Transcripts For CNBC Squawk Box 20120502

he's expected to meet with the banks on the stress test and other issues. andrew. >> let's get you kaupt to speed on the top story os testify morning. facebook's road show, it's going to begin on morn. founder and ceo mark zuckerberg is expected to be involved in the road show. that's big news. we're going to keep an eye on it. the justice wants a summer trial date. the company's requested a delay, but government lawyers say that a class action settlement between bp and a team of plaintiffs' attorneys shouldn't slow down for claims that aren't covered by the proposed deal. and we've got a little deal newses this morning. the current official of dress barn buying charming shops for 75 cent as share. that's about $890 million. charling shops owns lane bryant, fashion wug and katharine's plus size chains ee. i don't know about that shop. >> i know what it is. >> becky has no reason to know. >> isn't lane bryant a full figured story. so is katherines. there are movers from last night. trip adviser posted earnings of 38 cent as share. that was a better than expected 23%. trip adviser kind of trips off your tongue, doesn't it, spun off from media. they sunday after hours. >> i love that company. >> you know about that company? >> i will not go to a hotel without looking to see what tripadviser has to say about it. it's crowd sourcing at its best. >> you're kidding. a crowd called opentable. >> i use this too. do you? >> no. >> never? >> they're not using it enough. the company's earnings beat the street but a forecast revenue fell short of wall street estimate. analysts say it's an online restaurant reservation company and its international business is taking longer than expected to integrate the recent acquisition of a rival. and this is one that i saw the "fast money" guys predicting would make a hit. i don't remember if they said buy or sell. the quarter one beat the streets but broadcom warns that its gross profit margin from the fourth quarter could drop because of acquisition-related costs. >> all right. let's get a check on the markets this morning. right now, if you take a look at those futures, they are a little bit weaker. the dows futures are down about 18 points. the s&p futures are down about three points. but, remember, yesterday the dow did gain ground. it was up by about 65 points, touching at the heist level we have seen in over four years. 13.279 is where it closed at the end of the day. the gains have been even greater throughout much of the morning. of course, we do have those adp numbers that are giving up. they give a little bit of a preview what to expect on friday. in the meantime take a look at oil prices. oil prices down by about 41 cents. that is at $105.75. we've been sitting at around $100 for a while but things are picking back up. 1.94%. we talked than fedspeak that we'll be getting today. that moved markets yesterday and we'll pay attention to it as well. the dollar sup. dollar/yen, 80.29. euro is trading. and if you want to take a look at gold prices, they're down by 8.30 dlp. $1,654.10 an ounce. right now it's time to take a look at wa's been happening at europe. with that we're joined with the global markets report. steve sedgwick is standing by in london. good morning. >> for you and i it's wednesday. for others it's the first day in europe. they take monday off basically. actually that means they're playing catch-up and some of these markets were looking very good, but the data out of europe has been rather disappointing. we'll come to that in a moment. there are interesting stories. first of all, ubs is the top gainer in the euro stoxx 600. it's up 5.2%. and that's despite the fact that their net income figure really missed expectations by a long margin. they're going upward because the private banking business, the retrench eeds by that they put much in, the income and trading tivtss were pretty down in tough markets. have said they're looking forward to the future and these shares are down 30% by 12 months. actually doing rather well in session unlike the world's largest maker of wind turbines. now, this is vestas. it's a danish company. they missed expectations in the quarter by a really long margin and they're looking to cut costs, but real problem is they're facing vicious chinese competition. telling me he wouldn't comment on rumors that two of these chinese players were looking to take out the capacity in the sector. they're buying vestas wind systems. shares down 17% over the last 12 months. as we say, up half a percent. that's despite the fact that pmis and employment data out of europe was pretty horrible. apart from the spanish down 2%. most in positive territory. back to you. >> steve, thank you very much. again, steve sedgwick. >> what do you -- can i ask a question? a news question this morning? >> can i stop you? >> you could if you want. >> don't then. >> did you see our friend jack welch, diller, donald trump, all of these people come out in support this morning of the one and only rupert murdoch? did you read the reports? >> donald trump diddet on our air. >> it was like a concerted effort to really support the man in the middle of this melee. it's on the front pages of every paper this morning in "the new york times." "financial times." it's not -- it's actually on the front -- do you have "the wall street journal." i was actually surprised. >> not just on the front page. it was the lead story for the wall street jury room as well. >> did you find it interesting that all of these people came out in support of him or is it natural? >> i think it's natural. >> in the uk, the criticism was down party lines. see, i think that over here obviously you either love rupert or hate him based on whether you love fox news or "the wall street journal" or whatever you perceive to be his political link. over here the liberal left would love -- every single headline that come ts out about repert that's disparaging, they love. they rub it all over theirs bodies. i still think you sort of don't know where you're sitting. you think you're sitting right in the middle. >> no, no, no. i have a different view. i love rupert murdoch, the businessman. >> you don't like the ideology? >> no. some of the ideology i agree with, some i don't. as a businessman, i've always had a lot of admiration for him. though only there are a lot of people who question whether that admiration should be there. >> i think it's not only admiration, but some people fear it too. he's a very powerful map. you don't want to be on the wrong side. >> media employee gull, ran dafl hear heart. they're embarrassing. >> most of the political rhetoric that come out of the uk is embarrassing. >> you don't think this is a different situation? >> no. >> this phone-hacking scandal is a much more serious issue. >> i don't think you can tie it to a corporate culture that was engendered by this ruthless guy. do you think he was behind the hacking or promoteed a culture that inspired the hacking? >> i imagine there was a culture that allowed this to happen, whether it was pushed from on high or not. >> it sounds like it was pervasive through much of the british media, though. that's the bigger problem you have. was this beyond just one company. is this just the nature? >> i imagine it probably was. >> i also thing -- you any if i ever open up a business in mexico, i'm going to be the quickest business in mexico grower because every single official i see, i'm going to do what i've got do to get things open. you know where i stand. >> i do. >> you know where my moral bar is. >> it's at a different level. >> that right. >> different lengvel. >> exactly. those guys should be so lucky to be fit for their jobs as rupert is for his job. >> think this could impact the business for the first time. >> it's always been worrisome. the stocks had a few hits but it's back. it's fine. >> have you been watching r.i.m. by the way? that's a disaster? >> no, i haven't in a long time. >> this is the story. here. can we put that up? this is a crazy story. >> both were in "the new york times." >> and "the wall street journal." all the papers. yesterday, r.i.m., which has been counting on this new product, the new device that's supposed to come out in the fall to finally save itself, they give it out to developers yesterday, but, of course, it's not finished. it doesn't even work. >> i'm a blackberry -- huge advocate and huge user, i had the new bold. i had to get a new one because less than five months, five of the keys don't work. >> the only reason you're keeping it, you like the keyboard. >> that's the dumbest thing. if that's the case i'm going to the smartphone. if they're not going to keep it, i'm not keeping the blackberry. you just made my path that much easier go to the iphone. i actually got a new bold yesterday because i can't stand not having the keyboard, but -- >> you know wait seems to me that you're doing? finding any story you can to not talk about averages being at a four-year high because of my -- >> because of your correct call? >> yeah. exactly. let's get to that right now. >> do you know -- do you know what the s&p is up? call your buddy, adam parker, whatever his name is. >> from morgan stanley? >> he's looking for 400 on the s&p, isn't he? >> yeah. >> call him up. you know what he's going do. slowly raise his target so he doesn't look quite as stupid as he does right now. >> we have to invite him back on the show. >> he makes a lot of money to get this right, done he? >> he does. >> do you know what the -- >> don't give him such a hard time. >> do you know what the s&p is up? >> total percentage. >> yeah, percent. >> 12%. it's may. >> you're on your way. >> we'll see. >> i'll take any average. 115,000, remember that? it w >> it was down for april. >> down in april? >> it was. dow was up, but just barely. but the s&p -- yeah, i think it is. the s&p -- it was barely down in april. the s&p and the nasdaq were both down. >> year to date 1rks , 12%. wow. >> anyway, michelle is here. it's a lot easier to introduce her now. >> we'll be looking for an early snapshot when the tape joins us. michelle joins us now. big number in manufacturing which, i guess, in any type of bumpy recovery you see, you know, fits and starts and things like that. wasn't that a really good number? >> it was. manufacturing has been the bright spot for this -- throughout this expansion definitely coming out of the recession. really had healthy moneying growth. that sector went from being one of the worst sectors that really felt the pain and the downturn away from housing. manufacturing continues to outpace the economy. >> i was leading up to how that fits in with a 2.3g dp, with the claims numbers, with the 120. where are you from friday? >> 195, 200 on private. a little bit above con says sus. i think coming into the week there was a lot of nervousness, a lot of talk about whether payback -- >> for friday you're talking about. >> friday. i think it's now introduced two-sided risks. thing now people are feeling maybe this number won't be as weak as we had feared. the claims numbers are up. it's a little unsettling. this we this week's numbers are very important. it would suggest to me something is happening. >> you can get that number tomorrow at 8:30 on this show on "squawk box" on channel -- check your local listings. >> does this mean more volatility, michelle? there's more riff tock the downside than the upside? >> i think so. you know, the economy is growing about trend and it's going have periods where it looks better and periods where it looks softer. that's been the case ever since we're merged from recession and we tend to get overly optimistic thinking the economy can do more but it can't because it still faces headwinds. then we have periods where the last two summers talk of a double dip takes over and the truth is we don't have glarg imbalances that suggests that the economy is at risk organically for slipping back into recession. so the truth is as we keep saying to people, you have to fade the extremes. as we know now, the economy wasn't as strong as the data suggested. it's certainly -- again, we had a period of strengths and maybe catch-up. now we're seeing some settling back. the trick here is not to get overly pessimistic either. you take the economy for what it can do now. >> the warmest weather in north america that we've seen now, a fed that's so accommodating. still 2% below on the ten-year. what's wrong with the companies, the people who aople in a positn to extend the recovery? >> you know, i still thing we have a lot of uncertainty. i think between our own fiscal situation -- >> the fiscal cliff is coming. >> or the risk of it. there's all this uncertainty. our tax rate is going up for everything starting in 2013. are we going to have spending cuts which worry a lot of people in terms of the amount of fiscal drag. so, you know, when companies look around and say things look okay now, we're not going to bulk up and add a whole bunch of workers because there are people talking about going back into recession next year. >> huge catch tall deployment, ten-year. >> exactly. we've had that this whole recovery. uncertainty on the fiscal side. you remember, of course, last year with the risk of default and all the noise out of washington and of course the european situation as well. the tightening of the financial conditions. that also remains a concern. >> will the entire continent be in recession? >> we don't have germany slipping into recession, but we have very slow growth. >> whoo's going to stay out. will france stay out or are they at zero? >> they're out now but i'm not sure they can withstand it. now they're questioning whether or not to add considerable more growth and less austerity and how this all plays out. i tell you, the financial situation over there continues to be extremely unsettled. the impact of austerityausterit austerity on top of already weak economic fundamentals, that's the kind of thing we have talked about. while we hear good news and plans that are made in terms of providing support. what -- you know, so the market reacts positively when we have more action. the truth is people are underestimated the economic impact. >> the sovereigns are all -- they're all under water based on -- >> yeah. >> who finally bails them out? >> you know, in the end i think it comes down to ecb. >> there is a new study out today from fitz ratings from oxford ek nconomics that sugges that what the u.s. did in terms of stimulus and the policy initiatives that they brought in increased greg gate gdp by 4% after two or three years after the worst of the crisis. of course, it's hard to argue where we'd be without this. this goes back to that idea should you be spending more or should you go to quick austerity and make sure you get your house in order?or >> you know, i think in the end i sort of disagree with that study. i mean a lot of the stimulus -- i guess set us up for better growth. a lost of it in forms of tax cuts and temporary pay, we're saved. it sets the consumer up for a better path for spending now. in the end, i do thing you have to dras some of the strukt annual issues and all of the things europe is starting to come around for. you can't -- spending if it's not being -- if the structural problems are still there doesn't get you anything but a bigger deficit. >> they do go on to say that they thing up in of these fixes that came are anything that's anything long term and they do think it set us more in debt. so there are two sides of the coin. >> it all comes home to roost. that's what the u.s. is dealing with. how do we deal with our deficit? we talk about big spending cuts and having to raise taxes. that's going to undercut the economy's growth potential as we look out over the next five years. >> all right. michelle. thank you. >> okay. >> great to see you. i got distracted because tweet, tweet, tweet, all this treating. did you see how cool tweeting is? did you see yesterday tweeting and ho -- >> mandy drury about zweaters. winkle voss said it's going to -- >> he retweeted it. >> i wanted to answer someone. >> all you can do is cut and paste. >> i don't know,000 do that. i saw there was a retweet process. mandy's following me. i think i'm following her. i don't know. i retweeted it and the zweater is fully on its way. like i said, carmen looked like -- you looked like mr. rogers. he looked like stud. don't you thing? 6'5". >> he's bag guy. >> he said he could rip mark zucker berg from limb to limb. >> did he say that? >> in the movie. in the movie. they should have at the time. put anent to it. >> a good way to promote we have ben mezrich. >> he was the one who found your good friend eduardo, spider-man. >> eduardo -- that's how this whole book came about. bout it a little later. >> when we come back, president obama is speaking to afghanistan from the nation. winds down. we're going to head to washington right after this. but first as we head to a break, u.s. equity futures right now are indicated slightly lower, barely at this point. dow futures down by about 12 points. s&p down by over 2 points. "squawk box" will be right back. still ahead, fasten your seat belts and hold on tight. >> watch out. yikes. >> when the "squawk" team goes behind these wheels, you won't want to miss what happens. [ male announcer ] the inspiring story of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals, and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes... which still makes for a pretty enchanted tale. ♪ la la la [ man ] whoops, forgot one... [ male announcer ] sustainable solutions. fedex. solutions that matter. yeah, scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it! welcome back to "squawk." dow looks luke it would open 12 points lower. making headlines this morning, s&p is raising greaing greece's rating and general motors proposing to take a quarter steak stake in one third -- i never know how to say this company's name. can i get some help? isuzu. >> i say it wrong. isuzu's. >> it's isuzu's petals but it's isuzu. >> the investment would be worth son $3 billion but it's now seeking a smaller holding. it's now time for today's national forecast. scott williams joins us with the weather from the weather channel. >> all right. thank you so much. good morning, of course. here at the weather channel today, guys, we're celebrating our 30th anniversary on the air. so a lot of celebrations taking place as we take a look back at the '80s as well at weather.com. we'll find strong and severe thunderstorms around iowa, southern sections of minnesota, also into wisconsin with the red. a few showers, the upper ohio river valley toward the mid-atlantic and also clouds and showers will be moving into the northeast later today. so chicago, new york, washington, d.c., nod rat airport delays expected. take look at the showers and storms through sexes of wisconsin. also miner into northern illinois and iowa this morning. thunderstorm activity there. toward sections of the northeast, we have some light precipitation. right now moving through eastern sections of pennsylvania, washington, d.c., baltimore, a few scattered showers and thunderstorms around the delmarva peninsula this morning. the upper ohio river valley, we're tracking clouds as well. new york city, we're kweechlt off to the west, a little bit of light rain trying to move toward the east. the overall forecast for today, showers and thunderstorms around the region. low 80s in pittsburgh as well as washington, d.c. we'll find mostly cloudy skies. temperatures cooler for you in new york city. only tops out in the mid-50s for today and low 50s aunld the boston area. toward the midwest, warm temperatures. in 280s around chicago. 85 today. 90 toward louisville as well as st. louis. in the southeast we're looking at high pressure prts much in control but tapping into some of the moisture from the gulf, we'll find a few scattered showers and thunderstorms. upper 80s in tlarngs 90s in tampa. 90s for you in dallas area. for you, a few thunderstorms in the interior sections of the northeast. 90 degrees in raleigh. 89 degrees today in orlando. toward the south plains, of course, hot conditions. we'll find warm and windy conditions in the plains as well as those temperatures in the low 80s and toward seattle, we're looking at upper 50s for you around the region. low 90s in phoenix but sunny and dry for parts of the southwest and also into the rockies. you guys have great day. back to you. >> scott, thank you very much. the president addressing the nation last night after making a secret trip to afghanistan. >> despite initial success for a number of reasons, this war has taken longer than most anticipated. in 2002 bin laden and his lieutenants escape add i kros the border and established a safe haven in pakistan. america spent nearly eight years fighting a different war in iraq. ail die california da's extremists in the taliban have wage add brutal insurgency. >> john harwood joins us from washington with more on this. if you look at it, they say this was done right now to signal that the united states is still going to be here with some sort of a presence kornlting to support afghanistan. what do you think about the timing? >> well, the balance the president's got to strike is to indicate to the american people that this war after ten years is winding down. it's not a popular war. also tried to make the case that he's not simply going to leave affect to defend for itself and present the possibility that the same conditions could arise that led to al qaeda to be able to senn rate a save hang in the first place. while the 90,000 troops are going to be gone after 2014, the president says u.s. officials would have access to afghan facilities, to train soldiers and police and to go after remnants of al qaeda and do counterterrorism. that was the balance he was trying to strike. he was also commemorating the death of osama bin laden. they can be seen as successes that should help the president politically and the speech will also skren rate some criticism, becky, because the republicans have been saying he's been celebrating too much on the one-year anniversary. >> the cover of the "new york post" today has the president in football gear spiking the football with bin laden. >> as we know, that's a rupert murdoch -- the guy who's unfit to be heading anything. obviously ideologically you're going to see that. >> you have split. john mccain, for example, who was highly critical of the president for making a comparison between himself and mitt romney in campaign video about osama bin laden praised the trip to afternoon because, of course, john mccain has been committed and remains committed through seeing through the conflict to a successful conclusion. >> i think it's a difficult place for the president to be too. are you not supposed to be kmaernld in chief? you've got to pay attention to the politic bus you have to ilg noor them too. >> the greatest burden of the office of president is save guarding the national security. when you have moments of success, that is the sweet spot and it's a tremendous opportunity politically. so, yes, he was performing as commander in chief in was that the american people are likely to smile upon and that's a good thing for him. we also got news, by the way, this morning that the chinese dissident has left -- in beijing has left the custody of the u.s. officials at the embassy to seek medical treatment. it looks like that situation has been diffused somewhat to clear the way for the strategic economic talk that tim geithner and hillary clinton are going to engage in in the next couple of days. >> it's very tricky to have pulled that off. does hillary clinton get the praise for that. >> i think the whole diplomatic corps gets the praise for that. i was talking with nick oh larty. he took note of the in fact the chinese had been tempered in their response. he thought the president did the right thing to not name the dissident. keep the temperature down. the less attention there is, the easier it is to manage an outcome. it looks like they're managing an outcome. >> john, thanks again. coming up, "squawk box" takes flight with ceo of spirit airlines. >> for every dollar, jet fuel goeses up by tens of millions of dollars? how do they protect themselves from the hits, we'll take you inside with exclusive access when "squawk box" returns. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. welcome back. u.s. equities at this hour pulled back. won't know until we see the adp report. yesterday -- it wasn't a selloff but we certainly didn't close at our highs. we were well above a hundred. it weakened into the close and ended up at about 70, but it was a four-year high since 2007. the s&p 500 year to date you can see is up 12%. a number of dow components are at multiple highs. kraft closing at its highest level since november 2002. home depot ending yesterday at nearly an 11-year high. we haven't had langone or bernie on in a while. >> we haven't talked to them in a while. >> we need to have them on. >> is that because people are fixing up their homes again or there's something starting to take off with housing? >>. >> and the weather. >> and the weather. >> it's so warm. >> because on the days when people -- in the days when people weren't buying and were supposedly fixing them up, it didn't help. >> people are out on the weekends fixing stuff up because they can. >> mulch. mulch gets your yard ready again. >> did somebody tell you that? >> in this city i have to go to central park -- >> what do you do? do you have a deck? >> i don't have a deck. >> you don't even have a deck. >> i have central park. i have a huge backyard. >> that's nice. weird things going on there in themyle of the night. i don't think i would be heading there in the middle of the night. >> he's not. he's heading over here. >> it's up to you. all day cnbc is giving you never before seen access inside southwest airlines and its world-famous fuel hedging program. how it works has remained an center secret until now. southwest beyond the hedge. >> thanks so much, becky. southwest airlines has long been considering the industry's most addressive and dominant player when it comes to the energy derivatives marketet. the question was simpy. how does it work? when you're chris monroe, the country's biggest domestic carriers, thing about fuel costs can get a bit consumer. >> when you wake up in the morning, what goes through your head? >> i think about the in fact we're going to burn about 2 billion gallons of jet fuel every year. >> monroe tells us he sells everything from maps to crude conduction to heating oil and currency prices. it's all part of a complex calculus his team uses to determine how and when the airport should protect itself from wild swings in the market. >> it's really kind of thought of as insurance and we're protecting the enterprise from catastrophic price increases is our main groel goal. >> and that threat is very real. fuel costs are on the rise. in the first quarter southwest unloaded an extra half billion dollars compared to last year, just to keep its planes in the air. a whopping 38% of its operating costs and growing. but hedging for southwest is more than just insurance. it's a coveted lifeline. >> it's paid us over $3 billion. >> their real secret sauce? its balance sheet. it has an investment grade credit rating and its coffers are full of cash. >> it puts us in a position to negotiate with counter peats and to get better deals done and to have the credit to do things like trade out on the curve or do other types of trades that other carriers just don't do. >> southwest is currently hedged relatively little to the current year, but they put on more helps in the latter half of this year and probably going into 2013, although they're somewhat mum about that. so essentially they're hedged through fuel consumption. southwest would say v $400 million a year. >> wow. >> interesting. >> i don't know how you goat into all of this -- >> it's kind of fascinating. >> hedging -- it's like the huge thing. >> who are the crude traders out there and what are different faces of the oil trading and speculation. the driving season upon us, it's kind of an interesting topic. theyer er some of the smaefrt guys in the business and southwest is famous for what they did. they started in '99 with a guy named scott. in fact, there was a business school case study resign about what he did that's still used in some schools. you know, they made a billion bucks in 2008 when everybody was suffering from $147 a barrel prices. >> let's talk about another airline. low cost carrier spirit airlines tripling its first quarter. we're on the ceo call with the ceo himself, ben. good to see you this morning. let's talk about these numbers. they are good numbers. did you -- i don't know if you got a chance to hear this last segment about hedging. >> i did hear that segment. it's interesting. we hedge a little bit. wi look to protect the ticks that are already sold. if you buy a ticket from us today, for example, to fly in 30 days and the fuel price goes up, obviously we have to eat that difference. at spirit we have the lowest fuel per seat in part because we have a lot of seats on the plane and in part because we have a lot of planes. we're exposed the most on the fuel problem. >> you have your finger on the pulse of the american consumer. you have more consumers -- retail customers on than business folks that are coming on these planes. where do you see this going? i mean how strong is the market right now? >> well, you know, we continue to see pretty strong demand for our product, but, again, we're a value play. you know, we're sort of a dollar store or a mcdonald's kind of comparator if you will. we're continuing see pretty strong demand at the low price levels and that's what we try to do, figure out how to get high return on capital to the low price points to the consumer. >> let's talk about the baggage fees. boy, are you making a lot of money doing it. is number only going to keep going up? is there ever a chance the number will go down and you'll go out? is the tooth paste out of the container? >> at spirit we don't see it going back the other way. although i don't doubt that there might be other airlines that try to compete on a more, you know, everything-is-included basis. but, you know, when customers can decide i want to use this piece of the product and i'll pay for it but if i don't use it, i'll save money, we think that's better in the long term to do business. a former member o tfr member of the tsa came up with a suggestion. get rid of the baggage fees. it would be a much better experience. your response. >> i think that'sing are interesting and i don't think he's talking about spirit. the reason i say that, we've neutralized that. in 2010 we implement add carry-on bag as well. if you carry it on, you pay a fee and the fee is higher than if you check it. so at spirit, in fact, our customers aren't bringing a lot on board because they're choosing to check the bag instead. we think we have a better economic solution for the tsa rather than say you can't charge for checked bags. >> real quick because we've got to run in a sec. a lot of speculation about consolidation in the industry, specifically on american and u.s. air. what does it mean to you if it happens. >> what it means to us is more opportunity. we fly under the radar of most of the industry since we're a lower priced player. consolidation is good because -- for the industry h in general because it rationalizes capacity. and fares are higher. when fares are higher for the industry, we can come in and cut those fares and do pretty well. >> are we going to see it on the value side meaning is spirit and jetblue and others ultimately going to get together? >> i don't see that really happening. they have a little different business model than us, jetblue. they're out there selling product. leg room and tvs. we're selling price, super low fares. >> ben, thanks for joining us this morning. >> always great to be with you. if you have comments or questions, i'm us. coming up, we're going to take a pit stop in chicago where traders are buzzing about a rally this morning. in here, great food demands a great presentation. so at&t showed corporate caterers how to better collaborate by using a mobile solution, in a whole new way. using real-time photo sharing abilities, they can create and maintain high standards, from kitchen to table. this technology allows us to collaborate with our drivers to make a better experience for our customers. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better. ♪ look ira harrison. is there some sort of a sense that you get that sentiment could be changing on the floor? >> no. we're -- we've been up here on the s&p more importantly what we watch and certainly more what the world watches. the dow is performing nicely because as you see what stocks are making highs. where's the safest port and the deepest port. i think yesterday they saw them run for cover. i may be on the shortside, but we're in that zero interest rate. the french elections. what happened in europe. >> thanks, becky. >> still to come, the "squawk box" book club come the "squawk box" book club hands out another blue chip book awards. some more classics as we begin this big extravaganza. today's authors have written timeless classics that every business lead ear and investor needs in their library. at 8:30 a.m. eastern, author of "the wisdom of crowds," he's pretty good. he's going to become a "squawk" bookworm. >> coming up. kick start your engines. joe, becky and andrew are off to the races. they are catching up with the ceo of ferrari north america. . . 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[ male announcer ] one pill a day. 24 hours. zero heartburn. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number. he was just focused on making sure we were gonna be successful. he would never give up on any of us. with rent2buy from hertz car sales, you skip the lots... and pushy sales people... it's a fast, easy way to buy a used car. three days to try. zero pressure to buy. it's just another way you'll be traveling at the speed of hertz. coming up in the next hour the boss wants to see us. comcast is set to report quarrel results. ceo brian roberts will join us live. we go xfinity and beyond after this. first we'll welcome our guest host and find out why the man who ran t.a.r.p. says mortgage bailouts won't work. by the way, good morning, neal. check this out. the cars pulling up in front of the building, not one, not two, but four ferraris. we'll jump in the driver's seat. neal you may get to drive one of these too. still ahead, stick around. how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. yeah, scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it! comcast set to report. get the instant analysis and breakdown with comcast chairman and ceo brian roberts. >> going global with the "squawk" master. pimco's head of equities neel kashkari with names that with boost your portfolio profits. >> time to reveal a new member of the "squawk" book club. best selling author ben mezrich is bringing down the house this morning. >> the second hour of squawk begins right now. ♪ all right. it is earnings season and right now we have earnings from comcast which is the parent company of cnbc and msnbc. earnings without with 45 cents a share. three cents better than the street was expecting. estimate was 42 cents. with comcast one of the companies where street tends to pay more attention to cash flow. consolidated free cash flow in this case was up 37% to $3 billion. street was looking for $1.8 billion. joe the operating cash flow was up to 4.7 billion. >> revenue was 14.9 billion versus 4.43 billion. there's a lot of different metrics to look at and it has to do whether their adding high-speed customer ads were up 5% out of 439,000 last year in the first quarter it was 418,000. we're more than double 207,000 broadband connections than at&t and verizon had combined. now, video customer losses continue to improve in the first quarter there were 37,000 people that left compared to a loss of 39,000 in last year's first quarter. and business services, obviously, is one of the strong points with revenue increasing 37%. when we talk to brian -- i don't know how you can have a $1.8 billion street estimate and then do $3 billion. how can the street be so wrong with -- >> twice. >> at least 60% or 70% above that. we'll see. i haven't got an indication yet on where the stock is likely to open although it has been trading at a new 52 week high in recent sessions, got up above $30 a share. >> we have brian rockets who will be joining us in just about 25 minutes to talk more about that. in the meantime, andrew, take it away. >> that's a big beat. let's look at your morning headlines. investors looking to a key economic report at 8:15 a.m. earn. adp expected to report the u.s. economy added 175,000 new private-sector jobs in april. standard & poor upgrading greece's debt rating now out of selective default. and women's apparel ascena has a 25% premum for shareholders. we have red arrows across the board. we ownership 26 points lower. s&p is off 4.5 points. our guest host this morning tells us why some of the best names for your portfolio may be found overseas. pimco's ceo, neel kashkari joins us now. i wouldn't call at it revelation. welcome. good to see you. we were talking to ira harris dividend stocks were doing. when we think the bond market will fall, that 2% ten year is yeah it's 2% now but there's so much risk there and everybody is so bearish on the bull market. as a result maybe people were hesitant to go into the 4% yielding blue chip. >> for some reason they stayed cheap these 4% blue yield chips. i couldn't understand it. if you knew the fed really was going to stay until 2014 why wouldn't you buy at&t and general electric and verizon and pfizer. why wouldn't you put your money there at 10 and 11 times earnings instead of sitting in a money market yielding less than 1%. why wouldn't you do that? i think people thought rates would go up. now we're back they aren't. >> think it's that. we at pimco believe the fed will keep rates low until the end of 2014 maybe longer. but there's a major risk underlying the global economy. people were shocked by the financial crisis of 2008. that leaves scars with investors especially retail investors and institutions that can last for many years. a lot of people are still gun shy because they say -- >> why weren't you being those stocks for the last year and a half? >> we are. we're managing our global equity is growing. we're man hagging $5.5 billion. we're buying global equities around the world built we're cautious because we know the european risks are still there. the u.s. economy is beholding to the federal reserve. asia is slowing. oil price risks -- >> 12% is a big year and we're already there on the s&p. wasn't right to be that cautious for the last -- >> fair enough but it depends what your time horizon is. our clients are expecting long term returns. our holding is three, four, five years. we're not make being short term trades. no one knows for sure when the risks of europe will flare back up. >> but they are known. because i know about european risk at this point. >> can we then just baselinely say all in to equities because we're aware of risks. >> the first thing we stayed when you game on was global as opposed to buy the s&p with both hands. why? >> you need to be very selective on individual names, buy the names that have better balance sheets, better growth prospects. >> you can find those domestically? >> domestic ally and headquartered. we care where the company is manufactured. think about honda. world class car manufacturer. selling into america. selling into emerging markets. not selling to europe. has lower exposure. producing cars in japan and america so it has less risk from appreciating yen. if you overlay all the risk we see in a global economy honda matches up to those risks and should be more resilient against some of these shocks. >> let's get that list back up on the screen. >> deere was another one. >> world class agricultural company. a big percentage of deere's growth is coming. countries are demanding more protein, more agriculture but em ag markets have been underinvested. to play on emerging markets. >> explain the french liquor company. >> good example. second largest liquor company in the world. should be more resilient against european fragmentation. 40% of the sales are coming from asia, 30% from americas. 70% from outside europe. of course even if there's a recession people will still drink. we're being very selective on the names we buy. we can keep going. >> you want to go to brazil? >> brazilian education company, brazilian population is getting wealthier, unemployment is going down, they are demanding more higher educational services. 25% of the brazilian young people are in college today compared to 50% to 60% in other latin america countries. we see this a long term secular growth story for brazil. if we were baselinely piling into the s&p or emerging market index we wouldn't be able to find these specific names and focus on them. from our perspective with these global economic risks, individual company selection is critical. >> bernstein said buy the index. a blindfolded -- you're totally bottoms up here. all you need to say is, you kind of can cover your rear with this that we do like this buy but we're cautious because the risk can come back at any time. >> it's true. >> always true. but there are times when the overall averages can go on a tear for two or three years. >> that's true. >> nis to know that beforehand before making some sort of dipping your toe in the water. >> there's nobody who can time the market over an overextended period of time. fewer people can pick stocks that work. >> would you buy apple? >> we do own apple today. in our long short equity fund. we do own apple. i'm cautious. i have a lot of apple products. i like their products. it's obviously been trading, pretty expensive, how far it's come up over the last few years but we're buying it today. >> could you ever see a world where you're not cautious? what kind of global situation with loose nukes and, you know, terrorists, and tsunamis, and business cycles and overhanging debt -- >> i'll give you a scenario. >> tell me where you would be optimistic. >> when two things happen. when the u.s. economy is growing for its own fundamental reasons not because of liquidity. number two, when the eurozone crisis when taking measures to stabilize the eurozone crisis not just buying time. >> is that possible to do that over there? best time buyers in the world. >> for the next few years -- the fed will hold rates low. we have to be cautious. doesn't mean we're not buying stocks we're pick being names selectively that should be more resilient. >> you talked about five different names. how many stocks there are in the portfolio. >> depending on the portfolio, our long short portfolio is very concentrated. 15 to 20 names. global portfolio is 80 to 90 names. which is still fairly concentrated. >> walmart? >> i don't personally because i don't know where it's at today. i don't have a sense of its valuation today. it's a great franchise. >> we've been having a running debate on the set about walmart and corporate governance. it is a bellwether for the u.s. economy and global economy. >> i wonder, i'm thinking when everyone, if we were in a world where people said wow things are really, really good now, i'm not worried about europe, i'm not worried about -- normally that's the time to be heading for the exits. when there's things to be cautious about, normally that keeps the wall of worry intact which is what markets climb most of the time. you know, honestly i've never seen like barons write a piece where they weren't highlighting a risk. saying good, this is the time to do it. always saying this is a time to be cautious. >> if you went back to '05 and '06, people thought what's wrong. we had the housing crash and financial crisis. it's good to be cautious. >> in 2005 and you got out because you thought, you wouldn't have been that brilliant to get into this thing. right? >> even the people that coined the term irrational exuberance were out and the market went to 11,000. they were eventually right. i don't envy you, neel, where you have to defend all your forecasts. i don't know -- i think i learned or i try to learn very quickly -- see i can say 30% for a year and i can be wrong. nobody cares. i catch some grief from e-mailers but so many people use cautious optimistically. it's what you can do or say. it works in every situation and you can't be too wrong when you say it. >> i was going to say one thing i'm careful about is to be candid with you i'm not forecasting what the dow will be. >> that's a good way to start. we're not -- i'm not going to remember six months from now whether the brazilian education company -- but i will remember you didn't say anything about the s&p or dow. >> i'm telling you names that are actively in our portfolio, that our analysts like. our clients will hold us accountable because this will determine the performance that we deliver for your clients. at the end of the day that's what matters. >> pimco is pretty media savvy, obviously. a company that's done that well. the big miss that gross made with the treasuries. you can explain that away too. we were worried about the risks in the bond market so we were able to participate in other parts of the world being long bonds, and minimizing the risk that we saw in u.s. treasuries. that's explain why you can miss the u.s. treasury market move and yet say we didn't miss it because we were other places where we did participate but didn't have the same type of risk. finally copped to be wrong. >> keep in mind, bill gross's investors total return investors made money last year. people talk about a miss they still made money. >> there's a time he outperformed everybody. >> where there's a high profile miss and lose 30% or 40%, bill gross's investors still made money last year. >> excellent point. >> it's a bond fund and great year for bonds. >> if you look at bill gross's long term record. >> he's the bond king. elvis is not the king because he sucked. you become the king because you're good. >> this is true. >> or king of pop. >> mr. jackson. >> a lot of kings. >> mr. jackson and whitney. i'm sorry to bring that up. did you see that? that's the kind of news. >> do we know for sure? >> i don't know. there was something going on. >> between michael jackson. >> and whitney houston. >> i'm just saying. just because you said it i just read it yesterday. sorry to bring it up. >> a lot more to come from neel kashkari. if you know anything, if you can confirm the jacko -- never mind. if you have questions, comments or anything you see here on "squawk," we've gone off the rails already, e-mail us at cnbc.com or follow us on twitter @"squawk"cnbc. >> ben mezrich has what some would call a cult following and now being awarded a blue chip book award from "squawk." he joins us in a few minutes. plus comcast ceo brian roberts will join us and talk about the company's latest quarterly results. results.st and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? 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"squawk box" will be live in omaha. warren buffett will address his shareholders on saturday and address "squawk" viewers on monday. we'll join us live for three hours starting at 6:00 eastern. >> little bit of news this morning. auto nation the largest retailer in the country reporting april retail sales up 12%. the company selling 20,500 cars. imports up even sharper, 16% in premum luxury up 10%. auto nation stock over the past 52 weeks, there you can see it. looks like something, it's weird. >> because of the y axis is so compressed. zero to 42. look at those moves that look like you're on a roller coaster. they are big moves but on a normal chart wouldn't look that bad. >> when we come back we'll talk about what happens when three tv anchors take a $300,000 ferrari for a joyride. this is "squawk's" version of "the italian job." we have the ceo of ferrari north america just ahead. also comcast extending its string of strong results. ceo brian reports talked to us about what is contributing to the earnings growth these days. "squawk" will be right back. >> time now for today's aflac trivia question. the empire state building first opened on may 1st of what year? the answer when cnbc's "squawk box" continues. aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat at aflac.com. plegh! yeah, scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it! the world needs more energy. where's it going to come from? ♪ that's why right here, in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's it going to do to the planet? natural gas is the cleanest conventional fuel there is. we've got to be smart about this. it's a smart way to go. ♪ in here, the landscaping business grows with snow. to keep big winter jobs on track, at&t provided a mobile solution that lets everyone from field workers to accounting, initiate, bill, and track work in real time. you can't live under a dome in minnesota, that's why there's guys like me. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better. ♪ in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store, whatever else that i need to do -- still don't have to use gas. i'm never at the gas station unless i want some coffee. it's the best thing ever. as a matter of fact, i'm taking my savings so that i can go to hawaii. ♪ now the answer to today's aflac trivia question. the empire state building first opened on may 1st of what year? the answer, 1931. 400 horsepower of maximum performance. black sunshine. >> in honor of the occupy wall street movement, ferrari is revving up sales in north america. we got to drive some of these italian rockets. that's an old tape. you can tell. that is new. i've driven fast cars before. never a ferrari. it is an unbelievable feat of engineering. >> i was afraid of it at first. >> they said the lower rpms don't put it all the way to the floor. >> that's when you can lose control. >> don't put to it the floor. >> trying to get on the parkway. >> thought the engine, no noise. >> when i was younger i put a glass pack on my six cylinder fire bird. yeah. i was 16 years old. you put a glass pack muffler on. it was a three speed six tank. i had a hooker header thing. you know, it was ridiculous. i was in cincinnati. sorry. anyway that was a fake engine sound. the engine sound -- >> this is real. >> it's unbelievable. >> becky likes the noise. because when we were driving she was -- >> i like it too. >> she kept saying, give it a little more so i can hear the noise. >> the acceleration was great. >> do you miss the clutches? >> they are not clutches. they are padles. >> don't you want to have a clutch? >> i have one. do i miss a clutch? i have a six speed. you get used to that. you get used to using the gears to slow down. >> when you were driving -- >> i wasn't playing with the pedals. >> i was the whole time. >> i left it on automatic. i don't want to play with the paddle. without a clutch -- >> didn't know how to get it back to automatic. >> you have an automatic here. >> this is when you're about to kill me. >> yes. >> this was not good. i tried to, you know -- those cars, the miles we put on them were hard miles. anyone -- you should ask whether that was the car we used. pay $300,000 for a ferrari you should ask. we put 18,000 miles on it. we'll speak to the ceo of ferrari north america. tell me. that true? is that what he looks like. that's what i would have picked up in a lineup. >> handsome. >> if you have any questions or comments about anything e-mail us at quack at cnbc.com. up next, brian roberts on the company's latest quarter and then we welcome another member to the "squawk box" book club, ben mezrich will be joining us. we'll talk about ben's two favorite subjects, accidental billionaires and ugly americans in a few seconds. a few seconds. let's start with car insurance x. this one does save people a lot of money and it's very affordable. it was very delicious. could you please taste car insurance y? this one is much more expensive. ugh. it's really bad. let's see what you picked. oh, geico! over their competitor. you are a magician right? no., oh. you're not?, no., oh, well, give it a shot. i am so, so sorry. it was this close. welcome back to "squawk" on this wednesday morning. little past 7:30 on the east coast. among the stories we're following google winning a big u.s. interior department contract to provide the department with e-mail and collaboration software. it was originally order to microsoft but google sued claiming the original criteria favored microsoft. china's manufacturing sector strength for a second consecutive month, china's pmi did rise a point. but still remains below the 50 mark. mortgage applications edged higher by a .10%. average 30 year mortgage rates were unchanged at 4.05%. comcast beating wall street estimates with first quarter profit of 33 cents a share. better than the street was expecting. joining us from philadelphia is brian roberts chairman and ceo of comcast. brian, good morning. >> good morning. how entrepreneur >> great. it's very good to have you here today. that number of 45 cents was three cents better than the street was expecting but one of the metrics that wall street pays attention to is cash flow. free cash flow was also up. it was up about 37% to $3 billion and that really was much stronger than the street had been expected at $1.8 billion. joe was talking about this earlier. what happened to catch the street by surprise? >> it's a good quarter and we're pleased with the start to the year both the cable company and nbc are out of block fast. in the first quarter traditionally our best quarter for free cash flow and a few analysts missed the fact in the first quarter you pay your taxes and second quarter it drops. over the full year it eens out. it was a good quarter. so company by company you have to look at their number. we're very pleased. >> you said you're pleased with nbc universal. what was driving things there? >> well, in a bunch of different businesses as you know starting with the cable channels which i know is near and dear to everybody's hearts here. revenue was up. the advertising business continues to show real strength. you know, there's always uncertainty around the economy in the last couple of years but traditionally television has powered through this and cable television is coming into the upfront. we're excited about that. we had some timing issues that make the numbers look slightly even stronger just the timing of two movies in the first quarter," safe house" and "lorax" were successful. them parks had a good quarter. we were pleased with "smash" and "voice" and the super bowl was a huge success. it was a good quarter. we're showing momentum. i'm pleased with how steve berk has got the company working together. really good quarter. >> you have the upfronts coming. you and people are looking who has the upper hand. is at any time television networks or ad companies at this point? >> well, you know you need each other. and i think we're optimistic, realistic, but it's an the election year. there's real demand on wanting to get your message out and i think we're very fortunate to have so many wonderful brands that are just starting the upfronts and a lot of enthusiasm around the company. we have a good message. each of our properties are better than they were in terms of what they can deliver for their audience. we've invested whether in the cable nets or something like the golf channel, or nbc itself, or cnbc, each property is investing and growing, you know, for the long term, i believe and in some cases, ratings down but when you go to the demo for what the advertisers wants we've sharpened our message, we got 0 a good story and i'm confident that we'll have a very strong upfront and we'll have to see how it goes. >> i know our doing things that are a little different, taking a look at packaging across all the platforms for nbc universal. that's different than other companies can package at this point. what's the theory behind that? >> we have a great unique story whether you're looking for young adults, women, affluent audience, all the networks of nbc universal, cable and broadcast we're in a unique position. maybe some companies have slightly different story but with nbc sports network and we got the olympics coming up, one of the premier opportunities to reach large audiences that maybe for 17 days, so i'm, you know, very confident. we also have a local advertising business both with the television stations as well as with our cable systems and that business is going along nicely too. so steady as she goes and it's a good start. >> brian, one of the big questions about cable long term is cable tv, whether people -- whether more people will go on to the internet. your video customer losses this quarter continued to improve down 37,000. what are you doing differently? >> well, we've done a lot of things well. and i think we're pleased with fact that as you say, it's a number of quarters in a row we've been reducing our losses and getting better as a competitor, giving better service and innovating faster and it all comes together under xfinity which is our new brand for our company. we got several million homes that have access to that and they are beginning to watch shows anywhere they want on any device they want. we have sped up our internet services over the last year. we have fabulous quarter, if you ask me what the highlight of the quarter was, i would point you to 439,000 high-speed internet connections. more than last year and our best quarter of last year. so that is a, you know, dramatic number, in my opinion of belief in what the internet can do, why you need more and more band width and those people that have made the investment in their infrastructure to have the fwaefbest investment in and out of your home and add wi-fi and other capabilities to that will be in a great position in the future with the surge of interest in not just on your tv but on other devices for video of all sorts. our internet business is stronger than our phone business. we had strong quarters. we added about 150,000 residential phone customers but we also have, you know, 30 plus percent growth in business services, small medium size businesses and we haven't got to the medium size business. we're expecting to do that over the next couple of years. real strength in the cable business, our leadership team has innovated faster. you have to give good service. we're focused on improving that. all statistic suggest we're doing that. now with our verizon partnership we're excited about the cable business and i think it shows in the numbers. >> brian, we talked how fragmented everything is getting. think about internet and then you think about all the different cable choices, all the different channels. we've asked it in the past why network? why is network even relevant or important any more. it's borne out here 37% increase in revenues for nbc. it doesn't go to the bottom line because there's development costs trying to, you know, take nbc back to its, some of its past glories. when does that actually happen where revenue actually goes up. >> i wish i knew. >> what's your plan where we start harvesting that through or cast over earnings per share, two, three years? >> it will take multiple years. it's not in multiple quarters. when we bought nbc universal the hardest turn around would be nbc itself. >> with the most upside. >> with the most upside. you saw a wonderful quarter from cbs and you can see health in the sector, the business has changed with retransmission fees. with the, more like the cable network model. and i think we're well positioned to grow over time, but we have a, you know, new shows coming out. we have pilot season and the team is steady with optimism and it's a long term game that we're trying to -- >> olympics will be expensive too, right, brian? >> the olympics were all sort of baked into when we bought the company, we knew what the economics were, factored into the price. we extended the franchise for a decade. we really got all of the technological rights for the next decade for the olympics to the united states. as the world evolved as you were talking about with new ways to access content and what value that will mean to different companies we're in an extremely good position. we believe over that decade we're going to break even or make money on the olympics and i think that's a reversal of where the company historically has been in the last few olympics. we're optimistic for london. it looks good. next earnings happens in the middle of olympics. we'll talk about ways we're putting comcast and nbc universal together and innovative never before tried ways to bring more olympics coverage to the viewers and fans. that's where we start how we're managing the company which is trying to make it great for the consumer and all these business questions have to be answered but we're in a special place with the various parts of the company working together. >> the stock is right near an all time high. do you feel this is a message that gets out to the street at this point? >> i think there's some sense that we're, to the point you were discussing earlier, take the cable business for a second, that we're innovating better than we've ever done before and executing better than we've ever done before. so you're starting to see quarter after quarter, you know, nice results. this obviously in the second quarter and third quarter you had the summer and seasonality with college campuses and things that the numbers might be slightly different, but you compare that to a year before and you continue to see a trend that our platform is really great and that the capital spending has, you know, come down as a percentage of revenue and so hence free cash flow has been growing which is where you started the conversationer and i do think at some level that message has gotten out but i think, you know, i'll leave it up to investors to decide at what multiple, you know, is fair for a company like this and historically that's been a much higher multiple than where we're at now. our job is to stay focused on running the business and let the stock, you know, respond accordingly. >> brian, thank you very much for joining us today. we appreciate your time. >> nice to talk to all you. keep up the good work. >> thank you. >> i know. it's true. interesting report numbers where you can kind of look up where are we? >> where are we in this whole thing. >> up next our latest entry in the "squawk" book club, the nonfiction ben miss rich joins us. author of best selling books like "accidental billionaires," "bringing down the house." we handout another blue chip award. >> still ahead, fasten your seat belts and hold on tight. >> watch out! yikes! >> when the "squawk" team goes behind these wheels, you don't want to miss what happens. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals, and the storybook narrator... 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[ male announcer ] sustainable solutions. fedex. soons that matter. departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. we are proud to be kicking off a new segment this week, the "squawk box" book club. features the world's prominent business authors. we'll be building a library of classics that are must reads for any investor. authors will be featured on our website. check them out at box squawkb squawkbox.cnbc.com. >> ben mezrich," bringing down the house" and "ugly americans." gary kaminsky thinks this is a book all traders should read. >> that was the one i read. i learned -- how did you learn about the red light district in japan? the extent that you wrote about? >> i went inside. i went to tokyo. >> to the sex clubs. when they decide to put up a red light -- they do it in the thickest. >> actually went over there. >> it's not your cup of tea. >> i was there for 48 hours. it's a crazy scene. you guys are pretty much the only ones who read "ugly americans." in the finance world is great. we've been trying to make that movie forever. it's a great movie. >> welcome to the club. >> thank you. >> "accidental billionaires" became ""the social network." >> i got a random e-mail, my best friend co-founded facebook and no one has ever heard of him. i go out for a drink at a bar and eduardo shows up angry. says mark zuckerberg screwed me. he told this incredible story. as i got into it, it was much more complex. mark didn't want to talk to me. >> have you seen mark since the book or movie? >> no. i've met a lot of facebook people. they were mad at me for like a while and then the movie came out and everybody was -- it ended up being -- >> we had the wiggle boss twins on. >> hollywood could not have invented those guys. >> yeah. >> i met a lot of the people. it's a really fantastic story. it was very shakespearean. i got caught up into it. what turned me on is she's two college best friends who did something not for money and then it exploded and kind of tore them apart. so, for me it was all the drama in it. but in the end i think it worked out for everybody. i mean facebook did great, eduardo did great. so everybody was happy, i think. >> i know people were worried about the zuckerberg, the persona and character from it but i actually thought he was a sympathetic character. he was a kid. >> he was a college kid. >> didn't have a friend in the world. designee worked really hard and he was brilliant. >> not that character. >> what did you think after work with both of them? >> he deserved sean parker as his friend. >> thought it was a great rendition of him. i thought jessie eisenberg played it perfectly. a lot of college kids look at that movie and think i want to be mark zuckerberg. even though he has this characteristic of being strange. >> he has a billion dollars. meanwhile i think "the accidental billionaire" was you. >> didn't get any facebook. it's a crazy story. facebook is just getting started. i think it's a monster that will get bigger and bigger. >> can i bring you something that you might write about? >> i get 20 or 30 things a week, every college kid who steals something or does something crazy i get a tweet or e-mail and that's how i find my stories. i'm open to it. >> but you're a tortured soul because you're locked in a room somewhere. >> i sit in a room like a closet. >> you have to do it. >> the writing is hard. the writing process -- >> shakespeare maybe? >> it's hard. anybody who writes know it's an awful -- it's like digging a ditch or sitting in a room over and over again. >> for hours. >> when you do the active stuff. >> you're having fun. >> i like going out and acpart of the story. >> working with aaron sorkin did you like what de? >> yeah. >> remember when i sat down and watched the movie for the first time and that line comes where the fwirl is dating you is like dating a stairmaster. i was like this is going to be an awesome movie. he's a genius. he's crazy. the activity level. he's wild to work with. a brilliant writer. i thought the movie was perfect. >> we've been introdistrict attorneysing -- introducing the classics. >> first i thought i'm excited that -- >> burrows is on later this week. >> i love -- i'm reading "game of thrones." it's not a business book but a lot of strategy. >> i think about it all the time because it's like the castle intrigue that takes place at every workplace. >> it's a great, great book. all of the books. i don't read a lot of straight business stories. i'm reading just a lot of random things. >> now, when we introduced you you said you redefined the again reof nonfiction in part because some people suggested. >> i do something a little controversial. i have the true story. i do all the research and write it as a thriller. so it's a truer to and i tanned by the book but written in a way that, you know, my audience likes to read. i'm open about it up front. i say at the beginning of the book this is how i'm writing this book. some people like it and some don't. and i feel it's a very, a good form of nonfiction and it works for me and that's how i like to write my books. >> your latest book "sex on the moon." >> comes out in july. true story about a kid who robbed nasa. >> you like robbery stories. >> he stole 600 pound safe of moon rocks from every moon landing in history and spread them on a bed and had sex on them. you can't beat what a geeky guy will too. >> he had a partner? >> he had two girls. >> two girls and the moon rocks? i thought it was with the rocks. i think that's a sick -- okay. good. >> i like to write these stories of kids in that gray area between right and wrong. this guy went a little bit far. the facebook story or m.i.t. story those guys aren't committing crimes they are doing something a little bit outside, you know. >> how often do you read the paper and see a story -- >> every now and then i see one. all right there's a dozen journalists chasing it. i like them coming to me. every now and then i read something and think that would be cool. but it's hard because i just don't like to dive in there with everyone else. >> i can say this? there's a movie being written about you. correct? >> i don't know where it stands. >> george clooney's company. >> haven't heard anything a long time. >> you need get involved in that. good story there. get a deal going here. >> work together. >> what happened to nasa moon rock -- >> he went to jail for nine years. >> it didn't turn out well. it was a prank that went wrong. >> what did you steal? >> nothing. >> okay. >> ben before you go, two thing. we need a signature on the book. >> all right. >> so we can add to it the "squawk" library. you got the pen here. >> do i get an award. do i get an oscar. >> hold on. hold on. it's not over yet. we're coming. >> get to thank the academy. >> this is better than the academy. >> do you have a speech ready? >> are you married? >> i am. thank my wife and kid. >> don't be stupid. >> here you go. it has plastic interest. here it is. signing off? that is awesome. is that awesome or what? >> this is great. >> thank you for being here. >> thank you. i'll put it on the wall. >> this is bigger than anything. let's be honest. >> very jealous i'm getting this. thank you for being. congratulations on the award. coming up, the market getting ready for the government's april jobs report on friday morning. today we're going to do a preview when we get private payroll data from adp and then start your engines. this will being a great. ceo of ferrari north america is here. we talk luxury cars. state of the global economy. much, much more all in the next hour of "squawk". putting your money to work. portfolio picks from our guest host, neel kashkari and crowd sourcing for your investments. we'll give james surowiecki a blue chip award. >> ferrari let's us borrow a few cars. >> hey man you just [ bleep ] your ferrari. >> it's not mine. >> breaking data on jobs. we'll get an early read on the april jobs report at 8:15 a.m. eastern with adp employment numbers. the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernen along with becky quick and wow, and someone said they didn't like that music and we got a call from management. our guest host this morning is neel kashkari, head of global equities at pimco. do you know that song? thank your boys. think cars. >> is it from "cars"? >> yes. you got it! >> hold on that song is way before "cars" ever existed. >> but they used it in that. >> we should find out what movie -- >> that's the movie it was in. "cars." rascal flatts, right? >> checking u.s. futures. the original version was tom cochran and then rascal flatts. checking u.s. equities futures this morning indicated a little bit lower. continuing the afternoon, the late afternoon swoon. wasn't a swoon. we were well up over 100 and closed up about 70, down 35 now. everything could change at 8:15. that's going to be the big number. we're counting down friday's april employment report. we'll get an early read in less than 15 minutes from adp employment with that data. forecasters saying the economy likely going add 175,000 private payroll jobs last month. in other news today facebook's ipo road show will begin on monday. that means the company's shares could begin trading on may 18th. mark your calendar and circle it. founder and ceo mark zuckerberg is expected to be involved in the road show. he angered some investors in march when he skipped an analyst meeting. recapping some of this news this morning, big news out of comcast beating estimates with first quarter profit. chairman ceo brian roberts was positive on the first quarter he joined us earlier this morning. take a listen. >> it's a good quarter and we're pleased with the start to the year both the cable company and nbc are out of the block fast. company by company you have to look at their numbers but all in all we're very pleased. >> take a look at comcast stock as we speak. it's come down just a little bit despite a big beat. >> it was a big beat. when you listen to roberts when he was on talking to us he says the first quarter tends to be their vongest quarter. that could be why you see a little bit down. that stock is right near an all time high. >> also, of course, worth noting comcast is the parent company of this network and nbc universal. >> let's get a check on the european markets. s&p is raising greek's credit racing. the country is rated triple c with a stable outlook. european equities right now the ftse is off by 34 points. this is the first day we're seeing trading in these markets after the close yesterday for may day. cac 40 opening 20. dax opening up by 8.50. italy is down by almost 2%. we've talked about it a lot. the u.s. teetering on a fiscal cliff. the program designed to then economy like the trillions in tax cuts set to expire in a matter of months and then the sequestration from the super committee that failed. this could have dire consequences as the nation is trying to revive job creation and growth. dave believes these risks are real. also with us as our guest host, neel kashkari of pimco. david, we always wait until the last minute to do things. this is really well-known and prominently on everyone's mind. don't you think as lame as these guys are, that it doesn't really happen when push comes to shove? >> you know, i wish i had some confidence in their ability to act. we're facing two problems. we're facing this short term fiscal cliff at the end the year. we're facing a longer term budgetary trend that's unsustainable. would be nice if politicians could address both of those together. it seems, though, they are traffic trouble addressing either of them. >> it's because of the the election. correct me if i'm wrong but the the elections in november, still got a month and a half then before ten, right? we'll have a resolution on that then the same clowns in congress but we'll at least -- actually the same president, but at least know what's going to happen on inauguration day in 2013. >> let's just say the expectations are very high for that lame duck session coming after the the election. one thing that's starting to trouble me a little bit is i'm hearing talk maybe we could have some sort of temporary extension along the lines of what we did with the payroll tax last year. a temporary extension of less than a year doesn't work for income tax cuts. you won't have a different tax rate, different deduction rate applied to income earned in the first couple of months versus income earned over the rest the year. you have to come to grips with tissue before the end the year. >> people love the clinton tax structure. that's the end of the world to go back to the clinton tax rate. that was the greatest time in the history of the world. why would it be so bad if those were to expire according to people? >> well, the problem is we're dealing with a fragile economy and i scaled the size of the fiscal cliff that includes the tax cuts that's about half of it. then you have the sequestered spending, payroll tax cut, a bunch of other things. i scaled the size of the problem at 5 percentage points of gdp. you have an economy that's growing at maybe 2.5%. even if you apply the most conservative possible multiplier to that 5 point hit on gdp we're back in recession next year if you don't address the fiscal question. >> that's enough to make someone cautious. >> it is. i'm more optimistic. if republicans and democrats can agree on anything it's to keep spending. with president obama getting re-elected or mitt romney getting elected either one will have support of the american people. they don't want the new republican president to live with thinks fiscal cliff. >> when do we deal with our problems? longer term problems that are out there that people like judd gregg who was on yesterday who said we have to teal with this. >> it depends on the president, whether it's president obama or president romney showing leadership and owning the issue. president obama so far has not been willing to do it. he ignored simpson-bowles. the question is will he take it on in his second term or will president romney seriously take it on in his first term. >> go ahead? >> i agree with neel. the base case is not that we go over the cliff. we're assuming something like a 1 to 1.5% hit to gdp. we expect some tax cuts will get extended. there's a nonzero probability we'll have gridlock after the the election and the out come in that scenario is very, very dire. >> i know. that's what i heard that the american people will be behind whoever -- like 47% will be behind earth guy strongly and then we are in the middle for the six. this isn't going solve all of our -- the ideologies are divided in this country that whom ever wins the the election the other side -- >> meeting with president obama he may have won 47 or 50%. you can have a mandate with a divided electorate. >> look how much damage we did with last year's debt ceiling debacle. americans confidence in economic policy making, and in august of last year we hit an all time low in that index and we've been digging out of that hole over the course of the last few months. it's no coincidence that the economy hit a low point last summer during that debt ceiling situation and has been improving a little bit since that point. >> didn't that focus everyone on what we need to do that's why we're talk become it right now. i have some trouble with, you know, most of the time people blame the tea party or the 90 guys that were elected after obamacare. they blame them for the breakdown of the budget talks. they were sent there are to a reason. >> the best thing is to deal with both of these problems at the same time, deal with our longer term structural imbalances. >> these taxes really do matter on how well the economy does. so you're making the case that a lot of people would dispute. >> sure. the bush tax cuts are worth about two and a half percentage points of gdp. interestingly if we continue those bush tax cuts but allow other tax cuts to expire, the payroll tax cut, et cetera, then assuming the economy gets back to full employment which is a very questionable assumption, i grant you, but assuming that happens then tax receipts of percentage of gdp gets back to 18.5%. >> they say they will tell you and it's, you know it's not true, they will tell you that's why we went down to 14% because of the bush tax cuts. '06 and '07 we were at 18% gdp under the bush tax cuts. >> we get back to the long term average. can we address health care and other items on the spending side that will push us well above that. >> that's another thing that we got to figure. it's may now. >> if we can't then we got to go higher on taxes. there has to be a decision made on one side or the other. >> all right. how do you think that comes down in june? you're an economist, but i'm talking about the obamacare. >> yeah. >> it's important, isn't it in some of your numbers? >> not terribly important because remember obamacare was scored by cbo and there are some questions about scoring. but it was scored as neutral in terms of the budget impact. >> come on, david, it's $2 trillion that will end up costing. >> there's taxes on the other side. so it is, i think, close to neutral. the question is medicare and medicaid even without obamacare are going to go from about 5% of gdp today to close to 15% of gdp. >> you saw the piece recently that for some reason it's moderated whether the recession or whether it's, you know, hm o's or it has moderate. hasn't grown at nearly -- dave we got run. thank you, morgan stanley. say hello to adam. neel kashkari will be with us for the rest of the hour. >> you're so tough. >> he started it. >> when we come back we'll get an early read on employment. we're a couple of minutes away from that adp jobs report for april. this is a big number. we'll bring it to you along with instant analysis after this. as we head to a break take a look at the dow futures. right now they are down about 30 points. we'll see what happens after adp comes back. squawk will be right back. adp releasing its estimate for the april jobs report and it's much weaker than expected at 119,000. the estimate was 175,000 and the estimate for friday was 175,000. so the question now becomes whether or not economists are going to mark down their forecast for friday. joining us live now from st. louis is the chairman of macro economic advisors. they put together the forecast or survey here for adp. joel, good morning. >> good morning. >> are we seeing here a replay of what we saw last year which was a solid first quarter in job growth and now a springtime swoon? >> possible. today's number was below expectations, a little on the soft side. but given the totality of the evidence i'm seeing i would be disinclined to change either my forecast of employment going forward or our forecast for gdp. >> why is that? we've had jobless claims tick up. we've had other data that's been soft but you're sticking with your forecast. >> right. so give me a minute i'll tick off the reasons. first let's remind your listeners employment is more lagging than leading indicator so this number could be reflecting the slowdown in gdp that occurred in the first quarter which was not as pernicious as seen on paper. some of this weakness in employment is that we're coming off a winter time boost to jobs growth that came from the unusually warm weather. let's go back to that first quarter gdp number. little on the down side. however, household sector did extremely well. residential construction posted good numbers. we believe some of the weakness in business investment was a result a back end of a pulla forward of investment to beat the expiration of full expensing at the end the year. government spending was unusually weak but with budget numbers in place for the fiscal year that probably could be made up in the next couple of quarters. let's look at the recent data. stock market has rebounded very nicely from the recent swoon. vehicle sales yesterday reported on target. ism in manufacturing yesterday very solid. gasoline and oil prices down meaningfully from last month's forecast. yesterday it was reported that bank willingness to lend in the second quarter surged. a lot of data is forward looking. >> let's go through some of the details. we have the chart. guys bring it back up when it comes to goods producing versus the service sector. i thought they were running those factories overtime when it came to the auto manufacturing. but it decline by 5,000. all jobs were in the service sector up 123,000. does that tell us, joel, these are not quality jobs out there? >> not necessarily at all. there are plenty of good joins the service economy. that want does include construction and our data showed a big decline in construction employment in the month and that would be consistent with construction employment having been elevated in the winter months. there's a little bit of a tension between the adp data for manufacturing and the report. we have to wait until next month when we feel we're further clear of the weather situation see which of those two reports was giving the right signal. >> we have to figure this out here. there were some talk that the march bls number was the catchup from the warmer weather hiring that happened. is this april report now, is adp here lagging the bls in terms of correcting for the hiring that happened because of the weather? >> i think if you go back and read the analysis that came out of the street, our own work on this employment number, there was some question about exactly when the payback from warm weather on employment this spring -- >> by the way, joel, people are looking at a chart right now, if you look at the green line, put it back up. that's the bls. so the blue line there is the bls private-sector and you see there it declined last month and then the green line is adp which you can tell a story. this is catchup for what the report says and we'll let joel answer the question. >> you can tell that story but i would be disinclined to do it. the survey uses different techniques to collect and amass the data. there's differences between them. any one month, discrepancy like this hard to pin a precise story on one month's data. we do think the payback on this, winter effect could have been spread over a couple of months. >> all right. let's bring in rick santelli. he's been monitoring how the market has been reacting to this. rick we saw some weakness on futures, down 20 additional points? >> pretty much doubled down. in the neighborhood of down 23 to 25 in the dow futures. they are now down a little over 50. interest rates moved down several basis points but already at fairly historic low yields. you know, once again my comments should be you should expect them. i find it always fascinating that, you know, we have a big expert there, a well-respected person from the organization can't look at the number and say it's a crummy number. no matter how many times you want to dance around it it's a crummy number. it's disappointing. not enough. better than no job growth and certainly we're better off than the credit crisis but we're boat loads of carriers away from bringing enough jobs to the marketplace. end of story. >> joel >> i agree. ate weak number. it's not enough. we have millions of jobs to create. no argument from me on that whatsoever. >> what's been very strange, gentlemen, is watching these head twists we get day-by-day. steve how do you look at yesterday's ism. >> so, my take on all of this is i thought the economy was strong in the first quarter and i thought jobs were strong and some of the other data were strong and i knew there was a weather addition to it. i thought the weather addition was in the 40 to 50,000 range it's looking more like -- if all of march was a catchup, and we did all of the seasonal adjustment one that one month, then i was right. but if it continues this way i'm concerned about jobless claims. i think we need one more month of data. i know people want to know now what the future will be, but if we do have this one month of catchup and maybe it was caught up in the adp number this month where in the bls number last month, we know we had this warmer weather. we know seasonal adjustments are less than perfect, far less than perfect. i'm still thinking this is a 2.5% economy. it's a 3% economy. rick's argument about the weakness of the economy is valid at 2% as at 2.5%. it came in at 2.2. we were looking for 2.5. we need 3 and should be doing 4. that's what you said. >> rick, at least now maybe you'll give some kudos and credit to ben bernanke, he's on the case. he's been on the case. and he never should have been off the case. now this is proving it that he was right. you want him to stop doing everything and thank god he's there helping us along. >> the sarcasm is rick's. >> sometimes he figures out the crime. >> so did columbo. >> the fed will stay aggressive and needs to stay aggressive because the economy is not having its own engine right now. >> you don't buy as being aggressive making it worse. >> not with unemployment at 8.2%. not with real gdp growth at 2.2%. >> thmy read of the fed they wot do anything as long as we have a two handle on gdp, if we're doing -- >> they won't unwind the balance sheet on that quickly either. >> they will let it ride and stay low until 2014. >> we have the ultimate pushing on a string. we have mother nature pushing on a string. we have ben bernanke pushing on a string. nothing helping. we get back to the question, is at any time hangover from the recession or is it the structural problems we have with regulations and tax policy. >> it's the deleveraging. >> deleveraging. >> that's the hangover. >> combination. >> we're still down 5 million jobs from where we were. we need those. >> excellent point. >> deleveraging story is getting harder to tell when the personal saving rate has fallen under 4%. >> that's not good news. that's bad news. we want to see consumption going up while people are saving. >> thank you. >> more of today's top stories. revisit that whole moon rock sex thing. >> oh, no. >> large groups of people are collectively smarter than an elite few. that's the premise of james surowiecki's book "the wisdom of crowd." we'll induct him into the "squawk". departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon. it's the at&t network -- securing a world of new opportunities. ♪ yeah, scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it! ev♪ if you miss a day of watering. ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh the newest member of the "squawk" book club, award our next blue chip book award to james surowiecki. we'll join us next to talk about his business best seller "the wisdom of crowds." columnist from new yorker. we love him. we'll get behind the wheel of some ferrari. ceo of north america ferrari will join us as well. . there it is. you can just call that the adp number there down 58. >> we were down about 20 or 30 points before. but double down. >> 119,000 is eerily, private-sector in april for the adp and people were looking for 175. that's eerily close to that lousy number of 120. they revised last month down a little bit too. the ism which was strong and we thought maybe, you know, maybe that was a positive and we shouldn't assume it was all about unemployment. an interesting number tomorrow at 8:30. >> who was it earlier this morning, michelle was saying if we get one more week of jobless claims it's a serious issue. you have to start reading what it means for the overall unemployment picture. >> mastercard earned six cents above estimates. revenue also beat card holder spending increased by 17% from the same quarter a year ago. pepsico increasing its annual dividend by 4%. payout goes up to $2.15 from $2.06. pepsi has raised its dividend for 40 consecutive years which is pretty amazing given that those years included 2008 and 2009. but it's not a huge yield. pretty good. 3%. not bad. why don't you buy pepsi. what about pepsi? >> i don't have a view on pepsi. we may own pepsi. we own plenty of american companies. john deere was one of the ones i mentioned. there's plenty of great american companies. >> i'm not an apple bull. i'm an apple user. >> pepsi is coming out with a low-carb snack. >> a low-carb. it's hard for me to keep eating pork rinds with cheddar cheese because it makes me feel gross. it makes you smell gross. i wonder what it is. american eagle shares jumping in pre-market trading. >> pork rinds are protein. carbs are what achilles you. >> carbs are what cause this. company is raising earnings fwidance to 18 to 20 cents from a prior eight to ten cents. consensus is 10 cents a share. >> this week we've been kicking off the "squawk box" book club. this is exclusive books. we introduce new books going forward after this week but now let's present our next blue chip book award goes to the wisdom of crowds by james surowiecki. the book is must read how large groups of people are better at solving the problems than an elite few. james surowiecki joins us now. he writes for "the newyorker" magazine. >> this is crowd sourcing. this is the thought that this could be done en masse. >> came out a long time ago, 2004. so it was a little bit ahead of a lot of that happening. people started to get a little bit interested in in terms of the internet. it was in the wake of this that you started to see the internet become a place where large groups of people can come together and, you know, wikipedia had just begun. you're seeing a lot more along those lines. >> don't want to pit you against your client but i'm going to. you talked about "wisdom of crowds" and he talks about "blink." one guy who has an idea and better way to make a decision than to rely on everybody. >> you want everyone in the group to be relying on their own information their own gut whatever it is. i do think that "blink" does believe in the power of experts more than this book does. >> what about the failure of "the wisdom of crowds." when you think of the financial crisis that was a function in a large part, a lot of people thinking one thing and there were a couple of people on the sidelines with sort of "bling" said this is wrong but everybody else played along. >> this book was written in the wake of the stock market crash bursting. another example of madness of crowds. the way i think about it is that for groups of people to be smart what you really need sue need people to think for themselves and you need groups to be diverse. and i think one of the things that happens in financial markets, one of the problems that they can run into is that diversity oftentimes can vanish. that's what happens during bubbles. the other thing and you see this more and more in financial markets, there's a lot of trend following and a lot of herding behavior. i think that the rise in particular things like momentum trading have magnified. >> a little government can go a long way too. a free market -- there's a reason they make crystals and semiconductors in rooms where there's not even the slightest spec or you go to outer space to do it. it was not a free market in the housing market that caused that. so, would you say that this -- i mean was adam smith the first person realized a lot of people acting in their season self-interest sets prices and a locates capital more effectively then these elites that run medicare and obamacare. isn't it better to -- otherwise it's central planning. >> i think that it definitely is an argument for adopting more bottom up mechanisms to make decisions and solve problems. adam smith was certainly the person who probably captured it best when it comes to markets. going back to aristotle -- >> still haven't learned. >> another interesting example of that think about the way corporation run. one of the big implications of the book, i think, is companies should do a much better job of incorporating the knowledge of their employees. and lou platt who ran hewlett-packard, if hewlett-packard knew what hewlett-packard knows we would be more successful. in big organizations you have this central planning problem. a few people at the top that make all the decisions. they try to incorporate the knowledge people have but a lot of it goes missing. one of the things i talk about a lot in the book is ways for companies doing a better job. >> how do you do that without really bogging things down. the problem with democracy is it's chaos. >> the way i think about it is when i talk about "the wisdom of crowds" in this book and inside a corporation i'm not thinking about a quest for consensus which is what you end up, i think one thing that technology has done is make it possible to incorporate lots of pieces of information and get a collective read on what people are thinking much more quickly and efficiently. if you think about a market that can happen very fast. you know the incorporation of information. in a can use things that i talk about in the book like prediction markets where you ask employees to bet on what sales are going to be or how a product is going to do. that can be done very quickly. doesn't involve a lot of meetings or anything like that. i think the idea there is what you're really trying to gate read on is what people collectively believe. >> steve jobs would say this is crazy. tech dies would say you need a dictator. >> jobs is the great counter example whenever i give a talk or mention this. people say what about steve jobs. it's true that if you know your ceo is steve jobs then okay maybe you're better off just relying on that. first of all they are very rare. jobs was actually surprisingly good at is surrounding himself with a group of very motivated people and listening to their insights. even jobs himself did a great job of breaking down barriers inside the corporation. counter example is google. google has very powerful people at the top. if you look at the way they run they do an incredibly good job of incorporating all their employees. >> james congratulations. we want you to sign a book for our library. >> will. >> honors of the pen here. thank you, sir. and here's the blue chip book award. you can put this on your shelf. >> thank you. >> add this to our library. >> absolutely. appreciate you being here. >> thank you. when we come back, luxury consumers have been finding their way back to ferrari after the financial crisis. the company at this point still isn't back at their 2007 levels. but joe, andrew and i got behind some high performance models. we'll talk with the ceo of north america right after this. welcome back to "squawk box." the market understand a little bit pressure. dow futures down by 56 points. loss doubled after we got that disappointing adp number. 119,000, street was expecting 175,000 private job numbers. we'll see what that means. in our headlines today, chesapeake energy once again in the news. reuters reporting the ceo ran a lucrative business on the side, a $200 million hedge fund that traded in the same commodities that chesapeake produces. that fund was started by mcclendon. no evidence that either man used inside trading. he came under fire that he's taken up to $1.1 billion in loans against his stakes in gas wells. >> last week becky, andrew and i hit the road in two premier luxury cars. the california and new ff, the ferrari four. they gave us the keys and we were off to the races. >> wow. hello. you are crazy! ooh. watch out. hello. whoa! yikes! >> i'm alive and i'm happy about it. >> i can live in a car like this. >> i'm running the yellow light. >> ciao. wait a minute. >> joining us now is marco mattiacci, ceo of north america ferrari. cacciatore. thank you for lending us those wonderful cars. off camera i asked you not that i could afford $294,000 and it's a ferrari 4 because there's plenty of room in the back seat. my question is if i put 16 or 17,000 miles a year on it, maintenance would not be an issue to use that oscar to come network is this >> not at all. >> one of your colleagues said it's a commuter car. >> it is with the back seat because i have a back seat and it's getting smaller and smaller as my kids age. but i need a $268,000 subsidy from ferrari. >> 40% of our cars are leased. >> these are luxury cars, obviously. how is business? >> business is very, very strong. and i think last year 2011 we set a record here in the united states. we're keeping the pace this year as well to be on top, to be another record here. what we're very happy about, usually 65% of ferrari owners are repeaters. so, at the moment in california sales are part of that shift. 75% of the buyers are new owners, never owned a ferrari. so it's stronger than ever. we have almost one year leasing. so business is strong. >> that's the ff right there. i'm not going to say anything about the pan america. blind spots. fits the bill but out of my price range at 300,000. amazing car. >> we the vest 16% of our net in r and d. we have a lot of cross. you're driving the best in class. >> you can hear it. is that as close to, like an suv or crossover, is that as close as you'll get right there? >> no. >> that's a ferrari. >> four seater. not close to an suv. >> where besides the united states -- what do you sell in china? china is a communist country but you're selling ferraris left and right. >> in the u.s. we have a shift in determines of geographic wealth. largest market is california. second largest market used to be new york state, now florida is overtaking new york. second largest market. we have a lot of influx in spending from south america. >> how about the rest of the world? >> rest of the world, i mean, asia is very strong. >> middle east has got to be strong? >> middle east is strong. >> china, you don't think about, who are these kids in china or people in china, they are like princelings. >> china. demographics is different. 50% of our buyer created their wealth in the last 36 months. it's very new wealth. different demographic. largest market and most important market. >> you let us drive these cars and as joe pointed out early we put some heavy duty mileage and we enjoyed it. you're talking to the cnbc audience. is this your buy center >> it's very interesting. almost 40% of our buyer owner so it's a dream that can be realized. it's open for business and the way you're pioneering if technology is the market. >> i think it's great. if someone aspires to have a ferarri, it's great. a ferarri to the occupy wall street crowd, i guess you could split that up between a thousand people, whatever it costs, and we'd have a better soots. >> how long has ferarri been around? >> as a company, 70 yearings. >> did you see the ferarri that was abandoned? did you guys go and retrieve it? >> the ferarri was one of the most prestigious cars ever built. what i want to say is that i'm very lucky with this job because i have so many great interpreters in this country. it's incredible. >> is there any shortage? can people get what they want? >> how long does it take to get one? >> if today you ask for a 4, 5 spider, you'll have to wait two years. for california, that's one year. >> anything i can take off the lot? >> you can have a toy car? >> if we drive the ones that are out there today? or do we already have our shot? >> they're for us. >> coming up, some final thoughts with our guest host and squawk on the street, the first quarter conference calls starts at 9:00 a.m. they'll be bringing you all of the details. you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those." we provide the exact individualization that your body needs. oh, wow! that feels really good. it's about support where you find it most comfortable. to celebrate 25 years of better sleep-for both of you - sleep number introduces the silver edition bed set, at incredible savings of $1,000 for a limited time. only at the sleep number store, where queen mattresses start at just $699. ttd# 1-800-345-2550 let's talk about the typical financial consultation ttd# 1-800-345-2550 when companies try 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neil said he wants this one. neil is our guest host. why don't we do some quick business, too. you've been doing earnings and they've come up better than expected. you've actually think they've done good out of this? >> we do. >> we think that corporate earnings can sfa strong. that should be good for stocks if you're picking the right company. we continue to be bullish. we're being very selective on the downside. >> but it's going to hold onto what happens in 2014 with the fed? >> yes, again, we think that betting with the fed, not against the fed, is the right way to go.

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