Transcripts For CNBC Squawk Box 20120720

piper jaffray's gene munster at 6:40 eastern time. one more tech name of note, advanced micro devices. second quarter earnings falling short of consensus. also the chipmaker is warning current quarter revenue will also miss estimates. the company has been hit by a shaky global economy and shift towards tablets and smartphones. and steve, i'll send it over to you. >> in other headlines, a group of banks being investigated in the libor scandal reportedly looking to pursue a group settlement with regulators. the banks said to prefer this rather than face backlash by going it alone. discussions are preliminary. mayer getting a $70 million pay package to lead yahoo!. it includes stock options over five years. a survey today finds u.s. auto companies will hire more people and expand plants over the next year. the companies say they need to keep up with increasing consumer demand for vehicles to replace aging cars and trucks, joe. >> thanks, steve. time for the global markets report. kelly evans is standing by in london this morning. kelly, how are you? >> hi, joe. i'm wonderful. thanks for sending it over here. let's just give you a quick sense of what's happening overnight in europe and across the globe, in fact. a bit of a quieter day. we really have been searching for a signal. decliners outpacing advancers. we're down 0.4%. as you can see, we were doing okay until this sharp selloff just began here. sharp although not that large in terms of magnitude. again, down about 0.4% on the day. let's take a look at what's happening across europe. a closer look. the ibex 5, this now down almost 1% in spain. when we checked in on the program just an hour or so ago, that was in the green. may have somethingo with the fact that the spanish ten-year has just crossed back above 7%. the cac out of paris is down more than 0.5%. xetra dax down by 0.2% and ftse down by 0.4%. not a lot of news in terms of data, although this call among finance ministers to approve a memorandum of understanding and help bail out spain's banks will be taking place. whether that really solves anything, as we know, whole different story. the ten-year in the u.s., we're seeing prices rise, yield sinking still below 1.5%. 1.482% is the level on that. same thing is happening in the uk. we're seeing 1.495. over here in spain, as i mentioned, this is where we're seeing some of the pressure, above 7%, 7.086%, unsustainably high. clearly there's more and more sort of talk around the markets about to what degree the imf might have to come in and start bailing out spain as a sovereign, forgetting what's happening with its banking sector. finally, let's take a look at another one here that's benefiting from this clear flight to safety. obviously, the ten-year german bond, 1.183%. remarkable. quick look at what's happening with the euro/dollar and commodities before we toss it back to you guys. we're seeing brent and nymex lower by more than 1% for the morning. so a pretty big move there. the euro/dollar weaker by only about one-third of a percent. 122.33. that's your level to watch. joe, i know you're keeping an eye on that vacation. >> you're right. it's rapidly approaching. i'm going to wave. look up there. i don't know what time it will be tonight, but i'm going to wave as we go by the traffic. the 32-mile line of traffic leading to the -- are you going to get it together for the olympics, kelly? >> you know, joe, we keep getting reports about different areas, whether it's traffic problems, problems with people accessing their money. we know about some of the security issues that we heard earlier. all i will say is that expectations, i think, now have fallen so low that maybe this event can surprise. it's kind of like a meeting of the euro group finance ministers, for example. >> i saw phelps somewhere. i just hope -- i mean, you have not switched allegiance. you're not going to be there, like, cheering on great britain, right? >> no way. >> well, no, although i would be throwing my weight behind the front-runner. there's lots of stories over here about just how well positioned britain is for maybe the biggest medal haul it's had. >> what would that be? >> the biggest winner of all. >> what would that be? two? two bronzes? the brits, they show up. jolly good, we're here participating. we don't win a lot. >> kelly, come on. you're all america all the way. >> come on, kelly. >> i am america all the way. i'll be flying my flag. we had nick simmons, the 800 meter runner on the program the other day. he was terrific. so i'll be rooting for nick. i'll be pulling for everyone else. but i will also, of course, hope that the brits do well because if not, we'll hear about it for quite some time. >> it's a beautiful shot behind you. it's all red, white and blue right behind you. we like that. >> very patriotic, yeah, that's for you guys. >> subliminal. it's what? >> those are british colors. >> they stole that from us. thanks, kelly. >> did you get stuck in any of that traffic? >> no, i haven't had too much of a problem yet, but i've been taking the tube because it's already pretty well known here that the traffic is going to be bad regardless. what's interesting, becky, though is that there's almost this lull period right now where between kind of the iffy weather, the fact that tourists are either waiting for the olympics or steering clear of the event, the roads, i was speaking with someone about this last night, but the roads aren't too bad right now. maybe the real trouble comes in about a week or so time. >> okay, kelly. thanks. have fun. >> thanks. back to microsoft, ed mcgwire covers the company. ed, would you call this, i think smpl simply put, a transition quarter for microsoft? there's not a whole lot going on. we knew about the $6 billion writedown, the investment that they made in the internet. but there's no new products. we're waiting. the best is yet to come. >> yeah, this is absolutely a setup for a big series of products. windows 8's the big release. that most people know about. windows servers on tap. we've got a new version of office. a whole bunch of new cloud-based offerings. >> wow! whew! >> it's all coming together. >> tell me how you change -- i'm not a person who's going to understand, either changes in windows or office, but what new bells and whistles would induce, i guess, a business upgrade? >> well, microsoft is kind of a stealth gorilla in business. >> certainly. >> they really pull together a lot of pieces. they have the software that runs the data center. they've got offerings in the cloud that are integrated with your pcs, with office. the ability to incorporate tablets and mobile into an experience that can actually be managed by, you know, a central i.t. manager. it's a great value proposition. what we're seeing now in their quarter is a lot of long-term contracts. corporate cios, people in charge of technology, are saying hey, you know, we need to bet on somebody for the long haul, and we're going to sign long-term contracts with microsoft. they're not about to go away sometime soon. >> no. and people that think they're a mature company and they're lucky to get an order, what was that revenue number? $18 billion in a quarter? >> $18 billion. you know what was really interesting this quarter is that windows was actually smaller than the -- the office division was the biggest, and their server and tools business, which is your traditional enterprise technology has actually been bigger than windows for two of the last three quarters. so this is really a lot more enterprise story. >> does that have a win with apple? when people are buying these items, are they getting office? is that still a sell for microsoft? >> well, it certainly is. i mean, it's very sticky. everybody uses word, excel, power point. >> well, not everybody. >> joe's still on one of those slide rule -- are you using a slide rule, joe? >> excel. >> excel. no, lotus. >> open some of the stuff they send us in notes and excel. you do when you open some of the notes they send us. some of that stuff is on the attachments. >> maybe inadvertently, i do. people say that the pc -- >> lodite? can you say lodite? they need to figure out how to do tablets, and they need to figure out other areas. would you say that microsoft hasn't shown the ability to be nimble and innovative in some of these new areas in the past, and we should maybe be skeptical? >> joe, i think that's fair. you know, skepticism has been, i think, a big motivator for microsoft. they've been something of an underdog, which has helped them. they're going to be launching the surface tablet along with windows. it's a true hybrid. you can use it as a tablet, but then you can also fold it -- fold back the cover and use it as a keyboard. so they're looking to a new generation of computing that involves some new form factors. we'll see some of that coming. but they -- i think they have acknowledged that they can't dominate the world anymore. it's a world of multiple devices. we've got android -- >> why is apple the company that invents the ipad, and why is microsoft not that company, and can it ever be? >> microsoft has had a lot of i.p. or a lot of ideas that they haven't brought to market effectively. but i think having a benevolent dictator like steve jobs who really led the whole idea of design and concept and experience was really important. microsoft was pretty bureaucratic. you had a lot of silos that were competing against each other. what we've seen over the last -- over the last couple of years is a lot of these ideas are now coming together around this. >> what do they got to do to prove? that's a ten-year chart right there. >> that's right. well, windows 8 has to be a hit. people have to buy in. >> that still doesn't mean it's going well above 30. dividend is good for a tech stock. >> and i would argue that microsoft's enterprise business is really this unappreciated jewel. when you start looking at the cash flows, they had long-term contract bookings over 20% in their server and tools business and over 12% in the business division. i think when investors really look at how defensible these characteristics are and how much growth there is, actually, when you even take windows out, windows ends up being just a little bit of a cherry on top. >> all right, ed, thank you. by the way, we should let you know that those talks between directv and viacom, they have finally reached an agreement, and viacom's channels will all be back on directv. this has been a long-running dispute. viacom was looking for at least $1 billion over its last contract. no details have been put out in the press release, but things had gotten dirty. as recently as wednesday, viacom was basically telling other distribution channels to start using that as a marketing tool, that they had channels that directv did not to try and lure away there them. viacom stations did see when they got pulled off directv did see a drop in some of the ratings across the board. so this was a pretty bitter dispute. they have reached an agreement. and it will renew carriage with directv for all of viacom's channels like nickelodeon, comedy central, all of them. renewed fears about tensions in the middle east wreaki ining havoc on energy markets. the newly named vice chairman of ihs and also author on the remaking of the modern world. it was really good to see that vice chairman title you have to really make you somebody now. forget the pulitzer. forget the great book. you're now vice chairman. that's good. congratulations. >> thank you. thanks. >> 11 bucks a barrel since june 21. why is that, dan? >> the primary reason is the tension around iran, the fact that the sanctions have now fully gone into place. we're seeing the impact of them. and at the same time, iran is bellicose in its language and specific events such as the attack on the tour bus in bulgaria raise the stakes that something further will happen. and in general, there's been a buildup of military force in the persian gulf with the position of the sanctions. >> you know, up until that point, dan, the story had been why the sanctions which were effective hadn't increased oil prices further? how did that flip and change? is it just the actual military action? >> well, i think it's the tension around it. actually, the sanctions, i think, have worked better than it looked like they would just a few months ago. our tracking system of shipments of oil from iran indicates that from the island in the first 19 days of july, less than 800,000 of barrels of oil a day shipped. normally they export 2.2 million barrels a day. it's a big chunk of oil out of the market. at the same time, a lot of oil is coming in from other directions. the saudis are producing at over 10 million barrels a day. >> dan, i want to bring you firmly into the u.s. political debate because u.s. oil policy is going to be a big part, i think, of the discussion we're going to have between now and november. and the obama administration's record is on the line here. and it's being criticized about how well they did or did not do when it came to bringing u.s. natural resources to market. what are the facts as you see them when somebody says to you, look, the obama administration kept oil off the market? what has kept production from being what it could have been? what is your response, dan? >> well, of course, that's an argument about what's happened to federal land. i think the thing that's most striking to me is what we might call private initiative has done. u.s. oil production is actually up 25% since 2008. and to give you a sense of the scale, the increase alone in u.s. oil production since 2008 is equivalent to about 75% of iranian exports. if that production hadn't come about in north dakota, in eagleford in south texas, it would be a lot more difficult -- >> in spite of instead of because of. so just say it, dan. it's in spite of -- >> is that something the administration is getting credit for? had nothing to do with? how would you characterize it? >> i think it's largely been driven by private initiative on private lands. what the administration has done is basically come out in favor of the shale gas development which has had, you know, created all these jobs, very large investment, and it's given the u.s. a competitive advantage. and i think the administration had to decide a couple of years ago, a year or two ago, where did it stand, and its basic view has been in favor of shale gas development. >> could they -- should they have done more to bring more oil to market, in your opinion? >> well, bringing more -- you know, it's not really -- there's limits to what the government can do. clearly, leasing on federal lands, what happens in the offshore, those have a big effect. and those kind of policies are, you know, right now, for instance, what are the rules in terms of drilling on federal land affect not the timing tomorrow but the timing over the next year or two. >> okay. dan, thank you so much for joining us. >> thank you. >> and congratulations on the promotion. >> thank you. >> have you gotten a "squawk" book award yet, dan? >> i'm standing by. i'm waiting. >> because that would be the icing on the -- >> would it be "prize" or "commanding heights" or the new one? >> i think "the quest." >> the new one, huh? >> give me a call. i'd love to get the prize. >> i have it on my desk. >> the last prize we gave out, the guy walked off, left the prize, and said that the whole network sucked. that was paul krugman. so we're a little hesitant. >> we know how to deliver a prize. >> we're a little hesitant to give out a -- >> i promise that i will be most pleased to receive that award, should you decide to give it. >> all right. >> even dogs don't bite the hand that feeds them normally. >> is there a committee of 17 people who decides it, several nobel laureates. that's how we make this decision. >> we don't let any nobel laureates weigh in. we try to make it, you know -- >> dan's well on his way. deserves one. >> he does. >> several times over. >> al gore and yasir arafat. he's gone, sorry. nobel laureates aren't what they used to be. when we come back, we're going to talk about a man who last week was rubbing elbows with the media elite in sun valley. today he is joining us on set. we have wpp's sir martin sorele talking advertising, the economy and the olympics right after this. while many automakers are just beginning to dabble with the idea of hybrid technology... it's already ingrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. welcome back. advertising is facing a chilly summer. the leading global investment agency group "m" is revising global ad spending forecast for 2012, driving it a little lower than it had been before. joining us now to talk more about it is sir martin sorrell. >> good early morning. >> good morning. >> i'm not sure i'm quite so enthusiastic to be sitting next to joe after his british bashing this morning. >> it was done in love. >> he didn't realize you were in the green room listening in. but to his point, the olympics are coming up. >> yes. >> it's got a lot of excitement. >> we came in fourth last time. on the medal table. >> that's pretty strong. >> which olympics was this? was this the regular? >> the beijing olympics. do you remember the beijing olympics? we came in fourth. that's right. >> see if that's true because he's advertising, guys. >> i'm sure he knows. >> you've got to watch him. >> we made this big run. so watch out for us, joe. we're catching up. we're small but perfectly formed. >> wow. how is the advertising outlook right now? all things considered? it sounds like things have been slowing down. >> you and i were in sun valley. and i think it was a little bit gloomy. i think generally. we heard from mario monti. >> force. is that counting every territory they've ever owned or visited? great britain. >> 47. >> rahm emanuel and chris christie. >> 72 and ahead of australia. thank good. can you imagine the national embarrassment? >> we've never beaten australia before. good swimmers. good swimmers. but we saw rahm emanuel and chris christie which i don't know how constructive that was. that was impressive. the big positive was shale. shale oil or shale gas and self-sufficient.economy i think that was the good news from sun valley. having said that, i think second quarter, i think many clients were saying it's a bit tougher. we've seen earnings revisions downwards. i think some companies are surprising on the upside. in the industry, i think we've seen some good numbers from one of our competitors. this morning, a bit more muted, although the stock price reaction was strong. but if you actually look at the numbers, sort of slowing in q2. i think generally for the year, we're running at about 4% or so far this year. and we're looking at about that, maybe a little better for the year as a whole. it's been boosted by the olympics. it's been boosted by our favorite subject, the election. it's been boosted by the european football championships. but again -- >> soccer. >> soccer, yeah. not as much as people were looking for. so estimates have been taken down to about 5%. you mentioned group "m." group "m" is at 5. two inflations, five, if advertising stays at the same proportion, you're talking about growth at 4% or 5%. it's not bad. it's not terrible. >> what is the situation, though, in terms of ceos, they get nervous. we know they haven't been hiring at least here in the united states. do they pull back on advertising at the same time? >> i was watching the hank paulson show yesterday. and hank makes the point about not genuine cost cutting in productivity improvements. what he talks about is people attacking costs. i think what we see is a bifurcated approach. in france, italy, spain, the uk, maybe not so much germany and the united states, people are not investing capacity. you know that. you see that. they're not investing in capital expenditure, but they are investing behind brands. in the fast-growth markets, they are investing in capacity. in china, we're up 14% in china. we've seen no slowdown. >> no slowdown. >> but we are focused on consumption. and i was talking to our leading indian oligarch. from a consumption point of view, we're still up 9%, 10% in the first five months of the year. russia would be the same. brazil would be the same. retail sales, consumption have remained the same. in china, the five-year plan shifts from investment and savings or from savings to consumption. and we're seeing emphasis on health care safety nets. and we're seeing emphasis on service businesses. you have to be very careful when you think about what's happening from an investment and savings point of view as opposed to a consumption point of view. all those economies, the rise in the lower, middle and middle class has been enormous. we're talking about hundreds of millions of people that have been brought into a consuming consumption phase. and that's having an impact on our business. and, again, hank paulson organized this conference for eight western ceos with the leadership with the state-owned enterprise leadership in china. it's really interesting what's happening. the state-owned enterprise leaders are talking about becoming more entrepreneurial, more risk prone, in a sense, and we're moving to a more statused approach in the uk and indeed to some extent in the united states. so companies in the west are becoming more conservative. companies in the east, i think, are actually becoming more aggressive. >> but these slowdowns that we hear just in terms of overall growth, if china's growing at 7%, even though the consumption continues to grow, doesn't that have some impact to see the rate of growth slow? >> i mean, i describe, and i think you're absolutely right, becky, 2012 is the same as '11 but less. so if we were growing somewhere between 5% to 6% like for like this year we're growing around 4%. so things have sort of damped down a bit. but the patent is still exactly the same. and if you're running a multinational company, you have to go for growth in those faster-growth markets. you have to, in a way, give up a little bit on western europe and be a consolidator in western europe and to some extent the united states. certainly in front of the election. i mean, i think we haven't had the preelection bounce that we usually get in the fourth year of the cycle. >> so ten years ago, you would do radio, print and tv. >> yeah. >> and now, what? there are seven, eight, nine, ten different media outlets. >> it makes us more important. >> what does that mean for budgets, and what does it mean for spending and efficiency in advertising in. >> more complexity, more choice, more difficult choices. you know, we manage a book of about $75 billion around the world. so we're looking at "a," is that the right number, looking at aggregate, and where should it be spent? >> quickly, the biggest one -- the biggest growing one? >> ten seconds. >> google. >> digital. >> you mentioned microsoft and the growth we're seeing there. but google is the strong one. >> martin, thank you very much. >> thank you much, becky. when we come back --  good morning. and welcome back to "squawk box" here on cnbc. 49% owned by general electric, which just reported results of 38 cents a share on an operating basis. that was 12% above last year, the ninth consecutive quarter of what the company is calling strong operating earnings growth. the estimate was 37 cents. so that's a penny ahead of expectations. total revenue was up 2%. it was negatively impacted. fx was $9.9 billion. $900 billion of negative impact on the stronger kbar dollar. but $36.5 billion compared to a first call estimate of $36.795 billion. $36.5 billion versus $36.795 billion. ge capital, people want to see how that unit is, you know, faring after it being somewhat problematic in the financial crisis. earned $2.1 billion. and that was up 31%. and the big news a few months back was that ge capital was going to resume paying dividends to the parent. and it returned $3 billion in dividends to the parent in its tier one common equity ratios, now 10.1%. there's no change in the company's outlook, which might be significant. >> although they are raising their operating cash expectations to $17 billion to $19 billion based upon the restart of that ge capital dividend. the eps growth expectations, they're very confident in that double digit, but operating cash expectations, they are raising. >> is this like an alice in wonderland report given what we've been hearing from every other company out there? it seems pretty strong. it seems pretty strong. >> record backlog, $204 billion. orders pricing was up. they were able to raise prices 1.2%. you know, when some of the numbers that you put first are the ones you want, you know, people to see. industrial segment revenues were $25 billion, up 9%. that's good. organic growth was up 10%. both of those, obviously, good numbers. industrial growth market orders up 14%. and energy segment. see, these are all the strong point. energy segment profit up 15%. oil and gas up 11%. transportation up 51%. the stock at this point is 1960 to 1973. joining us with his reaction is jack degan, harvard adviser, chief investment officer. i own stock from working at ge for 22 years or whatever. it's the only 49% of me works for ge now, apparently. but i don't remember how the company has raised its dividend. and not the ge capital dividend. when do we hear about that, and when was the last time because, you know, i don't want to speak for ge, but i feel like, you know, they want to continue to do that because it was pared during the financial crisis. they want to get it back to where it was. is it possible it happens this quarter, and when was the last time it happened? >> joe, i'm not sure i understand. when was the last time they raised the dividend, or when was the last time they were at levels before the crisis? >> when was the last time they raised the dividend, and could it still happen if it's not in this report? they can say it at any time, right? it's been a while. they did it twoice a year a couple of times since it was pared. i don't see anything right here. were you hoping for a dividend boost? >> not this quarter, joe. >> not this quarter. >> they've done it twice in the last year. what they've stated clearly is that they expect to raise the dividend commensurate with earnings growth. so expect 10ish percent per year. i expect we end up with another dividend increase later this year, possibly after another skr upstreaming of a dividend from ge capital to the parent maybe later in the year. >> the last dividend increase was in december. what is it, july? >> it looks like they've done it twice in december now. oh, they did it once again in april, too. >> just this recent april? >> no, no, december 2011 was the last -- >> and then in april. >> april '11 as well. >> all right. so we'll see. everything else -- you probably expected, given the multinationals that we've seen, you expected some for ex issues. is the revenue number other than that okay? 36.5 versus 36.795 estimate? >> joe, that's a very good revenue number. investors should pay no attention to the forex because that can flip next quarter. they have beaten pretty dramatically on a constant currency basis. i think that's very good news. i think the most exciting thing you've said this morning is that the outlook is unchanged because their outlook at the beginning of the year was quite positive. you know, with 20% of revenues coming from europe, i think this is quite a positive statement. >> that's an excellent point. 20% of the revenue coming from europe. they do say that it's still a very volatile global economy. we've heard that from just about everybody. i guess you can only see so far at a time like this. >> you have to throw some caveats into a good release. and ge is conservative enough to always do that. i think this is pretty exciting. ge is at 5% higher than when the three of us sat here last time. the s&p is down a couple of percent. ge is in a very nice position relative to the s&p right now, which is what our clients and probably your viewers are interested in. ge will grow earnings 10-plus percent this year and next. the s&p maybe half of that. ge is committed to raising industrial margins 50 basis points this year and 50 basis points next. ge's dividend is already 50% higher than the s&p, and they've committed to raising it, again, commensurate with earnings, maybe 10% this year and 10% next. i'm as optimistic on ge relative to the s&p as i've been since we were talking in early '09. >> got a market multiple. >> it has. and arguably -- >> should have more. used to have almost double the market multiple when it was considered to be safe and consistent -- and a consistent earner. i get around 12 or 13 times earnings based on this year's earnings, based on 2012, right? >> yeah. it's arguably always has been a better-than-average company. it's an extremely well managed company. it's a company with a very strong balance sheet, a lot of history. the portfolio remake over the last ten years has been very positive. you know, it's almost been stealthy what they've done in terms of improving this balance sheet. so i think it's a much better company now than it was five years ago. >> right. jack degan, thanks, as always, for your opinions this morning. >> thanks for having me, joe. >> best to jackie. get to the broader markets here, daniel -- help me, joe. >> stesich. >> stesich. >> nobody's going to know at home. they don't know him either. do it with a lot of confidence. >> it's like when you're singing, you know, if you don't know the words, sing louder. dan, let's talk about ge. i call it had an alice in wonderland report. everything is fine. double-digit growth is in place. they had a pretty strong revenue number, even though they missed a little bit. different from what we're hearing other companies. does it affect the market today? >> you know, i don't think ge affects it so much, but that was a good analogy. it does look all around the floor here. as far as the week goes, the one stock isn't going to have that much of an effect. we've had a pretty good week. and most of it was based on really low expectations on earnings. they've beaten on that. and i don't think guidance has been as poor. and today, you know, that exemplifies it. so that does help going forward. we've got a lot ahead of us. next week gdp is coming out. that's going to say a lot about how our economy is doing and how that stock market will do going forward. >> how much concern is there on the floor there about the outlook for the u.s. economy right now? >> there is a considerable amount. you've had quite a few months now of slower growth in a lot of numbers. a lot of broad-based numbers. so the worry is that this gdp -- i think the estimate i saw this morning still around 1.5%, the broadly watched one. i'm not that confident right now. and i've been a confident guy all year. but i'm looking for lower than that and evaluate where it goes from there depending on where it comes out. you know, you see sub-1% growth and then qe is going to be really strong and maybe you'll have some bearing at that time. >> you guys are all excited because the commodity play is back on, right? it seems they were out of favor, and now because of the drought story and also because of what's happening in iran, people are piling back into commodities. >> right. it doesn't take much for the commodities story to get back in. and we did have two big things. this drought is incredible. the ground around my home, you know, basically illinois, is hard as a rock. we had a little rain up here, but it wasn't broad based. that creates a problem. again, the iranian situation, any time that comes in, oil goes wacky. i don't think that's going to be that big a deal should something happen. i think the u.s. should be able to prevent any major escalation there. but as far as the commodities, that's what is going to be a real scare in the next three to six months. >> dan, thanks for joining us this morning. >> thank you. if you have any comments or questions about anything you see here on "squawk," go ahead and e-mail us at squawk@cnbc.com. when we come back, the street reacting to google. how the search giant turned in positive results despite global headwinds. the developing story out of colorado, a masked gunman opening fire at the showing of "the dark knight" in a denver suburb of aurora. at this point at least 14 people are dead. 50 people are wounded. we will continue to monitor and bring you the latest. want to s and retire with more? 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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, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. talk to your doctor today about androgel 1.62% so you can use less gel. log on now to androgeloffer.com and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. welcome back, everybody. among the stocks to watch this morning, google shares. they rose in the extended hours after a better-than-expected quarterly report from the company. gene munster is senior research analyst at piper jaffray. and gene, i guess the good news is, we didn't see signs of some sort of a global slowdown in advertising. so hooray at that point, correct? >> yeah, we're bracing for the worst, and we didn't get it. it was 1% upside relative over the street. i think in a normal print, a norm aquaal quarter, normal environment, it was down slightly. it was more or less a relief they didn't miss meaningfully. >> so there are still some questions about core strategy there. one of them includes what they are doing with motorola. they didn't say too much on the conference call last night. >> they didn't. and that was the big question i was getting from investors going into it is they were begging for some sort of direction, some sort of parameters in terms of how much they're going to invest in motorola because this is a big company. it basically doubles the employee size of google. so ultimately, i think that that's still kind of one of these near-term lingering questions. just what's the operating model look like as these two companies combine? >> and what is your thought with the limited amount of information you've been given on this? >> well, based on talking to people close to the company and the industry, it looks like they'll be investing aggressively. the first thing is they're going to pare back the number of phones they have, but they will be investing aggressively in the phones they have, try to rep electrica replicate what apple is doing and will have a negative 2% to 4% on 2013 earnings as they really start to ramp up that spend. >> but you think it's money well spent, or no? >> i think that might not be the best money well spent. i think that market is going to be very difficult for them. i understand strategically what they're trying to do, but in our opinion, the best thing to do is focus on working with these hardware partners like they've been doing. we'd rather them focus on other things, but at this point, we've got to go with what we have. >> and i know microsoft is planning its windows phone later this year. what kind of competition is that going to bring to this market? do you worry about that? how big of a concern? >> no. not so big of a concern. i think at the end of the day, they have a little bit of an edge, i think, in the tablet market because they'll be able to bring office to the tablet. but i think in the phone market, really momentum behind apple and android, it's going to be hard to really change, i think, what's going on there. >> very quickly, gene, what do you do with the stock today? >> i think -- i bet it ends up flat for the day. it's up a couple percent right now. i think it's going to be probably flat next quarter and then start to work higher as people get visibility on this motorola. >> gene, thanks for joining us this morning. appreciate it. >> thank you. coming up, the fast food indicator. what business at the likes of mcdonald's and kfc tells us about the state of the consumer at home and the economy abroad. our "disrupters" series continues with bruce gibner. and we'll tackle the looming fiscal cliff with pennsylvania senator pat toomey. don't miss "squawk box" starting monday at 6:00 a.m. eastern.  [ male announcer ] drive a car filled with as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this ie pursuit of perfection. welcome back. u.s. equity futures at this hour are down about 46 points or so. >> what percentage is that? >> 0.36%. oh, there's the board which came up. i just gave it to you. >> i'm just dying to know the percentage each time. >> don't be sarcastic on this show. >> because it doesn't work. >> thank you, sarcasm -- >> you're being sarcastic about my sarcasm, which makes you a double loser. >> i think which makes me a winner, it's like double negative, like disirregardless. if i use disirregardless, people tell me it's not a word. >> unirrespective. the senate introducing intromized legislation to address cyber threats, permitting the government to share information with american business under certain conditions. an op. ed in the "wall street journal" "the cyber threat to our nation is one of the most serious economic and national security challenges that we face. it would be the height of irresponsibility to leave a digital back door wide open to our cyber adversaries." we're looking at a menu of restaurant names this morning from chipotle to mcdonald's. john glass covers the space for morgan stanley. good morning. >> good morning, thanks for having me. >> how are these guys doing and what is it telling us about the economy? >> i would say that the restaurant results to date have been mixed. starting in the spring and march we started to see a little bit of softness in the full service restaurants so-called casual diners. fast food has been better domestically, although we have seen signs of weakness. chipotle last night reported trends softened, positive softened since late spring. it's a mix. restaurants are a good barometer of the consumer. it is a fairly spontaneous purchase, you tend to go out more if you feel good about your situation and the obvious is true when you feel more stressed. >> we're trying to figure out what fast food says about the economy, john. if people are buying more fast food you could imagine that would be a time of more economic stress whereas they might trade up and mcdonald's could do worse for example in better economic times. >> i think traditionally what's happened, you haven't seen as much direct trade down. people use different restaurants for different functions. you've seen uncanny improvement across the board from mcdonald's to wendy's and the recentlial players suggesting tradedown going on. the last few years a lot of the chains spent time revamping their menus and revamping the restaurants so some of this is just better execution at the restaurant level. >> surge in corn prices, john, is that something that's going to show up in the bottom line, hurt the bottom line for the restaurants? >> you know, restaurants are downstream users of food so restaurants will feel this impact six to nine months from now, food producers and others are starting to see this now but restaurants because they contract annually or every six months for most products aren't going to probably see the pressure until next year. they're clearly worried about what will happen with commodities from the beef market. it's something we spent a lot of time on recently. to go back to your earlier question, traditionally the companies have offered a suite of products from value to premium so their idea is to get people to trade up when times are good and trade down and keep them as customers when times aren't so good. >> what is your favorite stock best value in this space? >> i think the restaurants have actually had a tremendous run this year. we like yum! brands because of its exposure to china. china has been under stress but their business is strong particularly relative to the industry, comp. store sales last quarter up ten, even if they moderate into the third quarter it's mid single digits, estimate of unit growth, ten fast food restaurants per million people and there's 500 restaurants per million people in the u.s. >> john, thanks very much, john glass. >> thanks for having me. steve, you had a late night last night and i'm reminded by a viewer who writes in your band was great last night, the turnout from cnbc, the crew there was fantastic. >> half the crew was here. >> "now i'm hungover and cranky and going back to bed" he writes in. >> it was nice of that gentleman to come and there were many other people there. >> what part of the city? >> 18th street, really nice restaurant. >> what part of snotown? >> right off fifth avenue. i don't know what part of town is that. >> near soho? >> no, it's chelsea. >> so you were in chelsea. >> yeah. >> just doing your thing, playing with your band. >> yeah. >> the muck rakers. >> the moon cussers. >> the moon cussers. >> maybe 100 people plus came out last night and we played until midnight. >> and you were drinking what? >> beer. >> really? >> yeah. >> you got home at what time in. >> do i have to say this publicly on television? >> yeah. >> can i say that i took a nap in the afternoon yesterday? >> you look good for whatever time you got in and you're bright eyed and bushy-tailed. >> you look normal. >> i got to bed at 2:00 last night, i woke up at 4:00. >> what? >> yeah, i'm good. >> woo! we could push you right over the edge. >> i'm very worried about him, we're this close, folks. >> now that i know. >> now that he knows he's going to push. when we come back, itten to watch joe needling steve and sheila bair, former chair of the fdic and u.s. cities are facing bankruptcy, alexandra lebenthal will talk about what the catastrophe could mean for investments and morgan stanley's chief equity strategist adam parker right after this. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. two years on, a report card on dodd-frank. >> with this law, ordinary investors can make better financial decisions as to what will work for them. >> former fdic chair sheila bair here exclusively on the lessons of regulating investment portfolio. and chief equity strategist adam parker joins the "squawk" set as today's guest host. we go behind the libor numbers and what it means for your money. the second hour of "squawk box" starts right now. good morning, everyone. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and steve liesman, who is in for andrew, who is out on vacation just for the day. let's look at the future this is morning and what has been a volatile week the dow futures are down by about 46 points this morning. let's get to some of our headlines on this friday morning, and here is a breaking news story that we have been following all morning long, 14 people are dead at a shooting in an aurora, colorado, theater. it was showing "the dark knight rises," one suspect is in custody according to aurora's police chief. there were many people wounded in that as well, about 50 but that number continues to change. we'll keep you updated as we know more. dow component general electric earning 38 cents a share for the second quarter, that was one cent above estimates. earnings for the ge capital unit rose by 31% to $2.1 billion. ge is a 49% owner of cnbc parent nbc universal. and via com and directv settled a dispute that kept viacom's channels off the service for more than a week. at this point the channels have been returned to directv. stocks are up for three straight days. let's talk about a couple of different things. oh, look who is here, bonds and equities with a couple of pros, alexandra lebenthal a long name i'll spend time on. you're miked up and ready to go. you are put together, both of you guys came ready. >> we didn't plan it. >> ready to impress. >> good summer looks. she blaut bagrought bagels. what did you bring? >> wisdom and knowledge. >> can you eat wisdom and knowledge? andrew parker, and i'll start with the guest who was on time, alexandra. >> give her lots more time. >> he's here all the way 'til 9:00. alexandra, i've heard meredith whitney is right because of what's happening in california. does it make her more right with the cities actually declaring bankruptcy? >> you know, it's actually quite brave that i'm here today. >> really? >> one would expect that i was going to get that question. so what i wanted to do was actually break down what's gone on in each california city. there have been three cities so far that have declared bankruptcy. one i'm going to put in the very strange and tiny category that's mammoth lakes, california, for anybody who has ever gone skiing up there. >> i know it well. >> $4.3 million in municipal debt. they were unable to pay a $43 million legal judgment against a developer so that was the reason for that bankruptcy. so let's put that as a one-off. then let's go to stockton, city of 292,000 people. they do have $1 billion worth of debt outstanding. some of that, those bonds are insured, so those bonds will continue to get paid even if after the bankruptcy is said and done, bond holders don't get paid, which i'm not saying is going to happen, and then san bernardino, $220 million in debt, accused of fraudulent reporting for 16 years so that's a special situation. are cities and states still facing problems? yes. does that mean massive full scale bankruptcies? no. and i would love to point to the report that came out this week from paul volcker and dave ravage who work together, share an office together, which was a thoughtful report that laid out all of the problems and said we are heading for disaster if nothing is done, and that's the key. >> and i think their big point was what the federal government is going to be doing in terms of cutting its budget. >> and that the federal government is so disconnected from the states that you really have dysfunction. also interesting, i was doing some research and internet sales tax has become a big topic, $23 billion in internet sales tax could be collected by the states and just look at that number, i mean that's enormous. >> new jersey is already making some moves. there were new papers in your tax this is year that you had to sign that said basically i didn't shop at all online or i did and you had to make up a number. amazon thankfully keeps records of everything you've bought over the course of the year so you can go find it. they're geting aggressive. >> you are so scrupulous. >> i did because i wrote a column for "fortune" how they should be collecting the taxes so i better make sure my own house is in order. >> i'm also scrupulous. >> pathologically ethical. >> that's becky. >> worst case fiscal cliff, we go like thelma and louise full force with the accelerator all the way down. doesn't that make municipals more attractive to people if taxes just sky rocket? >> yes. that is, you know, when bill clinton was elected they said he was the second best municipal bonds salesman in america, of course first being my dear old dad. yes when taxes go up, municipals become more attractive, although right now you have this interesting phenomena and i think we have a chart that municipals almost across the board are trading at well over 100% of treasuries so even if you're not in a high tax bracket, even if you're in a zero tax bracket, municipal bonds are better than a taxable investment. >> maybe we'll have that chart. adam, we'll get to you, but yeah. >> alexandra, isn't it right defaults are coming down in the market? we have the big headlines, san bernardino, stockton but if you look at the overall credit quality. is it credit quality improving overall? >> you have the lowest default rate than in three years and default rates in investment grade bonds are miniscule to begin with. 30 states are actually reporting better than expected results on their budgets. state sales tax receipts are going up. >> adam you're with us for a while, i have to ask alexandra one more time before we stop talking muni bonds. you said they're better than a taxable instrument. >> um-hum. >> we had simpson and bowles on last week who told us one of the things we should do is look at municipal bonds and treating them as taxable vehicles as well. >> tax reform is definitely going to be on the agenda, and bear in mind that under the obama stimulus we had a big change in the municipal landscape with the advent of build america bonds which were taxable with the federal subsidy. i think that's where the argument between the states and the federal government is really going to come to a head, because you are increasing borrowing costs for states and cities and towns, when you tax municipal bonds so i think that story is yet to be told but it's certainly one that the municipal industry and states and government and localities are very aware of right now. >> if we had that chart up right now i'd look around 12 years where the best value is. >> in what grade? >> investment grade. >> g.o., are you sticking with g.o.? >> no, there are revenue bonds that are essential purpose and if you're investing, i would look to essential purpose bonds, cities that need a tunnel or a bridge or that tunnel or bridge, excuse me. >> secured by a toll or guaranteed -- >> yes, and one of the things you don't want to see is an issuer bringing debt to market for those purposes. it might happen as budget issues become even stronger is that they will stop investing in infrastructure projects and that's a really sad thing, because that creates economic activity. >> adam we'll dig deep near your overall thesis but what do you think in terms of municipal bonds and what kind of opportunity does it present given where you think the economy is headed? >> morgan stanley's house view is fairly downbeat on muis. they don't see a tremendous amount of upside this year but i'm not an expert. i'm a stock person. i just think about it is there's no old case without policy. everybody knows we need the federal government to do so something so that could be good for bonds. >> it's hard to say until we get answers. >> it might not be so good for equities. >> we need to talk about the market because the market is held up well. >> on fire. >> and we don't know who is going to be right, you or me. >> maybe we'll both be wrong. >> but it could still have a great year or it could -- >> yeah, i mean you know the stuff that's in place for 2013 we have to worry about, the fiscal cliff and europe looks like it's getting worse on the margin and most of the emerging markets are getting worse, china, brazil, so the earnings season is worse than people thought if you look back early june, we saw more negative guidance in the second quarter than any time in this economic cycle of three or four years to hit the markets higher and bernanke hasn't been particularly delvish. >> some great companies for 12 years growing earnings but the multiple contracting, walmart, they're finally moving and the dividends are pretty good. i don't know. people hate stocks, there's no buy/hold anymore. >> i like those stocks, the strategy within the market's been working. >> you can see i want to talk to both of you, but i want to talk to you badly, too. you'll be here for two hours. >> i'll be here bothering you for a while. >> thanks for the bagels. next, former fdic chair sheila bair talks banks and libor. and later mitt romney on the offensive accusing the president of putting his job before americans but the voters feel the same way. we'll discuss that in just a bit. comments? questions? send them to @squawkcnbc on twitter, follow the show and look for updates from andrew, becky, joe and the "squawk" staff. between listening to the numbers... ...and listening to your instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ thbetween listening to theas numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. dodd-frank turns 2 years old this week. joining success former fdic chairman sheila bair. good morning. >> happy to be here. >> we have a lot to talk about, but dodd-frank turning 2 years old and questions whether we're better off or worse off than two years ago. tell us what you think we've come, where the improvement stands and what we need to do at this point still. >> i think we've improved bank capital levels, capital is up, liquidity, funding sources are somewhat more stable, so a credit quality is improving, delinquencies going down. there has been positive improvement, some the result of regulatory action and market forces and improving economy. there are a lot of challenges on the horizon and especially in the trading desk these large financial institutions it doesn't appear to be the reform has really taken hold. the culture still seems to be one of excess risk taking, perhaps ignoring the law when it means they can fatten their year-end bonuses. >> talking about the libor problems in? >> i'm exactly talking about the libor problem. so i think there's still a lot of reforms that haven't occurred. dodd-frank is only about a third implemented right now so there's a lot of work left and obviously europe's a problem, the fiscal cliff's a problem, the economy is an uncertain aspect, house something still not clear where it's going so there are a lot of head winds confronting the financial services sector that we need to be attuned to. >> watching things like this libor scandal and how it's unfolding obviously raises a whole lot of questions about what's happening, what the environment is, how do you change this and brings up the question, does something like dodd-frank prevent that from happening? is there a way to regulate some problems or regulate a change in the entire environment? >> right. >> i'm left wondering if there's any way to change any of this? >> that's a good question. there are tools the regulators had prior to the crisis that weren't always used as well as they should. there was plenty of authority. i read in the paper that the federal reserve board's general counsel said that rate rigging isn't a safety and soundness issue, that's nonsense. banks aren't supposed to break the law, completely unsafe and unsound, in addition to being terribly wrong, it exposes the bank to tremendous litigation exposure and that's what we're seeing with barclays and potentially other banks as well so there were authorities that could have been used. lot of this is the political will and fortitude of the regulatory community to use these tools and for congress to support them as opposed to trying to constantly pressure them not act, which unfortunately we see sometimes. >> which gets us back to dodd-frank and you point out it's only about a third of the way implemented. i think it's 185 of an expected 400 rules. >> right. >> i've read recently it takes 24 million manhours per year to take those 185 rules and implement them. that's what it's taking the banking industry at this point. >> yes. >> you've heard stories from people saying that they are hiring more compliance officers than they are loan officers at this point and i just wonder if the regulation is too unwieldy and serves the right purpose, if there are enough regulations already on the books if they were properly implemented would be a more successful way of going after some of these problems. >> i think a cple of things come to mind. one the compliance cost of those significant are not overwhelming, but i think you're absolutely right that these rules are too complex and one what are the benefit we get in return for the red tape they're creating. my concern is that there are hundreds of pages long but the benefit is incremental so we're not attacking core problems but we're having a lot of voluminous rules. things like a leverage ratio for bank capital i think getting a higher leverage ratio for all financial institutions significant ones would be a lot more effective than all of the extensive regulation we have trying to deal with risk management practices and internal controls and your stress tests and all that. you need some of that but really just get the leverage ratio up, it's simple and easy, the examiners can enforce it. there are more simple straightforward measures for greater focus. we're not seeing that right now. >> sheila, good morning. >> good morning. >> if a gop congress comes in, a gop president, i think what we're hearing is they would repeal dodd-frank. do you agree with that idea? >> well, no, i don't. i think we're better having it than not having it. i think i've sensed the rhetoric shifting to repeal and replace now as opposed to outright repeal. the idea we didn't have to do anything after the 2008 crisis is not a responsible one and i think, i hope most people on both sides of the aisle recognize that reform was needed. there are different ideas. there are things about dodd-frank that i don't like but overall we're much better having it than not having it. lot about dodd frank is how the regulators use their tools to implement and enforce it. >> sheila, i know you said that the compliance costs are an issue but you don't think they're overly burdensome. i recently spoke with some investors who are looking at banks under $1 billion in market cap who say they don't think there's a place for them anymore, that they can't exist because of this and these are smart investors who have already taken steps into some of these arenas and putting their money where their mouths are because they assume that these banks that are under $1 billion are going to be bought at some point, they're going to have to be sold because of the regulatory burden. >> right. >> does that eventually cut off credit ability to people? >> i think that's a real issue and i made that comment in aggregate, there's a real discrete issue for the smaller community banks and it frustrates me. the cfpb came out with 1,100 pages of rules related to mortgage disclosures, my gosh, why do they have to be so long and complex? a lot of community banks got out of consumer finance because it's compliance intensive. that's unfortunate because they're very close, it's a hands on business model, they're very close to their customers and want to provide a fuller range of services to their customers but they're getting priced out of that market because of the compliance costs so i wish the regulators would look at two-tiered structures and just, it's all too complex for banks big and small and for smaller ones a lot of the rules probably shouldn't apply and if they do, they should be much simpler and straightforward and accessible to the banks so they can make consumer loans and mortgages and other types of services that their bank customers want. >> i don't want to put words in your mouth, sheila, but to sum this up you think we're better off with dodd-frank than without it but you wouldn't mind some changes and some reform to try and make it easier particularly for the smaller banks to succeed here? >> i think if there are going to be changes to dodd-frank, i don't know if there will be or not. there are a number of areas where at the top of my list would be to make the financial stability oversight council an independent entity with its own rule writing authority so you have one centralized, cohesive, coordinated place to write these rules. the member agencies will have input but for the system wide rules i think that's really essential. yes, there are other tweaks i would make in terms of certainly improving maybe perhaps explicitly a two-tiered regulatory system for smaller banks, you could do that independently whether you reopen dodd-frank or not. >> sheila? >> sorry. go ahead. >> i want to ask but libor before we run out of time. knowing what the fed knew back in 2008, should it have done more? >> yes, again, based on what i am reading in the papers i think they should have. looking at those e-mails it looks like they had pretty explicit notification of some very bad behavior, and i don't understand why they didn't investigate. i think they deserve credit for trying to suggest some reforms, but again, even those reforms did not tackle the core problem, which was that it wasn't a transaction-based survey. it was a judgment survey, but i don't understand why they didn't investigate, given what they were being told. i don't understand that and they did have authority to do that. >> sheila, did you know about it? >> did i know about it? well, what i read in the papers i knew about. i knew that there was a market perception that libor was judgmental and it was but no, i had no idea that there was actual -- judgment's one thing, the kind of really over rate fixing is something completely different, i never knew about that. i don't think anybody did. apparently except the new york fed. >> sheila thank you for joining us. >> happy to be here. >> talk to you again soon. still to come we found the man who knows everything there is it know about libor and why it exists. we'll speak to him in a bit. and unemployment a hot button election issue with the jobless rate around 8%. we'll talk to experts on both sides of the aisle. keep it right here. man, i'm glad aflac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? 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[ male announcer ] help your family stay afloat at aflac.com. plegh! now the answer to today's aflac trivia question. what country won a record 83 gold medals at the 1984 olympic games? the answer, united states. >> aflac! welcome back to "squawk box," everyone. we are continuing to follow that story of an overnight shoots an an aurora, colorado, movie theat theater. president obama releasing a statement "michelle and i are shocked and saddened by the horrific shooting in colorado. federal and local law enforcement are still ponding and my administration will do everything we can to support the people of aurora in this extraordinarily difficult time." we'll continue to follow that story as more details come in. there are 14 people who are dead and 50 who are wounded at this point. up next we'll talk about whether the president and mitt romney will start ramping up discussion of their own plans to try and boost jobs, that debate and much more on the markets and everything else, right after this break. expression of power - is control. ♪ during the golden opportunity sales event, get great values on some of our newest models. this is the pit of perfection. welcome back to "squawk box." two initial public offerings are said to debut today. kayak priced its ipo at $26 a share, that was above the expected range of $22 to $25. network security company palo alto networks priced at $42 share, above the expected range of $38 to $40. one ipo that won't be debuting today as expected is fender musical instruments, the well-known guitar maker has pulled its offering citing market conditions and concerns about economic conditions in europe. also apple's latest ipad has finally made its debut in china today. the ipad was kept out of the chinese market while apple fought over a trademark, apple paid pro view of china $60 million. the nation's jobs picture sure to be at the center of election season debate, as november draws closer. joe watkins worked in the h.w. in 41's administration as a republican strategist on camera left and jimmy williams is a former senior adviser to senator dick durbin, and is a democratic strategist, and so many rich things, the texture -- no, just overnight, just i haven't mentioned this yet but former speaker pelosi, the minority leader. >> yes. >> was talking -- dp >> your favorite person. >> she was all over the tax issues, until someone said you got some interesting stuff going on with you and your husband. how about yours? now you saw what she said. >> the economy is what you're saying. >> out of the 35 members in congress that released tax returns that have been asked, 17, 17 members of congress, and then what we were just talking about off camera, jimmy, i said to you that the right track, wrong track thing, is the 8.2% is one thing. the unemployment, right track, wrong track, 32-62, a 30-point difference. that's problematic. >> this is the cbs/"new york times" poll? >> every day we see 32-63 but the "new york times" poll was interesting, had romney up. the fox news poll had obama up. rasmussen had romney up. gallup had it tied, but the clear politics of average the president is still up by a couple of points. >> i try to explain people who follow politics lightly or don't follow it, if john mccain, a vietnam veteran war hero who served his country valiantly a sitting senator can get 40% of the vote against barack obama in a bad year for republicans i'm pretty sure mitt romney will get at least 47%. no one thinks this is not going to be a close election. is the country uneasy, yes. is this the summertime? yes, people are trying to go on vacation, trying to do things with their kids because their kids are around, not in schools. once we get back we'll go to conventions and have debates. the debates i think, joe you may agree or disagree, the debates will be everything we need to know, whether or not mitt romney who by the way his 2012 debates in the gop prima werry much better than the ones in 2008. will obama step up to the plate and do exactly the same thing? i will be interested in seeing those debates. >> they are good debaters. majority of americans think we're headed in the wrong direction. you have 23 million americans who aren't working and no matter what disingenuous argument tries to say what do mitt romney's tax returns say, for most americans it is the economy, the same things james carville and paul begala said. >> interest rate is 57%. >> why? >> it's thin and liquid. you should buy it. >> romney should be ten points ahead based on that. >> not ahead of an incumbent president. >> an incumbent president has the advantage and president obama still is in strong position if you look at the swing states, although mitt romney has come up in new mexico, he's come up in virginia, where he's tied, come in north carolina. >> still down in ohio. >> still down in ohio but has a chance to turn that around. it will be a very close election. americans are paying attention to the economy, where are we going? we're going in the wrong direction most americans think and they think the president if you look at what the president's doing his only argument has been so far they want to deny me two terms. that's what joe biden said to the naacp they want to deny the president two terms. 23 million americans aren't working, the president has not met in the last six months with his jobs council. >> whoa, whoa, hang on. i hate to break to you the news and the american people. no one gives a crap about the jobs council. nobody does. >> shouldn't the president want to listen to a handle of business leaders -- >> you have more brains coming out of your head than most people. why would anybody pay attention to a council of any kind in washington, d.c. in. >> the president cobbled it together. >> and georgia h.w. bush did the same thing on social security and george w. bush and ronald reagan did councils. it's a ruse. councils don't matter. >> simpson-bowles? >> that might be where we agree. the jobs council is completely irrelevant. >> i hope not when you consider the economy is the issue and unemployment is at 8.2% consistently. wouldn't you try to fix it if you're the president? >> wait, is anyone at this table suggesting that barack obama is not trying to fix the economy? thank you. >> well there was a time when early on when during the health care debate where the jobs picture wasn't great and there was a time i was wondering does he not know it's in his best interests to get this jobs number in a much better position. >> 8.8 million jobs were lost in the recession, that's a fact of life, 4.4 million have been created, since the recession ended. i'm sorry, folks, if he's created or under his watch, half of the jobs have come back. >> meaningless number. debris with you. people don't feel jobs have been created, they don't feel jobs have been created. we it talk numbers and i can tell you all the numbers you want to know because i know them, they're irrelevant, because if people don't feel it, it doesn't matter. >> jimmy, do you agree with the strategy of just looking almost solely at bain only talking about bain? >> no. >> you feel you need a shower after watching the tactics in politics? >> i need to shower all the time. that's why i have an outdoor shower in my house. that's a trick question. come on. that's a trick question. you know, look, is bain the only reason that barack obama should get reelected or mitt romney shouldn't win? no. but certainly his record, if he's running he's a job creator that should be looked at. >> but is it a diversary tactic? >> i disagree. you can walk and chew gum at the same time. i get on the acela and see two trains that can go at the same time. you can talk about your opponent and what you're going to do. everyone's running around saying, my republican friends go around every day and say barack obama is not running on his record. has anyone seen his stump speeches? he talks about his economic record every single day. >> two candidates go to the naacp convention. mitt romney goes there and says here is my plan to put americans back to work, five-point plan and joe biden, because president obama didn't attend the convention, joe biden goes there and in defense of the president doesn't say here is what we're doing, he said they want to deny barack obama a second term. that's the crux of his argument and he says that to thundering applause. that's nice but that's not going to put 23 million folks who are either unemployed -- >> i don't think that was the point of joe biden's speech. the point was to encourage the black vote. >> unemployment is the highest it's ever been. >> how many unemployed? >> 23 million. >> thank you. >> the s&p has record profit margins, record cash balances and the companies that have been spending capital to build facilities and hire people have underperformed, the market's been nervous about those investments. >> yes. >> so what are we going to do to get this incongruity solves where unemployment stays high and profit margins stay high and people don't want to spend? how will that flesh out in 2013? >> david k. josen put out a piece in reuters saying we know america's companies have about $6 trillion sitting overseas in profit and not bringing it back? why, they'll get penalized if they do so. that's a lot of money. >> i don't know where the $6 trillion number comes from. >> democrats have said -- >> on the balance sheets it's $1.5 trillion. >> democrats try to do repatriation if you will. one of the things in romney's 59-point plan is the theory of going to a territorial system. >> it's 58 points. >> 58 points. >> the president said he visited 57 states. >> maybe that's it. one of the points -- i'm only 45 so i can't count that high, but what i can tell you is that one of the points in mitt romney's plan on his website is to go to a territorial tax system. that's a problem. you know why? that says to u.s. companies, please, send your money overseas and don't bring it back and if you don't think that's a massive job destructor in this country that's a major problem. to your point, to your point. i think wall street and the munis and bond guys are completely, absolutely worried. i don't know why they would be. you had sheila bair on, two-year anniversary since dodd-frank. what are they worried about? >> you've had four years of an administration with more regulation, higher taxes, punish the people that create jobs. >> higher taxes where? >> obama care is a huge tax. >> other than the tanning booths, find one tax that is different. >> not for a lack of trying, my gosh. give him a second term in. >> i want to deal with the reality. >> medical device makers have been paying a high tax. >> snooki is paying higher taxes. >> don't you want to raise taxes? doesn't the president, we hear it from him, i've heard -- >> you're asking me or barack obama? if you pay over 1 million bucks you ought to pay a surtax. >> he's saying 20250. >> i'm with chuck schumer. >> the president is the one saying over 250, so he's saying -- >> even in this, right now, with 8% unemployment, you should raise taxes on somebody as long as they make 1 million raise it on them. >> i'm sure their tax also be exactly the same for everything that's under $999,999. so if that's the case what's the hurt? where is the pain? i don't understand where the pain is. >> small business owners, won't hurt anyone? >> how many small business owners maybe over $1 million a year? >> the ones that do. there's a small percentage. >> you want the businesses to success. >> even tanning booth owners. i have a problem with this idea that taxes are higher under obama than bush. they're not. it's a simple fact they're not. >> they're not unless you look at the health care plan. they're not at this point. we've extended all the tax cuts and gone through. >> the whole case for stocks would be that you get this under way, that you get the corrage. >> his base killed him after he extended the bush tax cuts for everyone. that hurt. >> liberals were displeased, most everybody in the country was i think -- >> kicking and screaming, despite his best efforts taxes haven't been raised. >> that may be your thoughts. what makes the sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. oh, wow, that feels really good! take it up one notch. oh gosh, yes. once you experience it, there's no going back. now, save $500 on our p6 bed set. and hurry in for the final closeout of our 2011 flexfit adjustable base. only at the sleep number store, where queen welcome back. if you're not quite sure what libor means and why it matter force you are and your money, andrew verstee ne executive director of the yale law center for the study of corporate law. >> good morning. >> i had a hard time understanding who the victim is here. am i missing something? who is it that's been hurt by this libor scandal? >> depends on exactly what you think happened. if you think libor was artificially low for a period of time, then anybody who is supposed to be paid libor was a loser so that includes municipalities that had libor paying notes or instruments, it includes banks that had made loans at libor and not completely hedged them out on the other side, so they would be losers. also losers would be people who were trying to do business with either of those groups at a time that those two groups were getting burned, so maybe if you were a borrower who wanted a new, who wanted to refi their subprime loan or something, if you were trying to do that at a time when your bank was not really excited about libor that might have made credit harder to get for you but there's another story of libor disruption that isn't the story about it going down or up necessarily in one direction, it's more just people manipulating it to try to get the result they want that day, under that story it's a story just like any kind of manipulation of a financial asset where the system as a whole is the loser and volatility -- >> stop right there. i want to you walk me through this. i hope we don't get too deep into the weeds here. >> sure. >> i trader calls the libor desk, says, submit your bid at "x" or ""x" plus or minus one because he needed something, right? >> right. >> that submission goes into a pot where the top and the bottom are thrown out, and what is the ability of that one trader to influence or that submission to influence what is essentially a treem e trimmed mean? what kind of influence could it possibly have? >> people often think the trimmed mean system prevents manipulation and certainly dampens is as does the fact it goes into a pool with other banks it's averaged in. neither of the facts make it impossible for a single bank to manipulate the outcome because when you go in to the excluded mean, when you go out of the mean and into the quartile excluded by this rule, you push somebody else into the mean, so when you get excluded, some other -- >> depends on the distribution of other bids, right? >> that's right. >> if everybody is submitting a ten and you come in at 15, you're out and haven't influenced it at all if everybody's in the middle. >> five different people are collaborating. that's the question at this point. >> that's the next question, becky. >> my thought was this was not a big deal. we first talked to the cftc, they told us about the day the first day. >> we had gentzler on and couldn't understand it. >> it's olympic scoring so it's thrown out but if you have five different banks that are colluding. >> are they colluding is the question. >> it is true there are times when this excluded means system where that will prevent manipulation but a large number of cases the numbers don't work out that way and you can, by going into the excluded quartile, push someone else into the mean and by yourself change the system. that being said, with five banks, you can do it every time. that's why five is the magic number. >> right. >> with one, with two, you can do it a lot of the time. with five, you can do it any time you want. >> andrew, i just want to say my point on this, i think it was such an important rate that the fed ought to have done more about it in 2008 when it heard about it. what's your take on -- doesn't it look like consumers themselves were hurt here, but you think regulators should have done more? >> well, i think that having a financial system with a benchmark that people can depend on matters to everyone, including consumers. libor is the background assumption of our financial system. it's important for people getting a loan that they could have a benchmark that they can trust. it's important for corporations to manage interest rate risks, to have a benchmark they can trust so it matters to have a system that people trust and even if rates didn't go systematically in a place that hurt retail borrowers or investors, it still matters to the financial system. >> it could be a market rate. why did they do a submitted rate? first of all, it looked like libor was right on top of effective fed funds for a very long time and only kind of began to blow out in '08. they could use the market for this, can't they? >> chairman gentzler who you had on talked about the need for a transparent transaction based system and that's all to the good because we are comfortable with those. they pose fewer risks but actually every financial index involves some amount of subjectivity and below me on the screen are financial tickers going by with prices of many commodities. >> and baseball scores. >> and baseball scores, right. these things all involve some amount of human input into the methodology, and what's interesting is we don't worry about those, not just because they are more objective -- >> they're based on real transactions. >> that's part of it but also because we don't worry about conflicts of interesting. the interesting thing about libor the people who set libor were the primary users of libor. >> if it was based on real transactions, if you were willing to put your money where your mouth was. >> if it was based on real transactions it would be a different possibility for manipulation because you'd have to gain real transactions or the way the system scores it. it would be a different system. >> we have to leave it there but we're glad you're around to explain this stuff to us, and whoever found andrew is great. thanks for coming on. >> my pleasure. some other time. >> we're probably going to have use of your services as this scandal unfolds. becky? >> we can do that. >> thanks. coming up we'll wrap up a heavy week of earnings with a look at some of the stocks you need to watch at the open, and then we will have the latest from aurora, colorado, that tragic theater shooting. the news has changed pretty frequently on this. the numbers have moved on a minute by minute basis. at this point they're saying there are 12 people dead, that number at some point has been as high as 15, but again police are telling nbc at this point that 12 people are confirmed dead. there are 50 people who have been injured, and that shooting occurring during the showing of the latest batman movie "the dark knight rises." the president releasing a statement a short time ago saying "michelle and i are shocked and saddened by the horrific shooting in colorado. federal and local law enforcement are still responding and my administration will do everything that we can do to support the people of aurora in that extraordinary difficult time." we will continue to follow the story as the details come in and "squawk box" will return righting after this. #a#a#a#a#a#a'9#a+=#a#a#a#a#a#a +g#a stocks to watch, baker hughes earning $1 for the second quarter, well above estimates at 77 cents, saw increased drilling activity in its international works. schlumberger five cents above estimates, saw increased business in non-u.s. markets and rebound in deepwater drilling. suntrust earned 50 cents a share, six cents above estimates, higher revenue and credit line lost provisions and xerox matching wall street estimates, cut its full year estimate because of declining sales in shrinking profit margins and we also saw some news from general electric about reorganizing its, did you see this, becky, reorganizing -- >> what's that? >> -- its energy businesses into three standalone businesses. >> i did see this. >> reporting to jeff immelt, power and water, oil and gas and energy management, these results will take effect the beginning of the fourth quarter and john kernicke, who has been on the show lfr, vice chairman and ge inf infrastructure ceo will oversee the transition and the three unit also have new guys returning them and he'll leave the company and serve as an adviser to jeff immelt and vice chairman but will leave at the end of this year. when we come back we have anti-tax warrior grover norquist talking about the fiscal cliff and tax reform. and then the entrepreneur and disruptor behind uber on the success and future of the technology. "squawk" will be back. what makes the sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. oh, wow, that feels really good! take it up one notch. oh gosh, yes. once you experience it, there's no going back. now, save $500 on our p6 bed set. and hurry in for the final closeout of our 2011 flexfit adjustable base. only at the sleep number store, where queen mattresses start at just $699. waging the war on taxes. >> i want to get our corporate tax rates globally. >> he wants to pile another $5 trillion in tax cuts. >> we'll get behind the numbers with grover norquist. we'll talk to uber's ceo and get the latest scoop on what could forever change how you hail your next cab. and the impact of dodd-frank two years later, the unfinished business of regulating wall street's big banks, representatives from both sides of the aisle will be joining us, the third hour of "squawk box" begins right now. welcome back to "squawk box" on cnbc, if, in business worldwide, i'm joe kernen and becky quick and steve liesman. out late, two hours' sleep, you know, throwing them back, playing lead guitar. you're doing all right, though? >> i'm doing all right, but can i get out? i have one hour to go where you can push a button, i blow up. >> you know who might do it, grover norquist. >> i'm laying low. i have one thing for him and want to see how he answers that. >> super grover. >> super grover from sesame street. joining us is adam parker, chief equity strategist at morgan stanley. developing story out of colorado we've been talking to you about all morning a mass gunman opening fire at a midnight showing of the new batman movie in the denver suburb of aurora. at this point there were reports that 15 people are dead, now there are reports that it's 12. 50 wounded. we'll continue to monitor and bring you the latest, as for now, let's bring you up to speed on some of the day's business headlines. general electric is posting better than expected second quarter earnings, solid u.s. demand for equipment used in energy production offset the effects of a weakening european economy, revenues were just slightly below expectations, 900 million was the effect of the foreign currency. viacom and directv ended the blackout, reaching an agreement to restore viacom networks, 20 million subscribers. and marisa mayer getting $70 million pay package. that's a drop in the bucket. i don't know if you can multiply that by a billion but it's not -- the package includes salary, bonuses, restricted stock and stock options over five years. checking u.s. equity futures which have been weak most of the morning, gotten weaken down about 71 points. our next guest making waves on main street then in awashington so far his taxation protection pledge has signatures from 238 representatives and 41 senators, grover norquist, president of americans for tax reform. >> hi. >> and it's good to see you. i called you super grover, that's because of your name. i'm not making value judgments. you probably have seen there's grover and super grover when he puts on the cape. you know, the one question i might ask you, grover, is you know, even back when reagan and tip o'neill got things done and in the past where we've seen parties work together, sometimes, even doing what one party will still think is the wrong thing or an incremental step towards the wrong thing, sometimes you need to throw a bone to get the other party to throw a bone back to you and you know, make some type of compromise. in your world, i guess it seems much more difficult if you signed a pledge to never ever raise taxes in any respect. do you see where i'm going with that? >> yes, but first you have to ask yourself what problem are you trying to fix? under bush, spending increased too rapidly. under obama, reid and pelosi t increased much more dramatically, quickly and higher. we're spending too much money. now, some democrats say, well, why don't we raise taxes? well, raising taxes doesn't solve the problem of spending too much money. it enables the problem of spending too much money. so there isn't some sort of deal where raising taxes would be part of fixing the spending program problem, because spending can only be fixed by spending less, raising taxes isn't part of that, so it's not part of a compromise, and as you point out, reagan was lied to by the democrats, in 1982. he was told, mr. president, mr. reagan if you raise taxes $1, it was like $80 billion but $1, we'll give you $3 of real spending cuts. taxes were raised, spending went up, not down. there was no spending cuts. there were no spending cuts. eight years later the democrats played the same game with bush, george herbert walker bush. in 1990 they said if you give us $1 of real tax increases, we'll give you $2 of make believe spending cuts, so he was a cheaper date. he was lied to about $2 for one. reagan was lied to $3 for one. the democrats under obama come back and say how about one to one, wouldn't that be good, too? no. the problem is spending too much. the answer to that is spend less, raising taxes is what politicians do instead of reforming government, not in addition to, instead of. >> but grover, i think the plans at least if you look at bowles-simpson call for $3 of spending cuts for $1 in higher taxes. >> no. >> and just to look at the straight numbers, the revenue that we take in, instead of calling this taxes, the revenue that we take in, in the united states has dropped to about 16% of gdp from 18%, that it's been historically since world war ii. >> right. >> the idea that you need to fill that gap. spending skyrocketed and this needs to come down but the revenue gap needs to be closed by bringing in more revenue as well. >> wait, wait, wait. why are we at 16% and we were down towards 14%, 15%. why?sy economy. we haven't cut taxes since bh was in. we had the same tax code with a lousier economy. if obama had been creating jobs at the rate reagan did, there would be about 7 million more people working. every month, you can compare, in the 37th month of this recovery, how poorly obama's doing compared to the reagan recovery. we are looking at millions of people out of work because obama decided to raise taxes, spend more money, have more regulations and spit at the business community as opposed to reagan, who did the opposite. reagan worked. obama, this is the worst recovery since world war ii. that's why revenues are down. >> i've read some things about republics lasting 200 years until you get to the point where there's more on the receiving end than the producing end, and then slowly the same party gets elected again and again and again and eventually the republic -- you've seen those things on the internet. you still make the point, americans are very aspirational with respect to the tax code. >> right. >> you cite something 52% of registered voters want all tax cuts extended. why do i keep hearing polls show that 70% of americans want taxes raised on the rich? where are those polls from that i hear democrats citing all the time in. >> you can ask the question different ways. one of them is, do you think we should raise taxes on rich people? yes. what do you think the government would do with all that money? just spend it. sometimes you have to ask two questions as to what people are looking for, but there was a recent poll that walked through, people asked would you rather have all the 2001-2003 tax cuts extended or on everybody except the rich, which is about as tough as you can ask it, to try to get obama's answer, and not only was it 52% said extend them for everyone, hispanics were 70-30 -- 60-40, young people 70-30. >> that's the one question i had for you. we did a poll, joe, which i looked at the mcclochy poll which is what grover is citing. question similar, we came up with 39%, grover, and that number was constant over a course of a year. i want to ask you, which way that number trending? i tried to go back and find the prior question in mcclatchy and couldn't find it. i'm confused how you come up with 52%, we at 39, the nbc/""wall street journal"" poll was similar to ours. >> the mcclatchy just came out when i was on tv the other day. >> right. >> here is the challenge. why would you raise taxes, which would slow the economy, and wouldn't help you to reduce spending? what the republicans in congress have done is they've actually written a budget, unlike simpson-bowles which is an outline in haiku, the democrats haven't written a budget, nevermind voted for one in the senate, the republicans in the house passed the ryan plan, in legislative form, written down, it's scored by cbo, it's an adult, grownup, real budget. obama hasn't done one of those, the democrats in the senate haven't done one of those. the republicans have a plan that saves $6 trillion in real spending restraint over the next deca decade, brings spending down to 15% of gdp, as you go out to 2040, by growing the economy and not growing the government, and it does tax reform. >> let me just ask you something because we got to go. >> it's really out there. >> what? take their button off i can't hear him. grover? >> yeah, i'm here. >> i hear him. he's hearing you. >> now the button is off. all right. grover, this last question, we're at 1%, pay 39.5% of taxes, the top 5% pays 61% of the taxes, we're going to still hear about paying your fair share, i hear that every day from somebody, paying your fair share. are you worried if we're at 49% with no federal income tax and paying none, are you worried eventually it's going to be hard not to, it's going to be hard for aspiration to take over and have that 49% not always vote their wallet, vote that the money's flowing their way? sooner or later, i mean are you pessimistic about tax cutters' ability to get elected that the point? >> actually i'm optimistic. if you look at the 50 states you see similar situations, and where high income tax states, california and others, the tax burden is very high on certain people and less so on other large percentage of the population, and voters there, washington state, they put a tax up, an obama buffett tax, only on 1%, those dirty, rotten 1% people and it was voted down by the people of washington state. >> you don't need -- you got the 99%, we keep hearing that hackneyed phrase. you don't need 99%. all you need is really i think 49% would do it with half the people don't even know what day it is so you get 49, 47 and you win, right? all you need is 49%. it's looking bad for -- >> this is not eastern europe in the 1950s. this is a country that isn't interested in obama's politics of class warfare, and going after the other guy, and his effort to tear down steve jobs and say he didn't create anything because the government did it all, i mean, you know, and the steve jobs of the world, what a weird way to spit at the american business community and tell them that they don't amount to anything. >> that comment, i got five or six or eight other ones that just, and what scares me is because it's very consistent the stuff i've heard. if you've made enough money you should stop, just all that. >> that is obama's world view. it's frightening. i mean i don't think he's going to get reelected when you look at the polls now and you look at the economy and how poorly it's doing, but watch this. 56 days after that election, if obama's reelected, there's a $500 billion tax increase for sure. if romney wins, that tax increase goes away, because the republicans have committed to doing that. it's the clearest division massive tax increase with obama, no tax increase and tax reform with romney. the closer we get to election day, the clearer and starker that division is. >> as we look at spain down 247 points in the lower right. thanks, grover norquist we appreciate it. >> good to be with you. our guest host this morning is adam parker, and adam, we've been watching the stock market. we know about the fiscal cliff. we know about all the uncertainty. why has the market seemed like it's suddenly turned around recently? there's a lot of worries. what is driving things here? >> i think it's a few things. you look around the world and u.s. looks like a better place, the corporations have higher earnings quality, they have record profit margins, the cash balances are growing, so i think it'srillive trade you've seen. i think people are not attracted to the low yield, the ten years offering, buying higher quality u.s. companies that yield well so i think that strategy makes sense. i'm surprised, though, that with lower growth in the economy the last couple of months, more negative guidance this quarter than any quarter of this economic cycle and bernanke being, you know, i would say less dovish that the market isn't lower. i'm surprised about that. i would have thought we would be 5%, 10% lower on the s&p based on what happened in the last couple of months. >> you think we'll see multiple contraction? people say multiples are so low they have come up. i've heard arguments that multiple contraction could hit us. >> i think big time there will be multiple contractions. all of the stuff we've been talking about, the politics, we have huge fiscal stimulus and the debate is how and when we unwind it. we have accommodating monetary policy, we've got this cliff which that was a bit of a one-sided argument i think about how it could unfold but it's 500 basis points calendar year next year so i think it could be 100, 200 basis points head wind and the economy is growing only 150 basis points this quarter. >> if we're lucky. >> yeah, maybe. you could have real risk in the economy. the analyst estimates accelerate to 117 bucks in enkz next year from 104 this year from record levels already. i think the numbers have to come down and when they're coming down i'm not sure people are going to get more excited about buying equities. >> and we'll have more time to talk about this as the morning goes by. coming up, folks, the dodd-frank financial regulatory bill was signed into law, it's 2 years old today, not today but tomorrow, but some rules are subject to place and some are not in place. we'll talk about the impact of the controversial bill with representatives from both sides of the aisle, coming up next. my volt is the best vehicle i've ever driven. i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station. it's pretty great. i get a bunch of kids waving at me... giving me the thumbs up. it's always a gratifying experience. it makes me feel good about my car. i absolutely love my chevy volt. ♪ for couples? the sleep number bed offers couples the ability to have unique support for their individual bodies. we have a left and a right 'cause you can each control your individual side. i can adjust mine to my liking and she can do the same. oh yeah. you can have it your way and i'll have it mine. now, save $500 on our exceptional p6 bed set. and hurry in for the final closeout of our 2011 flexfit adjustable base. only at the sleep number store, where queen mattresses start at just $699. with the fidelity stock screener, you can try strategies from independent experts and see what criteria they use. such as a 5% yield on dividend-paying stocks. then you can customize the strategies and narrow down to exactly those stocks you want to follow. i'm mark allen of fidelity investments. the expert strategies feature is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. welcome back, everybody. tomorrow marks the two-year anniversary of dodd-frank being signed into law. more than 100 rules have yet to be finalized. joining us is representative shelly moore capiteau and representative carolyn maloney. thank you for joining us this morning. representative maloney, earlier this morning we had sheila bair on this morning, she thinks we're better off with dodd-frank than without it but said some rules can be onerous and maybe we need a two-tier structure to give big banks one set of rules and smaller banks a second set of rules. where do you think we stand with dodd-frank? >> well, i think that the financial crisis was not caused by overregulation. we had deregulation in huge areas of the economy that were not regulated at all so it has put new rules in place to help prevent another crisis, and to help build a solid foundation for future economic growth, since we've passed dodd-frank and financial reform, we've created 3.8 million new jobs. lending is up 15%, and the consumers are protected. just yesterday or the day before yesterday, the cfpb had a settlement with a major credit card issuer that restored losses to consumers, paid fines, we know that our banks are better capitalized now. they have more than $421 billion than they had before in their coffers. the regulators have new tools to implement and to go after threats as we're seeing with the new libor tragedy and scandal that the cftc is reacting to it. >> you could throw out a lot of different numbers but can you give a real assessment of where things stand and any potential problems you see with dodd-frank? >> i would say with dodd-frank the country is far better off. we lost $18 trillion in household wealth during the financial crisis. we lost over 8 million jobs. 6 million more people went into poverty, so the cost of not having fair and balanced regulation is extensive, and when you have the rules of the road in place, i know that after the great recession, we had 70 years of economic growth after reforms were put in place, when they were reregulated or removed as glass-steagall was, we got into another financial crisis with the new financial reforms and a solid foundation. i look forward to many, many years of economic growth and strength in the american economy and for american families. >> capitrepresentative capiteaus dodd-frank resolve some of the problems? sheila bair thought we were better off with it than without it but thought there could be simpler ways to address the problems during the financial crisis. >> i think dodd-frank has made more uncertainty in our economy than we can handle at this time. we also need to look at what my colleague says that full implementation of the rules there, 63 deadlines have been missed, there's still only half the rules that have been in effect, the promise of dodd-frank was to remove old regulation and put new regulation in but even the secretary of the treasury says that's not occurring. i'm sitting here in west virginia where community banks and smaller institutions like sheila bair was referred to are buried under regulations and what happens? it's lack of lending. it's lack of employment. it's lack of growth in the economy, and i think it's having an onerous effect on our smaller institutions most certainly, and it's creating a lot of uncertainty on the larger institutions. it has not ended too big to fail. there's a lot of agreement on that, and so i'm extremely concerned about the direction that dodd-frank has taken us and where it's going to take us in the future. >> congresswoman maloney that is one of the huge questions at this point. i've seen estimates that of those 185 rules that have been implemented, there are 400 eventually expected but of the 185 it's something like 24 million manhours per year it's taking to keep up with all of those regulations. there's also talk that in terms of what the banks are hiring, they're hiring more compliance officers than loan officers. i just wonder if there are parts of dodd-frank that you might revise if you had the chance. >> well, we certainly look at ways to improve always, and the chairlady and i have several bills in that make certain adjustments, particularly for smaller institutions, but i do disagree with her statement that too big to fail was not ended. we did end it. we put resolution authority to dismantle large institutions that are in trouble, living wills. what we had when we got into the crisis were two choices, you could either bail them out, a bad choice or let them fail, another bad choice. what we can do now is dismantle alleges the fdic did in the areas they had some control and authority. >> there is a living will for an individual institution that gets into trouble but what about other systemic situation where you see a bank being related to other banks and that eventually affecting the entire financial system? there's really not a solution for that at this point, is there? >> we recreated the fsoc, all of the major regulators required to meet four times a year. they've met 40, looking at systemic problems and taking steps to prevent it. we've created the office of financial research to also look at systemic problems and take steps to prevent it, and when you talk about the rules not being implemented, the funding for the sec and the cftc was cut dramatically. the opposition party put out 50 different bills and amendments to stop the enforcement and to stop the laws moving forward, so there have been many obstacles put in place, but i think all americans agree that a crisis is too much, 18 trillion lost in household wealth is too big a price for americans to pay. the financial reforms are going to put us on a solid road for recovery in future economic growth. >> congresswoman kapito the last quick word? >> when you talk about systemic risk, what you're going to do is have the fdic going to the treasury, going to the taxpayers to bail out these institutions. that's absolutely what will happen if god forbid you have an incidence like this. if you hear my colleague she talks about more piling on and piling on and it's creating a great weight, a ton of rocks on our financial institutions, more regulation does not mean better regulation. >> representatives, thank you for your time. "squawk box" will be right back. >> thank you. akers are just beginning to dabble with the idea of hybrid technology... it's already ingrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursui of perfection. what makes the sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. oh, wow, that feels really good! take it up one notch. oh gosh, yes. once you experience it, there's no going back. now, save $500 on our p6 bed set. and hurry in for the final closeout of our 2011 flexfit adjustable base. only at the sleep number store, where queen mattresses start at just $699. coming up, anti-austerity protests turning violent in spain earlier this morning. the major european average is in the red. michelle caruso-cabrera will bring us the latest straight ahead. t plan. one golden crown. come on frank how long have we known each other? go to e-trade. they got killer tools man. they'll help you nail a retirement plan that's fierce. two golden crowns. you realize the odds of winning are the same as being mauled by a polar bear and a regular bear in the same day? frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade. that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, they help save you up to thousands in out-of-pocket costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and you'll never need a referral to see a specialist. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. welcome back to "squawk box," in the headlines, 12 people are dead, 50 injured in a shooting in colorado during a midnight showing of the new batman movie "the dark knight rises." a suspect was arrested shortly before the attack. citigroup says it may have to take a significant non-cash charge this quarter fedependingn how a dispute with morgan stanley is resolved. the disagreement -- adam works for morgan stanley. i see you reach us nervously for your cup, i ask you all kinds of things, downgrades. andy you're a stock guy, what you're going to stick with. good idea. disagreement on the smith barney morgan stanley venture. planning to buy an additional 14. from citigroup, and kayak and palo alto network debut today, k and palo alto specializes in computer network security. >> timing is everything and i just blew that. >> it's called sleeping. >> it's the only little thing i had this morning given i've not had that much sleep. the banking sector bailout, anti-austerity protesters in the country turning violent. cnbc's chief international correspondent only international correspondent -- >> shh! a lot of dramatic events in the last 24 hours when it comes to spain, you just saw the video there. the key thing we'll focus on is the eurozone finance ministers in the last hour approving the terms which spain will receive failout money for the banks. there's a lot called the mou later on. the one key element i want to focus on right now, spain has said they are willing to shot down i.e., liquidate, get rid of inkohl vent, unsustainable banks, they have a lot of small, regional, junkie banks. up to now they've refused. the second fact that matters, european wide consequences and consequences for american investors. the head of the european central bank, mario draghi, is reported to have said in cases of bank liquidations, senior bond holders should take losses. connect the two facts, we may have arrived at a bank where senior bank debt holders could face losses. that is up until now a completely unheard of event in europe, happens almost never here in the united states, and not in many parts of the world. to remind you of how significant that is, how much of a tu turnaround this is the ecb forced debt holders to pay off and fear was contagion and as a result now, the irish are saying wait a minute, you made us take this? i want to tell you three other things that happened in just the last 20 minutes, one of the regions of spain said they have a liquidity crisis, they need help from the federal government. show you what's going on with spain's ten-year t is rocketing higher, maybe because the bank of valencia. we talked about how spain needed to help out the banks. now the spanish federal government may have to help out the regional governments as well. let's show you what's going on with the european stocks, boards lower across the board as you can see, sharp weakness there. maybe because there's concerns about what's going to happen now to various banks when you have to start questioning. we are at the moment in europe like we saw in the united states, you have to start understanding the capital structure of a bank in a way that you never had to before. >> the frightening thing there is the italian market is down even more than the spanish market, down 3.5%. >> so if you're an investor, and you're thinking now it's possible that a senior bank debtholder can start to take losses, you have to start being much more selective about which banks you're going to have your money, right? >> i thought the reason they weren't going to do that to this point, so many of the other banks with the senior bond holders, you'd put pressure on the german and french banks. >> all of that is here theoret still true. once they capitalize banks instead of governments something different changes. when a government can't pay you back to another government, you can kind of on fabfiscate, inst of ten years we'll give them 30 years, 100 years. >> if you're reporting on a quarterly baseis? >>'bank fails you have a recognizable loss you have to explain to your taxpayers. when you see the mou that comes out you'll see the phrase "burden sharing" in a big way. >> if i'm a german taxpayer wouldn't i want to capitalize my banks than trying to pay spanish governments, trying to pay the italian government? >> or do you want to bail out a bank that shouldn't exist in the if, place? why should you be recapitalizing a bank -- go ahead. >> several european finance ministers opposed this idea. >> absolutely. >> draghi said it was slapped down and went away. >> you think it's a done deal? >> you're saying it resurfaced now? >> it's a possibility. we've opened the door with this. >> i thought it was dead. >> i don't think it's dead at all, absolutely not. >> that's why you see the certain and the contagion fear. >> it was out last week, said it and the finance minister slapped it down. >> right, right, so all of the things the finance ministers said would never happen, there will never be a default in europe. >> it's going to happen, okay. >> we don't know it's going to happen but i'm saying the possibility now -- yes. no, not the draghi thing, the draghi thing will not be in the mou, absolutely not. that's a battle, burden sharing will be in the mou. could be junior, could be the cocos, the hybrids. >> i watched the volatility curve because the front end's been so low and people have been nervous about things in the future but not right now so it will be interesting to see if we get a move up in the vix, people get more worried about europe again. >> keep an eye on that. the debt levels, spanish debt ten-year, 7.18%, that's -- woo. >> very my and the third round of austerity measures in the last week, higher taxs announced, more cuts announced, that's why you see thousands protesting and the violence that occurred overnight in madrid. >> michelle, thank you very much. you'll keep us appraised of everything as it's happening. when we come back, he is the ceo of uber, the company that makes private car service just a smartphone app away. we'll be speaking with him right after this. ♪ ♪ i want to go ♪ i want to win [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky [ male announcer ] even the planet has an olympic dream. dow is proud to support that dream by helping provide greener, more sustainable solutions from the olympic village to the stadium. solutionism. the new optimism.™ ♪ this dream what makes the sleep number store different? you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. oh, wow, that feels really good! take it up one notch. oh gosh, yes. once you experience it, there's no going back. now, save $500 on our p6 bed set. and hurry in for the final closeout of our 2011 flexfit adjustable base. only at the sleep number store, where queen mattresses start at just $699. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ welcome back to "squawk box." welcome back, there's becky. the futures now were under a little bit more pressure, down 70. now they're down 80 so it went 40, 70, 80, and maybe spain playing a bit of a role in the yields there, and that's down 0.62% on the dow, 0.7 on the s&p. making headlines a masked gunman opened fire during the remere of "the dark knight rises" in a denver suburb last night. this is eyewitness cell phone video. 12 people are deaded dozens wounded. the suspect was arrested and police are checking his apartment after he told them he had explosives there. we'll continue to monitor this, becky. our disruptor series continues with another ceo who is changing everyday life with new technology. here's what uber is all about. need a car? there's an app for that. from vancouver to new york to paris, uber is your local chauffeur wherever you need it, within minutes. uber uses a city's income data and taxi and town car fees to drive its fares lower and create steeper competition. ask washington, d.c., which recently waged a price war. >> that's going to be helpful. >> backed by the likes of amazon's jeff besos and goldman sachs, uber is growing an average 26% each month, urining a profit in most of its 13 cities where it competes for riders, not drivers. it's a boone to small business like limo companies that lease cars to the service as it seeks partnerships, just not an ipo for now. >> that was kayla tausche reporting. joining us is travis kalanick. >> good morning, it's good to be. >> adam parker is a huge uber fan and andrew ross sorkin showed me the application, wait times are incredibly short, a cab in two to five minutes or a car service to pick you up. what made you come one this idea originally? >> i live in san francisco, and it's really hard to get a ride, so my co-founder and i just wanted to push a button and get a ride and wanted it to be a classy ride. >> from what i've heard when you say push a button it really means you push a button, it sends the car service, everything including your credit card information, so you don't even have to bother with any of that, you don't have to tell them where they're going, they show up immediately. how did you actually put all that information together, though? is this an easy task or is this something that took quite a bit of work? fr >> there's a decent amount of work and in every city there is an operational component in that city. we work with limo companies who then have drivers, sometimes those limo companies have one or two drivers but we give them iphones, they're running the driver app and of course consumers are either using their iphone, android or blackberry device and they can connect, they connect to the service by again just pushing that button. we have credit card on file so the door's open for them, they get in the car, they can see the car coming to them on the map, and they get on their way and when they're at their destination, they walk out, no vouchers, no tip, it's all included, no cash changing hands so our motto is everyone's private driver and we try to deliver on that experience. >> i would guess one of the places you could run into problems is with pushback from the cab companies who probably think this is cutting into their live lie hool ll lly livelyhood. that was a problem in washington, d.c., and they were trying to put up stiff penalties for your company until your users flooded them with calls and letters. i guess that speaks to exactly how much people actually really like this application. >> well, look, in every other industry out there, competition is a good thing, and in our world, look, we're providing convenient classy ride and i think what d.c., what some of the folks in d.c. were trying to do on the government side was they were trying to say that uber can offer its classy service but it can't offer it at the best price, and that kind of protectionism just stifles innovation. >> travis, how do you know what you're paying? >> so we have rates on the site that basically say what the sort of up front cost is, what we call the base fare and what the calculations are for time and distance. >> right. >> you also can reach out to any number of our customer support folks which are very proactive on twitter, on e-mail, et cetera, and ask them for fair estimates. ultimately we're putting fair estimates in the app just to make it easy for consumers. >> i'm not going to get hosed i guess when a guy pulls up and says, take me to the station, it's 40 bucks. >> there's no negotiation. what happens is you just get in the car, you get to your destination. you get an e-mail receipt that shows the exact route that was taken by the car, as well as how much time and how much distance. if for any reason you feel like the driver was taking you for a loop or something like that, you can reach out to us and we handle that pretty immediately. >> how about security, travis? how do we know there's some authorized driver and not some crazy guy? >> the first thing is that before they're able to connect to our system, we make sure that they're licensed, they're insured, that they follow all the regulatory regimes that might exist in their city or state. we do a professional assessment, also make sure of the city. every ride that's taken the passenger rates the dryer and those ratings become a litmus test of how well the service is being delivered. >> taking you for a loop, is that term, is that what that's from? think about it, though. if you get into a place and someone takes you for a big loop around the city they also say taken for a ride. >> aim thing, here's the golden gate bridge. >> a ride would be '30s gangster talk, take you for a ride, knock you off. >> it is amazing. >> this is not your first rodeo either, travis. before uber you founded red swoosh, which cold to akamai, and you also had a company named scour, it was a p to p search engine. >> that's right. >> at this point you're also an angel investor, putting a lot of money into a lot of things. what else is up and coming do you see in silicon valley? >> i did a bunch of angel investing between selling my last company and starting uber. when i'm all in, i'm all in. i'm not doing a lot of angel investing. in fact i'm doing none. the minute we started doing uber, i basically stopped angel investing. there's a lot of great stuff out there but i just get all consumed. >> how many cities are you in? >> we're in 13, and dozens more next year so it's expanding pretty rapidly, and that's what happens, we were just in san francisco for a year and that obviously went well. we went to new york, and that started taking off, and we've done 11 cities since then and every city we've done after -- >> this is huge. what did you just do to the value of new york city? >> new york city hasn't changed, hasn't substantially changed the number of medallions since the mid to late '40s, talking about the 1940s, so the sort of constraint on supply is so great it's not clear we're affecting the number of passengers they can get right now because there are so many folks that are underserved. >> wow so it's in london. >> we launched in london three weeks ago. >> i can't believe it's going to work in all of the european cities, it's just too screwed up over there. >> this is what people told me, i had a board member tell me, they said if you're in paris you got to be careful because it's full of parisians. >> for the record the guest told that joke, we did not. >> paris in terms of transportation is san francisco's sister city. it's very hard to get a ride in paris so we wanted to go there. we went there and the numbers are looking phenomenal. >> apparently i'm being told that you're in the early stages of talking to auto companies about partnerships. what kind of partnerships? >> when you're growing as fast as we are, you're talking about putting thousands of cars, really tens of thousands of cars on the road in a short period of time and we need to make sure our limo partners and essentially their drivers are able to put cars on the road, invest in cars in a streamlined fashion because if they don't our demand keeps going up but outstrips supply. you can't get a ride when you want it, etas, pickup times basically start going up because there's not enough cars out there. so we need to constantly make sure to streamline our supply chain which is essentially cars on the road otherwise the service doesn't work. >> mexico city, travis, no way. >> there's 30 million people in mexico city. >> so yes you'll try it? >> absolutely. i would say we're going to be in mexico city in 2013 for sure. >> wow! travis, the next time you're in new york, will you come visit us on set? >> absolutely. >> we'll send a car. >> transportation's on me, i got it covered. >> probably be a half hour late. >> travis, thank you very much for joining us. >> we're interested in this story on set. >> for a bunch of ludites we're interested in that. >> a little competition good for cnbc? >> you can have somebody else order for you and it goes to their credit card. >> good idea, adam. thanks to travis kalanick. don't miss "squawk box" on monday, our disruptor series continues with bruce gibney with peter teale and sean parker. >> he does spotify. >> i have one kid into that. >> coming up, stocks on the move and heading to the opening bell and analysis by our guest host adam parker. 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