Transcripts For CNBC Squawk Box 20120619

business was stag night. his departure is linked to criticism of oracle's president. oracle is authorizing $10 billion for additional stock repurchases. andrew, let's get over to you. >> breaking news that's crossing the wires. a merger this morning, a two step deal. walgreen is buying a 45% stake in the european pharmacy alliance boots. walgreen will be investing approximately 6.7 billion in cash and stocks in exchange for a 45% equity interest ownerswne in boots. the u.s. chain will have option to proceed to a full accommodation by acquiring the rest over the next three years time at the current share price. that second step would be valued at $9.5 billion in cash and stock. walgreen ceo and alliance boots executive will join us in just a few moments to go through southeast details. it's an interesting deal that will create the largest pharmaceutical company or pharmaceutical retailer or wholesaler in the world and interesting deal especially in a time like this in the crazy economy we're living in. >> this is a kkr entity. >> we should talk about that. alliance boots was taken private. kkr is its largest shareholder in addition to stefan jobs the chairman and founder of the company. >> they sucked the life of the company out already? the vampire, private equity, they've paid big dividend, left a shell of the company and ready to pawn it off to some unsuspecting -- >> here's the most interesting part. the way this is structured, there's cash in a stock. stefano is take only stock. he's going to become one of the largest shareholders in walgreen. kkr will be one of the largest shareholders in walgreen as well. interesting elements. >> they are keeping skin in the game. >> so, joe, they have not stucked the life out just yet. the other element of this, of course, is what's going on. what will happen to the obamacare and health insurance market and that want plays in to a different element. >> is this back office operations or front office operations. >> they will get huge efficiencies in terms of buying drugs. the other element is that alliance boots, i don't know if you've been to a boot store in europe, the alliance part of this is a wholesaler and that's something that walgreen's doesn't have. the idea of being able to mix that wholesale operation with the distribution -- >> you have to think it has something to do with the cvs caremark. cvs caremark is our prescription benefits manager and made me switch my prescriptions over to cvs. >> the other thing that's probably pretty interesting two different wise prices of drugs. here in the u.s. we pay an enormous but in europe they don't. >> the drug companies got that concession that we wouldn't do reimportation and that's why they signed on. >> right. >> how far does boots go? >> all over europe and i think there's a bit of it in south america maybe brazil. i'll check in a moment. >> alliance every where. alliance is whole selling a around the yorld. >> i don't think they wholesale in the u.s. >> kelly evans has to go to boots. it maybe needed any drugs while in the uk yet? >> no. i feel like walgreen's is stalking me because first i moved to new york and they buy dwayne reed and now i move to london and they buy boots. take a look what's happening behind me overnight. more green across the board following yesterday we saw the same thing. stocks have been searching for direction. the stoxx europe 600 is up about .42%. this follows a mixed batch of news. german sentiment was soft and spain had to pay significantly higher rates. ibex 35 in spain is 1.5%. ftse and italy up. dax holding up okay. up half a percent. the zew survey is a survey of investors sentiment. came in a reading minus 17. richard was quick to put out the zew survey of investors, he wants to know about the survey of actual business conditions. footcy 100 up. take a closer look. spain after auctioning offer that 12 and 18 month debt had to take significantly higher rates. a little bit better tone for the longer term paper. italy is at 6.004%. some trades are back below 7%. but for 18 months italy -- spain is paying 5.107% to borrow. both of those are up two percentage points from the last auction of similar maturities about a month ago or so. france and the german bund are benefiting today with yields down too. quick look at the currency story before i throw it back to you guys. always about the euro dollar. we were higher earlier this morning and goon prepare those gains. up .3% of the question going forward is going to be whether as euro starts weakening at a level of 1 pipe 2617 valued much more highly. can the euro start weakening? guys. >> great. yeah. that was are a short span of stocks went three to five. you probably mentioned that. microsoft is creating a lot of buzz unveiling its new surface tablet at a secretive event after the market closed. let's get perspective. you run red team global. how old is that? >> it's brand new. >> you're the de facto operator. we say you run it. do you run it? >> i run it joe. >> you have time to talk to us lowly journalists today when you're running this place you all right. >> your humility is amazing. yes, i love talk towing. >> let me ask you other than having a keyboard which a lot of people -- that seems like a no brainer, you know, come to think let's just try it because i heard from so many people they don't like the fingerprints and the oil and it's much harder to operate. what else does it have besides that? >> this is a pretty bold move on microsoft's part in many ways. the hardware is certainly by the review we've seen overnight going to really impress the market, but i think that this is a productivity drive for them and an extension of their window strategy which is very different than apple strategy of really a clean break from the pc. >> yeah. i liked having a clean break from the pc when i got a mac. i don't know of anyone who said i really wish my phone and my tablet would be a lot more like window sos i can see that stupid hourglass just constantly flipping around and around while the thing is frozen. >> i would try it. with the keyboard i'm in >> you're a single issue voter. >> is that a sales point that it's like windows? windows is so passe. >> windows is passe but windows 8 on this device crates a new age for microsoft in terms of this category. the real question is will consumers and businesses be attracted enough to vault microsoft from a no position in the tablet market space and in the mobile os space to a decent position and i think that's -- the jury is still out on that. >> my guess would be, mike, they are looking for consumers like me who still have pcs at home and still have a lot of their media and pictures tied up in microsoft stuff. i have a server that's a windows only server that holds all this. they are a perfect audience. >> you are. businesses will be attracted to the fact that these are windows machines. they leverage the existing infrastructure. they are easier to manage. the flip side is that these devices are combination pcs, tablets, particularly the pro version wanting windows. as a result they may compromise the experience that the bar that apple has set for the consumer tan let experience. that's the unknown. we don't know a lot about the device but we'll know more in the coming weeks as to whether microsoft can bridge that gap. >> there's been somebloggospher may release a tablet. >> microsoft is multiple groups and i think the office group has to be on ipad just because it's so dramatically penetrated the enterprise and continues to do so as well as what they called byod. so isn't that one of the last great reasons to go pick up a new microsoft windows 1 tablet? isn't that one of the crutches that you say it will work better on mac? >> it's a tough decision. the flip side is that you could easily argue that because of the predominance of apple, if you're not on that device you could lose the momentum that office has in the enterprise to other products that are available on apple. it's a tough spot that microsoft is in. this is a defensive and offensive move because exactly that. we're in a post-pc world now. they don't make the os. they don't make the apps that are predominate on these tablet device. this is a very, strong move and effort on their part to do that. >> it sounds like a laptop th that -- you sit there with word, you got to flip it down. you sit there with word and excel it seems like a smaller laptop. it would meet some resistance. looks like a different version of a laptop. >> you may recall that tim cook famously just said recently that we don't believe in hybrids, that's like shoving a toast near to a refrigerator. apple is take a different tack here than microsoft. but productivity is a big issue on apple tablets. it's an issue. to be able to create content. microsoft may address that problem. >> you've seen other companies try to get into apple's space with these different -- whether phone or consumer device, a year from now are we going to put another check mark here yeah they tried that and that didn't work or do you think this could get a foot hold? >> i don't thing this is zoom or kim. this is more thoughtful and comprehensive and pretty strong entry into the market. so i don't think that's the case. but the forces at work in the tablet market, the executing market are darwinian. the issue right now is microsoft is terribly coming from behind. they really lost it because they basically misjudged as did others, apple's ability to dominate that space and validated the category. that's their biggest problem right now. >> mike, when you try to estimate the revenue potential how do you it? i played with this thing. becky might have -- >> didn't realize -- >> it's pretty cool. if it was at the right price point lower than the ipad i could see it working. >> there's going to be about 120 million tablets out there this year. maybe at some point they will capture 10% to is15 of the mark which isn't huge. it won't move the needle financially for them. it's also a reference design for all their oem partners which by the way they are competing now which is another risk of this bold strategy. so initially it necessarily won't move needle, it may take time but i think it's an absolute necessity for them. >> all right, mike. thank you. >> thanks. >> you got bigger things to do now running that whole operation up there. you got this out of the way by 6:15. frees up the rest day. deal maker of the day, top executives of walgreen and alliance boots, a "squawk box" exclusive. roger clemens acquit on all counts. he denied using steroids and human growth hormone. this was the federal prosecutor's second attempt after a mistrial. tough to make these things stick. "new york post". that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪ back to your deal of the morning. walgreen's buying a 45% in europe's alliance boots with an option to buy the rest over the next 2 1/2 years. it's an interesting deal. let's go through a couple of details. wall green is paying $6.7 billion, $4 billion in cash, 83.4 million in shares and the big question how they buy the rest at 55% if the option is exercised walgreen's paying 4.9 billion in cash and issuing another 144.3 million shares. all of that subject to walgreen shares not falling below 31.18 per share. joining us now, greg wasson walgreen's president and stefano pesano. let's talk about the strategic rationale of this deal. why do it now? >> good morning, andrew and everyone. we certainly are excited with what we're announcing today. it will bring together two iconic brands of similar heritage and culture, walgreen's and alliance boots to great the first global pharmacy led health and well be enterprise. now is the time because it's creating an international health care platform where we can bring innovative health care. >> thhow much of this deal is about cost savings and how much is about growing the pie? >> what we're doing, we're creating a supply chain that's unmatched in the industry. we'll be the largest buyer of prescription drugs in the world and many more health and well being items. so, immediately we'll become the largest procurer of prescription drugs. also in the middle of the two step process and even beyond we can create revenues by offering alliance boots number 7 in walgreen stores in the united states as well as begin to look at this as an international expansion platform. so stefano and his group can help us get into emerging countries around the world. >> stefano let's talk about this two step process. why not sell the company out right today? >> we have a lot of things to do. walgreen was interested in improving its organization. and we were to discussion continuing our expansion across the world because we have always been key to become a global company. so this process, we are continuing now. at the same time to know each other, to deliver what is really important, most of the energy because we don't need to be just one company. and we will have a clean view on how to organize the company when the company will be one as we open. >> greg, any chance that you decide over the next 2 1/2 years as you get to know each other that you don't continue to pursue the deal? talk about the rationale what will happen over the next 2 1/2 years? >> andrew, we certainly have every intention to proceed to step two. the two step transaction, as stefano just said is a unique but perfect structure for bringing these two companies together. i want allows us to capture really synergies. it allows companies to focus on their core negotiations. this accelerate our strategies. when we come together really helps us create an international expansion platform and creates more and more synergy. we have every intention of bringing these two companies together. we think this is the most prudent way to make that happen. >> i've tried to do a deal in the u.s. for ten years. i really believe that this industry needed a global player. now that i found a partner you can be sure i'll do all i can to keep him with me. >> one of the questions we were batting around the table was this idea that, you know, drug prices are different in different countries. here in the u.s. for a pfizer drug you pay an notorious amount where as prices are capped in many countries in europe that you do business in. how does it change the relationship in terms of your pricing pressure that you're going to have over some of the drug companies but how are the prices going to change or will they? >> stefano has been doing this throughout europe certainly with alliance boots for years. with price differences between countries. i think andrew the real opportunity is we'll be the largest buyer of prescription drugs and many other health and well being items. we'll work with pharmaceutical suppliers and front end suppliers in ways we haven't been able to do in the past to bring their frouts the marketplace. this is creating a unique international health care platform that we'll be able to really bring across the globe to bring innovative solutions. >> we work in 25 countries. in each single country we have different gradations and different prices, different ways to deliver. so, of course, if you want to be a multinational company in other industry, you have to be able to cope with the local needs and one of the characteristics is price. >> greg, i used to have several of my prescriptions at walgreen, cvs caremark is the benefits manager for our company and basically if i didn't move my prescriptions to cvs i was going be paying a higher price. is part of this combination of the cvs caremark -- >> i'm sorry you're no longer at walgreen's. i would say this is much greater. what we're doing is we're putting together two iconic brands, to create something that doesn't exist in the world today. and we're bringing it, to create a real health care platform. so we think this will give us an opportunity to bring more creative solutions, help control health care costs to a greater degree in the united states and across the world. ultimately i think we can help payers across the world to control costs and help bring access to patients. so eventually you'll be able to come back to walgreen's and fill your prescriptions. >> real quick, stefano, we have to run. we were just talking about, you're keeping -- you're going to become one of the largest shareholders in walgreen. kkkr was an owner of low pressure system boots. why stay in? >> i really do believe in this combination. as i've said we were looking for a global deal. i have spent 35 years of my life in the industry. i believe i know the industry. but all the deals that i have done are really small in comparison with this deal. >> stefano we have to leave it there. congratulations to boston you. thank you for coming on to cnbc to talk about it. >> when we come back we'll talk about greece. stick around. recently, students from 31 countries took part in a science test. the top academic performers surprised some people. so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this.  optionsxpress, where you can trade your favorite products, all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com. sven's home security gets the most rewards of any small business credit card! how does this thing work? 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[ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice. ♪ >> good morning. welcome back to "squawk box". i'm joe kernen along with becky quick and andrew ross sorkin. the fed is convening a two day meeting. we could see a tweak to operation twist. well have more in just a minute. i don't know whether you do this sort of the -- >> no, no. >> what's the tweak. there's a tweak to the twist. >> you think? >> do you remember? >> that was pretty bad. >> yeah. >> that's the latest. >> but the latest. does it involve taking your clothes off somehow? >> you wish. all right. let's talk about europe. there's another key spanish debt auction this morning. yeeltds jumping to the highest level since the birth of the euro. sharon stark is here to talk to us and kevin ferry at the cme. let's start off talking about what you thought was going to happen. you still think that greece doesn't have a chance of staying in the euro over the long term. why is that? >> well, unfortunately the debt did not go away. they do have leadership now which is definitely a step in the right direction. the whole coalition government in the next couple of days. greece still doesn't have enough known pay off their debt. it's that simple. this near term, you know, loan that's coming from the troika will get them through the next bond payment and next debt payment but greece does not have the ability to generate enough revenue to meet their future obligations and i think what's happened now is the other european nations are preparing for a greek exit. >> so, kevin, that must be what the market was kind of looking through last night or yesterday as we watched the market initially trade up on this idea and then give it all back. so, kevin, what's the next thing we watch for? >> well, i think that was a big tell, becky, from a standpoint that policies losing some efficacy and traders are getting fatigued by the process. i expect it to continue. there was no type of resolution. as we bring the focus back into the states, you know, perhaps you can run things more in a positive light. so the markets held in well overall although the action was a wild trip to nowhere and maybe watch as you were talking about twists getting back in it, it would actually be better if the curve step-ened somewhat here in some fashion and so the market forces would rather see the curve going the opposite direction which policymakers are trying to force it. >> what does the market want to see? you're saying they don't want to see more of operation twist or at least some sort of help from the fed? >> whether they want or not, i mean the concession is leaning towards them, people moving more in that direction. how would they do it? what is the operation? would they be selling things? would they move into mortgages, whatever. the devil is in the details. >> the general consensus is they will go ahead and extend operation twist on a temporary basis from now until let's say september. if that's what happens tomorrow how does the market react or is that already baked in? >> we expect a great positive reaction. >> you both are saying you think that's already baked in, sharon? >> i think the market expects them to extend operation twist and more importantly i think the economic summit will be a very critical meeting because you'll have leaders coming in from all over the world including europe and it's at that meeting that some sort of global solution will at least be on the table and perhaps, you know, announced as soon as september. >> kevin, is that soon enough for the market? >> well, we'll get the play while they are waiting. that's the key. don't try to read too much of a macro story in the gyrations. expect a lot of gyration. that's what we would get. again, if everyone is talking about twist, they have 200 billion left in short securities to sell. it's more of what they end of buying. i'm not a big fan of it. >> kevin, your gut feeling, 12,700 for the dow. what's your feeling? >> i think it's an environment in which u.s. equities can stretch themselves from the economic reality farther than people think so i think the upside is still very doable. >> kevin, sharon, thank you very much for joining us. >> okay. >> thank you. >> before we get to this next interview, had a lot of thoughts. spain is not sure about its banks at this point and everybody is worried they will find a lot more. is now the news today, mark grant is now receiving his stuff. >> you wrote a column? >> i do. >> i'll get you a copy of the newspaper. >> got it over here. "new york times". i keep doing down spectrum of liberalism. i get to your column. >> about mark grant. >> i'll read that. spain is going delay publishing the audits until september so they are going to -- i don't know whether they saw anything. their 18 month bills last option in may 3%, 3.3. today 5.1%. now you know that the european commission is like an important body so you know the president is this guy juan manuel barroso. in a tone tinged with anger yesterday he said we're not coming here to receive lessons in terms of democracy and in terms of how to manage our economy. especially since this crisis was not originated in europe, the crisis was originated in north america. many in our financial sector were conat that my fwhatd the unorthodox practices. few mainstream economists would support the view that the u.s. financial practices caused europe's heavy borrowing or the structural, deep structural problems in the currency union. this is a guy that is the -- this is the duke. he's actually mad and bitter so have someone go over and say can we help. that's his rationale why we need to contribute. i finally realized whose fault this entire european problem is. >> whose that? >> george bush. >> i thought you were going to say greenspan. >> him too. mainly george bush. his head should be on a plate in an hbo movie. he cut taxes for the wealthy. next thing you know spain has some problems sponsorship at least -- he's also going to be responsible for obamacare being overturned because he put roberts and scalia. he's still around. he's right there for you. right there. the two day fed meeting begins today. growing number of fed watchers believes we'll see some form of easing but not mark olson. joining us greg ip. you say nor easing. more twists or a twist tweak. is that not considered easing, mark? >> think when we talk about twists, i think that -- i get the impress some people think it's an off and on switch. we have to look at the balance sheet of the fed. there's been enormous restructuring that has been done and a significant percentage of the bonds are now in the 10 to 30 year category of maturities and so that has happened. i think what we'll probably see today is a reaffirmation of the need to continue the overall easing policy, that there isn't a lot of twisting left to be done. chubby checker not with standing. >> heard qe3 is coming. not now or never? >> it seems to me that the timing is not right. if there is going to be a real issue -- if you look at for example the last statement that the fed made in april, if you look at janet yellen's statement and chairman bernanke's statement they've seen an economy, domestic economy that's doing moderately well although some risks and the risks are to europe. if you folks have covered very well what happened in greece did not resolve knigit just eliminated some of the potential down side risk exposures. if the fed does something dramatic it would seem it would be in this meeting. >> one thing we said, mark and i'll get to greg, is that we're trying to justify or at least give the europeans the benefit of the doubt on this kicking of the can strategy. we're hoping that they think if they can create more time then maybe things in italy and spain they can sort of work things out there but then i realize if spain's economy is this bad and bank assets continue to deteriorate what good is buying time if three months from now things are worse in their banking situation than they are now. is this a viable strategy where they are buying time and things improve over time or things get worse? >> joe, i would read it slightly different. it seems to me what they are doing in greece, you have to say one thing on get elected. the coalition, the federalist coalition is in place but they were talking about even having to back away from some of the austerity measures. now it's their turn to demonstrate whether they will take austerity seriously. it's buying time in that context. >> greg, what do you think happened? do you agree with mark that qe3, it's not the right time for it and we'll get a new version of the twist? >> i don't agree. i think the odds favor we'll get something. you make an important incidents takes between qe3 and a twist. actual qe3 they buy the bonds by printing money whereas with the twist they buy the bonds by selling something else in portfolio. i agree with mark we won't get actual qe3. the fed is very nervous of doing actual qe3. the more money they print the more they have to clean up afterwards. there's an implication they may have been partly responsible for a spike in commodity prices. the bar is lower the an operation twist. the catch there is they have not as many one to three year bonds left to sell for that kind of an operation. if we were to see hints or actual move towards operation, more operation twist this week, you might expect to see them move out towards the three to six year area of bonds. >> your closer to the whole european situation? you got some insight you can share with us on what to expect. >> look, you know, quite simply europe's situation can only be solved with some form of banging union or some form of euro bonds. any move that moves them closer to that and the crisis is not over. they bought some time but not very much time because spain's problems have not been involved yet because it all rests in germany's hands. on once germany gives the go ahead that they are prepared to do something else then everything sells patch work and we've not solved that problem. >> greg, thanks. >> i love barroso. that's classic. don't you? sort of classic. i don't know. >> 50 years of entitlement state rights as we, as we provide for their security with nato, as we provide for all the drug innovation. we provide and still this is our fault that they mismanaged their economy right into the toilet. always thought so. >> i'm not sayinghat's right. >> jamie dimon preparing to head back to congress. we'll ask if the boss will get a different reception on the house side of the hill. that's coming up after the break. we're back on this tuesday morning. jpmorgan ceo jaime dimon will be testifying before the house financial services committee today. so what are we going to hear or what should we be trying to hear today from jaime dimon that we didn't hear last week when he was in front of the senate house committee? >> the senate banking committee but i'm tempted to be glib and say if you really want to know what's going on with jaime dimon listen to mary thompson's interview. announced many questions he should have been asked. in fairness to the committee it's very difficult in a committee when you go side to side to ask serious questions. let's hope we get some sensible regulations for our banks and how they can be regulated to reduce that threat and reduce the chance of bailouts while enabling them to support the economy and prosperity and growth that we all need so much. >> what is it we want to hear from him specifically? do you want to understand if this was a proprietary trade versus hedge. are there details here that you think the public still needs to know about? >> no question. there are many details about this particular trade and the operation of the co in london. he won't tell us until around july 13th. what he can talk about, those is what he in particular did in connection with the co office. it was reported he was the one that changed it from a low risk hedging operation to what is effectively a very high risk prop trade but more important issue is not what jaime dimon did or jpmorgan did, the real issue is what did these banks do that increased or lowered the risk of bailout, failure and taxpayer exposure and how it intersects with regulation which as you know and you've reported it extremely well he's been in the forefront of fighting rather than enabling in a sensible way. >> what's the chance this turns into political theater. in some ways you say the hearing was thoughtful, there were real issues that did come to the about theatrics and camera time than real answers. >> i think the problem is when you're in the political arena as you referenced i was there long enough, it's always going to be a political dimension where people are looking to score points and advance their interests. on the other hand, last week i think was a dramatically missed opportunity. there was so much time spent fawning over the ceo of jpmorgan and frankly asking him how he would regulate big banks like the one he runs, rather than them asking and probing real questions. he said to mary thompson, it was very insightful, he said we're playing with fire here, what we need is belts and suspenders, quote/unquote. that's true. they are playing with fire, and we can't -- the american people can't count on each individual bank of having adequate belts and suspenders. >> dennis, we got to run. tee it up, the one question you would want to ask this morning. >> he said he's against too big to fail and any bank that fails should be put in the dust bin of history. the question is how he does he expect to do that with his bank and how would he specifically do it with the other two big too fail banks so that, in fact, the american taxpayers aren't at risk of bailouts. >> thanks for joining us this morning. >> thanks a lot. >> more from the house financial chairman spencer baucus at the top of the hour. stay tuned for that and more coming up. >> als is important to me because i had a family member that was diagnosed with this. it affects the neurological system to the point you completely start to deteriorate and it's a difficult process to stop. if we are privileged enough to have any extra there is always somebody in need and we always want to give back. i'm pete negerian and i'm living well. the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ 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. our cloud is made of bedrock. concrete. and steel. our cloud is the smartest brains combating the latest security threats. it spans oceans, stretches continents. and is scalable as far as the mind can see. our cloud is the cloud other clouds look up to. welcome to the uppernet. verizon. bachus. tonight at 9:00 eastern, getting back to business, a cnbc town hall event. we all know that capitalism thrives on competition, but venture capitalist kevin owe leery describes it as war. >> i don't know where we got lost, we're all singing kumbaya these days, but business is war. you get up in the morning and figure out how do i kill my competitor, how do i pour boiling oil on him. that's how you do it. that's what made america great, competing, winning, fighting, competing. >> i completely disagree. >> oh. >> sorry. >> so wrong. you are so wrong. >> when i first cut the feet out of my panty house i was at a cocktail party and they came up and said business is war. i sat on my apartment and said, i don't want to go to war. why does it have to be war? i have not taken that approach. i have not been obsessed or focused on the competition and annihilating the competition. i have only been focused on my own quality, what can i offer is the best and give value. >> that is tomorrow night. it premiers wednesday at 9:00 p.m. eastern, so we'll have more on that and probably talk about it tomorrow night too. >> when we come back in the next hour, house financial services chairman spencer bachus tells us what he would like to ask jamie dimon today. plus famed activist investor nelson pelts on his later target and we'll welcome today's guest host, knows about everyone from bank executives to random ministers, ft managing editor jillian tett shares all. d adapt to changing road conditions. one that continually monitors and corrects for wheel slip. we imagined a vehicle that can increase emergency braking power when you need it most. and we imagined it looking like nothing else on the road today. then...we built it. the 2012 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. ttd# 1-800-345-2550 let's talk about the typical financial consultation ttd# 1-800-345-2550 when companies try to sell you something off their menu ttd# 1-800-345-2550 instead of trying to understand what you really need. ttd# 1-800-345-2550 ttd# 1-800-345-2550 at charles schwab, we provide ttd# 1-800-345-2550 a full range of financial products, ttd# 1-800-345-2550 even if they're not ours. ttd# 1-800-345-2550 and we listen before making our recommendations, ttd# 1-800-345-2550 so we can offer practical ideas that make sense for you. ttd# 1-800-345-2550 ttd# 1-800-345-2550 so talk to chuck, and see how we can help you, not sell you. ttd# 1-800-345-2550 economic concerns continuing across the globe. we're giving you the facts and keeping investors ahead of the game with the smartest minds in the business. jillian tett of the "financial times" is our guest host this morning. >> two different perspectives on the euro crisis. donald trump with investment opportunities no one is seeing. >> the ecb on what central bankers could do and how to ease europe's fiscal pain. it's the second hour of "squawk box" begins right now. good morning. welcome back to "squawk box" on cnbc. i'm becky quick. before we take a quick look at the futures, see the dow futures up by 35 points. markets yesterday managed to hang in there. the dow only down by about 25 points at end of the day. still a little disappointment after seeing the greek elections go the way the markets had been hoping for on friday and still seeing red arrows throughout much of the day. spain today having to dig deep once again to sell its debt. the company -- the country did see strong demand for its 12 and 18-month bills this morning but the yields soared. the 12-month bills at a record high of 5.07%. and the country may face more difficult test on thursday. that's when it those sell up to 2 billion our ross of two, three and five-year debt. in the united states, more investors are betting on some sort of easing move as fed policymakers begin a two-day meeting. many are predicting an extension of operation twist. maybe something that lasts for three months between now and september. chief u.s. economist yan hatsus is expecting the central bank to announce new purchases of mortgage backed securities and treasuries. today's guest host is credited with foreseeing the financial crisis, named one of the most important women in newspapers in 2010, gillian tett is the managing editor for the "financial times" and great to have you here this morning. >> thank you for having me. >> the situation in europe right now, would you describe this as a brief pause as we figure out what the next step is? >> i think andrew captured it well, w we moved from grexit to spannic. >> give that to joe. >> okay. >> [ inaudible ]. >> all credit -- >> give it to -- it was andrew. >> no. >> you can share the credit. >> i'm not sharing. >> we are in spanic and people are saying right now not only are they concerned about the situation with spanish banks, there's still a lot of worry the bailouts may not be enough. a lot of concern about how that support mechanism is going to be dispersed. but there's a lot of concern about the fundamental issue about whether eurozone is ready to pull together and try to find a joint solution whether angela merkel will greet any union or mutualization of debt, or whether essentially we are heading for some breakup this summer. >> there are some tensions that are showing. joe brought up earlier today comments from "the wall street journal" where barroso pointed out and said this is not our fault. the reason the u.s. should be helping fund this because this was a north american problem, that transfixed and came across the pond? >> i think anyone who's looking to either blame america for what's happening right now in the eurozone or look at america for some kind of solution, is living in coo-coo land right now. if you roll back to the asian crisis, used to talk about the committee to save the world, the wonderful picture on the front of the magazine showing people like larry summers and alan greenspan and bob rubin. the reality today there is no committee to save the world. we've moved from so-called g-20 to g-0 and anyone hoping that the u.s. can either kind of focus the blame or actually wave the magic wand and make it go away is dreaming. what we're seeing coming out of the g-20 meeting is a pledge about coordination, about a commitment for the euro zoe, but we haven't gotten anybody in charge saying yes here is a solution and we'll follow through. >> you don't have a lot of money put forth. the imf has raised funds outside the united states but almost everyone is pointing back and saying this is a problem that has to be solved at home. does germany have the resolve and is there the money within europe to come up with a plan and save the eu. >> there's a tremendous amount of frustrations among americans, in washington recently hearing about this, and people amongst china, saying actually it's not a shortage of money in the eurozone that's a problem, it's a shortage of political will and the system of governance for using that money. the big unknown whether germany will step up to the plate. because the key thing to understand about the eurozone today is you're eg rising levels of splits and fractures on two levels in two dimensions. on the one hand you're seeing growing tensions between countries, between say greece and germany or spain and finland, and at the same time you're seeing a rising level of conflict and tension between the voters and the elite. and let nobody forget that it was the elite who dreamed up this eurozone project in an effort to heal the scars and wounds of world war ii. tragically that project is now reopening those wounds and scars and at the same time you're seeing growing voter revolt against the elite and that's very worrying. >> it's the voters who are really going to have the short end of the stick. the elite were smart enough to move their bank money out of the banks in most trouble. >> yes, did not win the election on sunday, we didn't get the far left on sunday, however i would bet that give it a few months, given the complete unsustainability of greece's situation there could well be more votes further down the road. we could see it coming back. in terms of the rising level of extremism in greece could weigh the pattern we're going to see in other countries. netherlands, the nice sensible dutch, dutch always very sensible or used to be, you're seeing rising level of extreme politics in the netherlands. they have a key vote coming up in september and even in germany you're seeing growing levels of protest and tension. if you want to understand why they're gridlocked right now, why merkel can't do what everybody at the g-20 is hoping she will do because she's facing growing pressures herself, so they really are in an increasingly dangerous situation right now. >> if you were going to retire in ten years and live out the rest of your days, and the spanish government says lend the money to me and i'll pay you back in ten years and you can retire, if you lend this spanish government that you needed ten years right now? >> right now probably head to hawaii right now i think. >> no way. >> no. >> if it was you and your retirement -- >> you're never going to get it back. >> greece will never have enough of an economy to service their debt or pay it back. but spain, which is five times this big, will their economy recover to the point where -- >> would you loan it to them at 7%. >> and pay back the principal in ten years? >> i would be wary. >> what kind of interest rate would you like. >> way more than 7%. >> let me put another image in your mind. i've got family members who bought spanish property down near -- >> where? >> down in maligo. >> co sta dell sol. they bought this house about 10, 15 years ago. when they bought it, there was almost nothing around them. within five years, all the land got filled in. but it got filled in by apartment blocks that for the most part if you go back five or six years were pretty much empty. i would look out and see no windows, no light in the windows because they couldn't get rid of them. the key point is, there is a huge overhang of property, it's been like arizona or california, in america five years ago. which basically hasn't yet been dealt with and so if you roll back what's called the spanish panic right now, the spanic -- >> were you listening on the radio? >> hey. >> i was really interested. you said andrew said -- i was interested in hearing what it was. >> if you look back to what the spannic problem is, this vast overhang of property loans and property which isn't being used effectively, hanging like a balloon on the spanish economy and there are only now waking up and acknowledging the scale of that problem. american actually came out three or four years ago and said this is the problems we're facing, but you know, americans know just how deadly that kind of property overhang can be, so it's no surprise you got this panic in spain right now. >> thanks. >> we're going to have more from gillian throughout the show. >> the other big thing on the agenda, jpmorgan's chairman and ceo jamie dime mon back on capitol hill before the house financial services committee and here now congressman spencer bachus the chairman of the house financial services committee. mr. chairman, i'm curious, given that mr. dimon was in d.c. last week, what kind of answers do you hope to get from him today that we didn't hear already? >> well, he said there was a failure of risk management at jpmorgan, but that they're sufficiently capitalized where the taxpayers aren't going to take a loss here and really the system has worked the way it was supposed to. you don't have depositors losing your money. you don't have the clients or customers of the bank losing their money. so, this is really not a crisis. what's happening in europe is a crisis. our failure to address our entitlement spending is a crisis, but this is not. and i think the democrats are trying to exploit this and, you know, as rahm emanuel famously said never let a crisis go to waste and they're wanting to use this opportunity to expand government. >> let me push back on you just for a moment. do you believe that jpmorgan is too big to fail? do you believe that there is a system in place to unwind jpmorgan and more importantly, do you believe that if jpmorgan were to fall, that we wouldn't be having -- that we wouldn't be dealing with all of the banks falling at the same time and what would happen then? >> well, if the economy failed or if it was a failure here in washington to address address the debt crisis or if, you know, we suddenly had more job losses, the economy would get in trouble and jpmorgan would get in trouble, but jpmorgan is probably one of the best capitalized, well-managed banks in the world. >> so let's take it off of jpmorgan for a second and get to a separate issue which is related, though, is there something to be said about what's happened inside jpmorgan about risk management that we should be thinking about as taxpayers, caring about in the context of potentially at other banks that may not be as good ultimately at risk management? is that something we should be worried about? are you suggesting this is all overstated? >> well, it's a very complex financial world and dodd/frank has made it even more complex and problematic. we've got 400 new rules that our banks are struggling to manage and, in fact, i think maybe that was part of the problem. >> what was the point of dodd/frank? >> dodd/frank -- >> hold on. >> part of the problem into what happened at jpmorgan? >> why do 3,000 pages? the questions you're asking are is if we did absolutely nothing to handle jpmorgan in the first place? why do we have 3,000 pages of new regulations when everything you pointed out, jpmorgan still could fail according to the information -- >> i suspect it could. the question i was trying to -- >> what did dodd/frank do? >> i think there's questions, but first of all, dodd/frank has not been can completely implemented. the volcker rule could have an impact on the trading going on there. are you trying to indicate that the laws that were written in washington created the problem at jpmorgan? >> let's talk about the volcker rule. you know, it's been a month since this loss was disclosed and the regulators can't tell us either the volcker rule would have even applied. they say it will probably take them to some time in july to even decide if these trades would have been covered by the volcker rule. that just shows you how complex a rule is, that when you have five -- >> do you believe it would take them until july 13th to tell you -- i believe they won't tell you until july 13th -- but you believe they're still trying to figure this out? >> oh absolutely. and i think they have, as late as yesterday, they have said they don't know whether the volcker rule would have applied to these trades. listen, i don't know that -- if anyone realizes in the media what these banks have gone through in the past three or four years. they have devoted tremendous energies just trying to comply with all these new rules and regulations. you know, we talk about they are a large institutions, it's a complex financial world, but dodd/frank has only made it more complicated and more complex. >> you like to repeal dodd/frank? >> we're going to have five regulators sitting before us today, they have to deal with five different regulators and one may tell them one thing and another one may contradict that. and what is needed is simply enough capital to when you make a bet, you can back it up. that's exactly what happened here. they lost .001 of their asset and the shareholders took the loss. >> congressman i -- >> in the last guest we had on was able to conflate jpmorgan, the one you just interviewed, tell her, and came on and said he got kid glove treatment, the taxpayers are at risk again. we're talking .001 -- >> in the context of jpmorgan and the perspective the congressman -- >> there's other banks that might be -- >> a larger question about risk management, big banks and taxpayers are holding the bag -- >> i thought dodd/frank hand thald for us. >> dodd/frank -- >> i thought we could all sleep at night because we had 3,000 pages of new regulations. >> we have to leave it there. good luck with today's hearing and gillian we should talk about this after the break. >> dodd/frank did not end too big to fail. >> we just heard that. i thought it had. i thought it had. now i realized it hasn't at all. >> absolutely it hadn't. it was claimed what it was going to do. >> i mean it hasn't done anything. 3,000 pages. >> when we come back, we're going to talk a lot more about what's been happening in the markets today. what you can expect coming out of europe. plus fannie mae unveiling the latest economic and housing outlook. first only on "sidewaquawk box." for me, it's really about building this extraordinary community. american express is passionate about the same thing. they're one of those partners that i would really rely on whether it's finding new customers, or, a new location for my next restaurant. when we all come together, my restaurants, my partners, and the community amazing things happen. to me, that's the membership effect. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. . in other news we've been following walgreens buying a 45% stake in alliance boots for $6.7 billion. also an option to acquire the rest over the next three years. walgreens ceo greg wasson joining us last hour said this. take a listen. >> we're bringing together two iconic brands of similar heritage and culture as you know. walgreens and alliance boots to create the first sgloebl pharmacy led health and well being enterprise. now is the time because this is creating an international health care platform. >> walgreens is also out with news of a 22% dividend hike today. separately investors will be getting a look at fresh housing market data this morning at 8:30 a.m. eastern. economists expect may housing start to be up .4% with a rate of 720,000 units. microsoft out with a new tablet computer called the surface. designed to compete with apple's ipad and boost popularity of the upcoming windows operating system. >> fannie mae putting out its first quarter housing survey this morning. joining us now to give us a preview of the rurltss is doug duncan fannie mae senior vice president and chief economist and again, i heard that we're finally seeing signs of stabilization, i saw a piece yesterday. signs of stabilization finally. false starts. this is it? >> well, interestingly, the rest of the economy is slowing but housing has been doing better than it's done the last couple years. and that's consistent with our forecast. our forecast is for 2012 growth at about 2.2%, but about a 7% increase in home sales this year. the way i would characterize that is, there is -- the housing cycle but the last couple years it's been disguised by the flood of distressed properties, that's starting to recede so your 're w starting to see the spring and summer sales season typical cycle emerge. whether at the end of the year because of all the political risks out there, we see a slowing, we sort of have that built into our forecast so that we actually see just a shade more downside to risk even though -- to prices, even though at this point in the year, we've seen some strengthening in prices. which actually showed up in fannie's results. >> there's -- >> go ahead. >> there's a great story on the front page of "the journal" today about how the credit problem that is here, there's the haves and have nots. if you need money, you can plenty of access -- if you need money it's difficult to get it if you don't have a great credit score and don't have a lot to put down. it's easy if you have a great credit score. frustration for the fed they can't get the money to the people who need it. making them question their effectiveness and my guess is it's got to be a big part of the housing problem when people who have under 650 credit score and don't have a lot of money put down, they can't buy houses like they used to. >> no question that credit repair is going to be an issue for a lot of households for access to credit. the fundamental question is, do we want to return to the underwriting criteria of 2005/2006/2007 or -- >> i'm sure we don't want people putting 0% down. what about somebody who has a 620 credit score and has 10% to put down on a house? is that someone who should be able to get a loan at a bank or is that too questionable? >> i think we've learned that the low 600s is not probably not a great place for the center of underwriting and no question underwriting criteria have tightened. i think that down payments are a bigg issue than in the past. we're highly core koer lated with people's investment in their property and willingness to pay. it's being dealt with in the regulatory world, the rules qualified residential mortgage rules. i think that's appropriate if we want to make sure that we've targeted credit to those who can manage that credit. >> do you think we would have the financial credit if 20% down was required on every mortgage. >> doubtful. 3,000 pages and it hasn't worked. >> i think there's no question that underwriting criteria, not just the down payment component but the rest. >> it was that simple, banks went back and did the normal type of underwriting that they've done historically to make sure they get their money back it would have been hard. >> that's a piece of it. critical piece of it. i think also, the mortgage business with automated underwriting and tools like that, became very efficient at underwriting loans that investors would buy. you had huge demand globally for fixed income assets. look at the aging populations in china and other places so there was demand for those fixed income products, and the ability of the machinery of the mortgage market to produce those assets was substantial. >> to what degree do you see this kind of cleansing happening with people coming in and trying to buy up repossessed properties and scrub them up, put them back on the market? i was over on the west coast recently and there was lots of gossip about how you get teams of savvy investment bankers teaming up with local plumbers and decorators and actually working together to go and hoover up properties that have been essentially been repossessed and put on a coat of white paint and get out and rent them. that's the kind of thing you need right now, get that cleansing process? >> it's a significant part of the current market, about 30% of sales are cash and one of the nice things about cash is that it gets you through the process because you don't have to go through the mortgage underwriting things. investors are absolutely helping bring down that flood of distressed properties. we're seeing a shift as the home ownership rate falls from the 69% down to about 64%, what's happening is those folks are moving into the rental market. so the part of the rental market that's increasing fastest is the one to four unit properties. you can see that migration as those investors are transitioning the distressed properties into the rental market. >> when do we see this reflected in consumer confidence or this improvement in the housing situation be offset by all t other crap happening across the pond. >> we survey monthly. >> am i allowed to say that. >> if in doubt blame the europeans. i will single handily take responsibility for the continent. >> you're blaming us. >> i'm not blaming you. >> i appreciated your comments because our outlook for the year said year of the political economy, because over 50% of global gdp is having a national election this year. >> i love the global economy. although politics, i love that stuff. >> we survey monthly and what we've seen is in the three months where we had 250,000 jobs in the private sector per month, the share of people that thought the economy was heading the wrong direction dropped substantially each month. when the labor market flattened out had their attitude flattened out too. they're in a holding pattern. >> that's fascinating to me. we've now seen for the last two years this kind of people being marched up the hill and down again. you start the year, you start the summer, the sun comes out, everyone starts to get more optimistic and bang you get the japanese earthquake, the eurozone problems and everyone freezes. do you think we're going to see that kind of freeze coming out again this year when people look to greece or grexic, spanic or people saying we're not going to spend money, sit on our cash and just wait? >> i think that's what's going on right now with the weakness in the payroll data and households having pulled back. one of the things about the retail sales numbers, it was done by drawing down savings. to get to the fed's concern about the lower credit per households can get credit, don't we want to get savings rates back up so we've got cushion within the population so simply expanding credit in households that didn't manage it well in the past i'm not sure in the long run that's the place -- >> we're not getting back to those roaring days. >> no time soon. no. we have from our perspective f you look at housing starts, or construction as the core measure of when we get back to normal, we don't see that happening until 2015 or thereabouts. >> long, hard slog. >> exactly. >> thank you. >> thank you. >> appreciate it. >> when we come back, donald trump in his weekly spot. we're going to talk about europe, business and the u.s. economy. and later, he is considered a political rock star and rumored vp candidate, senator marco rubio will be joining us in studio at 8:00 eastern. tdd# 1-800-345-2550 the spx is on my radar. 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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[ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or, signs in a woman which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are, or may become pregnant or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, gillian, tett this is big news. welcome back to "squawk." marriott will be investing $2 billion in new hotels over the next three years. the expansion plan comes despite an uncertain global economy. the company saying that 30% of that amount is going to go into the new addition brand aimed at younger well-to-do travelers. defense contractor lockheed and managesist union agreed to federal mediation in an attempt to end a two-month-old strike. 3600 workers are off the job in a dispute centering on pension benefits. goldman sachs ended up paying legal fees in the insider trading case, according to the "new york times" and my good friend peter lapman. procter & gamble where gupta served on the board ended up paying a portion of the $30 million total as well. they both can try to claw that back but may take some years time. becky, back to you. >> thank you very much. jamie dimon back on the hill and marco rubio, a name some consider a possible running mate for mitt romney will be joining us later in the show, a few of the topics we're hoping donald trump will cover this morning. joins us on the news line. good morning to you. >> good morning, becky. >> before we get to the other topics, can i ask you what you're thinking about europe right now and what this means for our markets here? little bit of a surprise with the action yesterday? >> well, it's a total mess. i mean, i know so many people over there, they don't know what's happening. the whole euro thing i think is eventually doomed. i can't see germany bailing out other countries because the german people are hard-working people. if somebody wants to retire at 45 or 50 are they're not going to have it. i see a lot of these countries going back to their own currencies. the world will continue. will it affect us? probably. but i don't think it will be nearly as bad as people are saying. >> is it creating a buying opportunity right now? i know last week we talked about some of the potential bargains you could get, at least in real estate over there? >> i think it's an amazing buying. an example, gillian was mentioning spain, spain is a great country, it's got a lot of problems, too much debt very much like us, very much like this country, but what an opportunity. she's talking about all of those empty homes and apartments and they're probably selling for nothing. you go and buy them. look at miami. the greatest example. four, five years ago, two years ago, actually a few months ago, miami is booming and a few years it was a disaster area. so, you know, it's going to happen elsewhere. maybe not to that extent, but it's going to happen elsewhere and frankly spain, you go to spain and buy something. i don't want to really suggest it, but somebody brought a project to me the other day in greece. >> whoa. >> and you're getting it for nothing, the land for nothing, you're getting everything for nothing. you have to sit with it for a while, but there are a lot of great opportunities in europe, there's no question about it. >> are you thinking of doing that opportunity in greece? >> well, i'm actually looking at something, it's so ridiculous that it's laughable and yet i'm thinking about doing something over there with a group that is very smart and frankly there's an opportunity and there's great opportunity in different places in spain. spain is an amazing place. it's a great country. it's got a fever and this is the time to take advantage of it. in five years all of a sudden the same apartments will be selling for a lot of money. >> it's gillian tett here from the "financial times." >> hi. >> i'm sure you could buy an entire fleet of or string of greek islands right now. >> what do you think is needed to turn around the spanish situation? what are you looking for as a key sign that it's time to jump in? >> i think, gillian, these countries will have to go back to their own currency. if you look at england, if you look at what happened with the pound, they were smart. they turned out to be the smart ones. now, germany, i hear, is buying back tremendous amounts of debt and they're buying it back at discounts, very much like on a much larger level companies would do where they have debt and buy it back at discount. i'm not sure germany is suffering like people think they're suffering because to what i understand they're buying huge amounts of debt and they're buying it at discount. that's not a bad way to make a living. but i really think that a lot of these countries are going to have to -- maybe all of them in the end -- will end ungoing back to their own conurrencies. you have different people, you have different thought process, they should have never been together. and remember this, the euro was really set up to hurt the united states. it was set up to compete with the united states and to a lesser extent other places. so now it's coming back to haunt them. but, you know, i have absolutely no doubt that over the next not such a long period of time, countries are going to start going back to their own currency. >> you know, donald, spain has valderrama, which is great. do you even know of a course in greece and why don't you buy like mikinos and turn it into a golf island? >> there are a lot of things for sale in greece and the only problem is nobody knows how you go about getting them. under what currency do you buy it? >> right. >> i don't know -- do you know of a single golf course -- >> but the issue, joe, you don't need golf courses for american tourists. i mean i've long thought the way to solve the problem in the eurozone to give the german pensioners voucher paid for by the government to go on holiday in greece and that's much more effective some sways than given the money to greece. the question is can you create an infrastructure in somewhere like greece or spain to turn it into the florida of the eurozone and make yes germans like snow birds for europe. >> i don't think they can pay back the money they owe. no matter what happens, i don't care how good their economy turns they're never going to be able to pay it back. they're going to end up going back to tdrackma, their own thi and start the printing process and back to life. there's to way they can ever pay that back. if they don't pay it back what's germany going to do? what is germany going to tell its people, by the way, we're going to give them a cut of know -- >> if you -- >> hundreds of billions of dollars. not going to work that way. i think they have to go back to their currency. a lot of other countries want to go back to their currency. >> happy german pensioners going to holiday in greece very cheaply then you get the beginnings of some kind of recovery. >> tourism in spain and greece has to be a huge part. >> fabulous beaches. >> the coast is where german goss now. >> if you're in malligo half are in dutch. >> thank you so much. crazy to see the euro at 126. you have to think that's going to come down too. >> i think it's going to come down and i think it's going to be very interesting what happens over the next two years. again, i say, i really believe these countries are going back to their own currencies and probably the sooner the better for them. >> thank you, donald. great talking to you as always. >> thank you. >> we will break down fedex numbers when we return. the current quarter is pretty good, but doesn't happen so often, some of the guidance you wouldn't say they've lowered guidance, the guidance they're giving is below where the street is for the if irs quarter. we'll talk about that because the stock has indicated a little lower. we'll have that. still to come, ecb council member and activist shareholder nelson peltz hungry for a good deal. he thinks he may have found one in lasquad. of any small business credit card! pizza!!!!! 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[ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? fedex out with numbers, the stock a little lower over the years, every quarter we see things like this. it is indicated lower. 199 ahead of expectations that's pretty good. for the year -- i'm sorry. this is a fourth quarter number. since they're on a different fiscal year. next quarter they'll report is the first and the estimate for the first is 1700 and they're indicating 145 to 160. in the past so many times we've said they're lowering guidance but always get -- >> they don't give guidance. >> so they're not lowering guidance. >> no. >> but the thing is sometimes they give -- sometimes they give some ideas to the analyst community and the analyst community is at $1.70. below where analysts are. for the year, the company is talking about i think the high-end of the range was 740 and estimate 739, but the low end was 690. so people would say okay, so the estimate 739 and they're saying 690 to 740. but many times fedex has so many variables that they give a wide range and maybe some conservative guidance, many times by the end of the day the stock could be up or when they report something good up in the beginning and by the end of the day it's down. >> this is not so much a call on the overall -- on the overall gdp for some of these issues. they've got head winds including higher employee related costs, higher pension expenses of $150 million due and they are looking for -- >> those comments don't sound -- >> the outlook for the gdp, growth of 2.2% and world gdp of 2.6% which that's a little stronger than some economists are looking forward to. they may have beater idea because they see the real numbers coming in. maybe that's a positive take for the u.s. economy coming out of this as well. when we come back, the ecb's ewald nowotny on possible solutions to the eurozone debt crisis. squa"squawk" will be back in tw minutes. 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[ male announcer ] now citi thankyou visa card holders can combine the thankyou points they've earned and get even greater rewards. ♪ ♪ [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. see your lexus dealer. the health of the spanish banks in the spotlight as leaders try to plan next steps in dealing with the debt crisis. joining us is ewald nowotny, governing council member and governing bank of austria. we appreciate it. the -- >> good morning. good morning. >> great to see you. short of a fiscal union, certainly a bank, a bank that brings all the different parties together, would be maybe something that might fit the bill and something you thought about in the past. how many years off? how hard would it be to get all the different parties to agree to something like that, governor? >> well, in this discussion is this medium term perspective of financial union or banking union for the eu or at least for the eurozone and that's what consists of a common european banking supervision of european deposit guarantees system and of resolution systems. all this would be considered for the major banks of europe and the is will be a topic of the eu summit on 28th of june this year. >> governor nowotny, it's gillian tett here from the "financial times" i've got a question i would like to ask, austria is one country you've seen growing signs for far right parties amongst the voters. i realize you're not in the business of politics but to what degree are you concerned these moves towards a common banking union are actually going to stoke up more backlash amongst voters in place like austria? >> i would not overvalue this aspect. of course you see we have in austria, a big coalition of the leading parties with parliamentary majority of about 60%, so there is, of course, an opposition and this is part of the far right opposition. but this is not really very much connected with this international discussions. >> ewold, let's say everything goes right and it's breakneck speed, quickest it's been done before. when could you have some type of banking union? best case scenario. we're fairly pessimistic at this point after seeing the way things operate, we're pessimistic this could be done very quickly. is it possible this could get done? >> well, one has to be fair to say, of course, a lot of details have to be hammered out. the first one is, will it apply with regard to all of the eu? i'm rather skeptical about that because it will be rather difficult to get uk on board. so realistically, it would be a scheme for the eurozone. that would mean it would not be within the context of the eu treaties. but it would be a matter of intergovernmental agreements and this kind of governmental agreements, this could happen in the second half of this year. >> how do you feel, governor nowotny, about calls for the ecb to step in and buy up large amounts of greek, italian, spanish bonds? do you see that as a solution right now? >> no. i don't see this as a solution. i think the basic problems have to be solved in the countries themselves. it doesn't help just to float the country's liquidity. this can be helpful. it could make sense if it is part of an encompassing program. but not in an isolated way. so, therefore, i think it is very important to have an encompassing program. we do have these programs in the context of the european firewall, and these agreements have to be now followed up. >> all right. we're going to -- we'd like to have you back, governor nowotny. just update us on the progress. it's interesting to talk about. that may be one of the, you know, if there could be a at least some type of union, we might not worry so much and wring our hands. we appreciate your time. governor, hopefully talk to you soon. >> okay. thank you very much. >> you're welcome. >> when we come back, nelson peltz searching for value. the activist investors taking a piece of lazrd. he's going to talk about his interest in the wall street firm right after this. and at the top of the hour, he's been widely mentioned as a possible vp candidate for the romney ticket. florida senator marco rubio will join us right here on set. tdd# 1-800-345-2550 i'm constantly working my screens. tdd# 1-800-345-2550 checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade. tdd# 1-800-345-2550 and i do it all with charles schwab, tdd# 1-800-345-2550 because their streetsmart edge platform tdd# 1-800-345-2550 helps me trade quickly, intuitively. tdd# 1-800-345-2550 staying on top of the market is key! tdd# 1-800-345-2550 and the momentum tool, tdd# 1-800-345-2550 it lets me do it at a glance, tdd# 1-800-345-2550 so when things shift, i'm ready. tdd# 1-800-345-2550 then to track the stocks i have my eye on, tdd# 1-800-345-2550 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if you're watching tv and have us on hold take us off. if not i'm going to gillian in a moment. >> i think it's a very [ inaudible ] move. behind someone that's been opportunistic and chance for upside potential, what's interesting is how this reflects of reshaping of wall street and if you go back to before 2007 it was big mega firms dominating. what you're seeing now with people interested in a group like lazard, maybe there's a space for more independent advisors and if you look at how they're thought to pay people inside the firm there's a shift in culture there. >> we have nelson back. we could put you on mute too, you know. >> i'm here. >> okay. good to have you. thank you for joining us this morning. i don't know if you got a chance to hear what gillian was saying, walk us through real quick your analysis in terms of buying lazard, the shares now trading at about 24, 25, up obviously 5% after the announcement yesterday. but they've come off if you look, we have a year chart there, they were trading over 36 bucks earlier in the year. >> they were trading at 46 last february. a year ago february. >> and so what's the rationale for this at a time when we don't see as many deals as we would imagine, that maybe some of the fee income isn't as high as it had been in the past? >> let me tell you, that's a good question. you know we're always looking for value at trian. and we love great brands and great franchises. this clearly meets those criteria. it's a great brand. it's a time-tested brand. it's well over 150 years old. it's got a great franchise. it's the largest independent advisory firm out there, number six in the lead tables and i'm sure they'll be moving up. but if you look at the business, andrew, 85% of it today comes from asset management and they've got a great asset management business. almost $160 billion under management in the right areas, inflows, they're in the emerging market area which is where a lot of money is going today. >> nelson, had you been trying, had you been looking -- >> let me tell you, you've got a free call here on one of the best advisories businesses in the world, okay, and it's an amazing free call because 85% of the earnings are coming today out of the asset management side. >> do you like any other investment banks out there, either standalone advisories, the ever corpses of the world? had you been looking in this area or just this specific firm? >> when we look at one firm, we certainly look at the entire horizon of what's out there. we feel that the other firms, the other boutiques, they're great, i'm not taking anything away from them, but they're a star system. okay. this firm has, you know, gone through all of the great names and still it's lazard that comes out the other end, whether it's bruce or andre, some of you are old enough to remember that, michele david, and on and on. and today it's still lazard and it's lasted the test of time. i'm not saying that evercorporation and greenhill can't do that. but this has shown me it can. >> thank you for calling in. i hope we can get you on the set very soon to talk about this and so many of your other deals. we love having you here. we won't put you on hold, i promise. we'll give you a lot of time to talk more about these issues. thanks for joining us this morning. >> all right. coming up from the sun side state to the squawk box set we'll talk to senator marco rubio, heart is fluttering a little bit, next. that's like chris matthew. w. this is the first car that i've been totally in love with 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. ♪ florida's junior senator is a fast rising american son. senator marco rubio will join us on the "squawk" set to talk business, the economy, immigration policy and a possible spot on the romney ticket. bar ron's calls him the real bond king. robert kessler will tell us why he's bullish on treasuries. >> breaking economic data. ♪ we'll get housing starts for may at 8:30 a.m. eastern. the third hour of "squak box" begins right now. welcome back to "squak box" on cnbc. i'm joe keernen with becky quick and andrew ross sorkin. and our guest host is gillian tett, managing editor the "financial times." we've had an interesting session yesterday, after all said and done, it wasn't too bad. >> down 25 at the end. >> jpmorgan ceo jamie dimon -- >> go ahead. >> where is he going to be? >> you know where he's going to be? >> from front of the real quality dudes the house. i love when they ask -- >> last week the senate banking committee. people were surprised -- >> when they show off their financial acumen, everyone blown away at home when those guys get going. >> we'll be watching this very closely. jamie will be back on capitol hill again. jamie dimon going to be testifying as joe said before the house financial services committee on his firm's failed hedging strategy and trading losses that resulted. we'll see what kind of questions we get this time around. if it will be a little more fiery than last time. in our global headlines this morning, another key spanish debt auction that took place this morning. the country actually saw strong demand for its 12 and 18-month bills. but the yield soared, the 12-month bills at a reuro recor high of 5.07%. check out the ten near, spanish bond is still yielding above 7%. that's seen as a key level at which point this is just unsustainable. this morning, spain's ten-year is yielding above 7%, at 7.088%. >> a little deal news this morning as well. walgreens buying a 45% stake in the european pharmacy alliance boots. walgreens going to be investing approximately $6.7 billion in cash and stock in exchange for that 45% equity ownership stake in alliance boots. the u.s. chain, though, here's the interesting part, is going to now have the option to proceed to a full combination by acquiring the remaining 55% over a roughly three-year time period at the current share price. the second step would be valued at about $9.5 billion in cash and stock. walgreens ceo gregory wasson and alliance boots executive chairman stefano pessina joined us. wasson outlining the strategy behind the deal. >> we will be the largest buyer of prescription drugs in the world and many more health and well-being items. we'll begin to create revenues by offering alliance boots number 7 in walgreens and duane reed stores in the united states and begin to look at this as an international expansion platform. stefano and his group can help us get into emerging countries around the world. >> walgreens shares you can see them, trading about 32.50 in premarket action up slightly. we'll see how it trades later today. >> said stefano. >> he just said -- >> he said stefano and i got an e-mail saying -- >> somebody doesn't -- i don't know. >> they're buddies. >> they're buddies. got it right. >> our news maker of the florida, florida senator marco rubio joining us on set from vp rumors to immigration policy, making his mark on american polling ticks in his book "an american son" talks about the need to keep america great and the balance between politics and family. senator, as i said, joins us on set. great to see you. >> thank you. like espn for day traders. i love it. >> that's true. >> so many times, senator, we unfortunately talk about the current america as a place that no longer offers opportunity. i don't agree with that notion. i don't agree that upward mobility is gone. but there is a sense that we've lost the ability for that and i think your book addresses that. >> i don't agree that it's gone either. i think the american people are extremely resilient. our economy is extremely resilient and proven that despite bad and unstable governmental policies what it's been able to do despite that. imagine if we had good leadership and competent congress and political class, what it could be doing. but i do think it's not guaranteed. upward mobility is not guaranteed. >> earned. >> you have to recognize for what it is and protect it for future generations. sometimes i think when we talk about america and talk about our economy we forget the source of our greatness. in our book i talk about the fact that my parents never made a lot of money. i don't think my parents ever owned a share of stock or real estate yet i would say they lived the american dream because they allowed their children to have every opportunity they didn't. that is a product of a both social environment but also an economic environment where those sorts of things are possible. and that's the essence over greatness. every country in the world has rich people. every country has big companies. the son of a bartender and maid can do whatever he wants to do. the ability to do it. >> one of the things that's frustrated me about the president is that he is a walking, breathing example of what's possible in this country and he said that before, but a lot of the tone lately has been that it's not possible to do that anymore. there's this bifurcation between the haves and have nots and the haves want to keep the have nots down. and i think he has to walk a fine line because he's a living breathing example of what's possible. >> i think that rhetoric is a political decision to -- he's not going to win on his record. you can't run on his record and get re-elected so he has to make this election about something else. i think what they've decided to do politically, i think it's sad, to divide americans against each other. but in order to get to 51% in key states and be re-elected. but there has been i think people are frustrated with some of the results in the sense that maybe we can't get to where our parents got, maybe our life is not going to be as good as the previous generations. but in order to ensure it is, we have to reembrace what it is that made us different. in the book, that's what i try to outline through the story of my family. the -- what made us -- i repeat my parents were not wealthy people, never were, and yet i would say they were extremely successful because through their hard work and sacrifice had a purpose. the purpose was to give their children the chance to do everything they didn't. xwroeg up, my parents never made us feel like there were things i couldn't do because of who they were. well because we're a bartender and maid there are things we can't do, people like us don't do that stuff. >> a notion that it's not a landowner society or a futile society, but there's a notion that there is a class of people that have access to education, that is not spread across all of the different groups. >> not just a notion, but i think that it's absolutely true. >> and that this is not possible. >> well, educational achievement in the 21st century is the great divide. >> that's what we need to work on and figure out. >> look at the unemployment rate between high school graduates and people that haven't finished it's dramatically different. there are no jobs in the 21st century -- no careers much less well-paying jobs for anyone with just a high school diploma any more. the sooner we realize that and our 21st education system reflects that -- why aren't we training kids to graduate with a high school diploma and an industry certification as an airplane engine mechanic or one of the trades. not every kid wants go to college but there are trades that pay well. why don't we do that? >> discuss this upward mobility issue, because there's two issues here. one is this what it's done politically the haves and have nots and what you argue president obama has argued that this idea of trying to divide people, but there is, in fact, numbers and statistics that would demonstrate there is an upward mobility problem in the country. do you agree with that. >> i think there are people not getting the results they want for their hard work, but the reason why that's happening is not because some people are making too much money. the reasons why it's not happening are many are social economic. you've outlined one of them as educational impediments. the other is how hard it is to make it. let's be clear one of the things that made us different economically is you can quit your job, max out your credit card and open up a business out of the spare bedroom of your home. probably in violation of the zoning code but you can do it. government's job is to make it easier for people to be able to do that, not harder. when you have a mountain of -- a mountain of regulations, isn't going to hurt the big corporations that can hire the best lawyers and accountants to navigate it. it's the guys trying to make it, the employee trying to become the employer held back by big government. >> as andrew says, you can see tangible statistics that show there's rising levels of income inequality in america and there's been growing sense that the rich are getting richer over last decade. does that worry you or do you regard that as the price we've paid for having a dynamic society in america today? >> the result worries me. what's the cause? is the cause of that divide the fact that some people are just making more money and, therefore, there's less money for other people or is the cause of that divide the fact that the economy has evolved in america, in the 21st century in a service oriented economy it's different, you know. 50 years ago you could work at a -- you could live in a city and work for the local plant and work there for 40 years and retire with a good pension. those days are gone. today you've got to have the skills to do something in the service economy and quite frankly sometimes you're going to have to be retrained two or three times. >> you think that's inevitable, income quality? >> i don't think it's inevitable. i think it's the result of policies that don't reflect the 21st century. >> in the recent headline of tht net worth of the american family going down from 139,000 to 79,000, middle-class people, home ownership is their main asset, get a 40% drop in home prices people that have a 11 homes like -- who was it -- i think bloomberg has 11 homes, that probably will hurt his net worth on the 11 homes, but he has another $20 billion to back it up. i would say a lot of the income disparity that is happening in the last couple years because of the housing bubble bust. that's the main asset. if you just look at the numbers, 79,000 versus 139,000 look what rich people did to these people but it's the housing bust. >> is this a permanent shift in the american economy? is what happened the two or three decades after world war ii an aberration or a case that is possible to go back to much more equal -- >> depends on what we do. >> i think we can get back to better results for everybody. i look at my personal story to illustrate this. i repeat my dad was a bartender, my mom worked as a maid and cashier, never made a lot of money but here's what they did, they inspired us to dream and reach high. they would never have accepted the idea we would have gone into the same jobs they did. they wanted us to do more. the reason i've been able to do more, despite the fact i was bornds bore were in this country i went to college and got degrees and that's really -- and the evidence now proves that the more education you have, it's not a cliche, the higher educated you are the more money you're going to make, and the better off you're going to be. >> we have to break into a commercial. there is the separate issue so many students now graduate from college, they think they've done what -- they've checked all the boggs boxes, left bit debt and the system isn't working for me the way i thought. >> help at 8% unemployment. >> not a lot of jobs for philosophy majorers. >> that's the reality. >> that's one of the points. the administration started at seven, eight. probably by november we may still be above 8%. >> four years above the original print in january of 2000. >> the rate is high western you take into account people that have dropped out and underemployed. >> this is one of the first times where clinton and bush both averaged -- >> clinton and bush averaged -- >> i'm not going to be political about it. >> the day you walked in the door there was a fire in the house to use the original number and then to talk about it in that context i think is unfair. >> that's what the -- >> look the $800 billion was to make sure it didn't get any worse. unfortunately we've been above 7, 8 for the entire time. >> i don't disagree there. there's a lot that didn't work over the last four years. >> immigration. i want to talk to you about -- see "the journal's" piece about demint did the right thing and you did the sugar lobbying and was that for the state? >> that's not accurate. first of all i'm prepared right now to get rid of the u.s. sugar program when other countries do the same. all these other countries we trade with have quotas, their own protectionist programs but what i'm not prepared to do is wipe out the u.s. sugar industry in exchange for nothing. >> in your book you talk about the -- could you vote to cut off sugar subsidies that would affect them? >> they're importers too. they produce overseas as well. these other countries, brazil and dominican republic have their own programs. they're not going to get rid of their sugar programs because we get rid of ours. >> demint voted against something that would benefit his state. >> south carolina is one of the biggest recipients, florida is number two. florida was a huge -- >> you voted against that too. >> listen, we should get rid of trade barriers. go to the world trade organization, multilateral forms get rid of these trade barriers. if you do it unilaterally you'll wipe out your own industry in exchange for nothing. >> wow. i want to see you and biden in a debate. is that possible? can i see that? that might not be -- they might stop that like one round. i think they might. i don't know. anyway. >> we'll have more with the senator in just a moment. still ahead on "squak box," we'll get a read on the housing market. we get the housing start numbers that hit at 8:30 a.m. eastern, about 16 minutes away. plus we're going to talk to the man that barron's calls the real bond king, robert kessler, why he is bullish on treasuries. as we head to a break check out the "squak box" market indicator. you can see right now futures are indicated higher. markets will open up if they open where we are right now. stay in the moment sanya focus lolo, focus let's do this i am from baltimore south carolina... bloomington, california... austin, texas... we are all here to represent the country we love this is for everyone back home it's go time. across america, we're all committed to team usa. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. see your lexus dealer. welcome back, everybody. we have more from our special guest senator marco rubio. senator, we haven't gotten the chance to talk on air about what's happening with our economy. at least from where you sit. you said you were listening earlier when donald trump was talking about what happened in miami and how there's been a real resurgence in property values there at least. you've got your ideas about why that's happening. >> into doubt it's resurging on what is the condo markets. the single family homes are not doing well in miami. many are still -- a lot still upside down. we're still cycling through foreclosures at the local level there. but a lot has to do with capital flight from latin america. we've always been the beneficiaries of that. so wealthy businessmen and women from venezuela, brazil, they invest money in miami real estate, florida estate, and orlando, and that's benefited us and only continue to benefit us. one of the great things we don't spend enough time talking about, how much this country would benefit from economic growth and prosperity in latin america and western hemisphere. we'll be the beneficiaries of that whether in mexico or colombia because of the free trade agreement. that's a real opportunity moving forward. we see that first in miami but that's true for the country. >> you've been at the forefront of trying to change immigration laws. you came up with the dream act that you introduced and had some ideas that the president recently adopted. some very similar ideas to what you had been promoting. what do you think of that move? >> i think it's important to bifurcate that issue. we have a larger immigration issue that has to do with the fact that on the one hand we have rampant illegal immigration and it has to be dealt with and people are rightfully concerned about it. on the other hand, we have 21st century immigration needs in this country and our immigration system is not modern. it does not reflect the economic needs and realities of the 21st century. related to that issue but separate is the plight of young people who were brought to this nation at a very young age, 5, 6, 7, 8 years of age, have grown up here their entire lives, undocumented, many kids don't know they're undocumented until they graduate high school. some of the kids are the valedictorians of their high school and we're going to deport them. i'm trying to figure out an approach that's balanced, that doesn't encourage illegal immigration in the future but recognizes the humanitarian position that that's kids are in. that's what we're trying to balance here and trying to find a solution to do that. >> what's wrong with what the president is doing right now? >> i think the biggest problem i have with it, it ignores the congress and the constitution. >> you would be okay with this plan if it was signed off on -- >> it needs to have more safeguards in place. it's important that the kids that who are getting this, that they came here before a certain age, lived here a certain period of time. these are things that are important. it has to be a permanent strategy, not a two-year deal. this approach requires a long-term solution and my biggest concern, and i may be proven wrong, my biggest concern is that by doing this way, the president is undermined and set back the hopes of getting a long-term solution done on this issue. i hope i'm wrong because this is an important issue that needs to be solved for the long term. >> mitt romney does not have similar ideas or at least he has not brought out similar ideas. his ideas on immigration have basically been very counter to what yours are. how do you measure that up? >> i think governor romney's position he's in favor of a legal immigration system that works. if we had a legal immigration system that was modern and worked, our illegal immigration problem would be diminished and easier to deal with. i think that's been his position on it. i think he's also expressed open-mindedness about figuring out an accommodation for certain kids that meet this criteria. obviously i think he's interested in seeing the details of what we're working on and we're still developing that because while i know the political guys that cover politics want to see us have an immediate solution to the problem that we craft in legislation, this has to be done right because you're dealing with real people and you're dealing with real law that's going to have a real impact. you have to have answers to every question that's going to be raised. >> agree with that. have you spoken with governor romney about your immigration plan? >> i have a few months ago and i know our staffs have talked to his and tried to keep them up to date on the progress. we're still developing our plan. again, because we're taking input from all the stakeholders. we need to know is it going to cost any money, how many people will this apply to. the minute i file legislation people will start to pick it apart. i better have answers to those questions or the effort loses credibility. that's the way you make possible public policy. not just rushing out there with something and hopefully we'll be able to get there. i hope what the president has done doesn't set us back. >> what the president's move over the last week, there are many people who turned back to you and said, this makes you an even more likely vp candidate because this would answer some of the criticisms to the romney campaign. have you heard from the campaign and are you someone who will be the president -- vice presidential candidate. >> as i've said, i won't discuss the vice presidential process out of respect for governor romney. i know he's going to make a great choice. on the broader question, immigration is an important issue in the hispanic community because it's a personal one. it's not a statistic. as i talk about in this book and outline that when i talk about immigration, when you talk about immigration in the hispanic community, you're talking about someone that you love, lives next door and your kid goss to school with. you kwunds stand the human element. even though you're not in favor of illegal immigration it break yours heart. immigration is important in the hispanic community. it's a myth to believe that hispanics think about immigration. they worry about making payroll, balancing their family's budget, their kids' future. my book talks about my parents and their focus on my future and opportunities. that is a typical sentiment in the hispanic community and i think to be successful in american politics an win and earn the votes of hispanics you to address that and that's how you win these votes now and in the future. >> they did a poll in ohio, with portman on the ticket and it didn't really change the dyna c dynamics very much. that's a key state. florida is incredibly key. and your addition to the ticket does change the dynamics. it widens a very slim romney lead in a state that might be as important as ohio. plus you've got, you know, the hispanic connection as well. but you're only 41 and you haven't been in the senate that long. does that -- how does it all figure out in the political calculation do you think? >> yeah. two things, one i'm not discussing the vice presidential -- >> did you already say that? >> i did. look, i don't think there's any -- i have no doubt i'm qualified to serve in the united states senate which is the job i have. >> you have a doubt you're qualified to serve as president? >> i have no doubt i'm qualified to serve in the united states senate. that's the job i have and doing. i'm trying -- i get more experience every day. issues new to me i've not dealt with when i was a state office holder. on the other hand, some of these things we're dealing with are not necessarily rocket science. in terms of what our economy and our country needs to move forward. and what it basically needs is basic sense of governance that's stable and competent, tax code that's predictable and permanent, regulations that are affordable. these are not complicated concepts. >> we appreciate your time. again the book is called "an american son." every powerful con is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪ coming coming up breaking economic data. a few minutes away from housing starts for may as we head to a break, take a look at the dow futures ahead of those housing numbers. ♪ [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. tdd# 1-800-345-2550 you and your money deserve. tdd# 1-800-345-2550 at charles schwab, that means taking a close look at you tdd# 1-800-345-2550 as well as your portfolio. tdd# 1-800-345-2550 we ask the right questions, tdd# 1-800-345-2550 then we actually listen to the answers tdd# 1-800-345-2550 before giving you practical ideas you can act on. tdd# 1-800-345-2550 so talk to chuck online, on the phone, tdd# 1-800-345-2550 or come in and pull up a chair. welcome back to welcome back to "squawk box." we are seconds away from housing starts data. for may, rick santelli is standing by at the cme in chicago and steve liesman of the mud puppies in studio? and survey says, may housing starts down almost 5%, 708,000 seasonally adjusted annualized rate from an upward lly reevise 744. if we didn't revise last month this number would be a smaller drop, obviously. look at permits, something exactly the opposite. permits were up almost 8%. 780,000 saar seasonally adjusted annual high rest from a slightly revised 723, so the permits are stronger than the actual starts. starts down at 708. we are at 699 at the end of march. so it's not like we haven't been here in virtually that last number, that 744,000, that's some of the best data probably going all the way back to '07 or so. so that's pretty good. the response in the marketplace, very little at this point. many would say it isn't so much the housing starts and permits it's the inventory of unsolved homes. and i understand that. but there is something positive i guess at least in my opinion on the permit side. back to you. >> all right. rick, thanks. for more on the data, let's get to steve liesman. >> the band is the moon cuffs. >> i'm sorry. >> you're just mocking me. >> that's not true. >> and the good thing about me i've learned, took about ten years to understand when you're mocking me. >> tomorrow i'll have another. moon custard -- >> didn't they call you joker man. put it together, joker man. >> does anyone call you lies man. >> all the time. >> your name spells lies. >> all the people writing in do that. can we talk about permits in housing now? >> please. >> thank you. rick has it right in terms of how the permits were the opposite of starts. multifamily dropped, 244,000, at an annual rate, good number in april, revised upward. single family came up 500,000 to 516. want to show you three looks at housing. the good, the bad and the holy beep. if you look at just on a one-year does not include the recent numbers, but it's what's going on. from the bottom of around 540, 520 come up now into the 700 ranges. that looks pretty good, right? rick even said it looks pretty good. take a look back. let's go back in time here take a look at like a ten-year look at housing. doesn't look so good. what is now the whole game that we're hanging our hat on, the 200,000 units up, was the monthly variation back in '03, '04, '05. >> we look at this the wrong way. we don't want strong housing numbers until we get rid of the excess inventory. you should be cheering low housing starts. >> some of the starts we've seen have been because of certain areas are low. now let's take a look at a 50 year e look. this should make you optimistic. how many more people are there in the country now from what there were in 1960. okay. we are below the level that was the bottom in the '60s. so demographically it should turn around. this is the argument we've had, people living on the couches in homes doubling up. one more thing i want to show you here which is the contribution of housing to gdp. and what you see here is the june's gdp buying, before the recession and then took off almost a percentage point at the worst of the recession and then in q1 added to growth. that's good news. you may have a situation here, where housing and the broader economy are on different cycles now, where you can have this housing resurgence, which we're having and the overall economy could be kind of lackluster. >> that's what i was talking about earlier. >> i missed that. >> gillian got defensive. i wasn't blaming europe but saying when we're finally seeing this stabilization we import all this uncertainty and angst from abroad to the consumer which maybe he doesn't feel that much better because his house is better, but now he's got this other stuff to worry about. >> are you going to see a process of -- >> hey, i'll take the blame. my accept won't -- >> those people over there. >> my accent makes me the target. >> keep the pound. >> hey. >> the ted offensive. that's what they're writing in. >> i have heard that joke before many times. >> really. >> i like that. >> the key question, are you seeing a process of healing and creative destruction and adjustment in the american economy and housing market or not. one of the things that make america great that process in the past, it's been very delayed this time around. but if it's happening now at last, then -- >> it is, though. i like what you did earlier, compared spain and the united states. we have been through a wrenching process here. these builders, look at their stocks, what happened to them. they had huge incentive to restructure. they restructured. and ostensibly building houses that are needed with solid finances. >> in europe, thus far they have totally avoided that process of creative destruction. they've tried to kick the can down the road and haven't fessed up to reality. >> careful what you wish for. if housing gets back on its feet, all the problems we had with unemployment will no longer be -- well it's not all these government programs, this uncertainty, just housing. that's what the apologists say about, you know, the current state that we're in, it's housing. if housing came back we'd have jobs growth, we would have a gdp. >> you're amazing. you think of these things initially through the political spectrum. i don't think of them that way. >> i do. >> when you're playing with -- when you're for the moonshiners -- >> moon custards, joker man. >> rick, do you got anything? can you help me here? i'm not doing so well. >> oh, i think you're doing just fine, joe. >> you do? was that political? because that's what i hear, that i hear about uncertainty and it's really just a lack of demand because housing hasn't come back. it's not all the regulations, it's not the nlrb, it's not uncertain tax policy, not uncertain health care, none of that, all just housing. if they get housing back to where it was they might have to take a look at what we're doing. >> you're right. it's a bunch of excuses in a political season. i'm not buying into any of it. how many -- what is it, close to $2 trillion business has sitting on the sidelines. >> why? >> well, i mean, it's not a question of why. it's a question of many countries, including this one, keep wanting to spend more on stimulus. the stimulus runs out, the debt lasts forever. my question is simple -- why is that money just sitting there? we have a humongous private sector stimulus sitting there. why isn't it moving? because they don't trust the landscape. it's pretty darn obvious but, you know, that's my opinion. and i think that it makes us much better. yes, spain has a housing problem. we have a housing problem. sam zell is right, never get fixed -- >> took me a while, lies man. >> joker man. >> what you're saying is not wrong, but i think it's second -- in the second order, rick. >> i think people don't use the $2 trillion because they don't see immediately demand and/or profit possibilities from that $2 trillion. you have a situation where there's excess capacity in the economy, we've shuttered factories, all sorts of stuff and if you said it, i'm going to put x billions -- x millions of dollars in the plant today, where's the demand, the certainty on that. i think there's a lot of things that have to do with why the $2 trillion is not being spent. government policy is one of them and i've maintained a long time, i'm not sure it's in the first order. >> i definitely think that the government needs to clear the zone, you know. you had marco rubio on. i'm sure he talked about his background, immigration, building the country. >> he did. >> okay. well -- pretty much enough said. >> my logo too late. bring it up. do you have it? bring it up. here's my idea for romney/rubio. it was too late. >> that would be good, joe. >> ultimate 1%. >> that would work -- >> they may not do it for just that reason. you may have cost rubio the nomination. >> you may have cost him the nomination. >> huff post might like that. the perspective of romney/rubio the campaign sticker. i didn't realize the irony. >> did you make that up? >> i did. >> that's why they call you joker man. >> that is. why they call you lies man. thank you. coming up, barron's calls him the real bond king. we have robert kessler. why he's actually bullish on treasuries even with a ten-year yield below 2%. ne of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. 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this is big news. and somebody asks me a question about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful. i'm hardly using gas, but it's there when i need it. anybody that thinks that this car doesn't have solid performance, hasn't driven it. there's no other car like this on the road. ♪ >> welcome welcome back. barron's calls him the real bond king. even with the u.s. ten-year yield hitting all-time lows he believe the treasuries are still an attractive place to be. joining us is robert kessler, founder and ceo of the kessler companies, thanks for being here. >> thank you. >> when we look at treasuries at 1.5%, that makes a lot of people think, oh, my gosh. why would you give the government money tore ten years, expecting a yield of 1.5%? what makes it still attractive? >> for some reason we have a problem with zero. which is where the federal reserve is. and the federal reserve has been there the last three years and that kind of tells you that anchor is really determining these other rates that we're looking at. and as long as we think the federal reserve is going to be at zero, then rates have no place to go other than to meet that zero. and, in fact, we have countries all around the world right now where rates are negative, an amazing thing. switzerland, minus a quarter of 1% for a five-year treasury. so people are paying to give the government money to know they're going to get the money back. we're so used to looking at these rates and we hear on television all the time, i wouldn't buy a treasury. we've been hearing i wouldn't buy a treasury for 30 years. every time the rates ratchet down, those are too cheap. i wouldn't buy that. we're at 160 and, of course the same thing is taking place. so, if you look at the past 200 years, take a very long period of time, since i see steve just did housing, based on the last 30 years, if you look at treasuries over the last 200 years, the average rate is really 3, 3.5%. and yet, everyone talks about the average rate as being 7% from 1982 on. and 1982 was an anomaly. >> it was after the '70s. >> we don't get inflation in this country very often. that is -- i think i sent in a chart, i don't know if you have it -- >> i think they're showing it now. >> as you look at that spike, that's once every 200 years. so when people say the market and treasuries started in 1982 i think that's probably wrong. the bull market and treasuries probably started in 2007. mostly because the whole process of creating credit and debt culminated as we got into 2006/2007 and normally bull markets and treasury take place from that de-leveraging process and that's what we're in right now. >> what about the way the fed is printing money right now? could they get us back into an inflationary cycle as bad as if not worse than what we saw back at the '70s into the '80s? >> the problem is that money isn't going any place. that money is basically sitting in banks and we don't have what he call velocity, meaning someone's out borrowing it and spending it. you have a consumer leading this recession, not just here, but in europe. >> you don't think one day that will happen? you don't think there's going to be a tipping point? >> probably, but not in the immediate future. i think one of the big mistakes, at least i hear all the time, is we're going to buy these big cap dividend stocks because in the long term, that will be a good investment. every time i hear the long term, i know someone's losing money. because we always talk about the long term as being something that we're -- >> you think that's the wrong strategy, at 4% pfizer or something like that? >> i mean, sounds good. it's seseductive. >> why don't we buy at&t telephone has a very nice dividend. go back two or lthree years ago when the market really took a fall, at&t dropped 47%. i mean, we have a very short memory about the reaction in markets. so if you were to say, look, i think this country appears to be going into a recession and it's certainly not being helped by europe and if europe's in a recession we're in a recession -- >> when you say that, i tried that earlier, i got a lot of trouble. >> i'm curious, how low do you think yields could actually go? i lived in japan in the 1990s. i've seen this playbook before. i was one of the people that stuck their neck out and wrote columns saying surely the market is going to crash soon and i was dead wrong. yields stayed low for a long time. do you think america could actually end up being like japan and have, you know, practically zero for a decade or so? >> maybe we should want to be something like japan. i mean they seem to be getting along pretty well. >> sounds like an awful place. in terms of not being able to move out of your parents -- >> it's happy stagnation in japan. there's an awful lot of -- >> i don't disagree but if you look at the japanese markets, we talk about stock markets for a second, over the last decade or so, had you owned jgbs you would have outperformed the nikkei average consistently, 3% gain versus 0. in the united states, we are facing that same de-leveraging process, that's the richard concept, and if we're facing it for the next decade, it's true. the high dividend paying stock paying 4% looks attractive, but if, in fact, we go no place, and the prices drop, then that 3% from the treasury market might seem attractive. >> here's the big issue. you have a large american pension fund industry which has promised most pensioners 8% returns going forward. it's completely unsustainable given what you're predicting. do you think we have a nasty reality check ahead of us here in america in terms of what people are going to be getting on their money going forward if you're right? >> sure. look at the way we're talking on television right now. we're talking about spain, we're talking about greece, that is -- it dominates the issues that we're dealing with and yet, the real issue of the american economy and the european economy right now, should be center stage. we are slipping backward. retail sales. consumer spending. all of these questions are things that are happening right now and they affect the treasury market. >> when you came in off camera and i said we were in the old building, had to be at least ten years ago and i think we were at 5% or 4%, and you were saying that's -- i thought you were crazy back then and we had jimmy rodgers saying the bond will never go below 5% or he'll kill himself if it goes. i don't remember what he said. it was hiyperbolehyperbole. look how long we were at 3% and 4%. the beginning of every year, the one thing that was consensus was that bond yields are headed back up at this point. and it is -- i just got to give you kudos. the other bond king, look what the other bond king did with treasuries. he capitulated at 3% or 4%, right? >> it's why -- happy sunny tie. >> not very sunny outlook. >> i think you can be very optimistic about this. this is creating tremendous opportunity in markets. >> not for savers. >> it doesn't happen tomorrow. we don't have any patience in this kind of game that we're in. we want something to happen right away. >> all right. bond king, going to get mad, when you said -- someone said mocking, immediately he's in germany and wrote in. bond king, thank you. robert kessler. coming up, stocks to watch ahead of the open. we'll head down to wall street next for the buzz from the new york stock exchange. 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[ male announcer ] now citi thankyou visa card holders can combine the thankyou points they've earned and get even greater rewards. ♪ but they can also hold you back. unless you ask, "what's next?" introducing the all-new rx f sport. this is the pursuit of perfection. let get down to the new york stock exchange, jim and david join us how. hey guys. >> out of nowhere, it's a big day. >> you mean a deal day? >> we have worries about guy leaving fed ex, i think this walgreens news is huge. >> yes, and as you know we've seen virtually nothing. this one reaching across borders. and you talked to the principals behind it this morning. there is about $11 billion worth of debt from a private company. >> expresses scripts may be finally overmatched. >> we'll talk about that on the show about does it give walgreens leverage with express scripts. >> is dwayne reid, do you remember you used to talk about that in the old says, has it gotten any better? >> what did you used to say? >> it's better. why they have not rebranded it is beyond me. >> we have a 24 hour one next to us, tom is the manager, i love it, they have an in-house doctor. >> what did you used to say? >> when they bought it, i asked if they had ever been to one because they would still be waiting in line. >> the lines have not changed. >> walgreens, the actual pharmacy area is not good either. >> i'm a user and i beg to differ. >> the one right down here on wall street and pine. it is so well run, it's just a machine. >> i'm with jim, the one in cresco is really good. >> maybe it's that elderly people are the -- >> cranky complainers like you. >> we'll will right back. >> tomorrow on squawk box, two ours with the master of management himself, jack welch. don't miss "squawk box." werful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪ stock stock of the day, walgreens shares giving up early begins a from this morning's deal. the stock is now indicated lower. at's's kind of interesting. walgreens buying a 45% stake in alliance boots. >> they are the buyer right now -- >> the risk garbs are there. >> yes. you were just saying -- >> okay, i get to start a new route with you guys. what i want to talk about is listening to senator rubio, what strikes me is one of the reasons i love america is because there is a positive dream. i think that dream has been very tarnished in the recent years. the hype does not always match the reality, but there is a vision. the scary thing is is the only thing keeping the euro zone together is fear. fear on the part of the elites that if they let the project unravel there will be an apocalypse. fear can drive the project but it's not a good vision, so what is going to be that positive dream in the euro zone. that will make them to the buy in the euro zone. >> you talk about it in the elites, right? what is the other 99% think? >> right now they're increasingly angry and bitter. there is a theme in the european politics over the last couple years is you have had a dozen governments kicked out. it is so dangerous because where ever you look on the european landscape, you will see levels of extremism. greece, austria, you're seeing some pretty volatile politics coming up and that's alarming going

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