Transcripts For CNBC Squawk Box 20120321

ben bernanke and tim geithner will testify before the house committee today. and a new poll suggests that the era of quantitative ease may co-- easing mae come to an end. you don't know -- whether they say one thing, whether we should think the opposite. but a march baker of america/merrill lynch says they no longer expect further kwav measures taking an easing. sovereign debt is still big. >> when you poll portfolio managers and you ask a question like that and it's three months of really nice action in the s&p, that's what they're going to say. >> right. that's exactly -- >> right that's p.r. >> it has nothing to do with their outlook on the economy or what they think about the fed. >> they're classic contrarian indicators. >> that's the word i was looking for. >> maybe not quite to the extent that the survey or retail investors is but i think they don't exactly have a track record of foreseeing the next move in the market. >> mr. wapner. >> does anybody really? do you have a view on this? >> no. i mean it -- no one has a -- i don't think anybody has a great track record. i mean, yeah, there are people who have gotten it right, but it's obviously been proven difficult over the last serval years to know either where the economy is going or where the stock market is going. don't you agree. >> did you see -- am i crazy? >> what's that? >> goldman sachs came out with a bullish stock market. >> yeah. and they're not doing it on the stocks but saying it's time to shift toward equities. >> sit new or unclear? >> unclear. >> i read it at 4:30. i didn't know if i missed something from before. what else is going on? >> one economic report of note today, existing home sales, 10:00 a.m. eastern time. forecasters aring look for a 1.3% increase. let's check on the markets this morning as well and take look at how the futures are setting up after yesterday's moderate selloff. right now it looks like we would have a higher open, about 1/4 of 1% gain across the board off the open today. take a look at what oil is doing this morning. crude oil is higher. 106.64 is where wti is. brent's pushing 125. heating oil and rbob as well. 10-year yield, sitting at 2.37%. dollar euro, the euro moving slightly higher, 1.326 is where that trade looks and taking a look at what gold is doing in the precious metals market, there's a look at gold moving 1% higher. >> in corporate headline this morning oracle posting better than expected earnings. a rise in software sales offset a sharp drop in hardware revenue. they did pull back from session highs after the company offered caution sales guidance on the current quarter, and hewlett-packard is going to hold its annual shareholder meeting. the proxy includes an advisory save on pay vote. it's big. i don't want to say it's big, but it's important in the corporate governance world and. to retain a particular incentive. hp is set to announce a reorganization involving its printer and pc groups. >> what do you think about that, by the way? sort of reuniting the printer and the pc groups. >> it's supposed to go the opposite way. i don't know. i don't know. >> do you think they're -- do you get the feeling as though they're headed on the right path? that -- >> no. >> that meg has a real clear idea of where they're supposed to be? >> no, don't thing you can. >> what you said is there's going to be a proposal for insiders to be reyearquired to more stock. the interesting thing if you remember, go back a few years, there was a lot of turmoil on the board and i think as a percentage of board representation of actual shares held, it was shocking how little actual stock members of the board had in hewlett-packard when they were makes these dramatic decisions related to the company, related to management. >> do you believe the board members should be either compensated more than they are or should be holding a lot more stock? >> well, isn't it about aligning incentives? isn't it about saying at least the level of compensated. >> your compensation should be 100% in stock for that board that you are sitting on. there's no reason why a board member should be paid cash comp. there are certain expenses associated with requirements of being on a board, but my viewpoint has always been if you're going to be on the board, you should have 100% of your compensation in stock. now, as far as retaining the stock, owning it, you want to see board members believe in the decisions that they're making and therefore if they do have a certain amount of their own money invested, let's say, in equities, you'd like to see a particular percentage in that. >> that's the suggestion. >> a significant percentage of their own holding. so you think they should be overweight -- >> if you have a board member -- by the way, wilbur ross will be here. we could ask him this question. if you're on the board of company and you're a billionaire, that's a certain percentage of your money should be associated with that board. if you're worth a couple of million of dollars, it's a certain percentage, obviously less amount of money. >> if there's more quote/unquote skin in the game, do you think the boards would be as attractive as it would be? suddenly you're getting six figures to be on the board i don't think that most board members, with the exception of maybe some academics, most board members are going on boardses for the money. >> you don't -- >> no, no, no. >> it's a relationship thing. >> you put it on the resume. >> it puts you in this sort of rarefied world. it's a good thing, but i don't -- >> it's a good chunk of hampton spending cash. >> for a couple hundred grand -- i know certain viewers are going to think i lost my mind. >> what about the retired executives who sit on four or five boards? if you sit on, let's -- >> no, no, no. there are people who are professional board members. >> there is significant income and very little expenses every time you get on a plane, every time you go somewhere for an off-site -- it's a pretty attractive way to earn a living. >> i agree. but a ceo traditionally -- let's -- let's use mickey drexler, ceo of j. crew. he's on the board of apple. >> yes. >> he's not on the board of apple because they're giving him 200 or 300. by the way, he probably made more of that because he's probably got stock. >> for every mickey drexler, how many have the motivation of being on as many boards can they be on for rewards. >> but the professional is doing it for the money, but when you look at executives that are on other boards, it's for experience and how it relates fwook your business. >> but going back to how we began the conversation, when i was managing money and investing, we would always look at board members, their alignment with shareholders in the sense of not necessarily even options but how much stock, how much actual stock. they take their own capital and wanted to believe in the company that they were helping guide. and by the way, if you look back at the historical track record of making investments of using that as one of your criteria, it's actually very good. >> by the way, you go back and look at the boards like lehman brothers, did they have enough skin in the game, right? >> there's only one question on this, too. i don't know if this is entirely fair, but if you align it that way where you're overwhelmingly getting paid -- >> it changes the incentive. >> it does change the incentive. you could argue long term, you want to make sound decisions for the company but should you not have members on the board who are woolly academics, taking their couple hundred thousand and thinking yojd shares for the next six to 12 months? >> looking back at diversification versus human capital and, again, academics are good because they bring a different way of thinking. they're highly analytical and they will typically want management to do much more kwanlts tayive analytical work for them to make the decisions as opposed to somebody -- i have to address what you said at the lee man board obviously. good time for us to plug -- "too big to fail," an excellent board. you know lehman brothers cons t consisted of a lot of board members. there was obviously -- >> you can use bear stearns board, if you want. that's okay. >> lee man board has people on it that were old-timers that weren't really -- >> in the game, if you will. >> -- in the game in the sense that they were probably not asking a lot of the right questions, and i felt as somebody internally there all along they didn't necessarily blame management for a lot of things. i felt that between the bear sterns collapse in mair of 2008 and the lee man collapse in september of 2008, my greatest question was where was the board. and i don't have to mention the names. you can go google it. look. you can see a lot of these people did not have a lot of experience in financial services. >> but i wonder if they had a lot of money on the line if they would have thought differently. >> the answer is they did not. >> they did not. >> no. we've got other news to get to including an fda panel voting against an experimental merck drug for a rare type of cancer called sarcoma. meanwhile they approved of a galaxy oh smith klein treatment. this always concerns me when the drug doesn't make you live longer. the panel said galaxy o'has helped delay tumor growth in the most vulnerable patient. in global new this morning the nigerian finance minister and former colombian financial monster are formalally set to league the world bank. the hold on the top post has never been contested. the u.s. has yet to publicly identify a nominee to succeed robert zell lick. they voted early today in favor of the new agreement. the communist party had staged nationwide protests against the deal. time for the global markets report. rebecca meehan is standing by in london. hey, becky. >> let's take a look. you might recall that yesterday we saw declines for the major european markets. and about here, i actually fell over. that was the most exciting thing of the day. i'm not going do that today. i'm going to update you on what's happening. we started off looking pretty strong when we came in this morn bug since then the gains have begun to taper off. we are still higher overall but only by a fraction, not even 1%. looking around the region to see how this breaks up, it is very different, depending on which market you look at. here in the uk, we're looking at gains of about 1.2%. in germany the dax is moving by 9.3%, almost 9.4% for the cac. if you look across to what's going on in italy, declines coming in at nearly 4.4%. in italy where they're struggling with austerity, the standoff between the unions and the governments, so that's speaking markets there. the euro/dollar is currently trading at 1.62. the euro/yen is also moving up by about half a percent. in fact, significant moves there. dollar/yen at 83.82. there will be a great deal of attention today on sterling as we get further into the day because we we have the uk budget. now, along with many european countries, think it's safe to say all european governments, they're trying to hang onto the prize, the triple rating. clearly growth is flagging badly. so the chance of george osbourne trying to tread the fine line. plus we had the bank of minutes. the policy committee minutes. they decided to leave minutes changed. so we found ott at least two members or two members exactly voted for more quantitative easing and say just because we've got high unemployment that doesn't mean we will necessarily get the capital inflation. we fond out yesterday that inflation is remaining stubbornly high in the uk. not coming down as quickly as the bank of england has hoped. speaking of budget, we should point out that we also have some budget announcements coming today in germany as well. speaking of germany, this is where the ten-year german debt is trading right now. we're looking at almost 2.1% for the bund. and in the uk, the ten-year debt is at 2.4%, ahead of that all important budg which will come out a little bit later on this afternoon. in spain, we're looking at debt yielding 5.2%, which clearly is a great deal higher than levels in the uk or germany for instance. the treasury in the states as well. but spanish debt has climbed significantly in the past few months and this time yesterday we were mentioning how the previous auctions of more short-term spanish debt, how the yields are coming under control as well. compare that with what's going on in the states. as you know, about 2.37 percent is where yields stand right now. back to you. >> in political news this morning, romney killed it last night. that's basically what happened. he report add very big win in the illinois primary. he outspent rick santorum 7 to 1 there and won with 47% of the vote. here's how the delegates' count now stand. take a look. romney, 485, santorum, 191, gingrich, 137, and mr. ron paul himself, 34. joining us from the windy city of chicago, our chief washington correspondent john harwood. mr. harwood, good morning. >> morning. >> is it over? can we finally say the math doesn't add and call it? have we been saying it from the beginning or no. >> i do thing it's over. last night was when we found out whether mr. santorum could turn over the race, which is what he had to do, and he just didn't have the strength to do it. at some point a challenger like rick santorum has got to break through in a big contested industrial state, not just count on going south like he's going to go to louisiana this weekend and try to pick off a win in a very favorable ideological circumstance. he might win louisiana. romney could get a boost -- the polls that we've seen, there haven't been that many in louisiana, showed santorum with a narrow lead. but even if santorum wins there, think thank what illinois told us on the heels of michigan and ohio was there simply is not the oomph in his candidacy. they're not doing a valiant job, dhiejts have much money, romney's got a big machine. at some point you look at the reality and say they don't have enough to stop him. >> hey, john, on the money issue. andrew read that intro and the headline was -- the headline was romney spent "x" amount more than santorum. >> 7 to 1. >> again, why is that necessarily relevant? the fact is he spent a lot more in other states, correct wrrks the return on that invested capital didn't necessarily result in winning the state or having more delegates. why is it when romney seems to spend a lot of money and win that's the focus. >> because his opponents are making it the focus. but i agree with you, gary. i don't think it's important. first of all, if you're a republican, you want somebody who's going to raise a lot of money. you don't want somebody who's going to run a ragtag campaign who, you know, is nickel and diming his effort to defeat barack obama. that's first. secondly, you know, that's sort of the way it is. if you don't have resources, you get outspent and ultimately you have to put victories on the board. so mitt romney has always had more money than everybody else. he's had more money in states that he's won and states that he's lost. i will say that there are some places where he didn't invest as much. he didn't have 7-1 advantage everywhere, but, you know, i -- at the end of the day i agree with you. newt gingrich was making that an issue. they're trying to say pound for pound, we're a better candidate. and rick santorum was dropping back. we're winning the rural areas and small towns where the conservatives really -- you know, that's the heart of conservatism. that's fine, but there's a loet of big cities in the country. you've got to carry those two and if you don't put it in ways to make majorities, you're not going to be the republican nominee. >> this is the judge, by the way, if it's not over, at what dpoinlt we start seeing the balls, the gingriches or anybody else for that matter start to drop out of the race? >> that is a matter of accepting reality and making reality fit with their own plans. for example, ron paul has known from day one, has never had the slightest bit of delusion that he was going to be the republican nominee or vice-presidential nominee. that's ridiculous. has his own reasons for going to the convention. he'll go take his delegates. it is quite possible that rick santorum and newt gingrich also go all the way to the convention, don't drop out because they -- they're sort of meshing their own campaigning with their principles and believing they can advance it. but it doesn't matter that much. they can fly around the states and make speeches, and it didn't really affect them all that much. it only affects them if you've got a challenger who can really heart the nominee or the eventual nominee, and i think we're seeing they can't. >> where's the sheldon adelson, for example, on gingrich? is he still writing checks or is he stopping? how does that work? >> i talked to a friend of his. i don't know that there's any confirmation of that from adelson. but you notice that newt gingrich, you know, got very low double digits, if he got double digits in illinois. i didn't see the final numbers. he is a marginal figure now. and, you know, could he win the state of louisiana, i spoeps that's possible. but even if he does, does anybody seriously think newt gingrich going to end up as the republican nominee? i don't think anyone who looks closely at republican politics does and i suspect that sheldon adelson who has a lot of friends supporting mitt romney who are talking to him is going to look at that reality like o'people do. >> have you recovered from the duke loss yet, just curious? >> no, i have not and i won't until next season starts but look out because we're going to be good? you notice i didn't send you any tweets or anything about that. i was trying to -- >> that was very gracious of you and gary will notice i wasn't giving him a hard time about kendall marshall breaking his wrist. >> i didn't bring it up. >> i think he's great kid. i hope he gets better and i hope he plays in the tournament if his dodge tors say it's okay. although, if i was his dad i might not let him do it. >> john, we're going to leave right there. appreciate it. >> you bet. >> coming up we'll talk to a top market strategist next. but up next, roy williams says his team's reparation is to play without the aforementioned tar heel. he's recovering from monday's surgery over his broken wrist. "squawk" will be right back. in what passes for common sense. used to be we socked money away and expected it to grow. then the world changed... and the common sense of retirement planning became anything but common. fortunately, td ameritrade's investment consultants can help you build a plan that fits your life. take control by opening a new account or rolling over an old 401(k) today, and we'll throw in up to $600. how's that for common sense? . . . there's nothin welcome back to "squawk." they have approached investors seeking a billion dollars for its second fund. elevation partners shares its name with the hit song released by bono's u youtube band. back to you. >> they made a fortune off this facebook thing. >> elevation. >> right over there? >> you're going to sing? >> that was like furniture falling. >> now that the show's gone completely off -- >> let's talk about today's national forecast. jot williams joining us from the weather center. scott? >> good morning, scott. the temperatures continue to elevate. we're talking about just in the past ten days, over 2,000 records across the country, and more record warmth is expected throughout the balance of the day today. so certainly we're looking at temperatures above average. new york city for today, we're looking at highs in the mid to upper 60s in a few locations. boston, what about 77 degrees for the high today. low 80s in burlington and syracuse. what about chicago? yeah, if you have travel plans there, make sure you bring the short sleeves and shorts. 85 degrees for the expected high. smashing the old record of 77 degrees likely later on this afternoon. through parts of missouri, arkansas and also louisiana, we're tracking a heavy rain and flash flood threat. this upper-level low appears to be stuck over texas and oklahoma. take a look at the plume of moisture. that means we're looking aet a heavy rain and severe weather threat. denver, 36. 60 in charlotte. upper 50s. foggy conditions in new york city. so some of the first flights out, watching for potential airport delays because of the fog. the fog will burn off new york city. we're looking highs, mid to upper 60s, so a beautiful day after the morning clouds. mid-80s, chicago. storms in dallas. phoenix, 76 for the high temperatures this afternoon. of course, the air travel concerns, we'll watch out for showers and storms in houston as well as new orleans. back to you. joining us now, david joy. welcome. >> good morning. thank you. >> interesting to juxtapose that. they're saying it's time for a historical shift, perhaps it's time to shift. >> i turned a report on -- the goldman report and it struck me maybe they should have made that a couple months ago. >> shots fired, shots fired. it's time to achieve the markets over the last two months, maybe the last five months. pull it back a bit. it seems the market wants to consolidate here. i'm not saying exit the markets. trim your positions back to sector neutrality. >> so you don't expect for us to come out of the gate quite so strong. you thought it would take an entire year to see these gains. what's going on? >> well, i think we rallied for two basic reasons. the first is strength in the economy. it has started in october, continued since. the second, of course, is the stability in the european and banking system. those things, i think, are well priced in the market. looking forward, we're going to be focused more on economic fundamentals. we're going to have to see economic fundamentals in the u.s. at the same time while we're waiting for that to appear, the emerging markets seem to be softening. they've flattened out. china has flattened out. industrial commodities have flattened out. >> this idea of a momentum shift from emerging back to developed markets which runs against everything that we learned or thought about for the last couple of years about the heavy indeaded industrialized market. do you think it's a short-term shift or long term? >> several months to maybe several quarters until we find out just how successful china has been at engineering a soft landing. but the reporting we're getting out of china is commodity stockpiles are pretty heil and therefore demand for things like copper, for aluminum, for iron ore are pretty soft. then they can get onto a more stable sustainable growth path, then it will be okay. cheerily the emerging markets of the world will going to produce the better earnings. >> they've got the population of the middle class. >> and better valuations too. >> curious, if people are taking their money out of stocks, where are they putting it? they're overconcerned about rising rates. >> yeah, one of the concerns i think i've observed talking to our clientele, they vlkt been as observa observant. now they see rates rising so their net asset values have pulled back. i think a couple of alternatives are the floating rate market relatively stable navs, credit quality improving along with an improving economy. that's one place to achieve stability and earn an income that's better than inflation. >> leveraged loans. we can save that conversation for another time. david joy from ameriprise financial. thank you for joining us. coming up, andrew? >> i'm not coming up. the future pitch for chicago is coming up and we're going to talk housing with case from case schiller. first take a look at the gainers. if you are one of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. 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[ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪ coming up and we're going to welcome back. joining us from the cmi this morning, yra harris. i guess you've heard about this goldman sachs call and heard joy talk about the time limits of it. you've been thinking about what we would have had the last couple of months. is today the day they would put more money into equities? >> i think on the reallocation, we've been seeing it -- you know, we've talked about it for quite a while. once we broke above, the bond s&p indicator, broke above the 200 a day moving average back in early february. it's been almost a 12 or 13% move. so, you know, we can go sideways here. as you know as well as anybody, working sideways is probably the healthiest thing for any market. if you get little bands of flux yaks, 1 or 2%, that's okay. when was it, i forget, a week ago, 2 1/2 weeks ago. you can do very nicely here and the long end of the curve will be important here because what we're going to look at is not just the price of the curve but in essence the real yield. we know that on the short end we are negative, but the long end is approaching where we're getting real return relative to tin flags rate. how far that gets extended will be critical. >> you know, you mentioned the bomd market and a lot of your colleagues were watching yesterday. i think it was -- let me make sure i get the data right. 31 years. it had been 31 years that youdy not have interest rates go up for ten days in a row which did not happen yesterday in term os testify ten year. that 31-year track record of not having ten days in a row of yields go up was not, in fact, broken. what about this correlation. do we have to continue to watch the ten-year every day and watch every tick up in terms of yield and the effect on price to figure out if there is going to be that has not been this correlation, but do we have to be concerned about it coming back? >> again, we owe -- maybe 31 years but we haven't had the fed involved this our time unless of -- you were born in '51. i was born in '53. we have the fed involved in an interesting way. the big thing is what's going to be the effect in the long end going into the peak part of the housing market as morkts rates jump up over 5, 5.5%. we have to come back to it from a couple weeks ago and what the feds said they could do with the reverse repos. i think that comes into play here because the fed cannot allow those rates on the mortgage side to get too high because that will really staal out whatever was -- whatever traction the housing market was going to be. so i think that's why it becomes significant to watch it. >> excellent point. you must have been listening earlier when we weren't on camp campus. i was born in '64. on this set, i'm the old man. have a good day. >> start calling you gram ps. >> do you think it's interesting and plays into what ira is saying? >> the bond guys are loathe to say now's a good time to go into equities and the equities guys are loathe to say now's a good time to go into treasuries. you asked him. >> yes. >> you said what's the -- >> no, no. >> you have to remember. yra -- yra has been somebody, a lot of this technical trading and a lot of them that were on the s&p, the negative guys that were on the s&p back in october and november, as you know, especially the strategists on wall street, it with us the bond guys that were willing to sort of say we think things have technically bottomed and it's important the correlations. yra brings up a great point. he says those that watched the correlations. if you knew what was going to happen in the tenure ore the last couple of days in terms of the percentage move, you would have expected in terms of the pair trade, the s&p would have had much more of a percentage correction. >> how useful has the vix been? if you had bought stocks back when it was peaking in the fall and sold when it was falling to the lows, you would have done great. >> scotty, to answer your question, most of the bond guys if you want to call them bond guys were recently up in the early move in terms of the equities guys. i think about it. >> hi. what do you mean by that. >> you remember. we had guys come on. they said we might test the 2009 lows in times when there was an expectation that we were going to have a significant correction at the end of last year. it was bond guys that were more willing to say, thing the s&p -- >> things have turned around. i just mentioned that because we didn't see -- the ten-year, for example, stayed so long for so long. it wasn't as if that kind of anticipated things so much. you're right. maybe the mentalities thing was showing. >> yes. you have to wonder. how long can rising rates and rising stocks co-exist? >> as long as the economic outlook is improving. >> i think yra harris had it. you're in a period where central banks around the world are pushing up equity prices, so you can't have bond yield prices go up and you can have equities go up because they're forcing seattasset allocations. if rates keep going up, energies go down, you know, you never know how long that's going to last. >> right. >> that's all i'm saying. >> andrew sorkin, we didn't get a chance to mention your tie. we've got to run. >> you've got to run. >> you've gob that 1980s woolly tie. >> it's the end of the season. the only reason you know is the bottom is flack. >> took the scissors. >> noticed right away. >> i think the music is trying to play us out. comments and questions you see including andrews tie, e-mail us. coming up, case schiller each month, it's a market-moving report on the state of real estate. mr. case will talk about housing rates and much more. so stay tuned. ♪ [ kareem ] i was fascinated by balsa wood airplanes since i was a kid. 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[ cheering ] [ tom ] i wanna see that again. ♪ we're back on a wednesday morning. if you could only hear what goes on during commercial breaks. investors are watching closely to see if there are any hints of recovery. joining us now with his thoughts is kip case. you have to explain he's the co-founder of case schilling. thanks for being with us this morning. six years we're in. how's the market across the board? i'm reading barron's over the weekend an they say happily if i can just wait till the beginning of 2013 we will finally see a rebound. where are you on that? >> boy, i don't know. it's hard to -- you know, you try to call these bottoms and tops, and it's impossible to do it. i mean i think the market's been showing some signs of life. they're not -- it's not going to be back to wait was like at the peek when we were doing 2.3 million in home sale as year or 2.3 million start as year, $4.5 billion of gdp, but it's starting to show some signs of life, despite the huge overhang and shadow inventory and other stuff that's out there. it was pretty discouraging actually and prices have been for obvious reasons not rising. >> policy question. if you were king for day and you could do whatever you wanted in washington and you believed the government has a role in all of this, you would do what? >> i'd probably do what they're doing now, just try to -- try to get the inventory down, figure out what to do with fannie mae and freddie mac and fha. they've got to take the risk out of the government's hands and put it back in the private sector. that's going to mean an increase in rates so i think you've got to wait things out, hope the economy stays on track because if the economy stays on track, that paper won't lose any more value and you'll see the beginnings of housing helping out. we've never gotten -- we've never had a recovery from a recession without housing, and we have one now. i mean we've got housing starts at 60-year lows. it's unbelievable what's happened in the housing market. it's gone down 80% of what we were doing at the five previous peaks, so it's -- it's -- i think you've got to wait for that market to just deal with the problem assets while it's showing signs of recovery already in the markets. >> mr. case, it's scott wapner. let mr. case, it's scott wapner. michelle caruso-cabrera says you were her favorite professor in college so she says hi. the other half of kay schiller says real estate is a good investment. warren buffett says the same thing and many others. is now a good time to beltway house? >> certainly the best time we've seen in five or six years. if you think about it, it's unbelievable how much we've got standing behind housing. first of all the income from it. the major income to somebody who buy as house as an investment is the rent you get by living in it. it's not taxed and it's about a 6% return. when you add on to that the fact that you can, you subsidize in terms of borrowing by the interest deduction the property tax deduction the existence of fannie mae and freddie mac, the low rates that qe2 and so forth are bringing us and it's just an enormous subsidy across the board in housing and we have to cut it right when we need thoughts come back to keep the recovery going. >> we were just talking about rising interest rates on the show and i'm just wondering what you're thinking about in terms of where rates could go from here and then how that would translate into rising mortgage rates and what that would possibly do to any recovery we're seeing in the housing market? >> well, rates are really low right now obviously if you qualify for credit. the problem is there are a lot of people who wouldn't get credit today if they were looking for it and are not getting it and not qualifying even to refinance. and that problem is that the risk premium is not being charged because the guarantees are still in place for the paper that's being held by the government and purchased in the recovery period. >> one last thing do you support eliminating the mortgage deduction. >> no. but it needs to be looked at and modified in the context of other parts of tax reform. >> we'll leave it there. chip case thank you so much for joining us this morning. >> pleasure. >> coming up wilbur ross the vulture investor on opportunity for money making opportunities. we'll land on our set. that's coming up at the top of the hour. carfirmation. only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world. and then decided that wasn't enough. two of the most important are energy security and economic growth. north america actually has one of the largest oil reserves in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands with the same emissions as many other oils and that's a huge breakthrough. that's good for our country's energy security and our economy. coming up, our guest host is circling. we'll be welcoming in famed vulture investor wilbur ross coming up next. speaking of legendary investors, jim o'neill will join us. he defines the term bricks. eel tell us where the best growth opportunities are right now. stay tuned for that and a lot more coming up after the break. paid-in-full discount. 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'cause he's a scotty. oh. scott: get scotts ez seed. it's guaranteed. seed your lawn. seed it! scott: get scotts ez seed. it's guaranteed. . good morning. welcome to "squawk box" on cnbc on this wednesday morning. i'm andrew ross sorkin along with a very special cast of characters. gary kaminsky is here. kelly evans is here and scott wapner all in the house. you didn't bring your gavel today. >> no. i feel at some point you got to stop bringing the gavel. everybody knows, right? >> because you are the judge. we got some big headlines this morning. >> there it is. don't you feel good when that's playing. it makes me feel better. for the third straight day the investors will get a reading of the housing market. realtors are out with existing february home sales. congress looked for a 1.3% rise on top of january's gain. republican front-runner mitt romney, he killed it last night. he won a key victory in the illinois presidential primary. romney easily beating rick santorum collecting 41 new delegates to bring his total to 485, santorum has 193 delegates. has now vowed to press on with his campaign. we're watching shares of oracle this morning. the software giant earned six cents above estimates, also provided current quarter guidance. oracle says its bottom line was helped by a jump in new software license sales. take a look at futures this morning. if we can. flip that chart around there. nice green arrows. dow would open up seven points higher, nasdaq opens four points higher. let's welcome our guest host this morning, joining us for the next two hours, a man who we call a vulture investor but we do not consider it a pejorative. wilbur ross chairman and ceo of wilbur ross and company. >> maybe you don't call at it perjorative but do i. >> you take offense? >> take offense. it doesn't make it a fact. the bird should be the phoenix the bird that rises again from its own ashes because we don't pick dead flesh off corpses we try to rehabilitate them. >> i was watching romney give a speech last night, his victory speech. and he said something very interesting. dodd-frank, he was talking about regulations, he said because of dodd-frank today if bill gates or steve jobs wanted to go out and get a loan for the next microsoft or apple, they couldn't. and that that is a function of the regulatory environment we live in today, you own banks, you're in the banking business. what do you make of that? >> well, i think dodd-frank and more particularly the consumer protection bureau are making it more difficult for banks to make loans because they are frightening the loan officers on the desk. they are afraid they will be picked over. it's a terrible environment from that point of view. and i'm told that at one of the big banks, consumer protection people made the bank write a letter to tens of thousands of their mortgage borrowers asking if they had complaints and when they didn't get enough responses, made them redraft the letter and send it out again. >> really? >> one thing for a federal agency to deal with problems and try to correct them, it's another one to look to create problems. >> i'm going to take your side. this is something that people would expect to come out of your mouth. but, wilbur, if in fact steve jobs or bill gates started the companies they would never have gotten bank financing in the first place? >> that's right. >> today if you want to start an apple computer you don't go to a bank. you get private capital in the form of private equity. >> not when you're starting. >> flip back. wilbur you wouldn't have made a bank loan. >> i think governor romney was using that a little bit hyperbole to make a point. it wasn't literally that start up companies used to get loans and now can't. he was trying to point out it is very hard for small and medium enterprises to get loans, even hard for individuals to get loans for the same kind of reason. you can't have shell shocked loan officers and easy money. >> if i have a business, let's say i have a business, it's a retail operation i have, let's say five locations and i want to expand to ten and i've identified the markets, i've identified the business opportunities. can i come in to your bank right now with existing cash flow but i definitely need to get debt financing and get it? >> sure. bank united, the first one we got involved with down in florida added over $700 million in loans in the last year. so some banks are making loans. i'm talking about the typical bank who has capital constraints, has all sorts of issues in addition to the regulatory overlay. >> is it the bank standards? someone said to me the bank standards are closer to what the world looked like in 2002, 2003 and it's about us resetting our expectations about who is supposed to get a loan. you buy that? >> well, i think credit got too lenient, and there's no question that was true not just in terms of subprime mortgages but one terms of loans in general. >> right. >> we became debt druggies as a society. i think the private-sector has gotten away from that. you're seeing reduction in consumer borrowing. you've seen a little bit increase in savings rate. now it's time to get government off being a debt druggy. >> do you think the argument that it's being overstated that it's difficult to get a loan when in reality part of the problem is there's just not as much demand as well? >> there isn't as much demand because while unemployment has gone down a little the economy isn't that strong. 1.5%, 2% growth is not exactly shooting the lights out. >> real quick to change the conversation. goldman sachs out this morning with a very bullish note on their view that equities are the place to being right now. that we're about to go through some -- inflation was part of their argument. >> equity risk premium, going around and around is the equity risk premium stale at these unusual levels or does it circle back to norms providing a big tail wind for the market. >> but so many others came out with the opposite or at least said we're is going take our foot off the gas for now. where would you be. >> i rather be in equities than ten year treasuries. the greatest bubble about to burst is the ten year and longer treasuries because the idea that inflation is gone forever and tore all time and therefore these artificially low rates can last is silly. >> good time to bring in our next guest, let's bring in rebecca pa terrifyson. rebecca, you're listening to what andrew and wilbur, if i'm a jpmorgan asset management client and i couple to today, 100% cash because i'm basically have been in cash for the last four years, and i want to grow my assets. i want a little income. what do i today? >> we're taking risk. we're advocating having risks in the portfolio. the economy in the u.s. is not doing great by any stretch but at least it's positive and improving. so we want to take advantage of extraordinarily easy monetary policy and improving growth backdrop. we're in equities, primarily u.s. we're diversifying our risk so we have high yield corporate debt, emerging market debt. bank loans which will take advantage. we have quite a lot of alternatives right now. a lot of our clients want the return but they got spooked last year by the volatility. they are willing to give up some liquidity. >> a lot of your clients and a lot of our viewers have fixed income portfolios. >> ah-ha. >> they need to generate income out of those portfolios to s subsidize their lives. what do i do today if is that my investment objective? >> i mean, we do hold some government debt but we are underweight g7 government debt. we're looking gone emerging dmaerkt. your average policy debt is about 60 basis points. your average he merging policy rate today is over 500 basis points. with better fundamentals. so we want to be in emd to get the yield and fundamentals. we want to be in high dividend equities, not all of them, the utilities have gotten over valued but active management can pick the stocks makes sense. corporate, high yield corporate debt still gives you a yield. bank loans give you a yield. there's a lot of ways and not just in bonds. >> if i buy emerging market debt do i need to worry about currency, do i need to hedge myself out for bringing the currency back. >> the next 12 months i don't think so. we're in a place right now where global growth sim proving. people are looking for yield. we're seeing a lot of yield going into the emerging markets. one good thing is that central banks are fighting back. brazil says currency war. that's good because they are intervening to keep the currency in a range. as a dollar based investor i don't get a lot of tail wind from the arenacy, i don't get a lot of help from the currency but it's not going hurt me. they will be quiet this year. that's fine. i'll take the yield. thank you. >> you own equities? i assume you buy just business as whole or do you actually play the markets? >> we're not traders. >> i know. >> we listen to people like jpmorgan for trading. >> thank you. >> but in terms of equities, do you have -- you sit on the board of esco resources. trading equity company that has obviously been impacted by the natural gas. >> absolutely. >> in a situation like that as an investor, you obviously got the commodity issues. walk us through how a long term investor looks at a company like that. i recognize you're on the board and you're limited what you can say. if i'm a long term investor what do i think? >> what we've been doing, our entry point was a little bit high to begin with so as the stock went down we continued to buy more. that's our normal thing. for us the one good thing about being in a public stock is if it does go down we buy more and we just lower our cost because if the story is in tact we're long term holders. we're not trading for a day or a week or a month. so if the fundamentals were right before they got to be twice as right as half the price. >> we're just looking at that chart. not a pretty picture. here obviously impacted again given the commodity price of natural gas. you own a security like this. this is something that you got a time horizon of what five to ten years? >> whatever number of years it takes. we don't have a specific time horizon because markets at the end. day tell you when you should exit. but i think the natural gas thing is very enlightening in that it has to be a really important part of the energy program for the united states and the whole warld and it's fascinating that the very fact that we found so much natural gas is what's created the problem coupled with the warm winter which exacerbated the supplies. so these are time limited problems. and we like very much to invest in companies during time limited problems because eventually you get through that cycle and then the fundamentals come back out and to me the fundamentals are u.s. is going to end up being in that exporter of natural gas, that's going to be a wonderful help for balance of payments, reduce our dependence on a lot of countries that aren't so crazy about us, and change many, many parts of what goes on here. >> wasn't there at that report out this morning that the united states is now the fastest growing producer of oil and gas in the world? >> yep. >> it is indeed. it's largely due to the shale. and what's compounded the problem for natural gas is that a lot of natural gas in shale is found associated with oil. well with oil at $100 plus a barrel, the natural gas is kind of a by product. the driller almost doesn't care for the moment what he gets for the natural gas. again, it's a time limited kind of issue. >> rebecca, on oil, your recent note you mention oil may be the new greece. trying to figure out what may cause that. explain what you mean. >> i think it's great that yesterday was march 20th. we had over 14 billion euros of greek debt mature and no one cared. you guys didn't talk about it all day. the fact that it wasn't a story is a great story. oil is a story at $124 barrel for brent. it does if it gets too high and moves too quickly. the good news compared to last year other commodities aren't going up. we're seeing a lot of food prices coming down. last year we had the double whammy of oil and food going up. we're watching oil. it would create stagflationary fears especially if it's supply driven. we don't know if it will happen. no one can predict israel and iran in the next 12 months. >> so far oil has not been supplied. there's not one gas station anywhere in the whole united states -- >> it's just risk premium at this point. >> if the price is higher than otherwise because of concerns about geopolitical events. >> it's speculation. supplies are fine. what you have is the future market speculators pulling up the spot. >> should thereabout a crackdown on speck lay tors. >> up don't need a crack down. the saudis are doing a good job with the announcement they made yesterday. >> rebecca, thanks again for joining us. wilbur in terms of speculators. >> i don't want to sound anti-speculator. >> speculator, vulture. >> phoenix. change the language. >> still to come this morning consumers can't seem to get enough of its products but are investors ready to turn sour on apple's sweet ride? we'll ask an apple expert and talk tech. that's coming up next. then later in the hour, congressman chris van hollen, ranking member of the budget

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