Transcripts For CNBC Squawk On The Street 20120501

this 1st of may. bank of america reportedly cutting 2,000 elite-high paying jobs. fast enough to keep investors in the stock. >> new york city pensions taking a stand against walmart. they're voting nearly 5 million shares against five directors including the chairman and the ceo. >> groupon rose up. two new accounting professionals. is this with the ceo meant when he said the company had to grow up as he took those swigs from the beer bottle. >> and rupe rexed t murdoch called "not fit" to run his company. but first up, bank of america reportedly raising investment banking, commercial banking and nonu.s.wet wealth management units. of course, they've already announced some 30,000 layoffs, david, and the journal headline, the top of the front page, is that the moneymakers are being let go. i wonder why? >> money making is all about return on capital. and that's a key here. investment banking is under pressure. there's no doubt about it. we've talked a lot about compensati compensation, when it comes particularly to income when it's been such a leader for so many years and has suffered greatly coming out of it because of all of the capital that needs to be held against that business and others. that, therefore, is preventing these banks from paying these big numbers. yeah, interesting move on bank of america's part as brian continues to try to grapple with costs that are simply still too high. >> they're trying to maintain that department. it is a money-making one. but there is a big challenge here, especially as there's a great run overall for 2012. but in the past month, one of the worst performing components. and the question is what are the catalysts as well as the financials higher, financials overall, a lagging performing sector. financials and tech. and in the month of april, down 2.5% for financials. 1.9 for tech. they are getting caught up in the news flow and the emotional flow of people moving to more defensive names as we work our way into what can be a volatile month. >> no doubt. and we've come out of earnings for all of these stocks. none of them have done particularly well. i've more or less been there since earnings. even though the earning seasons, you have to call it a mix to decent picture. none the less, it's never a great deal of investor enthusiasm. they got crushed in that first quarter as perhaps some of the results of some redemptions in various funds. it will be interesting to see how that stock performs. >> let's not go on and talk about another lagging dow component. that scandal is hitting home. a group of new york city pension funds will vote their shares against five walmart directors. lou says the bribery allegations are damaging. report of a cover up who has worse consequences. he has said in a statement they have made everetts about how walmart conducts its business here in the u.s. and abroad. and, of course, the interesting backdrop is within the past 24 hours, john lou has all but said he will run for mayor in 2013, as well. >> just to break in, chesapeake, out on the wires with the press release. they were going to end early the participation program. they were going to name an independence, nonexecutive chairman and end 18 months early in june, 2014. this program, no compensation for early termination. in other words u he's not going to get anything to sweeten this picture. we talked about how they weren't aware of every specific transaction. >> and, again, to just back up for people, we're talking about he had the right to coinvest in the company, as well. in any event, that's a good thing, right? to the extent of what they find productive. but, as a result of capital calls that you need to put money in to get the fluid out, so to speak, he had to actually go to banks, get a lot of loans against his ownership positions and some of that may not have been fully disclosed. at first the board said we were fully aware of it. and then the board admitted that it was generally aware of this. that was just a week ago when there did seem to be some, perhaps a split of type between the board and ceo, a charismatic gentleman who has always been a huge risk taker. >> he will continue as ceo. apparently, they say he supports the naming of this nonexecutive chairman. and, of course, it comes on the heels of this amended 10 k of which they said they were meeting with representatives of the internal revenue service about this program. >> it also comes on the heels of bemo saying that the worst sentiment should be baked in. here we are almost 5% in the premarket section. we could look back and say that was a very nice call which moved the shares in the opposite direction from where they've been. and here we are on the upswing. >> we had carl on late yesterday and he had once been a fairly significant holder. but one thing that did come out of the interview, he did think while he's not buying the shares, he did say he thought they were cheap. he did say that yesterday. >> we'll keep an eye on chk. a big story there. some big shake ups in the company groupon. it says starbucks ceo howard schultz are leaving the board as groupon tries to address its accounting problems. they are getting some new incoming board member, namely from american express, as the company had said earlier, it needs to grow up. this may be how they're trying to do that. >> we knew there were efforts under foot to replace two new board members. what was peculiar is if he's remaining on the board until the june meeting, until the elections, but schultz is quitting immediately. >> right. he wants out of there. >> and that, in and of itself, seems a little bit troubling. he couldn't even wait, another month, month and a half, two months, you know, for the election to happen. >> he's got a good reputation. >> but overall, the market probably going to respond positively, one would imagine. you do have two joining the board with financial expertise. we know they've had their share of challenges when it comes to that. and we'll see whether it stabilizes the stock, if not the situation where we always like to say not a lot of adult supervision. these guys are more financially savvy. >> all right. >> meantime, let's turn to news corp. >> oh, yeah. murduch is unfit to run a major company. lawmakers called to take responsibility of a culture of ryeness. kayla is back with all of the headquarters. >> david, that word willful is important because of course where charges are concerned, you're looking for intent. and if the committee does find that they were willfully blind to this and that they misled the committee, they can be held in contempt of court or far worse charges. but the full statement behind that is where the committee says he did not take willful blindness. this culture, we consider it permeated from the top throughout the organization and speaks volumes from the lack of effective governing and the subsidiary news international. but probably the most scathing comment was where they said rupert was not a fit person to exercise the stewardship of a major international company. now, including that statement, the statement of fitness, four conservatives voted against it because of that word fit and its political connotations and what that might mean for the issue of the office of communications chrks is currently investigating whether news corp. is a fit and proper owner of that 39% stake. but what the politicians were unanimous on was three misled in their committee. those are legal manager who was the executive chairman of news international most recently, a key murdoch lieutenant and colin myler. now, in january, as of january 2012, is editor of the new york daily news. but guys, this report is not the end for this committee. the conclusion called for the release of a legal document. chronically, into the practice of phone hacking and the committee believes that that report could show that executives were aware of all of the goings on if that report, which is very controversial, we should add, if that report is controversial and does find that executives were aware, even though they've taken the line that they had no knowledge that this was more than one road reporter, that could be extremely sering for the company. guys? >> all right, thanks very much, kayla. a lot of investors, strangely enough, when you get these negative headlines, in some ways, embrace them. they feel that it enhances the willingnessness of management to buy back significant amounts of stock. this happened also does, any opportunity the company might have had to buy the reminder that they don't already own. and so then the question becomes would they actually ever consider selling their 30 or so percent that they own currently of bskyb. and, again, would they move ahead even more? a very significant buy back share under way. but it's just a funny thing. bad headlines, not necessarily trading into bad things. >> not to mention that a lot of analysts just don't see any potential penalty as being material to cash flow. they're more worried about whether the simpsons is cancelled and you can use that money for something else. >> people talk about a lot of hidden value. there's so much money there on the table for a program like the simp somes, which hopefully isn't going to be cancelled any time soon. >> of course, you can see futures are mildly positive today as the dow just extended its monthly winning street to 7 in april. their first monthly drop of the year. the first drop since november. brian is chief investment strategist having just moved over to bmo, congratulations. it looks like your debut here. >> that's right. thank you for having us. thank you. a very good chance stocks will struggle to exceed their highest of the year. you think we're going to run into some tough areas? >> yes, one of the things was emotion and reaction, right? and for all intense and purposes, market participants really haven't had to deal with a lot of bad news like we've had to deal with for the majority of 20 2009, 2010, 2011. now we have employment slowing, we don't know what's going on in the middle east, we have prolonged periods of hundred dollar oil. so, now, after a double digit move in stocks, following, by the way, most institutional portfolio managers under performed in 2011, so we think the highs are in place. and then a rally back at the end of the year. >> so what does the portfolio look like at this point if there's a willingness to both games, is it a high percentage in cash? >> we would say this. timing the market is exceedingly difficult. we want to invest for the long time. when we look at sectors and industrie industries, we want to be invested for 18 months. we want to focus more on themes. two themes we would be overweighting would be quality growth and dividend growth. great balance sheets. on the dividend growth side. we want to buy those company that is have cash flow yields above the dividend yields. not just simply high yield. >> you know, when you look around, brian, and you look at the ten-year and you look at what's available and the fact that hedge funds have underperformed, it may end up they were correct in doing so. isn't it that there's no other asset class? >> we've been making that point that the next market will be driven. we've been saying for years now, what's the deal. >> the numbers are still stunning. with. >> we talk about this in our report. we could be seeing a bond fun bubble. but historically, it ushers in multiple decades of stocks out performing bonds. we think it's going to be more of a 2013 issue. >> a quick programming note before we go on. we will have the new york city comptroller on at 11:00 a.m. eastern today on the news that pension funds at 11:00 a.m. eastern time. coming up at 11:00 a.m. today, one of the best performing ipos. the ce joins us as well. one more look at futures and a lot more "squawk on the street" from post nine in just a moment. choose control. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. welcome back to "squawk on the street." in the press release just released, they say that their largest shareholder objected to the well participation program that has been the sebolith of so much controversy and pushed for the separation of the chairman and ceo rolls. here's mason hawkens saying we're pleaseneded and believe it has made the right decision seeking an independent chairman. obviously, the market responding very, very well to this news so far in premarket trading, the stock is up about 7%. so it would seem that people are looking for some sort of clarity in the sitcaution, some sort of action by the board, going into earnings today which are after the bell. there may be a bit of a lift and we'll see what the company has to say. >> coming up next, pfeizer releases its drug without lipitor. lots more before we head to break. much more squawk on the street from the nyse straight ahead. call it facebook here, mark zuckerburg is out to prove that his company is more than just a social network. it's also a place to find an organ donor. >> i can add that i became an organ donor. >> so that brings us to this morning's squawk on the street. now that facebook is saving lives, which venture should it take on next. we've got your responses throughout the morning here. >> the opening bell, just a few minutes away. a big day of trading starts right after this break. we'll be right back. , scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it! even if you miss a day of watering. if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this. like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. all right, you're watching cnbc "squawk on the street." the opening bell set to ring in in a little more than three minutes time. a lot going on, though. the first day of may will come out at 10:00. construction spending coming out, as well. a busy day for earnings. a quarter of the s&p reporting this week. of course, this is a very important quarter for pfizer. there was expected to be a drop in sales because of that. global sales of lipitor down. more importantly, it was a guidance taking the stock downright now. revenues are now $58-60 billion for the year. so we are looking at a lower open. >> revenue down 7%. and they did miss on the top line. but lipitor is a well-telegraph story. only 10 milligrams, though. so i'm very proud of that. haven't they put it in the water yet? >> they should. >> we should mention chesapeake is out a point or two. it does appear to have reached assetlement. by the way, he will no longer be chairman. and you heard kate kelly, their biggest shareholder, 13% holder really seems to have spoken up and said you guys have got to do something about this. as somebody has said on twitter, the board has gotten real. pf chang is being bought. >> yes, 30% premium. it's a private equity deal. despite incredibly low financing and willingness to finance deals, certainly of this side, i'm surprised we haven't seen more activity like this. >> they were trying to install new lunch menus and wundt happening quite fast enough. >> right. a true leverage buy out where a current company will stay in. >> of course, they do get a better tax rate because they get to treat it as a capital gain from here for the ceo. it's another reason why p-e can compete very effectively. >>. >> net income is up by a third. but they don't boost guidance, which a lot of industrials have done so far this year. and they say the reason for weakness in the corner, exactly what caterpillar said last week. so the second big industrial reason to blame. weakness on a part of the world we thought was going down. >> there's the opening bell and a look at the s&p 500 at the cnbc realtime exchange. >> i just saw captain american and iron man walking by. but no scarlet johanson. couldn't make it here today. and she is a new yorker? one would wonder why she just can't walk over. >> over at the nasdaq, it's fox fighting this saturday, as well. >> yeah. you mentioned p.f chang. that was a big miss for the company. they have more stores than in the united states. we're seeing that stock trade down by about 10%. 10% at this hour. so same store sales are up 2%. internationally, they were up 4.7%. that means avon products, it's going to be a crucible for the new ceo as she comes in from johnson and johnson. obviously with a lot of distractions, corporate distractions, there were d'arterly results. >> no, they were not good. as you say, the stock down about 4%. let's not forget that cody is still there. which, by the way, when you're talking about a $20.74 stock looks better than it did. they obviously, if they really want to get real, will have to raise. they have an unwillingness to go haase still. largely, i'm told now because they're equity investors. the people right from the beginning have said no hostile deal. but interesting to note that cody is still there. we'll see if he has another move left in them. cody is still luhr, some records for some individual brands. the best april they've had in five years. we're going to be getting some more numbers, as well. phil? >>. >> i've received numbers for ford at a decline of 5%. it's a smudge better than the estimate. we're running into a month here. but some of the automakers like chrysler will be way up. so, again, ford, a decline of 5%. and you mentioned general motors? we're going to get the numbers and talking with don johnson and vpf sales coming up in a half hour. >> what's your take on these numbers? is this a low base? these guys are now moving into the sweet spot of the market when people are looking at vehicles that are bet, redesigns and more fuel efficient. they're saying let me take a look at a chryshler or a dodge. that's why you're up 28% when everyone else is flat or slightly negative. don't discount the fact that these are better quality vehicl vehicles. >> want to go out to the stock exchange. >> we can never forget about, even when the market is closed. >> we've got a problem. it's may day. may day. everything is closed. it's hard to talk about europe when nothing is open. i think ireland is open, as well. everybody is still talking about growth. there's two elections on sunday, the greek and the french elections. the problem is real simple. everybody's gotten this idea. that's the big bank that does infrastructure projects in europe along with private investors, too. and he's behind the idea. the germans are behind the idea and the french, the socialist president behind the idea. let's get infrastructure. here's the problem. remember this whole debate we had? it eegs a great idea, but it doesn't do anything to stimulate the economy for a long time. and this's going to be the problem they're going to run into. that's why everybody is more in favor of the national level of simply loosening all of these tough budgetary standards that are going on. >> everybody except the germans. that's why it's going to be interesting over atrekkeds to loosen the budgetary austerity that everybody's been working on. allow them to keep those workers in spain and italy. figure out a way to do those projects and don't fire those workers. china, by the way, they're closed, too. so nothing is open. they've got a great pmi number. 53.1 above showing expansion. so soft landing. we had some earnings this morning. we did have some misses, as well. look at somebody like emerson. big, gigantic electrical products company. they had a miss. they cited weakness in europe. they also said china's comeback growth has been a little slower than expected. we've got a lot of super heroes around. >> it's built in. building products company. here's a little bit of good news. think sand, gravel, all over the united states. they're probably the biggest company. >> prices are up. volumes are up. the one thing i do want to know, arch cole. you know about the problems with cole. you've been talking about it. jimmy has been talking about it a lot. utility companies are switching to natural gas. they cut their dividend from 11 cent to 3 cent. that's bad. did you see natural gas prices? it's up like 15% in the last two weeks. a lot of people have been waiting for a bottom. i don't know if that's it. but it's a little bit surprising to see it up. morgan stanley had a note out on this as well. talking about super heroes, this is part of the great things. the new york stock exchange. the kids and their superheroes. >> all right, guyings, send it back to you. >> a check on one moving over to nasdaq. >> yeah, let's take a look at the nasdaq. trading flat at the moment ricke rickets. >> there are a couple of individual stock movers. take a look at the first quarter profit this morning that fell short of expectations. basically a mix of higher coasts. another mover is dense play. it's down around 4% last time i checked on earnings. strength in the u.s., offset resales in europe. lastly, a small cap, plx trading higher on being acquired by integrated device technology. that's a look at some of the movers today. >> all right, thank you. hey, rick. >> hi. you know, as i look at the board, you're not seeing a huge, wild range in treasuries of late. once again, home base seems to be not only under 2%, but around the 190 yield. these are the yields on the closing basis since basically early february. if you look at how january of this year looked, rates were lower than the 190s by a dozen basis points. but what's really important, you look at boons hovering in the 160s. a handful of basis from historic yield closes. it's a big deal in the context of europe. and we have more today in the national survey on the pmi side. we're going to see how much it resembles chicago. >> all right, rick, thank you. hi, sharon. >> hi, melissa. more relief ahead at the gas pump. this deal that delta has signed with phillips, it's phillips, 66 pipeline that has definitely had an impact. we're seeing a significant decline. that is the price between gasoline and crude that refinery margin. we're looking at a 12% slide in the last month. $3.81 is what we are paying nationally. and that gasoline crack down is 31%. it was trading as high as 30 bucks, now under 25. >> time now for the favor report and that would be me because my name is fader. we already talked about the deal, you know, that we mentioned earlier. let's talk about sears because we haven't at all. we also got the chairman's letter from chairman eddie lampart this morning. now, margins at sears a bit better when you go back to com store sales which is really where it all comes down to. they want to know more. as for what's going on in sears in terms of funding, remember, it wasn't that long ago that there were a lot of concerns about this company's ability to really continue to be in the market, if you will, and get factoring and everything else. we can go back to k-mart in that first holiday season in '03. but anyone years later, a convenient excuse. in my opinion, as soon as holdings has a profits problem, not a liquidity or an asset probable. remember, there's not a huge flow here. it became extraordinarily expensive to borrow those shares, so much that it wasn't a short position. lambe rexed t did a lot of interesting things in terms of owning more of sears. it's been a big bump up. >> let's go back to something new. that is not just the management, but also separating out certain parts of the company and at least saying he's going to consider more beyond that. it's proven very difficult and therefore we intend to separate the management of several of our businesses that, of course, sears formats with its own opportunities. it's part of a large company undergoing significant change. for now, right now, in fact, they are actually going to be separating out their out let stores and sears hometown. he says they'll evaluate other opportunities into separately owned companies. >> would you argue that if they're looking at a minus 13 same-store figure, that's not too bad? >> given the trouble, it's not too bad. but we've been saying for a long time, that's got to actually stop going down. and there are thoses who will point to a different margin. he talks about inventories and margins. we've got to be more profitable. >> well, we've got to take a break. now that facebook is doing organ donation, what should it take on next? don't miss the new york city comptroller john lou. he'll be here at squawk on the street 11:00 a.m. eastern time. he'll be talking about the new york city pension funds. as we head to break, take a look at this morning's early movers giving back some of its gains but still up a whopping 7%. stay tuned. ♪ there's a place i dream about ♪ ♪ where the sun never goes out ♪ ♪ and the sky is deep and blue ♪ ♪ won't you take me american flight 280 to miami is now ready for boarding. ♪ there with you fly without putting your life on pause. be yourself. nonstop. amer airlines. a living breathing intelligence bringing people together to bring new ideas to life. look. it's so simple. [ male announcer ] in here, the right minds from inside and outside the company come together to work on an idea. adding to it from the road, improving it in the cloud all in real time. good idea. ♪ it's the at&t network -- providing new ways to work together, so business works better. ♪ with rent2buy from hertz car sales, you skip the lots... and pushy sales people... it's a fast, easy way to buy a used car. three days to try. zero pressure to buy. it's just another way you'll be traveling at the speed of hertz. protesters taking to the streets all over europe to mark may day. >> reporter: >> they certainly have. after the traditional may day protest. now, there are probably 15-20,000 people in the protest. that's the early indications which may be disappointing for some. the situation is being faced by spain is really very difficult. there has been a great deal of public upset the way it's been handled. but it doesn't really seem to have met with huge numbers of people on the streets today. let me just stretch out the context of these tests. unbloimt in spain has almost reached 25%. over half the pop ewe lesion are out of work. we've seen retail sales falling for the past 21 straight months as well. and the property market has seen a great correction. we had a decade long property boom but nowhere know near. many investors are still concerned that the property market has another leg to go lower. if that happens, it could have a big impact on the spanish banks. they have a huge global presence, as well. and then, of course, into latin america and around the rest of the world, too. these economies are very intellect and there's a great deal of concern about what happens to the banks. we have that downgrade of the spanish economy. they've taken negative action, as well, in the past couple of days. so the situation does appear to be getting worse. at the same time, these all-important deals have been raising. it's very expensive for spain to borrow. >> thank you very much, becky. let's get to squawk on the street. more than just a gigantic social network for poking and posting pictures. it can also be a place to find an organ donor. i became an organ donor and you can say who you want to share it with. >> so, this morning, now that you're saying that facebook is into organ donation and saving lyes, what should they offer next? andrew writes online dating. facebook should take on asteroid mining. okay. been done. and david writes how about privacy? ouch. very pointed. when we come back this morning, it was one of the worst-performing sectors of the year. now they've made a big comeback. i'll talk about which tell come stocks might be continuing that trend. >> we're putting this show to fed. we'll have two current federal reserves joining us. what are their thoughts on race, the possibility of qe 3 and much more. that's later on squawk on the street. tdd# 1-800-345-2550 i'm constantly working my screens. tdd# 1-800-345-2550 checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade. tdd# 1-800-345-2550 and i do it all with charles schwab, tdd# 1-800-345-2550 because their streetsmart edge platform tdd# 1-800-345-2550 helps me trade quickly, intuitively. tdd# 1-800-345-2550 staying on top of the market is key! tdd# 1-800-345-2550 and the momentum tool, tdd# 1-800-345-2550 it lets me do it at a glance, tdd# 1-800-345-2550 so when things shift, i'm ready. tdd# 1-800-345-2550 then to track the stocks i have my eye on, tdd# 1-800-345-2550 i turn to schwab's high/low ticker. tdd# 1-800-345-2550 so i can spot a potential breakout tdd# 1-800-345-2550 before it breaks out. tdd# 1-800-345-2550 and get this...i can even trade, tdd# 1-800-345-2550 change my orders or check out my positions tdd# 1-800-345-2550 right on my chart. tdd# 1-800-345-2550 my system works for me. tdd# 1-800-345-2550 does yours work for you? 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[ scott ] seed your lawn. seed it! welcome back to "squawk on the street." lots of data. up a paltry .1%. but good news on an apori, ism manufacturing index. it was expected to be 53. it's 54.8. that's the best read since june of 2011. and, indeed, it seems as though somebody had a weak number early. one of the big news events of the day, australia lower grades and that put its interest rates on the government side at historic low yields. back to you. good news on the ism. a judge says a simple lawsuit can proceed. scott? >> dominique strauss khan had tried to claim diplomatic immunity by the maid who says he assaulted her just about one year ago. but the judge says no, that's a hail mary play. he says it was -- they are extremely pleased with the decision and now we look forward to holding him accountable. again, dsk was cleared of criminal charnleys last year when his credibility came into investigation. he also remains under charges for a prostitution investigation back in france. >> scott, thanks a lot. a special double header on the fed and the economy. steve's live interview with the fed president dennis lockhart. >> so far this year, shares are still double their ipo price. we'll talk to the company's ceo who also happens to be a former apple executive. >> we'll intensify across the nation today. meantime, b.p. expecting a better than expected. the oil giants say cost from the oil spill are weighing on production. take a look at shares. down about 2.5% to 42.43. meantime, pf chang is going private. that is a 30% premium over pf chang's closing price. the stock is soaring on that news up by almost 30%. >> meanwhile, general motors april sales, autosales just hitting the tape. they're down 8.2%. that looks slightly worse than estimates. >> good morning, i'm joined by don johnson. i'm looking at these numbers. i know you guys are going to point out there's fewer selling days. but it looks like one of those months, it was tough for the consumer to match the level of exuberance we've seen over the last couple of months, correct? >> yeah, i mean, the trend for the industry overall is going to be fairly similar to march. a little bit weaker than what we saw in february. but still pretty good when we look at our outlook for all of 2012, fairly consistent. >> in fact, you're raising your guidance for full-year industry sale from 14 to 14.5 million. that's generally in line with where everybody else is at. there are a few who say we could come close to 15 million. is that too exuberant? >> we think it is. we were in the 13 to 13.5 million range. i think it accurately reflects the strengths from the first quarter. but there are a lot of things that happened in the first quarter. the japanese companies made good on their commitments. we think that that's going to slow down a little bit. but we are still optimistic about the rest of the year. >> don, give me a pulse if you will, on the consumer that's out there right now. i know that you guys are generally pleased. but is the consumer going into the showroom starting to expect a slight up tick? or is it still a case of pent-up demand so people are not looking for that incentive yet? >> i think the major force right now, behind consumers, is the pent-up demand and a slow but steadily growing level of confident. i think the market is still seeing some pricing power. aged it's producing, as i said before, a very steady, manageable growth. what's the sense of what you're seeing in that market right now? >> we're continuing to see good strength in the small purchasers. truck sales were up 9%. small commercial sales were up 15, almost 16%. we're continuing to see more of that come out again. not 25, 50% increases, but nice, steady increases. oil and gas amongst small contractors and amongst agriculture. >> don johnson joining us from detroit. there you have it. gm is down 8.2%. a fewer selling days means we're going to see some tough comparisons. >> thanks a lot. shares of chesapeake up sharply on that news up 6.5% and cay kelly back at h.q. >> so chesapeake really made a landmark announcement. they made some pressure to eliminate chairman and ceo roles. that's something that they have successfully beaten back for years. but, at this point, they're capitulating to pressure, this founder well participation program in which aubrey was an investor which was approved by the board and disclosed to the sec many, many years ago but came to light recently and as did fact that aubrey did not fully disclose to the board had created something of a shareholder outcry. it's clear that their largest shareholder objected to the well participation program as it well under it and felt that drastic action was needed. so that will be ended immediately. and the chairman will be separated. i'm told that the board is looking aggressively for a replacement for aubrey. they want somebody who has no previous connection to the company, which is probably wise so that gives them a little more than a month to work with, which is none the less quick than a process like this. so far, the stock sup a little more than 6%, the last i checked. >> where duping it means for this tidbit and their amended 10 k with the fact that they were meeting with representative pheres the irs? >> the sec has launched an informal inquiry into the well participation program. it's unclear what the details are. what their scope of focus is. as far as i know, the headlines and the scrutiny, the irs investigation, as you mentioned, you know, just recently came to light. it's not clear if this has been a long-running thing. it does seem like a lot of folks have jumped on this for optical reasons. he's gotten generous compensation packages in the past. he's also had some public mistakes, such as a personal margin call in 2008 and forced down chesapeake prizes at the time. arguably, they're very well positioned. >> kate, do we know the degree to which he might be further compensated as a result of these changes? is there a negotiation still going on about that? >> that i don't know, simon. i would imagine if he were to leave, he would receive a severance package. i'm not aware of that. now, what compensation he might be due as he exits the well par tis program, not clear. i'll continue to look into those details. it's an investment he made. at 2 gas prices, it's not lucrative anyway. >> i mean, you seem to think that this has more legs. but my sense is this puts an ends to it. >> i'm sort of baffled. you and i talk about chesapeake a lot. i know that for years, they've been the subject of skrooutny and criticism. partly because of their hedging program where they've used long-dated options of gas drilling. so a lot of this stuff has been around for a long time, including the well participation program. yet suddenly, you know, news comes out about the well participation program. there's this massive reaction on the part of shareholders. the board takes this action. the board distances itself. so to me, there's more that we don't know. to me, the most interesting events are a, the board were not fully vindicated which is clearly a concern. and, b, the fact that their largest shareholder was demanding the changes today. that tells me there's a lot happening under the hood. >> in the meantime, groupon's board has overcome a major shake up. board member and venture capitalist are both stepping down. stepping in, former american express cfo daniel henry and the retiring vice chairman of robert bass joining us now. jordan, thank you for sparing the time to be here with us today. i've got the statement from groupon here. he says no more is it to focus on these other time commitments. how big of a deal is it, do you think? >> well, board members change sometimes. but very rarely do they change so soon after a company goes public. the acoapting issues that have surfaced at group on are quite serious because they undermine the confidence in investors. new board members with the accounting and finance background as the two that have been nominated to step in here, they're likely to make some very big change ins how the company runs and how it communicates with wall street i think this is a good move, but probably only moved one out of several moves to restore comforts. >> what other moves would you anticipate? >> one would think they have to add additional transparency when they speak with investors. groupon used to give out a lot more information. they've withdrawn that important information. and it really has undermined the confidence of investors. second, clearly, these accounting reserves, they need to be broader and more conservative, i think. that's what we saw with the revision of 14 numbers that hit at the end of march. they can't do that again. honestly, that shouldn't have plaid out already. >> given the high valuation that it was able to enjoy, it gave them no room for error that would normally be fine with private companies that are learning how to get their legs. at some level, they're a victim of their own early success because it got too big, too fast. >> what would make you change your mind on a long-term basis? how easy would it be to push them out if that were to happen? >> honestly, i think mason is more on changing congress or couponing or whatever he's trying to revolution nuys. to me, they need to tighten up on the accounting side. i think they're in the process of doing that. there also is a big difference between how consumers and merchants view groupon, which is, at some level, a high percentage of a negative experience and how negative they say it is with high merchant satisfaction. >> jordan, we've got to dash. but just before we leave you, it's a cell recommendation. where do you think the stock should trade to? it's at 10.85. >> i can't see why it would go ahead of the june 2nd lock-up inspiration. so i think the stock at one level is a defenseless stock which can really only go down. the journey from hype to disillusionment is a really painful one. >> jordan, thank you for your time. >> all right. coming up next. the company behind the strongest wall street debut so far this year. what can be done. meet the ceo. he's next. and in the next hour, vote their shares against walmart director's john liu will join us live. like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. the objectives that we see and the exploding market for digital context. equities seem to be very attr t attractively valued. all you need to believe is that we will avoid another recession over the next couple of years. and that is, indeed, our forecast. >> in honor of this business, some people study artificial intelligence. i study natural stupidity. now, a recent ipo that's really making a splash on wall street, squawk going nearly a hundred percent. the company makes software that helps companies analyze data. and here first on nbc, godfrey sullivan. godfrey, good to have you on the program. good morning. >> good morning. it was something to watch, the balcony being right here and watching you guys trade that first day. has business changed dramatically? even the way you perceive it from the time you went public to now? >> not dramatically, but we have an event going on with 2 or 300 people. and certainly the ipo helped from a branding standpoint. >> i'm not sure where you are in the corridor, but how is business right now and explain for those who aren't familiar what the company does. >> our quarter end was yesterday. we're really revolutionizing how the company -- everything around us. our mod ems our cell phones, it's all generating your car, your heart, your pacemaker all generating digital data and splunt makes it easy to analyze all of that machine data. >> so give us an example of the typical customer and how they might use that psammophis to mine that data. in the digital world, every teep you take is recorded. it generates machine events. every time you look at a product. every page you view, all of that generates machine activity. it can be ingested and analyze sod that you can understand customer trends, product trends, how your it or systems are performing, do you have denial of service attacks. there's a lot of information gathered with your data. >> how do you protect your first mode of status who might look at this is an area they want to expand or from start-ups. >> it's delightful in this whole world of data. our job is to run this thing for the whole term. we have a saying that an ipo is really only mile three. it's about building products that customers around the world will want to use and be the first choice for them to use. we have customers in 75 countries around the world. it's because we drive a very disruptive model where they're able to use our software before we pay for it. >> so you basically just drive hard at it and that's how you get a critical mass? >> agreed. there's an enormous amount of ip that's in there. it's not easy to replicate. and what we learn from customers every day continues to help us run harder. so staying ahead is about having the best product. >> you do have some cash. you talked about making some acquisitions in the future. what's the future look like on that front? >> we're happy to have the cash on the balance sheet. for us, it's about welcoming into the company. but we did buy a few years ago a couple of applications. and that could be an example of more acquisition activity that we could do as we move forward. >> interesting. everybody is watching. very, very interesting story, godfree. appreciate your time. congratulations once again. >> let's get to phil lebeau. >> an increase of 11.6%. that was slightly better than the street was expecting. this is not a surprise since some of the other automakers are flat or negative. an increase of 11.6% for the month of april. slightly better than kpapted. guys, back to you. >> okay, thank you very much. phil, coming up on the program, recovery qe 3 and everything in between. we'll have a live interview with two fed presidents. you will be aware that this question is really moving. you'll hear it first right here on "squawk on the street." >> the objective is to go after the big opportunity we see. >> shares are up about 64%. auto-bliss. with rent2buy from hertz car sales, you skip the lots... and pushy sales people... it's a fast, easy way to buy a used car. three days to try. zero pressure to buy. it's just another way you'll be traveling at the speed of hertz. tdd#: 1-800-345-2550 let's talk about that 401(k) you picked up back in the '80s. tdd#: 1-800-345-2550 like a lot of things, the market has changed, tdd#: 1-800-345-2550 and your plans probably have too. tdd#: 1-800-345-2550 so those old investments might not sound so hot today. tdd#: 1-800-345-2550 at charles schwab, we'll give you personalized recommendations tdd#: 1-800-345-2550 on how to reinvest that old 401(k) tdd#: 1-800-345-2550 and help you handle all of the rollover details. tdd#: 1-800-345-2550 so talk to chuck tdd#: 1-800-345-2550 and bring your old 401(k) into the 21st century. tdd#: 1-800-345-2550 take a look at the dow. up 75 points. we were up 80 a few minute ace go on the back of that surprisingly strong number. new orders, 58.the highest since the spring of 2011. not a single industry saw a down tick in new orders in april. and with that, the s&p is at 14.05. we're getting awfully close to some of the strongest levels we've seen in a while. >> so that is perhaps one to watch, as well, in today's session. meantime, china 13-month high. which companies will benefit? managing partner of fast-money contributor, of course. hey, tim, good to see you. interesting because today in the wall-street journal, there was an article promoting ge saying that china is hard. it's growing, but it's hard. austrwes australia is growing, it's a bit easier. >> last night's pmi tells you an interesting story. exports were better. this is a larger -- i would say it's a measure of the largest state companies and not necessarily the medium enterprises. but, look, either way, i think the mining companies, globally, have been trading more in china pmi and empmis than they have in developed pmis. and outside of this ism number, you've had terrible numbers outside of the longest week or so, out of the global pmi markets. but when you look at the global miners, i think you have to look at both valuations, you have to look at dividend yields and where these guys are in their charts and where they've been grinding around and addressing more than pessimistic views. >> right. >> so it's a major opportunity. >> so you've got to believe that the price of copper is going to go higher here and continue higher. >> with freeport, this is a company-specific thing. more than anything that's been holding them back, it's their strife down there. i think people are worried about their production. they have affirmed that they're going to hit their targets. at 4.3 times, almost a three and a half percent dividend yield. this is a great place to play. the aluminum market is going to grow probably 6% this year. the demand side of it that certainly oversupply would have been an issue for this industry is becoming more imbalanced. and there might be a deficit in 2013. valuations can be very cheap and get a lot cheaper. you need to wait and see when there's buying momentum. i would argue that at least take a look at these charts. global pmis, i think are not necessarily what's going to be driving the growth here. i think decoupling of the economies will give it a chance to run a little bit. >> tim, thanks a lot. you can catch tim every tuesday. >> heavy hitters on the economy. we're putting this show to fed, federal reserve, that is. we'll have two current federal reservesist joining us. what are their thoughts on race? the possibility of qe 3 and much more. that's next on squawk on the street. looking for a better place to put your cash? here's one you may not have thought of: fidelity. now you don't have to go to a bank to get the things you want from a bank. like no-fee atms -- all over the world. free checkwriting and mobile deposits. now, depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity. it's very important to understand how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. the pace of u.s. manufacturing is accelerating. it's put a fire under the last 30 minutes. you were saying they're very close to a year-high. >> 13.297 is the bull market high on the dow. it's basically one-point away. >> so financials have gained. j.p. morgan leading there. chesapeake leading and a lot of the consumer discretionary. sears, which david spoke about earlier, also making gains. look at the breaths. it's this last half hour. look at that five to one advance. that's down here at the nyse. the nasdaq, again, 3-1. two federal reserve presidents are in the midst. steve, good morning. >> hey, good morning. you know, we're lucky to get one, now we've got two federal reserve presidents. dennis lockhart and charlie evans. >> gentleman, thank you for joining us. let's see if we can give a preview of what we're going to talk about. first, i want to start with you and the recent economic data. claims have been elevated. are you changing your view? i hadn't really changed my outlook in any fundamental way. the number that we got was really very close to what we expected going into the quarter. someone kept changing that number. and, of course, last month's employment number, jobs number, also was a disappointment. but it's too early in my mind for me to change my outlook. >> jerry, what about you? >> i agree with dennis' assessment. i think that 2.2% was disappointing when at one point we thought it might have come in at 3%. i think the table is still set for 2.5, 3% growth over the next 18 months. i think it's a little disappointment at this point in the recovery. >> i want to come back to that, charlie. but let me just ask you about jobs. is this a repeat of the past two springs we've had where you've had a decent first quarter and then comes off again. ? >> i think it's too early to say. i think the job growth has been pretty strong recently. this week, we'll get another indication on that. i'm hoping that the labor markt will work itself out. it's not really enough to make progress on unemployment the way we ought to be. >> the sep forecast, the forecast of all of the members of the federal market committee, suggested that unemployment could come down or would come down below 8% this year. is that still your forecast? >> it's possible, yeah. i still am looking to a high 7s number by the end of the year. but, as charlie says, it's going to depend a great deal on the monthly generation of jobs numbers. >> let's go to what policy might come out of the different forecasts that are out there. i think what you're saying, dennis, it's too early not only to change judgment on the economy, but also to make a judgment about policy? >> that's pretty much my view. i'm a bit reticent at this time to pull the truinger on any new action. >> do you have numbers in your head that are definitive triggers for, you know, if we don't get that below 8%, is that something that would suggest to you the fed needs to do more? >> i think pulling a number out of the air is a bit too simplistic. i think more in thornilys of a set of conditions. you can attach some number to that. >> orb rick tcharlie evans, you subsequent speeches talked about this need. let me separate that into two questions for you. first, are you at a point now where even if your forecast comes out the way you expect it to be, which is this 2.5% number, that you believe the federal reserve should be doing more right now? >> i definitely think we should have strong, monetary combination. i would like to have more accommodation that's absolutely right. i think one way to do that would be to clarify what our current guidance is right now, we're using late 2014, i think we're using something like the economic triggers which as long as the unemployment rate is below 7.5%, we can continue to have very low funds. unless inflation goes up to a very high level, say 3 neolyte. we can continue to have a combination. i would like to have further progress so that we can say something like that. maybe we could do more asset purposes. >> it does stuff like twist it. in the end of the day, in the absence of these sort of transition mechanisms, which means the private sector is not really lending and/or borrowing. you can do all you want, but it's not going to do any good. >> i think improving our foreign guidance would be helpful. i think providing more liquidity would be helpful. i think ratifying for a long period of time to get things going. look, we might get lucky in the sense that something breaks the channel opens up a little bit. then we get a greater lift in the economy. i'd like nothing better than to start raising rates before 2014 on the strength of the stronger economy. what you said recently is it's too costly to give the benefit we get from additional quantitativeness. >> i'm a bit more skeptical than charlie is what i would consider to be a little bit more liquidity. i think there's only so much we can do to stimulate loan demand and to change the risk appetite. so i'm not sure at this moment that more stimulus would -- at least more really active stimulus in the form of quantitative easing, for example, would have that big of an effect. and i think the longer term costs have to be kept in line. costs related to expectations, for example. >> is that because you're a banker? >> that's the exact reason. >> all of this qe that comes donnelley, it creates all of these excess reserves that they're sitting on. why aren't the banks -- i guess we have had some improvement. why aren't they lending more? i talk to bankers a lot and they say because there's a lack of loan demand. you need borrowers who want to borrow and have a good reason to borrow and, obviously, the loans have to be acceptable in terms of credit risk. and you need the banks to have an appetite for lending. and this has been a kind of gradual evolution of both of those elements of the picture. >> charlie, is there anything that dennis has said here that, you know, the banks are not really going to be lending if you give them excess reserve? >> well, we all would have liked it if the banks were in a position to lend more. i think they're in a better place than they were before. but i've certainly heard the same commentary. people have paid down their balance sheets. companies are in a better position. i think that the circumstances could change, though, under the right circumstances. there could be a lot of lending and the economy would start picking up a lot. what about the effective savers? people saved for decades. they go to retire thinking they'll live off the fixed income and now you're giving them 1%. why is that fair? >> well, we're in a tough situation, obviously. and the current slow recovery is hurting everybody, i would say. it's hard to talk to people who aren't being affected adversely. so savers are certainly facing low interest rates. i would like nothing better to have higher interest rates on the strength of a stronger economy. there would be higher rates if we keep doing what we had been doing and ought to do. they'll increase. >> how about you, dennis? i'm sure you've been approached with that criticism. >> i hear it frequently. we can only have one policy. that is designed to support the recovery. unfortunately, there's winners and losers in any policy situation. we talked about the limits of monetary policy. monetary policy can't target outcomes for specific groups. >> leave it right there. we're going to take a break and come back and do more with this discussion. we'll talk more about what more can the fed do? can it give everybody a dollar? how about a hundred dollar snuz we're going to see if the feds will open up their wallets when they come back. squawk on the streets coming back with two fed presidents. 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scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this. the stories we're squawking about. domino's pizza down more than 10% after reporting a first quarter profit are lower than expected. revenue falling more than 1% mostly due to the sale of company-owned stores to franchises. company sales rose 20% last month. that makes the best april performance in four years. sirius posted for the first quarter today, boosted by an increase in subscriber prices. the company annual is 300,000 subscribers with an all-time high 23.3 million users. >> i'm here with charlie evans of chicago and dennis lockhart of atlanta. give me the thing that is you think could represent downside risk. >> well, i think there are two or three at the moment. first i'd say something breaking in europe that spills over into the u.s. economy. the second that is the so called fiscal cliff at the end of the year. the third is very hard to predouble-t, it would be a middle east conflict that has the effect of spiking oil prices. >> do you see additional policy measures as, conceptually, as holding your powder drive? that would be something that would prompt you to say you know what, the cost benefit analysis makes more sense there. >> to an extent, i do. i think in terms of additional policy that would increase the size of the balance sheet as something to be held in reserve for circumstances that i think are a bit different than what we see today. >> to what extent do we see inflation? something that given where rates are right now, the inflation rate, something that says you know, it's not a green light for more policy. >> well, inflation has definitely been higher than we were forecasting last year, in terms of underlying inflation where we're just under 2%. that's our objective over the long term. there's not as much room for inflation to go up as we had before. i still think there's a tremendous amount of room to help support the economy from the macro aq no, ma'amic simulation, it doesn't really generate much inflation. we've got a lot of slack and well anchored expect tagss. as the economy starts roaring along, again, productivity will get higher and a lot of good things will happen. i don't think that we're likely to see a burst of inflation. but, of course, the risks are a little higher than they were last year. >> do you feel like your inflation forecasts had been wrong in the following way that you forecast that the danger here is zeros in one handle, but they've been two. and on the headline numbers, three and even four? are you concerned about your forecasting process? i think on one hand, a lot of people were saying that inflation was going to take off on us. in fact, headline inflation did take off when commodity prices were higher. you would have expected it would stay up at that level. so anchored inflation expectations are really playing a big role. >> so i said during the break that you guys were going to open up your wallets. you did not do that. let's talk about the limits to monetary policy. is there anything that stops the amount that the fed can do? >> in theory, yes. in theory, we can continue to grow the balance sheet. there's going to be a limit. sooner or later, we're going to have to normalize the balance sheet. and getting out of that situation without getting caught in the situation where the expectations of inflation skyrocket or there's just too much money in circulation, that's a practical limit. >> speaking of limits, the bank of japan saying it's going to buy stocks. are those things that the federal reserve could do? >> well, we don't have that power. we can only make loans and that type of thing. so those options really aren't on the table. >> what about practical limits? >> i don't think that's really essential. i think that one beneficial effect of any further asset purchases would be to convey the idea that we're committed to conveying policy very low for the amount of time that's necessary. additional purchases would reaffirm that commitment over and above, you know, the long-t purchases themselves. >> gentlemen, thank you for joining us this morning. charlie evans of chicago and dennis lockhart, president of the federal reserve bank of atlanta. carl, back to you. >> steve, you're beginning to outdo yourself. you've got one, now you've got two. pretty soon, you're going to need the whole committee in front of you for us to begin -- >> if i did three, there would have to be a public announcement. it would be an actual meeting. >> yes. >> chairman liesman. thanks, steve, great stuff. by the way, take a look at the dow intraday. 13,304, the intraday high for the year after the ism, of course, beat. we should mention for the s&p intraday, 1,422. we'll see if we get there today. a lot more "squawk on the street" in a moment. don't away. welcome back to "squawk on the street." there is lots on the move today at the markets flash desk. i'm scott wapner with mpc. that marathon oil and it's on the move this morning. yes, it was out with earnings, but probably moving more so because the company saying it will look at spinning off some of the pipeline assets into an mlp and taking it public. could sell a minority interest in the unit in an ipo. but melissa, there's a look at mpc, marathon petroleum, up about 2.75% today. >> all right. thank you so much, scott wapner at the markets desk. today, occupy wall street, the movement, is organizing a nationwide general strike in conjunction with may day, also known as international workers day. demonstrators say they're aiming to disrupt the 1% and seek economic justice. jackie deangelis is in new york city checking out the latest, and she joins us from the scene. jackie. >> reporter: hi there, melissa. yeah, we are here in bryant park in new york city. this is one of the stage locations for the occupy wall street movement today. seeing little bit of life breathing back into the movement as it was kind of a quiet winter. you can see the protesters behind me, probably about 100 people or so mixed in with a lot of photographers and news people, also a lot of police presence down here. they're chanting. we're seeing a lot more people coming out now that it's not raining anymore. obviously, that was a deterrent this morning. but as you said, in celebration of may day, point here, to tell people not to go to work, not to go to school, no banking, no shopping. this is some of the literature that they're handing out here today. earlier, we saw 100 demonstrators passing by as part of one of the marches by the bank of america building, which is just a block north here on 42nd and 6th. they passed through, they went west, and then we lost sight of them. but we are keeping track of what the movement has planned to do today in terms of their marches. they're planning to go to madison square park. they're also planning to go to union square. they're going to end the day down by the financial district, of course, on wall street, the key part of their antigreed message to be dispersed there. i have their agenda here as well and some of the places they plan to target throughout the day. news corp., chase, morgan stanley, citigroup, barclays, blackrock, kkr. so a lot of the big names on this list as they make their way through. there also were some reports that they were going to try to disrupt traffic. we haven't seen any major evidence of that yet. but as i said, gaining a little steam here at bryant park and we'll continue to keep you posted. david, back over to you. >> thanks very much, jackie. jackie deangelis there monitoring those protests. want to come back to one of our key stories of the more, chesapeake energy, second largest natural gas producer in the country, top 15 oil producer, ending 18 months early its arrangement under which its ceo, aubrey mclennan, was allowed to co-invest and continues to co-invest in the company's wells, also saying it has now undertaken a search for a nonexecutive chairman, so mcclendon says he's happy to give that up. he's receiving no compensation for ending 18 months early that founder well participation program which has brought a great deal of concern for shareholders, including southeastern asset management, 13% holder, which seemed to have lent a hal hand here in pressuring the board step up and have mr. mcclendon step aside as chairman and end early that program. want to come back, though, to another investor out there, namely carl icahn, who at one point held 6% of the shares. he sold them, made a lot on this trade, did carl. that was last year. but from what i'm hearing from trading sources, mr. icahn, in fact, may be back in those shares, not to the significant level he was previously, but nonetheless, perhaps a buyer. again, icahn, well, i had a chance to talk to him yesterday. this is what he had to say about chesapeake energy. >> i do think that chesapeake is undervalued. but aside from that, you do have other problems, as you know. we're studying it. put it that way. and i'm not saying we have a position or we don't. >> apparently, they do, and potentially growing again, though icahn would not say as much. but trading sources tell me that, in fact, is the case. we should also keep in mind, chesapeake reporting earnings after the bell, and we'll see how much money they spent to continue to take some of that gas out of the ground and oil, an important component here. they cut back on their natural gas production, but important those numbers, so we'll see if that stock gets whip-sawed, perhaps as a result of not great numbers. again, who knows? >> makes you wonder if the era of the imperial ceo is beginning to come to a close? because aubrey was/is chesapeake to a large degree, always has been. one of those ceos who's been talked about having wide, broad influence over his own board. and clearly, that has disseminated to some degree. wouldn't you agree? >> no, it's an important point. i don't know that that era has ended per se. again, shareholders dealing solely it seems, with the ceo as opposed to the board, giving that ceo a great deal of power still. >> there are two ceos we talked about, even just today, who can be viewed as imperial ceos -- rupert murdoch of news corp. -- >> yes. >> as well as mark zuckerberg, facebook. >> nobody's going to be able to get to mr. zuckerberg. >> but at least he's explicit about it. at least he's said i've done these deals and tied up all the votes. he writes in the s-1, it's quite clear that it is a kingdom and -- >> or you have those trying to consolidate power. >> in all these cases, they have the votes, whereas mcclendon does not, and yet, is still, as you said in control. but not nearly as much as he once was. >> quickly, "squawk on the tweet," speaking of mark bu zuckerberg. facebook is out to show they are about more than just poking and posting pictures online. it's also a place to find an organ donor. today our question is -- >> i can add that i became an organ donor, then you can say who you want to share it with. >> now that facebook is in organ donations and saving lives what venture should it take next? tony writes "the next step up would be start cloning people." don writes "maybe open up a starbucks." "facebook should take on something users have been wanting for a long time now, like the dislike button." i don't know anybody who would use that, do you? >> no, i can't imagine disliking somebody. what's coming up? >> of course, we'll be on the chesapeake earnings conference call. should be a heated and interesting call. also, by ron wink en, vice chairman of blackstone, calling for a decline in the price of oil in 2012. >> see you tonight. here's what you might have missed if you're just tuning in. welcome to hour three of "squawk on the street." here's what's happening so far. >> rupert murdoch was today subject to a scathing attack from british mps who said he is not a fit person to run a major international company. we can own this refinery and control much more of our supply chain in terms of commodity cost. one of the challenges, frankly, not only for europe, but the united states, is to try to undertake structural reforms while you've still got growth. chesapeake has out on the wires with a press release. they are going to end early the well participation program with aubrey mcclendon. schultz is quitting immediately. >> right. he wants out of there. >> right, and that in and of itself seems, i don't know, maybe a little bit troubling. there is the opening bell and a look at s&p 500 at the cnbc realtime exchange. i think the table is still set for about 2.5% to 3% growth over the next 18 months. unfortunately, i just think that's a little disappointing at this point in the recovery. i think we ought to be doing better. >> i'm not sure at this moment that more stimulus would, at least more really active stimulus, in the form of quantitative easing, for example, would have that big an effect, and i think the longer-term costs have to be kept in mind. good tuesday morning. welcome to the third hour of "squawk on the street." let's get a check on a very interesting market day with the dow up more than 90 points. this is a fresh high for the year at 13,304. s&p intraday high for the year is 1,422. we're not quite there yet at 1,406. nasdaq having a good day, too, at 3,076. bank of america announcing it's cutting 2,000 jobs in the investment banking, commercial banking and non-u.s. wealth management units. shares leading higher just under 2%. from financials to tech, shares of research in motion tanking as the company announces the launch of the blackberry 10. ceo thorston heinz saying the first blackberry 10 devices are expected to launch in the latter part of 2012. let's get to our roadmap for the next hour. a group of new york city pension funds set to vote against five walmart directors following the recent bribery allegations against the superstore chain. we'll go straight to the source and sit down with new york city comptroller john liu in a cnbc exclusive in just a moment. also, chesapeake back in the headlines as the company announces it will strip ceo aubrey mcclendon of his chairmanship. is that enough to get shareholders back on knwhoord plus, mark andreasen going on the record to talk everything social media. we'll talk start-ups, mobile and new technology in a moment. first, rick santelli with an interesting day on the santelli exchange. i see treasury yields close to their highs for the day, rick. >> yes, they are. i never thought 194 yield would ever be called a high yield, but nonetheless, everything is relative. i've really enjoyed, and so did many on the floor, steve liesman's interview with a pair of fed officials, dennis lockhart, atlanta, of course, and charles evans, chicago. so let's highlight some of the comments, very unscientific, that i heard around me as we discussed while we were listening. the first is the employment rate. the employment rate was mentioned a lot. it was mentioned as a trigger, as a target, where they think it's going to be. but one thing i never heard mentioned at all, i never heard anything about the labor force participation rate. and i'll tell you what, let's give our fed men the benefit of the doubt. it has been moving down for decades, but does that make it less important? in the end, if it's really about jobs, jobs, jobs, if we have less people working and the rest aren't counted and that brings down the unemployment rate, how can an organization with the academic background of the federal reserve not make this a big story? it isn't political. we've seen this trend over several presidents, but nonetheless, it's a very disturbing trend. cost benefit analysis came up a lot. i have one thing about cost benefit analysis. i see very little research that ever truly does a cost benefit analysis on many of these programs, but i hear it constantly from this group of people we tend to ignore. they are called savers, and their cost benefit analysis is an f-minus in terms how they're grading what comes back into their pocket, which is basically zero. and if we talk about inflation, i really enjoyed this, several comments. one of them was, was that they were fairly amazed that inflation, you know, it doesn't stay up very long. commodity prices came down. of course, they did, because quantitative easing has been in spurts, and when it disappears, the dollar tends to do better and commodity prices tend to come down. and this other little issue of growth. i don't know how proud i would be that it's moving up and down, because growth is pretty much down, and these two obviously have contributed. the last, of course, is targeting. i believe it was dennis lockhart, said we really can't target what our programs do. well, i kind of tend to disagree. i think stocks and risk is exactly what is moving, and they are directly targeting it. they want entities to take more risk. they want stock prices to go up. they've more than kind of hinted at this over the years. real quickly, i'm running out of time, regs. you know, bail, no fail. how does this fit into this? since we've never allowed anybody to fail -- oh, we can't allow failure -- what we've done is we've caused what's bailed-out zombies to be regulated, overregulated. are investment bankers doing much hiring these days? are banks doing much hiring? no. but what's worse is, it really keeps the competition from taking their place. you think these small, little banks can compete with rooms full of regulators? even though as "60 minutes" pointed out, that didn't do a world of good when they were camping out in '05 and '06. the credit crisis arrived nonetheless. back to you. >> thank you, rick. we'll talk to you in a few minutes. rick santelli with a good one out in chicago. let's get to scott wapner for a market check. scott, we're closing in almost at the triple-digit gain level for the dow. >> we are, carl. the dow's been up seven straight months and on the first trading day of the month of may it hits a four-year high, 13,307, intraday high on this day, it's 13,309 where we are now. so it's improving as we're speaking here. financials leading the way today, and certainly among the sectors that are leading the way, bank of america's doing well, as is jpmorgan. ism, as you know, comes in better than expected. and this is the result, carl. >> yeah, we're going to talk a little later this hour about why, given all the weakness in the regional surveys, ism did manage to surprise in a big way today. scott, thank you very much. more fallout from the allegations that walmart used bribery to spur expansion in mexico. a group of new york city pension funds will vote their 4.7 million shares against five walmart directors standing for re-election at the company's annual shareholder meeting on june 1st. john liu is the new york city comptroller and trustee of the city pension funds. he joins us now at post 9 first on cnbc. mr. comptroller, great to have you with us this morning. >> good morning, carl. >> your concerns about walmart go back, basically seven years, before you were even comptroller. >> that's correct. the comptroller's office, then led by my predecessor, bill thompson, had initiated a series of discussions and registered real serious concerns with walmart directors and its audit committee about some of their practices. and of course, now we see that those concerns were valid. >> you said they had a lack of internal controls that they wouldn't launch investigations about bribery, about child labor, about executive comp? i mean, what sorts of issues were in play back then? >> there were concerns that the board was not independent enough to exercise real authority over the management practices. there were reports that management itself was not staying on top of things, not necessarily ensuring compliance, but also attempting to stop investigations. and the audit committee was not structured in a way to ensure full legal and regulatory compliance. >> so, you're saying the allegations in the "times," that directors tried to squash this investigation out of mexico, was one example of something you think is systemic to the comp y company. >> that's correct. what happened in mexico is very disturbing. it's disturbing to us as shareholders. we own more than $750 million worth of shares in this company. and the bribery allegations are serious enough, but if the reports of a cover-up are true, that could have far more wide-reaching implications for the company and the value of our stock. >> so, the directors you are going to vote against, mike duke, lee scott, arne sorenson, chris williams, s. robeson walton. why these five? >> these are the most influential board members. we're talking about the chairman, we're talking about the ceo, the former ceo, the head of the audit committee that was the head of the audit committee back then when we registered many of these concerns. what we need is a board that is looking for the long-term shareholder value. and some of these practices, it's relentless drive for profits, for expansion, have clearly undermined some of the concerns that shareholders would have. >> are others going to vote with you? >> we're going to be speaking with a number of institutional investors tomorrow. the council of institutional investors. and i think that the concerns we have here in new york city will be shared by many others. >> how much of this is borne in frustration of the stock itself? if the stock had done as well as apple has over the past seven years, would you be making complaints as vocally as you are now? >> we are always concerned about the sustainability of the companies that we own shares in. we're long-term investors. we don't check stock prices on a daily or weekly or even monthly basis. long-term shareholder value. and the allegations that have recently surfaced about this company are very disturbing and could be very detrimental to the long-term shareholder value. >> you can imagine a supporter of walmart listening to you and saying, here comes a complaint from someone who has his own issues to deal with in his own office regarding investigations about fund-raising. is it hard making this complaint when you're not coming from a clean place? >> it's not hard at all. in fact, this is new york city. it's an exciting place, but politics gets pretty rough here as well. nonetheless, we're talking about $750 million, over $750 million worth of shares that we own on behalf of our pensioners and taxpayers in this company. it is our fiduciary responsibility to make sure that the practices of the company, the management and its board members, are in line with our interests for long-term shareholder value. >> do you have recommendations as to who should replace these directors? >> we will be reviewing that over the next few weeks. the meeting is exactly a month from today. and i think it will be an important meeting not only for walmart but also for corporate, good corporate governance and good corporate practices. this is a company that claims leadership in ethics and good corporate citizenry. and yet, it seems that its leaders don't practice what they preach. >> somebody might say why not wait for justice or even the company's own internal investigation about mexico to yield some results before you start throwing arrows? >> well, years ago, the pension funds here in new york city with the leadership of the comptroller's office already requested these reviews, and they were time and time again rebuffed, until now, the company claims that they have initiated a review. well, it seems that they initiated a review after "the new york times" started poking around. >> mr. comptroller, it will be interesting to watch. appreciate your coming on to talk about it. >> always a pleasure. >> new york city comptroller john liu joining us here at post 9. let's get to capital markets editor gary kaminsky, looking at the crimes and misdemeanors at lehman brothers, sifting through some of the bankruptcy documents. good morning. >> good morning. liu's talking about disturbing stuff. last week, the inside data because of the bankruptcy proceeds on lehman brothers came out. if you're like me and continue to be fascinated by a lot of the sort of human capital developments here, i would suggest the "los angeles times" had a great piece over the weekend in terms of the information out there. some of the e-mails were on dealbreaking. might want to check them out. nick, give me one second here. don't pan in yet. let's just talk about the compensation, because in 2007, one of the documents provided for the top 50 paid employees, we have some of those names to show. and the interesting thing here is, again, these were numerical, arithmetic, the top 50 payments that were made. and there's a lot of buzz about this. but let me make a couple of points. number one, if these individuals had been in the 2-and-20 model, the numbers would be 10 to 12 times greater, given the fact that many of these were involved in money management, asset management, proprietary trading. secondarily, it doesn't mention anywhere that i've seen that for the 2007 payments, as those close to the situation know, 67% of that comp was put in restricted stock, which was wiped out, wept to zero, so those payments were never out. one name stands out, mark a. walsh, $17.5 million paid in 2007. mark walsh obviously in charge of the real estate investing, which many people do believe ultimately helped, as you know, take down the firm. take out this. nick, now you can come in here. look at this one slide here, recommendation. you've got to love this stuff. these are the internal documents that were presented to the executive committee. and if there was any doubt about what the people who were running lehman were thinking in 2007 into 2008, and the arrogance that they had, listen to this. they simply say "we believe the firm's competitors, however, with the exception of goldman sachs and jpmorgan, have sustained large losses, weakening their competitive position. despite recent capital-raising efforts, we believe most competitors are still capital constrained and more likely to invest in growth." they mentioned bank of america, bear stearns, citigroup, merrill lynch and ubs. talk about arrogance. this is what everybody will say, they wanted to play a playbook that they believe. again, go back to some of the e-mails. you can get them on dealbreaker. "this presents an opportunity for the firm to pursue a countercyclical growth strategy similar to the one that we pursued during the 2001-2002 downturn to improve our competitive position, and over time, generate superior returns for our shareholders." there you go. if there was any doubt, and many people have thought about it what was the management, the board of directors thinking at that time, that document tells you. they believed that if they went back to the playbook, the '98 playbook, the 2000, 2002 playbook, they were going to persevere. and for them to say they were in a better position than their competitors, i have nothing to say on that. >> gary, i was going to say, how hard is this to talk about given that it hits close to home for you? >> well, you know, it's not hard to talk about because i have felt for some time, carl, that this is the kind of thing that would have prevent these type of things in the future that has to come out. so i encourage anyone who's interested to look at these documents. by the way, i know a lot of people watch the show that are out there hit me with an e-mail if you've looked at these documents. may have been something i missed. we'll try to bring it to you by the end of the show today because there's great stuff here. as they say, sometimes reality is better than fiction. >> you got that right. thank you very much, gary. when we come back, chesapeake energy back in the news, announcing it will strip ceo mcclendon from his chairmanship. reporting after the bell. we'll talk with bethany mcclain after the break. can take care oy all your important legal matters in just minutes. now it's quicker and easier for you to start your business... protect your family... and launch your dreams. at legalzoom.com, we put the law on your side. and launch your dreams. for a hot dog cart. my mother said, "well, maybe we ought to buy this hot dog cart and set it up someplace." so my parents went to bank of america. they met with the branch manager and they said, "look, we've got this little hot dog cart, and it's on a really good corner. let's see if we can buy the property." and the branch manager said, "all right, i will take a chance with the two of you." and we've been loyal to bank of america for the last 71 years. with rent2buy from hertz car sales, you skip the lots... and pushy sales people... it's a fast, easy way to buy a used car. three days to try. zero pressure to buy. it's just another way you'll be traveling at the speed of hertz. chesapeake energy's been under pressure to overhaul its corporate governance in light of a recent loan scandal surrounding ceo aubrey mcclendon. the natural gas producer announced he will be stepping down but will remain ceo. they will name an independent, nonexecutive chairman in the near future. you can see what shares are doing on that news, up almost 8%, $58, although that is actually the wrong symbol. are these steps enough to restore confidence in chesape e chesapeake? bethany mclean is with us, "vanity fair" and cnbc contributor. welcome back. >> thanks for having me. >> i've been told either this is the worst board in the united states, and people have said that on our air, or that it's important that your main guy has skin in the game. where do you come down? >> well, i was thinking that if all the talk about good corporate governance over the last decade were actually true, that american business would be a pretty boring place. it's terrible. the way this has been structured, not only was it clear leading up to this that aubrey mcclendon was broke, he had the margin callback in 2008, he had to sell his map collection to the company. so, how could the board not have asked, well, how is he getting the money to finance his participation in these well deals? and they clearly never asked the question. >> how contentious was this last board meeting? >> i heard it was extremely contentious. you know, one of the fascinating things about the board is that, basically, one-third of the board are former politicians, and that means that they're concerned about their image, right? so, as soon as this started to be all over the papers, you know, everybody's in a race to protect their own image. >> all right. do you think aubrey's in -- is he threatened? is his tenure threatened in any way? >> well, we'll see what happens after this. you know, there is definitely some talk that he was going to have to step down entirely, in which case, since chesapeake really is his baby, that would mean that the company, i think, would be sold. it looks like they're trying this interim step of bringing in an independent chairman, and we'll see if that appeases investors. >> yeah, well, apparently, at least for today, it appears to be doing the trick, although long term, i wonder, what do you think the answer to that question is? >> well, i think it's really interesting. longer term, you just have to wonder about the business model overall, right? they've got what, $10 billion of debt on their balance sheet or more, they've sold over $10 billion in assets, meaning they're $20 billion in capex into this thing and it's not clear they're going to make money. and i just wonder what that means about the business model going forward and about the price, the right price of natural gas in this country. >> do you think it might actually be higher because of the losses they take? >> that's what one of my smart sources really thinks that chesapeake is a huge bellwether, not just for fracking, but really for the cost of energy in america. if chesapeake's business model doesn't work with low natural gas prices, then what does that say? so, i think it's really important to keep an eye on this company. i mean, it's a great fun scandal because aubrey mcclendon is such a character, but chesapeake is also an important company for the future of this country. >> and there are those who argue, look, i mean, low nat gas is one of the great tailwinds of our economy right now, and you could argue that chesapeake has a lo to do with that. >> absolutely. the cost of energy in america is what, a fifth of that of europe and china? and if the low energy cost in america isn't real, that has huge ramifications for this country for a long time. >> bethany, we'll see what happens tonight. obviously, it's going to be an important number to watch. >> absolutely. >> and we hope that as you get color on what's happening in the company, you'll come back. >> i'd love to. thanks. >> bethany mclean joining us in chicago. we'll catch you down at the close in europe. not a lot of action because a lot of the markets are closed for may day, but the uk is open and we will get that close in seven minutes time. don't go away. 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[ scott ] seed your lawn. seed it! 13,308, awfully close to the intraday high for the day. of course, we've already set one for the high so far this year on the dow. not quite for the s&p at 1,411. one specific stock story we want to mention -- genesee reporting lower than expected guidance for the full year. the stock is up $4.21 to $58.19. from the u.s. to europe, the bell's getting ready to sound over in london, denmark and ireland. we'll get that close and some of the details on the impact here this afternoon when we come right back. zap technology. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. all right, let's get ready for, i guess you could call it an abbreviated european close, with a lot of the markets there closed for may day, although still got a lot of data, simon, from the uk pm toink some other things as well. >> but what is fascinating is sts still the united states that is the driver, and i can confidently tell you that tomorrow, when european markets open, when you wake up and see them, they will probably all be trading higher, all things being wl, because of the acceleration in manufacturing here in the united states. you can see it quite clearly in london, which does trade today. of course, they don't commemorate labor day in the uk. margaret thatcher abolished that. we have the spring bank holiday, which follows i think next week. so, uk is trading, and you can see the way in which it bolted higher. just look for the sake of argument at the top of the ftse 100, and you'll see the banks did well today. you might see, therefore, potentially, although other european banks open in positive territory tomorrow, there might be a uk phenomenon. lloyds, still -- >> the european markets are closing now. >> there you go. actually, it does look as if we have more. i would have thought it was just denmark and ireland that was open today along with the uk, but we're showing other elements of green. i think that might be an error. i'm sure portugal isn't probably trading. let me take you back to the u.s. and show you what's happening here. imperial tobacco, which is of course one of the -- sorry, i was talking about lloyd's banking, 40% owned by the government. they've got a much better profit coming through, less interest margin than expected. so soe lloyds is higher. imperial tobacco has gotten $800 billion share buyback, so they've also traded higher. but the big focus has got to be, as you see so many protesting in the streets today to mark labor day across the european union, the degree to which behind those protests now -- we're showing you here what's happening or is happening or has happened in spain, in france, and indeed, in athens, separately there. behind those public protests you have got this concern that, particularly after the elections on sunday in greece and, indeed, in france, you are accelerating the move away from austerity, as arguably has already happened in spain. and therefore, the market may question what the consequences are further down the line for confidence on the bond markets over the summer, potentially, but also the role of germany, which could potentially become increasingly isolated as things stand at the moment, and how they will respond to that. and you see them kind of trying to position for the fact that a socialist could win in france on sunday by talking about the european investment bank. merkel saying yes, i'll take a growth strategy through that beefed-up institution. but there will be confidence in the movement moving forward. >> yes. we thought her political high-wire act was tougher before. it will be tougher after sunday night. >> having said that if you look at the ecb, germans and some of the north europeans are already in the minority, you know. the ecb does embark on things that the germans don't want about bond buying. so they're used to being sidelined to an extent. >> that's true. good point. thank you, simon. we'll check in with gary kaminsky, who i don't know, are you ready to talk about europe a lot more this summer? >> i am. i'm still reading some of the lehman stuff. i've got to read you another one later. i was watching steve liesman's great interview at the milken conference, as i'm sure many of you were as well. rick did a good job at the top of the hour sort of summarizing some of it. and rick, i think -- rick, are you out there still? >> i'm out here, buddy. >> rick, you and i are always asked, frequently asked what about those -- and i know you touched on it -- that paid attention to the rules, put enough money that they thought they had put the money in fixed income to have a retirement, a plan. did you hear what i heard, which was essentially that, yes, if you followed the rules, we're very sorry, but in fact, given the circumstances that we're dealing with, we could only have one mandate, and that mandate is to try to grow no matter what we do with interest rates? that was the message, was it not? >> yeah. not only did i hear that, but i also think -- let me think -- i also think i heard them say that they don't pick winners and losers. i thought i did hear that today. >> yeah, which is crazy, because essentially what they said was we feel bad for those that have followed the game, followed the rules, sat down with a financial planner, let's say 20, 15 years ago, and tried to allocate a certain amount of money to fixed income. but carl, how can you say there's not winners and losers, when in fact, you've essentially penalized those who have attempted to save money because they have clearly pointed out here in the liesman piece earlier today, that they have to do whatever they have to do to manipulate rates down to try to grow the economy? i -- rick, i couldn't have said it better myself. >> no. and the other part that i think is also somewhat disingenuous is that they talk about cost benefit analysis. have you seen any independent research that one way or the other gives a positive grade to many of these fed programs, other than, you know, certain ones in the beginning, like commercial paper? but the accommodation programs i have yet to see any research i would consider, you know, nonpartisan, objective, that says they get a high passing grade. >> yeah, i have not seen one ceo who's said that they have gone out and hired a person or brought in any human capital as a result of anything the fed has done. but i have seen a lot of people who anticipated they would be living off of fixed income right now, having to go back to work because they obviously can't produce the income -- >> gary, why is this important? we should tell viewers why this is important. if the labor force participation rate keeps falling, less people keep working, but we ignore the dropping unemployment rate, we're going to have to take care of these people, are we not? the costs are unbelievable. you add in the savers that have no savings, the entitlement programs. you think they're in duress now? holy cow! what do you think they're going to look like in ten years! >> absolutely. carl, a little bit off the topic of europe today, but timely nonetheless, especially given what we heard about an hour ago. >> yeah. and rick, i believe you have a guest in chicago with you, don't you? >> yeah. and i'll tell you, it's like we couldn't have created a better segue, in my opinion. we have mayor pro tem of costa mesa, california, james r righeimer, and he grew up in illinois, so that's why he's here. it's his father's 80th birthday. welcome, mayor pro tem. what's pro tem mean? >> i was elected to the council 17 months ago and i'm like appointed by the council to be the number two person in the city. >> so you're like a mayor vp. >> mayor vp, there you go. >> excellent. we were talking -- how did you get elected, first of all? what stance did you have? and you are a republican. >> well, the stance i took for was that we love our police, we love our firemen, they're fantastic, they're great people. we have great employees in our city. but the pension plan is unsustainable. we can't afford to continue to have our city spend the kind of dollars they do for that. in our city, $100 million budget, 72% of our money's going towards pay and benefits. >> wait, wait, wait, 72% of your budget? >> 72%. we have the number one, arguably, the number one sales tax generating, you know, shopping area, south coast plaza, on the planet, and we can't seal our streets. >> put numbers on this. what's an average fireman or policeman back? >> in costa mesa in orange county, we're not unusual from the rest of them. most of the contracts are the same. total compensation for our police officers and fire last year was about $131,000 a year -- >> and when they retire, and they retire after 30 years service, age 50. how much of that close to $140,000 do they get to make in retirement? >> some of that they wouldn't get, but of the pensionable part, 90% of that. on top of that, we have to put another $42,000 in their pension every year in order to pay for the retirement age as early as 50. >> and listen, they do a wonderful job. we couldn't live without them, but it's breaking the bank. >> right. >> i see people who say they're lowering the discount rate, you know what they think they get on investments, from 7.75% to 7.5%. some of this is in your own backyard. they can't possibly be making that. where's that end up? >> for calpers and calsters, they take the money in and make the payments out. the organizations tell us how much we're going to put in. so, if there's a low -- >> if there's a shortfall, they bring down the number to something realistic, 5%, you have to write a check. >> our city -- >> we have to go, but quickly, one thing i wanted to say, i get a lot of e-mails. people say when you retire, it's wonderful firemen, policemen and teachers, retirement and pension is supposed to be an add-on to help you get along. >> right. >> it's not supposed to send you to the cayman islands for vacation. i think we've gotten carried away. >> the point is you don't want to kick them to the alley, but not to the beach. >> we want to take care of them, but not at the expense of leaving only 30% of your budget for everything else! >> correct, correct. >> back to you. >> thank you very much, rick santelli in chicago. bob pisani's on the floor of the nyse. looking at this ism, talk about a macro short squeeze today. >> it's wrong and it doesn't usually happen that way, but the street was positioned short because the regional isms had generally been below expectations. we're still getting growth, but below expectations, except maybe richmond. so everyone said, hey, how much stronger can the national ism be? the answer is a lot stronger. everybody was wrong and you could see the market go up. the dow jones industrial average reached new highs. we're at a four-year intraday high. obviously, that's good news here. regional isms, national, but how do you account for that? it's a completely different index and the ism points out, don't go confusing us with the regional numbers. also, i would note, california does not have a regional ism. maybe the economy's picking up a little bit there and that's showing up, although that's a big defense area. but this is a go-go report here. new orders, employment and deliveries. even bob was impressed with the numbers as well. take a look at what we had happen. the dollar immediately went up. take a look at that. i mean, that's a very large move for the u.s. dollar. normally, this puts pressure on commodities and commodity stocks. what happened, though? huh, very interesting. first thing you want to look at with something like this would be copper, for example. copper would normally be under pressure when you see the dollar go up. but look, there it is. copper starts moving to the up side as well. and commodity stocks and stocks in general go up? look at commodity stocks. wait a minute. dollar up, commodities up, stocks up? that's an improving economy take. that is not a qe-3 take. that's what's got everybody talking. this is a different style than we've been seeing in the last couple of weeks. also, we saw a nice move up in building material companies. this is a separate story, but martin marietta and masco, two good building companies. their orders went up. and carl, surprisingly, their pricing went up as well. so, a couple of modest points here, and a lot of people still talking about this ism number today. but improving economy story, not qe-3 story. >> right, here. >> right, in the united states. >> besides the comments about china and brazil, even today. >> yes. in fact, a number of the companies that are out there that have international exposure, like emerson. they talk about china a little more disappointing, but again, we don't talk about bifurcating, we don't talk about dislocations. we don't do that because we get hate mail when we do that. it doesn't exist. >> thanks, bob. >> all right. >> see you in a little bit. let's check on the health of the u.s. economy ahead of friday's jobs number. steve liesman sat down with not one, but two fed presidents earlier today. here's what they had to say. >> look, we might get lucky in the sense that something breaks the channel, opens up a little bit, then we get greater lift in the economy. i'd like nothing better than to start raising rates before late 2014 on the strength of a stronger economy. >> i'm not sure at this moment that more stimulus, at least more really active stimulus in the form of quantitative easing, for example, would have that big an effect. >> now to weigh in on the results, state of the u.s. economy, tom borcelli at rbc capital markets. good morning to you. >> good morning. good to be here. >> can you explain some of the disparity between what the regional surveys said and what ism did today? why the surprise? >> you know, i don't think you can actually use the regional indicators to help guide you in that. i mean, we all do it because there's nothing else out there, but just think about new york. here we are in new york. new york is not necessarily a hotbed of manufacturing activity, yet we continue to use it. and you'll get these head fakes here and there. the bottom line is, over longer periods, the regional indicators tend to do a pretty decent job, but this is one of those classic months where you've got the head fake. >> yeah. new orders, as bob said a minute ago, looked really good. employment up in the index as well. >> yeah. >> how much -- what can we take away from that looking tomorrow to adp, claims on thursday and then fp on friday? >> yeah, so, i think there's a couple of things to consider here. there's no question that this was a solid report. the underlying detail, as you point out, were quite solid as well. employment, new orders production, et cetera. but at the end of the day, i just have to think towards what are you making the case for? right? i mean, sure, ism was good, but it was good to what end? and as a great example, i think back to last year, actually, right around this time. new orders were averaging over the first quarter of last year, new orders averaged about 62 or 63. and guess what gdp came in during that quarter? 2.2%. so, here we go with new orders at 58. so again, to what end are we bringing this analysis? are you making a case for a ripper of group? because i would completely push back on that. but if you're making a case that economic activity is basically going to hold up where we are, sure, i have to fully buy into that. but again, i just think it's funny, we do this whether it's on cnbc or any other channel. we take one data point and say qe's on the table, take another and say qe's not on the table. the data are choppy right now. there's no way getting around that, but i think we do a disservice by letting the swings make decisions for us one way or the other. >> no, absolutely. goldman has a 125 number for friday's jobs print. are you that negative? >> at rbc, we're at 160. i think that's probably slightly below consensus. you know, the bottom line is, it's funny with this payroll report, whether you're at 100 or 160 or 200, guess what? all of those numbers are basically within the standard of error. i think people fail to realize this. this is an ultravolatile report. anything in and around 150 within the standard error, shouldn't be a surprise to everyone. yet, if we print to 200 or 100, people then are going to start this conversation of, yes, qe's on, qe's off. our general call is 150. i don't think today's ism report leads you -- it's not going to shape your call one way or the other. if you just look at simple correlations, the employment index within ism and the manufacturing component of payrolls, it's, again, you talk about the regional indicators at the top. it's not going to lead you in the right direction. >> yeah. as you also say, though, sometimes it's all that you have and you have to make do with the numbers you're given at any point in time. >> absolutely. >> tom, appreciate the insight. thanks for that. >> thanks, guys. >> tom porcelli at rbc. the dow is now up 100 points. whether the ism is a make-or-break number or not, it is leading stocks higher today. the s&p up more than 14 to 1,412. when we come back, we'll talk to marc andressen for the economy, the fed and all things markets when we come back. 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>> marc andreesen is betting big on mobile and social. he says the smartphone revolution is underhigh and says he'd rather have the invention of twitter than the moon landing. now, andreesen couldn't comment about anything related to facebook and its pending ipo because he is on facebook's board as well as an investor in the company. so, i asked him, when it comes to the rest of his investments, how social media is changing the game. >> so, social is an approach, it's a technology that we think can be applied to lots of industries. one of the things we're very interested in right now is social commerce, social shopping. and then, of course, social intersects with mobile, where facebook has a backbone for a lot of applications that run on the smartphone, and facebook is a provider, as identity is key to our companies. >> do all companies now have to be social? >> i think it certainly helps a lot and i think the companies that aren't are at risk of disruption by new start-ups that are going to wire social deeply into what they're doing. >> so, which companies do you point to in terms of social commerce as examples of things that could be the next big companies? >> obviously, we're very excited, for example, about pinterest, which is a social environment for people to be able to create pinboards and all kinds of things, including things they might want to buy some day. we think that's a great platform. >> in addition, would you point to any of your investments in terms of the next facebook, a company that could be disruptive across industries? >> i don't think there's ever a next facebook, just like microsoft or ibm, but i think, hopefully, god willing, we have a few companies with really good potential. >> now, andreesen says he does not think we're in another internet bubble, but he says most of the growth he's seeing is happening in the private markets and not in the public ones. he is optimistic, though, that that could change, telling me that he's very positive on the jobs act, making it easier for companies to go public. now, andreesen is overall quite bullish on the american company. he predicts that the production of consumer electronics is going to move back to here in the u.s., which would, of course, be a good thing for the manufacturing industry. now, you can find more from my exclusive interview with andreesen on my blog, mediamoney.cnbc.com, and also at wiredconference.cnbc.com. carl, back over to you. >> always good to hear what andreesen has to say, julia. thank you so much. julia boorstin here in new york. seeing some remarkable action in shares of herbalife. we'll go to bertha at the flash desk. what's going on? >> that is an interesting question. we were watching herbalife, triggered an automatic stock, resumed trading, went down 10% and now down over 20%, triggering yet another stop. this is after the company posted first-quarter earnings that beat expectations. an estimate of 81%. its outlook was a little below, but revenues in the first quarter certainly were higher than -- a little higher than expected. two analysts this morning actually upped the price target. we don't know what is behind this precipitous fall, but it's certainly something that bears watching at the moment and we are calling on to see just what might have triggered this. back to you. >> all right, thank you very much, bertha coombs. as we go to break, take one more look at the major averages here. rally just continues to gain some steam. the dow is now up 114, s&p is eight points away from a new intraday high for the year. we'll talk to art cashin on the latest market moves in just two minutes. ♪ tdd# 1-800-345-2550 the 5-day moving average just crossed above the 20. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly. tdd# 1-800-345-2550 i can also bounce my ideas off their trading specialists - tdd# 1-800-345-2550 on the phone or face-to-face. tdd# 1-800-345-2550 and i can trade wherever i want, whenever i want. tdd# 1-800-345-2550 tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language. tdd# 1-800-345-2550 hey... a breakout on a head and shoulders bottom! tdd# 1-800-345-2550 that's what i'm talking about. tdd# 1-800-345-2550 open an account and trade up tdd# 1-800-345-2550 to 6 months commission-free. tdd# 1-800-345-2550 call 1-800-540-0098 tdd# 1-800-345-2550 and start trading today. getting a nice rally here at the nyse this morning. dow's up 124, just continues to add some padding on to this morning's gains. new high after new high. art cashin with ubs financial services joins us here at post 9. and it's all being attributed to the ism, which you would admit was a surprise. >> a big surprise, and caught them flat-footed. it was really interesting to listen and watch. they began to sell off as they were going into the number. probably some people would say, uh-oh, the number's been leaked and it's bad. so, the short sellers really got caught flat-footed when it came out much stronger than expected. >> volume's relatively healthy, given that most of europe's been closed. >> almost all of continental europe is closed, china's closed, and we're humming along, at really a regular rate here. this may prove that all the bears live in europe. >> yeah. talk to me about some of the seasonality going into may. because if i see another sell in may story on the web or in the papers, is it truth or not? >> well, it's historically stood out time and again. but if you really start to take it apart, there are some interesting aspects to it. there are some who believe that if you just wipe out the month of september, that period from may to halloween is still pretty good. so, you might be able to play june to august. we'll have to invent a subset of seasonality here. >> lastly, emerson, cummins, caterpillar have all said very bad things about china and very bad things about brazil, and europe, too. is that a surprise to you? >> well, not so much china, but i think it's beginning to catch up with them. the whole brick brigade is dropping on everybody's foot. the brazilian response has not been very strong. i mean, you're getting better markets in places much closer, like mexico and others. >> art, thanks. >> my pleasure. >> get some final thoughts on the rally after a short break. piro.obert over a million people have discovered how easy it is to use legalzoom for important legal documents. so start your business, protect your family, launch your dreams. at legalzoom.com, we put the law on your side. and i thought "i can't do this, it's just too hard." then there was a moment. when i decided to find a way to keep going. go for olympic gold and go to college too. 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