Transcripts For CNBC Squawk Box 20091021

it. >> although it's firmly above 10,000. >> caterpillar came home with earnings more than ten time what the street was looking for. >> it is funny how the market goes up and people say, it makes no sense, makes no sense. then all the numbers come out and they go, these are all pretty good. did not the market have an idea that maybe these numbers would be better than thought? >> certainly a hope. that appears to be getting affirmed. >> and it is another day, and that means, guess what? another busy earnings day today. before the bell, we'll get numbers from nor tlum grumman, boeing, eli lilly, genzyme, st. jude medical. yesterday boeing was down about 3% after a downgrade from morgan stanley talking about concerns with the 787. they worry that it's going to be too heavy now because they put these new titanium car about you nkles in to try and reinforce -- >> someone has been traveling! someone has been reading on the plane! >> i don't know what they are. >> carbunkles on the bottom of a ship? >> yes. these are the things they -- >> coo-coo-cachoo. c carbudgetels? >> she comes from a family where engineering is a strength, right? >> yes. many of the men in our family are into that. >> and boeing and morgan stanley are both reporting today. >> yes. >> good way to take the focus off of them? >> no. if i was boeing, i would downgrade morgan stanley. why wouldn't you? >> boeing talks about, oh, you're downgrading us? how is your new ceo looking? how is it looking? pay back that t.a.r.p. yet? i don't think boeing got any t.a.r.p., did it? >> how is that working out for you? >> yeah. i'd downgrade them. they're in chicago, right, boeing? >> based in chicago. >> i would downgrade morgan stanley to a sell, if i could. i would. >> meanwhile, we'll get a lot of earnings and a lot of economic agenda. crude oil inventories shortly after 10:30 and this afternoon, we will get the fed's beige book of residential economic activity after janet yellen spoke a little and a bunch of other fed speak this week. >> we may not have seen the big revenue jumper yahoo! did you see this? >> yes. >> carol bart, reported a multip multip multiple, reducing the bottom line, shares rising on the news after hours, darren is the comanager of jacob funds. there is a genetic model called the jacoba -- and that's not what this is. the fund owns about 6,000 shares of yahoo!. all we hear the b is that, darren, revenue has to grow at these companies to get bulis on them. is that true with yahoo! or is it like beating your head against the wall? with yahoo! it just feels good when you stop, right? >> yeah, that's right. for the past few years, investors have been measuring if it wasn't good enough. and i think that's what we contained of had here. i believe it was much blue consumer results. and at least there was an indication that advertising online is recovering somewhat, particularly in the display business which is yahoo!'s bread and butter. i think that's what investors are looking at most carefully and getting a little bit excited about. >> back in their late 90s, darren, there were so many internet companies and none of them had earnings and at that time, people said there would be maybe five survivors. yahoo! is one of them. obviously, it's not the same company. sl room for yahoo! to shine in the future. >> yeah deal. they just about the deal with mike roe of the, is i think and here fog a reason for being. and i'm not should it sure what that is. they're going to spend $60 managerial or so when they've been not marketing much over the past couple of years and they're trying to give users a reason why yahoo! exists. i'm not sure exactly how successful that has been. they've seen some metrics that have been decent, but traffic has actually continued to decelerate the 5% growth in the most recent quart perpendicular and so it's certainly, i think, one of the highest priorities that carol bartz is concerned with. we'll see. they've launched a few features rantly to try to become a associate network. it is certainly one of the big areas of yahoo! who are they, why are they and sh should they found? >> is that why you've been selling shares there? >> it once was a very distressed value system which we loved. it was trading less than four times than ibadah. and so what happened is the central ewation of the stock began to rise, got close to the 6.5, 7 times ibadah. it became less attractive. that's why when you have a situation like yahoo! which is a value situation, you don't want to get biggish and he take some profit when you get it. >> so $18. i guess if you went from $170 to 76, i guess you have a. >> we own 3.5% of the funds. they have the largest internet network in the world. a quarter of a billion registered active users -- >> it would be nice to mon tiesz that. can anybody? how do you make -- how are they eventually going to turn it into something like google? >> they've cleared outsourced na that technologies in the call the last nice, that basically they see the search algorithm and where they want to be adding value and vaeting a benefit user experience. this look look aol instead, don't think me it seems to me. >> that is one of their problems. what is their focus and what does it mean for users? i happen to be a very loyal follower in that. certainly i believe people even younger than i have migrated more towards google, towards facebook. yahoo! is trying to find that direction. i think they're still relevant. the amount of internet traffic they get is larger than any other website out there, including google. >> joe, you're a bad zavrm. you can't wie frig, anyway. >> eric, thank you. let us know if you're going to buy more. >> unfortunately, i think the results today is stock is going to move higher. but it is again a name that we would be looking at if the stock came down. >> really? okay. thank you. >> all right. in our headlines this morning, the t.a.r.p. inspector general says that the government's $700 billion bailout program has increased moral hazard in the mark. neal barofsky says by increasing capitals in the bank, the treasury's plan was clearly influencing the market's behavior. the take payers never will reclaim that on him. we'll mary more with it in just a few hours now in an interview, government said they would vo focuses at areas where it's hard to access credit. he specifically cited housing. the obama administration says they're trying to increase the limits of what kind of loans you can take out, maybe help out some of the smaller banks in the past. >> answering those critics who say we've given too much help to maybe the big guys and not enough help to small business. in the meantime, futures are lower today halfway through this busy earnings week. we've messaged morgan. interesting trade today, i think oil is off more than a buck. we'll get to inventory numbers later today. we hit 80 earlier in the week for a brief movement. ten-year note, the yield is down to about 3.35 or so. tt dollar, as we mentioned earlier on, having some trouble. with the some action out of canada saying this they're not going to -- they're not approaching it the way aus trael ya did with their rate hike a few weeks, ago. >> we're whack against the yen over 90. >> that's the one where you would railroad about the ten-year or all the bonds. but as long as china continues to -- it doesn't seem fair, to remain an export society. they're going to be an export society forever. >> that's what the rest of the nation is worried about. >> if they can find people to sell to. >> meanwhile, they're the envy of the russian economy. but we'll see what happened. you see they had a good fair? you're not allowed to publish any books in china. how do you have a book fair in parrish highlighting chinese books when everything is sen sured? you can't even look at the government wrong. it's weird to have a free market when you're totally repressed. >> they have made some changes. they've been slowly opening up really? go walk around in tiananmen square with a sign. see if you can do that. >> no, no, they have slowly started to -- >> they let a couple of posters go up? >> non. but you mentioned december. it doesn't work when you open up the flood gates a little then you can't sop it. >> sooner or later, you have to do that, right? >> things like yahoo! change the game over there. the flow of information is hard to stop. overseas this morning, christine tan is in singapore. first, throw, let's go to london and see what's happening. >> here is the story. every time you get a big target, these pull out better numbers. that is what's happening with cadbury. cadbury just pulled out a block burst statement saying profits will now be 135 basis points. growth will be 5% from 4% and until the most recent quarter, that number was up 7%. we get kraft numbers up on the 3rd. people will have to see what it is. now we're hearing a lot about a whisper number at the moment that needs to be beaten and goeltdman suffered on the back of that recently. now deutsche bank is the latest. the shares over in germany are down 4% and that's despite them putting out a surprise statement which blew away expectations. they have tripled the net profit in the third quarter to 1 trillion euros. does he spite the expectations in the markets, deutsche shares are trading 4.2% lower. now to singapore with christine. thanks for that, steve. it was mostly technology shares that came under pressure after recent games in the sector, trading had a little thin ahead of key economic data coming out of china tomorrow. in japan, the nikkei 225 ended flat with chinese data out tomorrow and japanese earnings in full swing next week. in hong kong, the telecommunication shares weighed on sentiment after weak earnings while demand for property stocks picked up after a slide that helped cushion the slide. in china, the shanghai composite saw some consolidation on rising expectations. there were concerns about possible monetary tightening. the indead fell 0.5%. in terms of earnings, they fell on the back of a weaker won. christine, thank you for that. let's check on the u.s. market this morning with lou brien and julia coronado from bnt paribas. good to see both of you this morning. >> morning. >> lou, i thought of you when you had written about china and the dollar. your thoughts on what's happening is in the market? to what degree is that going to be the dominant force as we pay attention to volatility the thing thing yesterday was that that was aimed at trying to bring the real down versus the dollar. and so you're starting to get more noise out of the europeans on the rate of the euro essentials the dollar. so it's the volatility of the markets that could be a real problem, whether it reverses more sharply. >> are you convinced it's going in one direction or the other? i think it's -- i think at some point there will be volatility associated with it. i think it's going to be a very difficult thing for them to maneuver this quietly here. you know, the -- but like i said, i think it is a bit of a crowded trade right now, in my opinion, the larger move in the dollar from here will probably be up, not down. and, you know, as you said, the one factor, the one main currency that hasn't moved versus the dollar is the won. the chinese won goes where the chinese decide it's going to go. and when they sensed a year ago in july that the ex ports, global ex ports will have a very difficult time, they repeged the dollar after letting it fall about 7% over the previous three years. so there's no loss of value currency value for their treasury holdings because they have held the currency flat for the dollar. >> julia, the other big story is the t.a.r.p. story. it's now said that they can shut down some of the programs that defined t.a.r.p. in its initial statements. should we look at that as a sign that other programs will start coming to an end? >> i think yes, we are going to see a lot of the intervention slow and stop. geithner's highlighting of the small business area is key. right now, we've seen large corporations and large banks with unlimited access to corporate markets right now, the policies have worked in opening up those markets. but the banking sector that provides credit to households and small businesses remains in a contractary mode. it's the small businesses that create the jobs and the job market still looks terrible. so i think this is a shift in focus. >> i think that's exactly right. there's a page 1 story about volcker, who he's obviously the minority view is trying to sell this view that the big banks cannot be allowed to operate the way they've been doing. commercial banking and investment banking. einhorn gave a big speech this week on the same topic. mervyn king has been greenhousigreenhouse i grousing about it in the uk. >> i think it's just that the debate is starting to get going about regulatory reform and what that's going to mean. we haven't really tackled a lot of these issues. regulatory reform is a train that's coming down the tracks. i think what we're hearing is more voices around the various positions. but certainly this is a problem that everybody needs need to be addressed. >> and lou, why hasn't the market rewarded at least in the last couple of days 12347. >> well, you know, the earnings have done very well versus the sfimts. the estimates have come down quite a bit, so i don't think it was a particularly high bar. i think there's been two of the reported dow stocks that have done better than a year ago and they both relate to the t.a.r.p. i think bank of america and jpmorgan. yesterday caterpillar was at 53% below year ago levels. you know, i think that trade could get getting higher, as well. but i have a real problem with the sustainability of this move. as the other gusts mentioned, the labor market is in real disarray and i don't know, with the deleveraging rather than an increase in credit, i don't know where the extra consumer buying comes from that's going to add to the profits. there's only so many times you can reuse a paper clip and you can't fire everyone that doesn't work in the c suite. so i think at some point you need real earnings, real sales. and you don't want to dollar or should expect the dollar to fall 10% every quarter, quarter after quarter. >> right. julia wbl the bears have pointed out companies that sell to end market are beating less consistency. some of the small every companies are seeing they're going to tut the cost. >> we are poised for a big stimulus letdown going into 2010. and unless they step in with more stimulus, we probably are going to see some disappointing numbers both on earnings and on growth. i think all of these profits have been sustained on cost cutting. so there's a real tension here between the data flow, which has been pretty choppy, and some of the earnings estimates which have been more optimistic. so i think there is some tensions here and yeah, there's some roadblocks ahead. >> we're going to grind our way through it. julia, thanks for the help. we'll talk to you soon. >> i looked up carbunkle. it's disgusting. >> something on your rear? >> a painful inflammation of the subcutaneous tissue having a tendency to spread like a boil. >> what did you say the -- >> carbunkle. what was it? >> a painful sir couple scribed im fnflammati inflammation. >> circumscribed or circumsized? >> circunscribed. >> that's what the analyst i wouldn't say used in the report. >> fine. that's not what i had. and that went away about three months ago. remember? >> you had some serious health issues. >> asteroids, we were talking about. >> you told us we couldn't talk about that on air. >> but now they're gone. >> did you actually take a match and put it out with those medicated pads? >> clearly, we were all out a little too late. anyway, when we return, we'll talk about what one giant says is the key to a tech recovery. coming up, we'll go north of the border to make cents on the dollar. scottco sn going to report from canada. protecting your heart includes watching your cholesterol. now there's new heart health advantage from bayer. its non-aspirin formula contains phytosterols, which may reduce the risk of heart disease... by lowering bad cholesterol. new heart health advantage from bayer. the gold delta skymiles credit card... from american express... it's the official card... of the world's largest airline. and it's the only credit card... that earns miles on delta. miles that take you... to more places than ever before. over 350 destinations worldwide. so switch today. get up to 25,000 bonus miles-- good for a free flight. call now to apply. there's no annual fee for the first year... and you can redeem... with no blackout dates or seat restrictions. these are just a few of the benefits... of carrying the official card of delta air lines. switch now and you can earn miles... on delta with your purchases: groceries, gas, entertainment, and more. get up to 25,000 bonus miles... with the gold delta skymiles credit card. call 1-800-skymiles to apply. this is the official card... of the world's largest airline. good morning. welcome back to "squawk box" here on cnbc. i am joe kernen along with becky quick and carl quintanilla. let's get right to the markets. brian battle of performance trust capital partners is standing by at the cme and this equities, brian, just seem to have some momentum. they seem to want to trade higher. how much of this is a portfolio managers that are going to continue to chase performance until some arbitrary dates where they're measured? what is it for most mutual funds? it's not the end of year, right? >> right. there is that technical. i think you're right. a lot of the mem yumm in the stock market is technical. we have a lot of earnings coming out that are positive. the s&p is at about 20 times earnings. that isn't sustainable if you don't have more e. we need to see the earnings going forward. so i think what we'll see is the major indices start to separate and within the indices we'll see people that innovate and exporters advance because people want apple stuff. they want the ipod and the mac. and we'll see ex ports do better and caterpillar is evidence of that because we're going to have a weaker dollar. so there is that momentum for technical points where there's going to be an up trade. i think the thing that is maybe bothering the bond market a little bit to change gears is the price of oil is higher, but it seems like oil is turned into a speculative vehicle. >> brian, i want to quickly bring out eli lilly numbers that are out. you're now we're talking about nongap concern egg hes of $1.20 a share sprs the $1.02. they're revising their full year guidance for 2009 from $3.90 to $4. or if you're looking at proforma sports, $4.40 and that marches up to a $4.29 expect aegz on the street. and for the quarter, 1.20 versus the 1.02 the street was looking for. >> so they already got 18 cents and they're now just slightly above where the street is. so that's better than -- they beat nicely on revenue, too, beck. >> did it? >> yeah. 5.56 versus 5.4 estimate on ref knew. so that is higher. but versus last year, they didn't -- did they eek out a gain versus last year on revenue? >> yeah. 7%. >> a 7% gain. so they muvent have had the same type of generic patent ex operations as much of the others that we've seen. >> we got decent numbers from pfizer yesterday, talked to barbara ryan about this and we'll talk to lickliter about.o'clock a.m. eastern today. >> yes. >> lickliter saying that this release driven by bottom line, tight control of operating expenses and. it allowed the company to earn up top 70 earnings growth. >> is that right? each drug company has its own sort of list of concerns and/or positives. depending on which drugs are losing patent ex operation, like with j&d it was topamax. it's tough to have revenue growth when you're getting your block cleepd by generic competition. do you have any -- >> lickliter will be on. 7:15 we'll talk more to him. >> yeah. brian, i was asking you right at the top, what is that date when mutual fund guys lock in their performance? >> yeah. you have to be real careful. guys are going to try to trade in front of it. >> there's a lot of guys not on the ship, which is what accounts for some of this momentum, right? i mean, if you're down -- if you didn't buy at the lows or if you sold at the lows and you missed 60%, why would anyone employ you to manage their money if you are sitting down there, didn't participate in this bousback? >> sure. you have although look at the window dressings. go into pharma, pharmaceuticals, it will take a long time, but there's a giant black cloud handed over if year. so it will be a very difficult trade right now approximated within of their major partners is going to start squeezing them. >> we will love to that you from you.when when he woman back, we have ferg rago, morgan stayly and ears when "squawk box" continues the exchanging world is at the heart of the collaborative economy. and collaboration is good-- no one has a monopoly on good ideas. we have at least half a dozen relationships, 50 percent of my time is spent outside our company, collaborating with other companies, finding the next cure for the most serious diseases. the global opportunity is a fantastic one. we're able to reach audiences, connect with them in their local cultures and take our brands around the world. nyse euronext. powering the exchanging world. well, say you're looking afor it in new places,. like working with a supplier in china and a manufacturer in germany to reach new customers in the u.s. well, ups can help bring it all together with efficient solutions like paperless invoice that can help make customs a breeze. hey, the opportunities are out there. seize them with ups. you know, it's hard drawing those perfect circles. welcome back. making headlines this morning, morgan stanley may give up its real estate equities unit to barclay's capital. they bought crescent for 6.5 billion in 2007. the owners of the new york mets actually made about $48 million in dealings with bernie madoff. there have been many reports in recent months suggesting the family lost money with the convicted swindler. and geely's talks to buy a ford unit has reportedly stalled. both sides are meeting in london. joseph. >> are you -- i'm right here. >> how are you? >> i'm good. >> i just did headlines over here. >> how are you? hi. i'm going to turn over here now and read something over here. >> that was smooth. >> the whole thing was smooth. >> smooth. >> we talk about the dollar every morning for the perhaps nowhere is the weak greenback better understood than on the u.s./canadian border. that's why we find our scott cohen in windsor, ontario. it's better than houston, scott, except i don't think you're going to get a deal with your dollars, are you? it's costing more. >> and that's why we're here. that is michigan over there, detroit, and this is windsor over here. the dollars over there do not buy as much as they used to over here. that is a problem on both sides of the border. so all dayed today, we're going to give you some cents on the dollar so to speak as we look at the real life effect with this weak currency. we can tell you where we are today has been a long time coming. >> we must protect the position of the american dollar as a pillar of monetary stability around the world. >> for as good as a generation, it's been better than gold. >> i was directed the finance secretary to defend the dollar against speculators. >> after the u.s. took the dollar off the gold standard in 1971, the world flocked to the dollar. it only made sense. >> you can buy just about anything made in the world here. also, the united states is a safe haven for capital. >> but now, the american currency is urge seize. its unquestioned dominant now questioning almost daily. so what has changed? >> my budget nearly doubles strategy for sustained security. >> there is no doubt that the cost of this program will be large. >> trade deficits, if the world is not buying our products, there's less demand for our currency. china with all its ex ports is part of the problem. >> china is tore peatoing a value of the dollar. but imports, like foreign oil, are more expensive at home. then there are the long-term costs. a weak dollar gives the u.s. more borrowing power. financing the debt is more expensive and hurting the dollar even more. >> so imagine if you're dealing with dollars, canadian or u.s., and the whole point is to try and get people to win more dollars. we're going to talk about the impact on the casino business, the cesears's windsor palace here. it used to be a great bargain for those u.s. citizens there. we'll be looking tt nuts and bolts of the u.s. dollar. guys. >> that is a strange way of looking at gambling, though, isn't it? >> i was just thinking about the same thing. >> no, no, you lose slower. your dollar is strong, so you -- wouldn't you want a weaker dollar so what you're losing is worth less? >> or do you want a weaker done or -- >> well, that is a major lose er. .if you're domg here coweapon, issue by able to find that. is you seen what building? >> where are all the customers out there? >> that would assume that there were a lot of customers here. >> but it's just a weird thing. they're getting your money's worth gambling. i don't know. because you're just giving it, right? i mean, i feel like a christian here. gambling is bad. it's a vice. it's not -- i shouldn't say that. >> unless you're winning, in which case it's great. >> that doesn't happen much, is it? >> no. that's why it's going to be the house. but you and my father have the same thing. it's a tax on the stupid. and yes. nas. okay opinion in less than 90 minutes, we'll get third top numbers from. you're looking for an estimate of 34 cents? >> yes. i think the top line number is much less important. the headline number could be stronger than that, given the mortgage banking games. however, credit quality will be the main focus. coming through this quarter so far, we're earn r encouraged. we've been bulis on the sector. stay away from vegas, buy bank stocks. >> i agree. >> we have a triple play. if you buy an equal dollar amount of wells fargo and jpmorgan, you'll probably double your money in two years and if we're wrong, i think it takes three years. >> and that's just because now basically the bangs can print money? >> they would be up. we need value first. half the banks still trade at hoe value. wells fargo could do $5 plus. that's about a six peo normalized earnings. >> so when we're looking through this relies a little labor. well, you know, the consumer news has been pretty much on the consumer slowdown. loan losses are starting to peace to see the provisional level ves. hopefully they'll go up less than half what. a deceleration in the nonaccrual loan he, that would be a positive sign. >> we have seen signs of improvement in california housing and some of the other arenas where wells plays actively. some people say, though, that this is a head fake, that you're going to see big numbers that come out as foreclosures start to ramp up again as the unemployment numbers rise. do you worry about a second downturn like that? >> those are lagging indicators. internal we're going to have a pretty decent environment. >> the three banks that you mentioned, jpmorgan, bank of america, wells fargo, why not a company like citigroup? are you still worried? >> we don't officially rate citigroup right now and obviously it's done quite well, also. >> that's a heck of a statement you made, though. you double in two years and couple in three? that's still like a 22% return per year been. >> percent than vaguace. >> you're an analyst at a reputable firm, so i like that. that's sticking your neck out. if you could -- heck, i might -- we can't, but if you could, you can take a mortgage out on your house and do that, right? >> yep, from wells fargo. >> right. other things that we should look for in the release, what other lines? >> well, wells had a weak quarter last -- last quarter, the stock went down when they released. they had the strongest revenue gains of any big bank. i thought that was an incredible quarter. it thought it was an incurving quarter. you have to look into how these comes come into the quarter, right? last week we were flattish but the week before we were up 6%. the president was in town last night, be rating the banks, there's been chatter about the amount of mon that mortgage originators are keeping, getting all this federal help and not passing it on to people who take out mortgages. should shareholders be cheering on banks to do that? >> wells fargo, bank of america have been committing 00s of thousands of dollars in loans each credit. we are strong emergencying service right income losses. the mortgage business is profitable, but if you take into account the last 12 months, it's probably break even at best. i'm on the side of the big banks. >> that's who you cover, right? yeah. i don't think the big banks really are to blame for this financial crisis. i'd look more at politicians, goldman sachs and ticket master. >> tifkt master? >> those are my three favorite conspiracy theories. >> what did ticket master do? >> did you ever see the fees for buying a ticket? >> they'll be part of the consumer protection, right? >> hopefully. >> talk to you again soon. wells fargo's chief financial service, howard atkins will run through the bank's numbers as soon as they did it. still to come this morning, former chook chairman andbox." still to come, frits henderson, eli lily john lechleiter. lot of ground to cover. 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>> 48 was ahead, two cents ahead of expectations and revenue was a big number, up 23%. i'm not sure how to account for that. >> part of it was because of their investment they have in s.a.b. miller. high earnings from that, lower corporate expenses. >> but that is -- let's see in -- >> lower income taxes. >> yeah. i doubt if this revenue number is directly comparable to the one we got that we're supposed to compare it to as well. $6.approximate 3 billion compared to $5.214. for the year, no surprises here. what did they say, 174 to 177? >> right, which lifts the low end. >> but the estimate is 176. so, it brackets the estimate. >> interesting. they talk about how their premium brands of the tobacco companies, marlboro, skoal, copenhagen, show great strength despite what they call a challenging operating environment. focused on returning cash to shareholders in forms of dividends. they're standing by the dividend. also their recent 3.6% dividend increase. >> a world full of nicotine addicts that don't -- >> premium brands. we always talk about the trade down, procter & gamble who got hurt by the trade down, their premium brands are continuing to hold their own. >> nicotine business to nicotine addicts. >> smokeless, copenhagen and skoal you mentioned, that's a huge growth area. >> that will deliver some nicotine, too. >> do you -- >> no, never have done that. >> never seen you around the office going like this. >> no, but have you ever? people swear by that. i see them, but they're constantly -- they get good at spitting too. >> remember -- bingo? >> really? >> yes. get shot in the chest, falls off the donkey. that guy. our guest host is nechlt ville isdell, former ceo of coca cola, currently sits on the gm board. >> that's butch cassidy, sorry. >> neville, thanks for coming in. >> good to see you. >> it looks like a lot of the numbers are beating expectations, probably because of growth overseas. we tend to forget that. this is something you pointed out in your notes too. >> yeah. >> big world. >> it's part of the story that's missing. look at caterpillar, big portion coming from overseas. and the turnaround has been much more rapid than people thought. china up 13, 37% or something in india for coke. then, of course, the dollar with regard to those same companies. that gets translated back into, as the dollar weakens, more dollars. i think that's part of the story that's being missed. the focus is always what's happening in the u.s. i see that on the analyst calls, in the media. i think that's where there's an awful lot of value. there's also value in u.s. stocks as part of the recovery. part of the story is missing this whole overseas. remember, dollars invested out there were from a strong dollar. there's a very good return coming in on that investment. >> the one question we get, though, it's great that you're still talking about unemployment ticking toward 10%. growth overseas won't necessarily help the jobs picture here in the united states. >> well, yeah. we're talking two things here in a way, the u.s. economy and we're talking about the xps who then would have a global portfolio. in the u.s., you're absolutely right. unemployment number will continue to drag. it's going to continue to drag on consumer sentiment and that's why i think it will be a slower recovery. we talked about green shoes. >> right. >> i said there were green shoes, but frankly northern hemisphere, slow growing green shoes. i think that's what we're going to see. it is going to take time before employment comes back, and it is one of the good stories about companies is they have more become more effective and more efficient. the response is excellent. managerial aspect -- lower jobs r, lower employment. that will take a while to be rectified. >> companies cut jobs and expenses a lot faster than they have in previous downturns. this was almost like a switch overnight where a lot of companies paired back very heavily. good earnings numbers last quarter and this quarter. do you get the sense that companies are reluctant to hire again or ramp up their spendings? they're taking a waiting attitude as well? >> i think they are. your analysis about the quick cut back, there was a real understanding we needed it. people recognized that this sort of really, really tough surgery had to take place. a lot of the facts have been taken out of the companies, much stronger going forward. they're going to be cautious about hiring. you'll see a lot of temporary employment. and we do see that. anectdotal anectdotally, 15, 20 hours a week, better than zero hours, but there's the part-time employee, which i think is going to increase. and that's part of a slow recovery. >> if we really are in for a prolonged period of joblessness, the past two earnings seasons at least have been driven by cost cutting, right, where results come in ahead of expectations? will there be a quarter to come where the companies have nothing left to cut and that's when with weak top line growth results disappoint? >> yeah, but i think you are seeing the revenue lines starting to -- that's what everyone is focusing on, and they should be. >> it's modest. >> but it's bottoming. you're going to see infantry recovery. for example, gm is probably an extreme example, but the lowest inventories in 40, 50 years. they closed down factories the whole summer. the rebound from that, normal recessionary rebound of inventory building is actually going to start helping the economy. there are a lot of small suppliers out there that are really struggling. >> gm and the other companies that are picking up production are doing so as we're seeing car sales start to slow again, because the cash for clunkers program went away. >> well, i think the cash -- it was inevitable after the cash for clunkers that we're going to see a reduction, because it pulled forward some of the demand. i think there is -- fritz will tell you better than i do. i think there's a real stabilization taking place out there. we'll look at growth in the overall industry, car industry next year, predicting somewhere like 11.5 million units. running the whole sector was running at 9.5. >> right. >> there is some pick up. it's not spectacular, but it's there. >> steve rad nechlt r has these comments on fortune.com. have you seen that? >> no. >> first account of what it was like come in, getting a look at the industry up close. he said the gm board, in his words, showed stunningly poor management, probably the weakest any of us had seen in a major company. the board of directors was utterly docile and that wagoner set a tone of friendly arrogance. he doesn't have a lot of good things to say about the old gm. does that fit with what you saw? >> i was part of old gm. so, this is great. >> i know. >> i joined in august of last year. so, it just -- the tsunami hit just as i joineded the board. i think that is actually unfair. i think that gm -- you see it now in terms of the product hitting the showrooms. fritz will talk about cadillac and how well that's doing, chevy and how well that's doing. those cars were being designed four, five, six, search, sometimes eight years ago. there was a balance sheet that gm had that was absolutely not sustainable. and the issue was, do you manage to stagger on and incrementally try to improve or do you go bankrupt? of course, when the whole credit crunch came, it was inevitable that's what happened. >> it's hard to dance if you've painted yourself into a very tiny corner. >> absolutely very difficult. i saw that coming in when i joined the board. i knew it was going to be a very, very tough period to get out of it. >> why did you join the board? >> because i think gm is -- an iconic company. i think great american brands. i love american brands. i want to be part of it. i like challenges. i did not realize it was going to be quite so big a challenge, i have to say that. i love challenges. a challenge, it is. today you have a whole new gm. and it is thanks to the attack force. it is thanks to the government that we are where we are, and an awful lot of terrible pain for retirees, et cetera, along the way. i think it's a better alternative than going into chapter 7. >> neville will be with us throughout the morning. a lot more to talk about, including his role on the board of general motors. we'll be speaking with gm's ceo, fritz henderson, joining us later this morning as well, coming up at about 7:35, 7:40 eastern time. if you have any questions, drop us a note. squawk@cnbc.com. eli lily results reported a short time ago. and former business with ceo john lechleiter. you're watching cnbc, first in business worldwide. time now for today's aflac trivia question. sesame street's bert and ernie were named after a cop and a taxi driver from what classic movie? aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work, who's going to help pay for gas? ..the mortgage, all kinds of expenses? aflacc it's the protection you need to stay ahead of the game... exactly! aflac. we've got you under our wing. aflac, aflac, aflac... aflac, aflac, aflac now the answer to today's aflac trivia question, sesame street characters bert and ernie were named after a cop and taxi driver from what classic movie? the answer? it's a wonderful life. welcome back to "squawk box," everyone. we're keeping an eye on futures this morning as we continue to get these earnings rolling out. right now you'll see that futures are under quite a bit of pressure, down about 40 points below fair value for the dow, coming on a day where the dollar is facing some weakness, too. cadbury's latest results may be pressure on kraft foods. the london-based confectionery giant says shares rose. they have until november to raise their bid or go away for six months because of british law. we'll see what happens. >> lily's out with third quarter earnings $1.20, well above expectations of a dollar. joining us first on cnbc, john lechleiter, ceo of eli lily and mike huckman is here as well. start us off, mike. >> sure. gone, good morning. >> morning, mike. >> what a blowout quarter. how much of that was due to cost cuts? >> i think a number of things going on this quarter. first of all, we continue to trend a solid top line growth. 5% top line growth, 6% volume growth, debated a bit by the exchange rates and benefited from the rate in terms of a pretty big improvement in our gross margin. that helped us deliver the bottom line 22% earnings per share growth. we're continuing to see good cost control across the company as well. >> nkt, you announced a pretty big cost cutting program a month or two ago. let's drill down into your portfolio and pipeline. medco announced only yesterday it's going to start a hunl study comparing plavix to your brand new blood thinner called efiant. are you worried about that head-to-head study not only because it seems to be slow out of the gate at the launch but because you have looming competition from another blood thinner called berlinta out of astrazeneca. >> we're delighted by this study. i think it shows that payers are increasingly going to be looking in new and different ways at the question of which medicines really provide the greatest value for the patients who depend on them and for their customers who pay for them. keep in mind that the pivotal phase three study we use to get approval for afiant was, itself, a 13,000 patient head-to-head trial that sought to compare with plavix. we met our end point in that study. we're not concerned about this comparison study and think it will stand up very, very well. >> it is mike here that's throwing the questions at you right now. although i'm sure joe will chime in here shortly. you're also waiting for two fda decisions on byetta diabetes drug that you share, one version of it. number one is a ruling on whether suspected pancreatitis side effect will be put as a warning on that drug label. number two is whether the fda will approve a once a week version of this drug. any guidance you can give us this morning on when you expect those two big decisions to come down? >> first of all, i think we feel very good about the track record of byetta, now that it's been used in over a million patients around the world. we submitted to the fda at the beginning of 2008 an application for the use of byetta as model therapy. once we gain approval for that new use, this is still under review, we will learn at that time what, if any, new language is in our label concerning pancreatitis. we continue to work with the agency on that. obviously our once weekly version was filed earlier this year. it's under review. we're hopeful we'll be able to launch that product in 2010. >> let's move on to bigger picture. pharma struck that $80 billion deal with the white house on health care reform. last week i heard congressman henry waxman tell npr, i'm quoting now, i think the drug companies ought to pay more money. is that $80 billion carved in stone or could it possibly get bumped up? >> mike, i do some simple math. medicines are about 10% of what americans pay for health care, about a dime on a dollar. this new program that's emerging, the new health care reform coming out of the senate panel, looks to be about an $800 billion affair. pharma says we're going to pay $80 billion for that. >> rolling on off the manufacturing line if there is an h1n1 outbreak? >> we, like a lot of other american companies, have a very well thought-out contingency plan. we know it's important in the event h1n1 becomes truly epidemic in nature that we continue to be able to produce our life-saving medicines. we're confident should that event occur that we'll be able to do that. >> john, this is joe. yesterday in the journal there's a lead editorial that showed previous estimates of what government health programs were going to cost and what they actually cost, in hindsight what they did cost. in your $800 billion, 10% is 80 billion. if i use the math, that was in the article yesterday it could be a multiple of those. you're not at all concerned about the prospects for the pharmaceutical industry if the government gets more involved in health care? >> well, we've been very concerned that whatever type of health care reform occur use private market mechanisms to the extent possible. we've gone on record as saying, we are not in favor of a government plan. joe, if you look at that article yesterday in the journal, there was one program on there that came in under budget, and that's medicare part d. why is that? well, because the medicare part d program is administered through the private sector. >> right. >> i believe private sector competition is what's held that price and cost down while 85% of seniors are pleased with that program. >> what would you -- how would you grade innovation in europe for the pharmaceutical industry over the past 15 or 20 years versus the innovation in this country? >> right now, we're having an innovation drought in our industry. >> right. >> i think this is what's leading to a lot of this con solidation. number of new medicines improved in the last five years are the lowest total since the early 1980s. that's why lilly today is so squarely focused on improving and driving innovation. i believe we have the substraight. whatever happens in health care reform, we want to make sure that it continues to promote the kind of innovation that patients in this country are going to depend on. >> all right. thank you, john leichleiter. appreciate it. >> fine education, it shines through every time you're on here. what's your football record this year? >> at sanax? i'm not sure what happened this year. oh, did you beat us? >> i'm thinking he -- >> we beat trinity. did you beat trinity? >> i'm not -- i don't know. >> we'll leave it till next time. >> thanks, joe. >> thank you. in this country, and i know joe loves to talk about this stuff, and i can't let lilly go. 13% increase in u.s. cialis sales driven by a higher nand and pricing, even in this economy. >> that's another thing. >> you're not going out. you're going to stay in. >> cigarettes, cialis. >> stay home in the hot tubs. >> it's called nesting is the actual term. today's guest host ran the largest beverage company and dabbles in gm. we'll talk to board member neville isdell and fritz henderson at 7:30 eastern time. 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(announcer) we call it the american renewal and at ge it means innovating, inventing and building things. it means everything from shipping a new wind turbine every 4 hours to creating some of the world's most advanced healthcare technologies. manufacturing is part of ge's belief that the american renewal is making things right here in america. the american renewal is happening right now. >> welcome back to "squawk." futures are moderately lower after selling overnight in europe. yahoo! shares come out today, earning 13 cents for the quarter, six cents ahead, looking for current quarter results to come ahead. unexpected profit from continental airlines, earned 2 cents a share. analysts were looking for a loss of six cents. airline stocks moved higher after ual expect announced that smaller. interest rates did edge higher. mortgage bankers' association says 13% drop in applications with new purchases. >> loss of 223, carl. and that compares to a loss of 212. the revenue rose 9% to 16.7 billion, but the street's at 17.1 billion. the revenue is 68 to 69 billion, which is above, actually, what the street is looking for at 67.8. it looks like they're setting themselves up for a better fourth quarter. reflects -- >> 135 to 155, 4.70 to $5 to reflect everything that's happening with 747s. 135 to 155. >> to 155, okay. yeah, 153 at the high end. boeing now down at $51 a share. >> are we going to -- >> not yet. pretty impressive call by morgan stanley yesterday. >> why? >> citing some concerns. >> about the 747. >> will it be taken negatively? i don't know. we'll find out from the analysts. >> i don't think their concern was the first share number. >> i think the big concern is what's going to happen with the delivery of the 787. the two issues on that. and jim mcnerney, boeing's chairman and ceo making comments, saying they look forward to getting them in the air soon, moving forward with flight tests and certification for two important programs. big question is when they actually launch them. >> does it sound like he's dancing there? >> it sounds like he says they look forward to getting them in the air and then we'll see. no time line on delivery for these things. morgan stanley analyst yesterday said because of the titanium carbuncles, it will make it a heavier plane and could make it difficult for customers to save on fuel costs. much heavier plane, they may -- >> that's the whole selling point. >> deposits, light and so beautiful and now it has titanium carbunkles. >> solid. >> sounds like a good thing. >> solid. let's make it out of diecast iron, right? that will fly. >> if there's something they think would be better that could hold the wing on, go for it. don't you think? let's get reaction from our analyst, managing director, analyst at carmine company. do we have any better idea after mcnerney's comments when it's coming? >> they expect first flight by the end of the year, which is what they said before. and the numbers, per se, in the quarter look like they're on track. the details that they give us on the third quarter will be viewed as key. second issue viewed as key is their ability to hold the 737 rate at 31 a month next year. >> what determines whether they're able to do that? >> well, the demand for the plane, whether they get further requests for deferrals and the ability of their customers to finance the deliveries. >> you mean whether the orders hold up? >> exactly. >> they can deliver them? >> a great big backlog, over 2,500 planes. traffic is still down. there's been some pressure for deferrals. i think things look a little better today than they did a couple of months ago. that's a big issue, the 777 is expected to go down the middle of next year and what happens to the 737. >> are they really called carbuncles? >> are what carbuncles? >> i don't know. something is going to be heavier on the 787 because they're using titanium and morgan stanley downgraded it partly based on that. >> right. they certainly still has to be skepticism on execution. in the preliminary look at the release, they still expect to have first flight by the end of the year. the biggest one, one of the bigger ones, in my mind, is ramping to ten a month, seven a month in seattle. to get to ten a month, they're going to have to either set up a second line in seattle and the unions have not given them a no strike vote or set it up in south carolina. >> they're boosting guidance for year revenue above where the street is, even though the guidance in this -- even though the revenue in this quarter looked like it was below street estimates. is it going to be a better fourth quarter? >> i guess it could in terms of what they deliver. that's not really the issue. the big issue here is the performance as well as the 747-8 a derivitive program and their ability to hold their money makers, 777 and 737 in three rates. >> it's all about the ca carbuncles. i don't believe it's a carbuncle. >> here they are. here. look. >> carbuncles. >> yes. >> who is saying this? >> heidi wood from morgan stanley. >> all right. carl? >> all right. i'm going to read it, look up and see. it's in parenthesis. >> here and there. i don't know why they're using that word. >> physiological thing. >> and it's also gemstones. when we come back this morning, we'll have more with that gentleman, former chairman of coke, neville isdell, also he currently sits on the board of gm. a perfect time to bring in fritz henderson. don't go away. accord ex. and camry le. every year, they battle it out in the fuel efficiency rankings. seems like a lot of work to play catch up. the award winning chevy malibu. offering 33 miles per gallon highway. may the best car win. is at the heart of the collaborative economy. and collaboration is good-- no one has a monopoly on good ideas. we have at least half a dozen relationships, 50 percent of my time is spent outside our company, collaborating with other companies, finding the next cure for the most serious diseases. the global opportunity is a fantastic one. we're able to reach audiences, connect with them in their local cultures and take our brands around the world. nyse euronext. powering the exchanging world. hi, may i help you? yes, we're looking to save on car insurance, even if that means we have to shop all day, right, honey? yep, all day. good thing you're starting here. we compare your progressive direct rate to other top companies', so you can save money! look! we saved a lot! and quick, too. and no more holding her purse! it's a european shoulder bag. it was a gift. mm-hmm. shopping less and saving more. now, that's progressive. call or click today. saying you're going to be thrilled is one thing. guaranteeing it? that's another. announcing the 60-day satisfaction guarantee when you buy a new chevy. if you don't absolutely love it, return it. simple as that. checking the futures now, see if they worsened after the boeing. not so much. although boeing is called lower now. in other headline this is morning, t.a.r.p. inspector general says the government's $700 billion bailout program has increased markets. by infusing capital into bamnks the trshry's plan was clearly influencie inine ining market b neil will join us to talk more about this. >> we've got a lot of it. >> we do, i think. >> more than ever. >> you would think so because you should pay for your mistakes. some would say that -- >> they haven't. an interesting speech in which he compared it to teenagers out drinking and have destroyed the neighborhood and parents say you shouldn't be doing that. you should be drinking liquor first then beer, rather than saying you shouldn't be drinking at all. >> exactly. >> no shortage of interesting topics to talk about with gm's ceo fritz henderson as well as neville isdell, who serves on the board. >> nice to be here. >> so many fires to be dealing with right now, opal, pay restrictions in the states, trying to get people to come work for the company. you obviously have a burchl of cars, market to a wary consumer. can you prioritize some of those and tell us what's in the top of your agenda? >> top of the agenda is the car piece. by the way, i checked. no carbuncles in the car. >> that's a good thing. >> how but you, fritz? >> i just wanted to clarify that. >> you personally? >> i guess when you come back, the first priority is marketing the cars to people. if i look at, for example, october, we're starting to get a little bit of traction. it's interesting, hangover for cars for clunkers took place in september, october feels a lot like it did before. our penetration in the month of september was 20.6%, our best market share in this year, although it was a terrible year over year comp. little bit of optimism about a little bit of improvement, at least in our voms. launch products are doing well. chevrolet is picking up the pace. the most important priority is getting our cars successfully marketed with consumers. >> a piece today talking about car loyalty. and historically we've seen relatively strong levels of loyalty. consumer buys a car, they're likely to buy a car the next time from that same manufacturer. so far this year only 20% of car shoppers are staying with the same brand. is that good news for you or bad news? >> well, historically, i might have said that was bad news. in the current environment, i would be neutral to maybe slightly positive. why? we have loyal buyers, particularly for our truck products who, over time, had been loyal to a chevrolet or gmc. over time our consideration has eroded. look at our penetration of 19.5%, that means obviously four and five customers aren't choosing our cars. if we look at the products we're launching into the marketplace today, these are the finest cars and crossovers we've ever done to go along with our strong truck lineup. our biggest challenge is to win back consideration. so, the concept of consumers being open to other choices is something we welcome. >> ties in with what you were telling us, the power of brands in this economy is really the overwhelming dynamic when it comes to where nand shdemand sh >> no question about it. bob lutz says it's all about the brand. that's what gm has to continue to rebuild. look at the results coming up, companies that are doing well, they're building market share. and historically, those companies that continue to invest behind their brands in difficult times, who don't pull the advertising because the noise level in the market is down, they're building share. and that's a common denominator out of a lot of results we've seen the last few days and we continue to see. out of that higher platform, those companies are stronger. that's another area i think we have to focus on. what's happening to share. are the companies going to continue to invest behind their brands? gm's issue, fritz can talk to this more succinctly than i can. the perception is behind the reality. better cars out there. good cars out there. the consumer still has an awful lot of memory. it's not good memory. it's all part of that past. but it is getting that reconsideration. that's why the new campaign -- let the best car win. >> right. joe? >> i want to shift gears a little, fritz. there's a report out today that may not happen today, but you could sign the opal deal by the end of this week. >> is that possible? >> yeah, it is possible. whether or not it's likely. this is one where we're basically dealing with it every day, knocking off issues, trying to resolve the final deal points, wokking with the german government, addressing questions from the german government. there's a lot of work under way. it is feasible that that could be done this week. >> certainly happened in recent days with the eu that is a little hard to understand. maybe you could explain it to us, fritz. you have to feel this is the best deal around with the possibility of you opening it up again to somebody else and then if it's still magna, you know you have the best deal. is that suming up what happened? >> eu has asked questions of the german government of there's a dialogue between the eu and germany when our board considered the transaction, we recommended and proceeded with the transaction, based upon subsequent input. we're on dialogue with our board members. we're trying to get the magna deal finalized while at the same time being in dialogue with the german government. right now there is no other buyer for the business. and the deal that we have on the table is what we think is in the best interest of gm. we obviously need to reablingt based on what's happening day by day. i would say in this case, our mainstream plan is to try to bring the magna transaction to closure. >> stephen ratner, head of the auto task force, is out with a piece in fortune where he talks about his experiences there and what he thought. i don't know if you've seen it yet. real quickly, he says that -- the opening lines, everyone new detroit's reputation for slow moving cultures. even by that low standard i was shocked by the stunningly poor management we found, particularly at gm where we encountered, among other things, the weakest finance operation anyone of us had ever seen at a major corporation. he says he conveyed more energy and openness to change when he sat down to talk with you about potentially taking over that ceo job. do you think, first of all, that that's fair and secondly do you think the characterization of gm as an insular management team, do you think that's changed with what we've seen the company go through? >> a couple things. i did look at the article last night. clearly, steve's opinion. if we look at the things that led to our bankruptcy, they were complicated, they were multifaceted. certainly our decision-making processes, our culture and how we operated wasn't what it should have been. and it has to change. it's one of the priorities i have on my list, one of the top priorities, if you will, of how do we change the culture? part of it is we're a lot leaner, becky, than we were, a third less people, layers taken out of the organization, different decision-making processes. in terms of bringing new blood into the organization, something i would like to do, we would like to do once we get charity on how we pay people, which we will. meantime, we made a lot of key changes in people just within the company, which are important. we brought different perspectives into key roles to shake things up. change in culture is an important priority for us. >> fritz? >> yes, neville? >> how involve sd the government? that's a big question out there. they are the owners. they're basically the shareholders. how do you actually think about the government's involvement on a day-to-day basis? people say they're going to interfere with gm. they're going to try and direct the business. not that you manage it, not let the board manage it. give me your take on it after three, four, five months. >> yeah. i think the answer is the board of directors is overseeing the management of the company and what the administration with the treasu treasury, task force said was we're going to have a board of directors, world-class board responsible for overseeing the company and we don't want to be involved with the management of the company. that's exactly what's happening. they are a large shareholder. they're interested in how the company is performing, but want the board to fulfill the role of management. that's what they say said. that's exactly what's happening today. >> as a board member, i would say that's absolutely on the money. we are being left alone to really run the business. >> well, fritz, thank you very much for your time today. appreciate your joining us. >> thank you. it's great to be here, becky. >> good to speak with you again. neville will be with us the rest of the program. big bank earnings could move the markets. quarterly results on wells fargo and morgan stanley, plus a whole lot more from our guest host, neville isdell. up next, don't make a trade until you know which stocks are making headlines. joe tells you all the pretrade news you need to know in stocks to watch. right after the break. >> john playing backup. >> the animal orchestra. >> let's this roll. >> no, i didn't order this. >> boeing reported a loss, worse than expectations. revenue number was also slightly below, but for the full year, the revenue guidance is now above expectations. also the number for the one that used expectations, 4.70 to $5, if you get to the high end it would be above the expectations for the year. it's all about these carbuncles becomy has been talking about, and the morgan stanley downgrade yesterday. >> heidi wood, morgan stanley's analyst, mentioned carbuncles. it would destroy a delicate design. >> right. she's using carbuncles as a big gross that would hurt this design and beck you now knows that there are no actual bolts or parts called carbuncles. >> didn't think that anyway. >> which is what she thought at the beginning. >> company reporting revenues of $4.32 billion, pillow expectations, for altria. >> remember when she said carbuncles? >> i read the notes that they sent. >> you thought it was an actual part. >> u.s. bank corp., hard to say if that compares to the 27% estimate. rv new number was above, though. lilly will be up today after the company beat expectations on a nice revenue gain. >> carbuncle carl, take it away. >> no, no, that's becky. do you need a new hip or kneecap? we're not talking about the bionic man, but striker, steve mcmillen will join us next. morgan stanley, wells fargo, u.s. bank corp. for a smarter way to trade online. only fidelity lets you back-test your strategies against an entire portfolio of stocks. plus you'll get advanced, customizable trading platforms. and you get the kind of execution you'd expect from fidelity... ...with a dedicated specialist to talk about even your most complex trades. they'll even help expedite the account transfer process. trade like a pro. trade with fidelity. what is cloud computing? a cloud is a workload optimized, service management platform enabling... ...new consumption and delivery models. it's what? my cloud does email. lowers my energy bill. shares pictures. we collaborate on our cloud. i develop software in my cloud. i want a cloud that understands risk. ...compares patient histories... ...predicts traffic patterns. my cloud is... everywhere. my cloud is secure. simple. powerful. flexible. that's what we're working on. i'm an ibmer. let's build a smarter planet. financials move to the front of earnings central. wells fargo and morgan stanley on deck. and you need a new hip? how about a plastic kneecap. >> gentlemen, we can rebuild him. we have the technology. >> no, it's not the bionic man. it's medical device maker stryker. steve mcmillan joins us. >> the plate in my head wasn't big enough. >> tarnished from the t.a.r.p., neil barofsky will tell us about lingering from the government bailout zpls where's all the money? >> that's as good as money, sir. those are i owe yous. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen, along with becky quick and carl quintanilla. carbuncle. >> it's not a carl buncle. >> guest host is neville isdell, currently sits on the board of general motor, former ceo of coca cola. wells fargo and morgan stanley will be out any minute. we're glued to wells fargo is hitting right now. ahead of those numbers, you see the futures are creating -- indicating a lower open. >> right now i only have a couple of headlines on this. again it looks like that number will be 63 cents. >> $169 billion of credit extend to customers. total credit losses 5.1 billion for wells fargo. assets and losses. >> archl checking and savings deposits up 11% annualized prior quarter. net margin 3.46%. >> expects credit losses to peak in 2010. >> stocks picking up on this, 30.70 bid, 30.87 ask after a 30.46 close on wells fargo. revenue number was also slightly ahead. is morgan hitting? >> and as carl was saying, current projections showing credit losses peaking in 2010 with consumer losses potentially peaking in the first half of the year and gradually declining absent further economic deterioratio deterioration. >> morgan staenley apparently is hitting. wells says commercial and real estate charge-offs remained manageable, in their words, for the third quarter. more of a concern for the smaller regional banks, not a big deal for the big banks. they're talking about it. >> morgan stanley was 38 cents versus 37 the street was looking for. net revenue $8.7 billion, which is -- that's also better than they saw quarter earlier. second quarter it was $5.4 billion. >> quarterly equity sales and trading net revenue $1.1 billion at morgan stanley. >> investment banking delivered strong results. underwriting revenue up 74% of the investment bank from last year. >> that's how you get a true indication, the people that own this thing. >> they know. >> when the press release hits, they're in it, on it. they know they've got all their ducks in a row for earnings. >> yep. >> and pull the trigger and they are pulling the trigger on both of these. we'll see where the overall futures report on this. >> john mac, morgan stanley's chairman and ceo. >> for now. >> saying they continue to build across the quarter, as they made important progress key initiatives. see if it says anything else. blah, blah, blah. although we have work to do still in sales and trading, it offers groth as we build our client business, pursue risk taking. >> wells now above 31. now 31.25 bid and ask now. that's up about almost 3%. not quite wells fargo ticking higher too. how about futures? definitely coming back a little. s&p was back. >> boeing numbers didn't help out earlier this morning, putting additional pressure on the dow futures. let's bring in dick bovet, joining us right now. and dick, when you look at those wells fargo and morgan stanley numbers coming in better than expected. >> numbers for wells fargo certainly were a surprise. nobody expected them to match second and first quarter earnings this quarter. what it's suggesting is that the company does have its loan losses under control and that it is able to grow its revenues by increasing its loan volume. in the case of morgan stanley, what you're seeing is a tremendous turn around in a company which had been in a great deal of trouble. the issue there was were they going to have to report a big loss in commercial real estate? apparently they did not. and apparently also, the turnaround in investment banking is what is really driving those numbers. in the case of the u.s. bank, which also beat the number, i think what you're looking at is the fact that this company doesn't believe there's a recession. in other words, richard davis, the guy who runs it, is dramatically pushing to increase his market share at the present time. and that's obviously showing up in the numbers. so, on the whole, if you take these three companies, i would assume all three of them should do pretty well in the market today and that they should lift financial stocks. >> you mentioned with wells fargo, it's what they see with their credit losses. they said they expect them to peak some time next year? that's good news? >> i think that's what people are looking at more thant earnings numbers. regions financial had much worse than expected numbers, but their nonperforming assets would be coming down and the stock went up. i think that's what analysts and investors are looking for in wells and in all the banks. that is, is there a reduction in what they call early stage delinquencies? that does appear to be happening across the board in banks and that is what's driving these stocks higher, even though in many cases the earnings are not that good. >> dick, when you look again across the board, today it's morgan stanley, wells fargo, bankcoo rp. who are the standouts in the entire banking industry? >> it's clear that wells fargo is proving to be a standout with those numbers. u.s. bankcorp is a bank people have a great deal of faith in. they like the management team. jp morgan certainly is extraordinarily well managed and doing very well. investment banking side of the industry, goldman sachs and morgan stanley are attractive company that is have tremendously positive outlooks. >> big ad in the journal today from the association of home builders, basically begging the administration to expand the home buyer tax credit. how critical is that to making sure these portfolios don't get any worse? >> the biggest problem these banks have faced is homes. biggest business of banks in america is lending money on residential real estate. if it stays in the doldrums, it will be difficult for the banks to see their loan losses improve at a rate the people want. i believe the industry has bottomed. we're not going to see any further, if you will, crashes in home prices or in home sales. so, while it's not going to be a positive for the banks here, it's no longer a negative. and i think you have to look to other areas to determine what you want to do with these stocks. >> are you also leading a lot of the papers this morning, stories about people like vulcar arguing that commercial and investment banking, although they might be the minority, saying they can't continue to coexist like this? >> i think the majority, when you talk about the legislators, if you look at the legislation currently in front of congress, it would do exactly what mer vin king is talking about, imposing capital regulations, changing risks, adding loan loss reserve. it will break the industry into two parts. one part will be a burchl of public utilities, called your traditional commercial banks. the other part are going to be the risk-taking companies, which is where i think you ought to put your money. goldman sachs, morgan stanley, greenhill. those are the companies that will benefit. most of the traditional banking companies will be hurt by this i definitely think it's going to happen. >> dick, we're watching wells fargo, the bid ask now below $30. bid of $29, after it closed at $30.36. what do you think investors will be seeing to push that stock lower even as it beats expectations? >> again, the number they're going to be honing in on, and the one i can't see at the moment, is what are their early stage delinquencies doing? in other words, is it showing that wells fargo is getting an increase in its loan losses from these early stage delinquencies? if that's occurring, then the market will ignore the earnings number and push the stock lower. if, in fact that, number is improving, the stock will go higher. again, i don't think that anyone is looking at the actual earnings numbers for these companies. again, i'll point to state street yesterday, which had relatively good numbers and the stock dropped 10% and reasonables financial, which had relatively bad numbers and the stock went up. it's all on expectations of what the future numbers are going to be. in order to make that determination, people are looking at what we call these early stage delinquencies. >> dick, thank you for joining us so quickly after these numbers hit. it's not easy to run through them all and be able to speak eloquently, like you have on these things. we appreciate your time. >> thank you. let's turn again to our guest co-host. neville, how much do you think the government at this point, obviously, has a right to have its say in a lot of what happens at banking institutions. >> my personal view is that that is a -- you heard what mervin king is saying about size. you talked earlier about moral hazard and the need to have that in there. i think too big to fail -- i think there's a real issue about organizations where they are just too big to fail, systemic risk. >> the critics would say that goldman knew it was too big to fail and they're back, taking brisk again. and maybe there's moral hazard there, that maybe they lerped they are big enough to be able to do this and the bonuses are going to be huge again. is it moral hazard that -- >> i think goldman is a superb organization. >> they are, but they were too big to fail, weren't they? >> yeah. there was some moral hazard. paulson obviously has been around lehman brothers, what happened. they did pick one and let it go. so, is it you that's going to survive or not? there is a message out there. is it strong enough? is the protection strong enough? probably not. i was -- i'm philosophically against the government coming in, rescuing any company, including general motors. i think you're dealing with a situation that was so extreme or the potential was so extreme this had to happen. you look at the remudiation, you have to look at size as part of it. splitting the -- i think the legislation that was removed and allowed the merging of the different activities, i think this got at least a play. >> northern island europe? can i call you that? >> i call myself a citizen of the world, but okay. >> do you see the united states moving down that path to a more -- what do you call it? is it euro socialism? it trends that way, right? >> yeah. >> are we headed that way? and is that okay? >> i don't think it's okay. i think we're headed that way because i think look at the discussion over health care. that's where some of it is happening. the issue that we have, if you can put a business hat on, dechding our system. takes people out of poverty. and more and more at the moment you're seeing left-wing idea willi ideaologies coming into play. this is the cleanup that's needed. i have concerns not just around the socialist side but protectionism. it's not just in terms of the tariffs, tire issue in china, but protectionism that is caused by group rules. what are we going to do about a carbon tax, have a duty on chinese products come in because their emission standards aren't the same? these are anti-free trade measures. yes there's a selling point that this is all about equity and et cetera. but at the end of the day, it's protectionism. this is something we really have to stand against. >> lot more with neville throughout the course of the next hour when we come back from the break, he wering sermt working overtime. bob dole will give us his review so far of how earnings have been coming in. have you seen what the t.a.r.p. has been saying again, criticizing heavily what they did, how the $700 billion bailout plan boosted moral hazard in the markets and what do they make of these plans to start dismantling pieces of the t.a.r.p.? >> tomorrow microsoft's long-awaited launch of windows 7, plus the dow component about to check into earnings central. steve bomber talk it is to "squawk box" first on cnbc. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 'course a trade doesn't always work out my way. tdd#: 1-800-345-2550 but when it does... tdd#: 1-800-345-2550 ...man... do i love that feeling. fewers. nothing has happened with all this stuff, boeing, morgan stanley, wachovia. down 51. in step with the euro markets. >> earning seasons, lot of action has been in the first -- >> i usually stay around for it. welcome back. >> thank you. >> it's good that you're -- >> an earnings season in which you didn't go play golf tournament. >> that's only january. i'm not going anymore. do you remember what it used to be called? >> the bob hope. >> chrysler. >> chrysler classic. it's not the bob hope fiat classic. i don't know what it is now. is this me or you? >> i think it might be -- >> let me go then. carl -- you like carl quin or carl carbuncle? wells fargo better than expect ed earnings revenue. it's down right now. dick bovet said i need to go see what the early delinquencies look like. >> housing was lousy yesterday. wachovia is coming along faster than they expected, better, faster than they expected. i just saw the headlines. >> a wachovia on every corner. soon sner or later that could be -- morgan stanley, that company topped estimates, holding up. continues to trade above the closing price. >> as joe mentioned, so far so good for big names reporting so far, especially this week. black rock advice chairman and global ceo joins us this morning. >> morning, carl. >> are you feeling this, too, where numbers appear to be good, great in some cases, but the market wary about rewarding them? >> i would agree. on balance pretty good. markets treated it well until the last couple of days. i think the market is yawning a bit and said okay we've given you strength based on these improving earnings. what's next? we're getting some guidance for company that says business is improving here, there little bits. but we need to see more of that. the market is just running a little tired. >> what kind of grade would you give the all-important top line growth story? how is that coming in? >> relative to expectations, a minus, b plus. relative to where you and i would like to see if for healthy economic recovery, a gentleman's c. normally the second quarter after we've seen a bottom, this being the first reported, you're beginning to see more earnings based on revenue growth. that's the problem. if you look inside, much of the revenue improvements around inventory replenishment, not enough of it around final demand. that's what we'll need to see kick in. i hope we do in the fourth quarter when we report those earnings. >> do you u k companies have it in them to post another quarter of growth based on cost cutting or cost discipline? >> i think for year over year results, probably right. a company has a pretty lean and mean fast. we didn't get a productivity here in the u.s. the past 12 months without corporate america being pretty vigilant about cutting costs and getting leverage out of technology. i think there's some residual left, carl. you're right. that won't last forever. we'll have to grow the top line. >> we'll talk later in the hour, had notes later. back in november 1980 when markets had been rallying for a while on less bad economic news, turned out that did peak and we ended up with a double dip recession, hitting lows in '82. seeing any similar dynamic taking place now? >> i don't think so. dynamics were different around inflation and interest rates. as long as we have this sluggish sort of recovery, we'll have authorities fighting to get growth coming back in this period of slowly but surely improving growth, coupled with contained inflation is a beautiful recipe for equity markets. so i don't see the same thing happening. will we question the ability of the economy to grow? will we question how strong it is? absolutely. so there will be moments where we wonder. i do believe that we're on a slow but noticeable improvement. >> in the short term, bob, are you feeling overbought? look at the percentage of stocks above their 2 hyundai. we don't see this often. >> a little overbought, but these things can correct themselves by going sideways a while. they don't have to go down. we saw this, i believe, in june. sideways for a few weeks. proverbial waiting to put my money in, so many people are preaching that story, mied go side wise for a while. >> i think we would be happy with that. thank you. making money with medical devices, stryker's ceo will tell us how it will impact the industry. keeping tabs on the t.a.r.p., neil barofsky will tell us how the bailout program has tarnished the government. that's what he thinks the situation is. "squawk box" will be right back. business is changing all the time. there is an unabated pace of continuous communication 24 hours a day. technology drives communication. allows people to collaborate giving them stimuli to think in different ways. having a foundation of innovation is the way that you differentiate yourself from the competition. it's the lifeblood of growth. making businesses richer, stronger, more resilient. nyse euronext powering the exchanging world. coming up next, replacement parts in a tough economy. these are like -- what's his name, steve, bionic man, those kind of parts. >> austin. >> yeah, austin? this is a different steve, macmillan. was it stryker? he's in the "squawk" board room. we'll talk reform, all these things, whether medical devices have been singled out in this whole health care bill. tdd# 1-800-345-2550 tdd# 1-800-345-2550 to an investment question. tdd# 1-800-345-2550 i don't really need much more than that right now. tdd# 1-800-345-2550 tdd# 1-800-345-2550 well we're going to be living on this money pretty soon. tdd# 1-800-345-2550 there's no time to make mistakes, tdd# 1-800-345-2550 at this point we need all the help we can get. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i've got investments all over, tdd# 1-800-345-2550 so i just need some reassurance, tdd# 1-800-345-2550 ya know, that i'm doing the right thing. tdd# 1-800-345-2550 welcome back to "squawk" here on cnbc, opening bell on wall street. want to recap the big earnings numbers that have come in today. quarterly profit of 46 cents a share, 19 cents ahead of estimates. topping estimates, morgan stanley 38 cents a share, 11 cents ahead. dow component boeing did lose $2.22 in the quarter, ten cents wider than analysts anticipated. revenues fell short and loss came on charges related to that dreamliner program and 747. after all of that news, we've been in the red mostly of the morning, improving a little off the session lows after asia sold off overnight in europe, joe, and has had trouble getting out of the red as well. >> come back out here, carl. we've got a great interview coming up. i'm going to show you. this is titanium, this thing i've got right here. >> that's the new hip, right? >> well, it can be used -- it can be used for hip or carbuncle cover apparently. south florida that's just wrong. >> it is titanium. i'm going to also show you this -- did you give this -- anyway, come back. medical device maker stryker, you can see the stock is sharply higher. we'll get to why. here now with more on this is stryker's ceo steve macmillan. good morning, steve. >> good morning, joe. >> portends good things for the rest of them, right? >> in the fda doghouse, working through issue. we had progress shown, one warning letter issued a couple of years ago has been lifted. that's a nice step forward. >> upgrades resulting on wall street, too. they're mentioning the fda issue is getting resolved. >> we've been working closely. those investments we've been making are frankly making us stronger as a total company around the world. >> we'll do this kim and get to the business issues. this really is -- where is the camera? this really is titanium and this is for a hip. then if you look at this, one side of that is bone. it's real hip bone and the other is what titanium looks like. >> up close. >> up close. so, you put this into a hip and then the bone grows into there and it becomes part of you basically. >> our version of the titanium, which we call tritanium, it's a complex process we worked on many years. these products are made right up the road in jersey. one of the companies manufacturing in theu, creating great jobs and innovating in health care. a tremendous product for us that really basically bonds with the bone better so it will stay in place longer and effectively make implants last much longer than in the past. >> we've heard that people put these things off in recessions. they put off implants. does that happen? >> a little bit. really on the marngin. ours are life-saving products. by the time somebody needs a hip or knee, they've been putting up with pain for a long time. it's, quote, unquote, elective. it's not really elective in a lot of cases. people have really gotten to the point where they can't function anymore and they need to have these done. we've seen a very modest downturn. frankly, again, it's life-changing surgery. >> how much does this cost? >> that is probably a couple thousand dollars. >> this piece right here? >> yes. >> you want this? >> that one is for you in case you ever need it. >> i want to use it on my carbuncle. it won't hurt as much when i sit on it. it has a place to drink. >> that's a place to put the screw in to attach it. >> it's not you. you didn't say this to me. leading ceo of a medical device maker is really up in arms about treatment and health care reform. why you? $4 billion on a small industry, why you guys? >> sure. pragmatically, i think it's because we're a relatively small industry and haven't been the best lobbyists and haven't galvannized to work the way some of the bigger orgs are. for perspective, the entire u.s. hip and knee market is about the same size as a large pharmaceutical product in the u.s. >> everybody else got in there. >> they got in there and frampgly are more experienced. our industry is a lot of small companies. disappointing part is that we're one of the most successful industries in the united states. think about what most governments are doing in the world right now, they're trying to find industry that is can succeed for the long term and support those industries. this is one where, frankly, we applaud the health care reform initiatives, but the initial discussion of a tax and the number they pulled out just would have an enormously difficult impact on our industry. so, we're hopeful calmer heads will prevail. >> sounds like you're being pc so they don't hit you harder. would you applaud a public plan that brings medicare reimbursement rates to a much wider -- would you like medicare reimbursement rates in your industry? >> a will the of us business are medicare. >> who is it that complains about medicare? the doctors say they're not getting enough. hospitals say they're not getting enough and eventually it will lead to where there's not as much service. >> yeah. and there's a lot of complaints on medicare. it gets more complicated if you go to a public option. i am not a fan of a public option. i am a fan of expanding coverage. at the end of the day, this country is too successful, and i think about it first on a human level, second on a business level. >> absolutely. right. >> we need to be providing -- the greatest health care system at the high end in the world. this is still the country that most people come to that need really great surgeries. the flip side is, we've got to expand access. >> got to expand access. some people we've had, david -- >> walker. >> david walker on says the cart is in front of the horse. if you don't fix the delivery system which is causing 17% of of our gdp to be spent on it now, add 47 million people to a broken delivery system without sleighing any of the sacred cows, who have all gotten in bed now, cut deals, pharmaceutical industry, doctors, amas have cut deals, they've all cut deals so they don't get it as badly. is that the way to go about it? >> it's a complicated -- >> you're already -- >> wheels are turning. >> health care system is incredibly complex. figuring out ways to expand to a more universal coverage system is, to me, the right discussion. it needs to be had. i think there are some ideas. frankly, i give the balk us group and senate finance committee a lot of kudos for really rolling up their sleeves and spending the time all summer, really, if you think about it, trying to understand the issues, despite the fact that they want to tax our industry more than i think it should be. overall, they've been putting in the time to understand the complexity of the system. what we need to do is come up with a uniquely american system that's a combination of public and private. and there are models out there. switzerland, singapore that i think people are increasingly looking to to say maybe there are some models. >> where is that county becky where they all are? >> in indiana. >> warsaw. >> warsaw, indiana, three of the major -- >> who is the representative there? >> that's what i was wondering. >> senator baeyh from indiana. >> is he holding up his end of the bargain? >> i think so. >> biomet . >> depugh and zimmer. >> massive portion, like 60% of -- >> the employment in warsaw is probably more, at least 60%, if not 70% or 80%. if you consider the effect -- same as southwest michigan, state of michigan not doing tremendously well right now. southeast michigan is doing okay. we think we're certainly part of that. is he you don't want to strike at a lot of good american industries. right now again we produce products here and ship them to the rest of the world as opposed to producing in china and shipping them here. if the tax goes through at the magnitude they're talking about, that would have a big impact on us. so we know we've got to help find ways to fund it. we don't think medical devices will get any kind of windfall from expanded coverage. that expanded coverage would be younger population that isn't using our product. if we got a windfall, we would be happy to share in that windfall. we don't think we'll get that nearly in some of the ways other industries. >> thank you, steve. you're constantly bringing me things for like hips. >> i hadn't brought you one in a while. >> you don't give carl a hip replacement thing. >> younger population that -- >> these are the guys that are -- >> no parts breaking. >> becky and carl suggested that it might -- >> might be better for me, for my carbuncles. thank you, steve. >> we'll check out the big earnings reports in a moment. plus the damage from the t.a.r.p. program, special inspector general for the t.a.r.p. program, neil parofsky, will tell us why he thinks it increased moral hazard in the markets. t.a.r.p.'s special inspector general neil barofsky says the program actually increased moral hazard. joining us now from washington, neil barofsky. this is happening as congress gets set to receive the program's quarterly report. thanks for joining us. you say moral hazard increased. you want to talk us through exactly what you mean? >> basically if you take the too big to fail institutions through the t.a.r.p. and related programs, you know, they've obviously all become bigger. look at the acquisitions, some done with government support, t.a.r.p. supported bank of america's acquisition of merrill lynch. trim the playing field, created larger institutions and that implicit guarantee that certain institutions would be too big to fail through the t.a.r.p. program, it's now explicit. that safety net that at least there was a question about before the government came out and stated we're not going to let these banks fail. the moral hazard has increased without meaningful regulatory reform, we could be in a more dangerous place than we were systemically than we were leading into the last financial crisis. >> very valid point to say maybe this idea of risk taking wasn't punished enough. certainly the companies that took the most in terms of t.a.r.p., companies, management, shareholders have come under quite a bit of pressure and scrutiny, not like many of them necessarily got saved by t.a.r.p. >> that's true for some of the assistance, but management is largely in place, shareholders weren't wiped out. if you look at some of the other institutions under a lot of stress and have exited the program, they really have benefited greatly. not just from the t.a.r.p., but other federal government programs. look at what their value at risk ratios are. they're taking more risk and yielding more profits than ever before. >> were you concerned by what we've seen in the earnings reports over the last few weeks? >> you can't help but take note of some of them, particularly when you look at how much these earnings reports were probably impacted not just by t.a.r.p. but other federally supported programs. >> for years, goldman has had this formula for paying out compensation. and, you know, when things were fine, everyone was okay with it. guys making a lot of money. it's great to be at goldman. everybody should try to get a job at goldman maybe. are you saying that given the -- some of the assistance that that firm has received that it really is -- you know, they have a tenier to paying out the bonuses that are coming down the pike this year? >> as a taxpayer and someone who is indirectly supporting these programs, it is somewhat offensive to see that having been given this opportunity, to cheat money to profit, they're taking in some cases for profits and bonuses. on the other hand, goldman is goldman, as well as these other institutions. it's a capitalist society. they're designed to make money, take profits and pay themselves handsomely. we, as a government, we support these institutions in the way we do without putting restrictions on the money, without making clear executive compensation rules as there aren't any in the fdic and federal reserve programs, we shouldn't be all that surprised that this happens. >> we, neil -- >> it's one thing to complain about a company that took assistance that needed it. it's another to complain about a company that took assistance because they were told by the government you have to do this so we don't make other banks look weak. >> sure. i think that's the case. the question of which ones needed assistance and which ones didn't need assistance, you shouldn't just rely on what their ceos say to the public. >> one of the big purposes of the t.a.r.p. was to make sure that the financial system was stabilized. is it the system more stable today than before t.a.r.p.? >> compared to where we were last october, there's no question that the system is far more stable. we were on the peripous and t.a.r.p. contributed to pulling us back. we're in a lot better shape than a year ago. because of the moral hazard and some systemic risks that are associated with making these institutions bigger and bigger, trimming their competition and giving them the opportunity to take more and more risks, systemically, we may be in a more dangerous place than we were a year ago. >> neil, thank you for your time today. obviously we'll be watching as you report this to congress later today as well. >> thank you. coming up, we're going to -- we're heading over to earnings central to check out -- me and you? >> yep. >> we're leaving. we'll go over there. i'm thrilled. art cashin will give us this morning's trader's edge. we'll be right back. here we are, earnings central. take a look at the stocks to watch this morning in earnings central. morgan stanley posted better than expected earnings and revenue, that broke a string of three straight losing quarters. morgan stanley is called higher this morning. wells fargo, even though earnings and revenue surpassed the street, that stock has been up, it's been down at 29 and chan change, now it's back up. looks like it could an unch by the time it's all said and done. little below still at this point. >> other fpgss reporting, u.s. bankcorp came out u.s. bancorp, three cents better than the street was expecting. that stock is indicated a little bit higher. northern trust shares. the company reporting earnings of 72 cents a share. that was 12 cents below consensus. revenue also missed the mark for this one, too. >> boeing turning in a wider than expected loss in the third quarter. and revenue was also short of the street's view. that has boeing actually now just -- it was worse earlier. it was at 15 and change. at least it's above 51. the company also saying the first 787, the first flight, remains on track to occur by the end of the year. >> remember, this was a stock that was down by about 3% yesterday after that morgan stably analyst. >> they're going to have to use heavier parts to re-enforce. really a work -- first time it's ever been done in terms of the composite materials and in terms of outsourcing that was actually done. it's a beautiful jet. we'll see. for a while it looked like boeing's decision in hindsight of with what airbus decided to do with that big monster plane, that it looked like the right thing to do. now they've got to roll it out. i guess we'll see that. eli lilly reported positive results. revenue topped expectations. earnings per share of -- was 18 cents above what the street was looking for. and you can see -- >> back up by 1 1/2%, 2%. northrop grumman back up today. and yahoo! reported better than expected third quarter earnings after the close today. it talked about cost cutting boosting the bottom line. not necessarily a return to advertising that we've seen in the past. that stock up by about 5% this morning. >> by the long way from what it could have been sold for by the previous management. >> right. >> $30. all right. carl is back, you know, comfortably asconced, sitting. we're over here with, you know, remote mikes on. we're going to walk back. we're going to start on our way back now, carl. hope you can make it. >> if you get lost, just call. okay? let's get a check of the trader's edge. art cashin is director of floor operations at ubs financial services. good morning, art. >> good morning, carl. >> they walked us through some of the earnings numbers. you made made the point that yesterday, that even those that knocked the cover off the ball like caterpillar, just marginally rewarded, what's going on? >> a little too early to make a hasty generalization. it's beginning to look like the latter stages of the rally was an in anticipation of good earnings. even when they come in, they're not causing any reaction. we'll know over the next couple of days if that continues. the other thing is the influence of the dollar, both on trading and on the earnings. you see, for example, coca-cola yesterday, their sales away from america were a big contributor of making earnings rise. as becky noted earlier in your program, that's not necessarily helping unemployment and other things here in the u.s. we've got this dichotomy of temporarily the stock market looking at the global world and then trying to figure out whether the u.s. economy can get turned back around. >> so you think this 1100, 1115 level on the s&p, blow through it, win over the skeptics. we come back. the skeptics who have been largely bystanders might get more bold about shorting? >> yeah, i think so. we're at a very important looking resistance area. we'll see if, as bob dole suggested, we're into another one of those sideways consolidations before an upmove or if we're starting to roll over a little bit here. this is a con juncture of all kinds of things. downtrend lines, wedge formations, variety of things. a lot of cocktail napkin. traders are going to watch it carefully. that's 1100, to 1115. >> let's try not to get those napkins too soggy. need those very fine lines. >> keep it separated from the ice cube at all times. >> art, talk to you soon. >> thank you. when we come back, a coke and a smile with our guest host, parting shots from former ceo and get his thoughts of macro issues, too. our guest host is former chairman and ceo of coca-cola. sugar drinks, people talk about taxing them and our kids, are all fat because of these sugar drinks. is the future with coca-cola, is it going to de-emphasize, in your view, sugar drinks and go to diet coke and juices? >> well, it's been happening. and the data is, in the u.s., right, sales of the sugar drinks are down 10% from 2000 to 2008. so if you -- give me the logic of that that you want to tax it for obesity. >> quek headline on galleon. winding down all hedge funds. the amount of money he lost on some of the these trades. not a great trader. he lost more money on one bad trade than he made through all of these alleged insider trades. and we've been told earlier in the week that business as ushlg w usual was going on, that's not the case. >> who would stay at that point. >> redemptions until january 1 sglst some bro st. >> so it's possible to drink, enjoy a coca-cola in moderation, high test coke, with all the ills of society can't be blamed on soda. >> the problem that we have, always looking for simple solutions to complex problem. this is a complex problem. you listen, they're saying we want to work on the issue as a real issue,ing looking at all tesk effects, it's exercise, it's video games, it's everything. if you want to solve it you need a rational debate. to pick on one product is not right. my favorite is coke zero, you've got an alternative. you could have a zero calorie alternative. that's why coke is dill there. it's about tax. even the size of the public interest said, well, the modest improvement in health. it's what they focus on is, well, we need the money from n. for the health care system, here's one way to get it. it's a tax. >> thank you very much for coming in. appreciate it. >> appreciate it. that does it for us today. join us tomorrow. again, those earnings reports will be continuing throughout the day and throughout tomorrow. so we'll see you in just a few minutes with more earnings central. right now it's time for "squawk on the street." live from the financial capital of the world. this is "squawk on the street." we apologize. we can't hear anything. we'll just proceed as if we can. good morning, everybody. >> i can. >> you can? >> yeah. that's one of us. i'm mark haines. >> i'm melissa lee. certainly a lot of

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