to emerge. it has been a whirlwind for this automaker. phil lebeau is outside headquarters and he has the latest. >> we're a matter of hours away with of when general motors is expected to emerge from chapter bankruptcy protection. we say hours because it's not finalized yet. here is what still needs to happen over the next couple of hours. yesterday, a federal bankruptcy judge stayed the sale of good assets from general motors into a new business. the judge said the appeal has little chance of slowing down general motors from aappearing from bankruptcy. at the press conference at 9:00 a.m., the new chairman of general motors. this will be the first time we've heard from ed whitacre since he was put into the slot of running this company. he's be announcing changes at general motors. they're going to strip out a lot

of the bureaucracy and and that includes bob lutz sticking with general motors as opposed to retiring as originally planned at the end of this year. he will stay with general motors in a leadership role that has not been clearly defined yet. but you can imagine given bob lutz' role, his influence within the company, it is going to be a prominent position. we're going to talk with bob lutz later today. closing bell, 4:00 this afternoon, we'll talk about bob lutz' new role in the company with bob lutz. later this morning, ray young, first on cnbc, talking about general motors emerging from bankruptcy. it's expected to happen in the next couple of hours. becky, back to you. >> all right, phil, thank you very much. obviously, phil will be covering this closely.

phil, we'll talk with you a little later this morning, as well. and some of the world's biggest names in mead gentleman and others gathering in sun valley this weekend. among the personals, warren buffett, google boss eric schmidt, great picture of gates and schmidt running into each other. someone asked gates about the new operating system from google and he said no comment. schmidt was right behind the reporters and they kind of laughed and ook hds. a lot of meetings happening out there. julia bo julia boorstin catching up with us. >> reporter: good morning, joe. with over 70 consumer businesses, warren buffett certainly is in a position to

speak about the economy, telling me that it hasn't started to pick up and that the consumer is still very, very soft. what could help? buffett says more stimulus definitely couldn't hurt. >> in general, i think -- and this is -- i believe in the stimulus and i thought we would believe in another one. but they may be overrated in terms of their ability to end the recession fast. >> reporter: but if you're advocating another one, are they overrated? >> no. i think they're useful. but anyone looking at them as a panamea, but they're using. >> do you think there should be another stimulus? >> i think there should be, but -- >> should we wait until some or more of that pone is out there? >> if you had another one, you would load as little on the christmas tries as possible.

but the president said that originally. then congress got into the in it and i think it's too much pep asked him about what he these about obama's machine and what he thinks so far. >> we knew that it would take six, seven, eight, nine months for all the money to flow through all the appropriate legal and steps that had to occur. so we don't really know. there's no question that the stimulus package was needed. you may need a larger one, but i would wait another three months to really see. >> coming up in the next hour of "squawk box," we'll have more from warren buffett including what he says is at the heart of the financial crisis. plus, guys, i'll tell you what he's going to be doing this

afternoon. >> julia boorstin joining us from sun valley. world leaders are wrapping up the annual g-8 summit. steve sedgwick is in italy with the latest and perhaps, steve, a report card on what did or did not get done. good morning to you. good morning to you, carl. very interesting hearing that debate about sdim ewe husband in the united states. that is exactly the same kind of debate we're seeing here in italy. not amongst the corporates, but along with the world leaders as erchblgs. you have some people that started this week talking about the need to discuss exit strategies. but that seems to be very much to one side and people are very confused. bob zoellick was talking to me yesterday from the world bank saying i it's premature to talk about a second package. people are very confused on that sh. they're confused on all the other big issues and the progress that we've made.

we saw is climate debate earlier in the week. baring in mind the developing neighs decided not to sign up to concrete levels this time around. what else have we got on trade at the agenda? trade, as well. i was speaking to the boss of the world trade organization yesterday. he believes we are moving fast and everyone believes obama is driving things well. in terms of firepower of the international bodies, dominick straus, the boss of the imf, says to me that they've been given enough firepower. >> the decision made at the g-21, it's under way. still, which has been decided, i'm lamenting. >> a lot of things have been decided. the problem is in delivery.

delivery on aid, delivery on climate change, delivery on the topic that's on the table today with development and money for africa. a lot of that 2005, glenn eagle's g-8 money hasn't turned up. it's all very well to get people to degree, but once they've agreed, then they have to delivery. we've mentioned pittsburgh. we've mentioned copenhagen. you can add dohar to that, as well. >> thank you for that, steve. in the meantime, joseph, some markets oa iday, welcome back. it's nice to have you at the desk again. >> yeah. friday, but it feels like a monday, which is -- >> for you. >> yeah, it does. for you, it feels like the end of the week. >> it is a friday. why does it not feel like that for you? >> because i was off yesterday. don't worry, two more days you get another monday. >> yeah. joining us is kevin caron and

grig miller, chief economist for sun trust banks. kevin, it looks like we're in a correction to what some people thought was a bear market rally. are we in a correction? and how much further do you expect it to take us in terms of going down? >> well, the stock market is clearly in a bit of a correction here. we've had bonds basically up the last several weeks, stocks down. and i think that that reflects some concerns about the shape of what a recovery might be. the bounce off the bottom, i think, reflected the fact that the worst did not come to pass and that the stock market took some relief off that. we put the risk trade on. but now i think there's a more intro speculative look about what the future might bring in terms of growth and the economy and everything that i'm hearing seems to suggest that markets and market participants are becoming more skeptical about what the shape of growth looks like after the session. >> i wonder if we head down on the 7s in the dow and the low 8s

or even back into the 7s in the s&p. are you expecting that? >> i think that you could see low 8s easily in this process. we've had a lot of viability. so to visit the lower 800 kind of numbers would not be at all a stretch from this point. >> and greg, are we seeing things in the overall economy that are causing this to happen in the equity markets? >> frankly, it's consistent with the pattern we've seen. >> the data at the beginning of the year. april and may were pretty good recession months. they were moving in a smaller negative fashion. june was disappointing. and frankly, i think now that investors have added risk to their port fomos, they're getting anxious about seeing some return to that risk and that's probably a little farther out there. there's still going to be a good deal of uncertainty as long as we're still posting negative

numbers on the economy. the market would really like to see us pop out and see some positive news, at least on the industrial side, industrial production, maybe a nice gdp number or two in a row. >> are we double dipping? does this look like a w or did we just get ahead of ourselves in the first place and we're bouncing along the bottom? >> frankly, yeah, i think we got a little faster than we had momentum for and the double dip doesn't look like it's measured in the numbers we're seeing. industrial production looks like it's bottomed out and is about to tun back towards the service. the consumer side of the economy and the gdp numbers did rather well for a recession in the second quarter and until june, even the consumer side looks like they were sort of consolidating because prices have gone down and there are so

many bargains out there. >> do you agree with that, kevin? if employment stays where it is or continues to decline, what would get the consumer moving again, do you think? >> well, i think that the consumer is going to be very sluggish. their balance sheets still have a lot of debt on them. there is going to be a lot of pressure on consumers to pear down that debt, delever that debt. a lot of the assets have been removed but removed to federal reserve balance sheets. when you look around, the major issue is leverage and debt. so i think you get some stabilization in terms of demand, but you don't have the get up sxvth that we've seen in past cycle hoef. they may have to adjust what has

had in the past for a more modest kind of -- >> this has been a long recession already. when do you think we'll be able to say that it began at this point and it ended at this point. is it ending now or do we have months to go? >> that's a good question. we have an understand indicator which is too complex to get into here. it used all kinds of data. what we saw was a very, very low reading, the lowest reading we've ever seen on the indicator in december. i'm not saying that that is absolutely going to be the national bureau of economic research's conclusion that december of '08 was the bottom, but it was certainly awfully dark then. recessions are marked from the most dribbled times, i may really we that sometimes around the first quarter of this year, that was the darkest 12346. >> grel, we were hoping that

your answer would be unchanged or something near these numbers. >> yeah, i think we will. i think the third quarter may be stronger than most people are looking at. the consumer does have a little bit behind them that we don't recognize too easily. interest rates are lower. and inplace hazard reversed from a positive 1.5% to a negative 1% in a year's time. this is a potential wage increase. granted, it is for the people that are still working, but it gives them a significant buffer to offset the lack of spending to those who have unfortunately lost their jobs over this period. i think we're under way now. it's going to be a number of months. we won't get any third quarter

numbers for another four months, but i think the process is already under way. >> thanks, gentlemen. see you later. >> when we come back today, remember the public cries of bonus pages pay out to iig? why the inspect is asking the government to dadadada

"what do you mean homeowners insunce don't cover floods?" "a few inches of wat caused all this?" what you donnow about flood inrae may shock you. including the fact at a preferred risk policy for an agent, call th.

ick day. coming due next week and i believe it's about $2 million to be paid out to about 40 individuals. >> the obama administration asking 25 mortgage servicing companying to modify more loans. the administration is sending letters to the ceos of the companies calling on them to devote, in the obama

administration's words, substantially more resources to the government's housing rescues program. the companies are being asked to increase staffing and training so the pace of modification can be increased. >> we know how hard it's been to get some of those services, just to get them on the phone and walk your way through the mortgages. >> once you get them on the phone, to not only get walked through it, not get bounced to five different people. we've heard from bankers who say, look, it's hard to get these things up and running. there a lot of people looking for modifications. but you can imagine the frustration on the homeowners. absolutely. meantime, the world leaders are wrapping up the g-8 summit in italy. john, on the g-8 wrb the initial reviews seem to say that the leaders are limping out of there, that obama had to drag them into some of the few policy decisions they made. and then the journal parities this decision to, in their

words, keep the earth temperatures from rising. was anything done there this week? >> i don't think a lot was done. but of course, we've still got some time between now and the copenhagen climate summit which is the real target for action on this issue. congress, of course, is working through the senate, has delayed action on its climate bill. there may be some relationship between that and the reluctance of these emerging economies like china and india to make firm commitments. so i don't think you can view what happened as a major step forward, but it's not necessarily tanking the process. i think there is still some momentum as evidenced by the house passage of that cap and trade bill for doing something about this. >> yeah. you talked to waxman last night, right? >> i did. >> where do you think he stands with the senate committee? how soon are we going to see some sort of legislation at least come to the floor? >> well, i think there are two questions, carl. one is going to be does congress do anything about cap and trade?

i still think that is an uphill fight in this coming. if you had to lay odds right now, you would say it's not going to become law in this congress, but this is a -- >> you mean the climate change aspect of a broader climate bill? >> i mean a cap on carbon energy emissions and a trading system. there is a separate question over whether we get an energy bill. i think that is much more likely and the energy bill would take some steps forward toward alternative energy and would contribute to a solution, potentially to climate change, but may not have that carbon cap system. but this is a dynamic process. it could change. some people were surprised, including the guy sitting right in front of your camera that the house was able to move as quickly as they did on this bill. so i think we've got to wait and see. but you know, there are some people within the obama administration, carl, who think that they've gotten what they need already by the house passing that bill so that they can go to other world leaders and say, we've shown that we're

prepared or we're preparing to take steps on this, so let's see what you are willing to put on the table, especially china and india. >> it's been said that the stimulus package, john, while the president has been overseas, and he's still got more to do in ghana has an image problem back home and that the president needs to come home and at least leave the defending of the package up to people other than his vice president. do you think that's true? >> well, it definitely has an image problem and there's a big timing problem for the administration. they've said all along, unemployment is a lagging indicator and it's going to keep going up. but everybody has been taken aback by how rapidly it's gone up and how high it's gone up. barack obama himself says it's going over 10%. if that happens late this year, continues rising into the spring, which is what economists expect, you've got a real, real problem with democrats saying, hey, what are we going to do about this? and republicans saying, where are the jobs? it's an effective argument for

republicans right now because they can say, you've spent all this money and what are we getting for it? even if the administration is correct substantively that we've got to wait for this to move through the pipeline, that we're going to see ramped up spending this summer and this fall, the economy is recovering, it's still a tough argument to make. henry waxman told me if the economists tell us we need another stimulus, we can get the votes for it. >> this morning, the journal polled 51 economists and asked them how many of them believe a second package is needed. 8. 8 of 51. >> and that tracks, carl, the view of the obama administration itself. but they have to deal with the political reality of unhappy voters out there, unhappy democrats and republicans all of a sudden feeling wind at their back and coming at them. >> how about sotomayor.

how much attention is that going to get? >> it will get some. diminished by the fact that everybody acknowledges, republicans and democrats, that she's going to be confirmed, so the drama is going to be to what degree do republicans feel that the first his panic nominee in history is something that they simply have to go along with? how much of a fight do they put up? what do they have to show to their base and, you know, do democrats remain unanimous? i think the white house is expecting no democrat will defect on this vote, but we have to watch that depending on this discussion about affirmative action, other hot button issues. i think the question will be how many republicans go along. white house officials tell me they think perhaps a third of the democrat caucus could vote -- i'm sorry, of the republican caucus could vote for her, which would produce a big number. >> it will be fun to watch senator franken on judiciary, as well. >> no doubt on what he's going to do. >> i know.

>> i know you saw this picture taken. it's in the new york post with the president checking out, apparently, this 17-year-old delegate of some kind. i guess this just proves, you really can't do anything without being on camera when you go to these international summits, right? potentially damaging, embarrassing, what? >> you know, i guess it's potentially embarrassing. who knows exactly what he was looking at. i can't blame him if he was looking at what the picture suggests what he was looking at. but, you know, it's fair game. when you're the leader of the free worl, you realize that there are no private moments, especially when you're standing with another world leader and, you know, he's got to take the embarrassment if that's what it produces. >> sarkozy's expression didn't help. >> right. >> because he is so shocked that barack obama would be looking at th? >> it lnl looked like he said,

hey, barack, check that out and barack knowingly looks over and sa cozy is like -- >> well, you know what, joe? democrats have had a little problem with male voters. maybe obama is trying to curve that problem. >> clinton should have cured that. >> exactly. >> you don't know if he's looking at that. >> obama could have droppe his pen on the floor. who knows. >> i wouldn't be surprised if sarkozy ambushed him and said, hey, look over here. >> the camera never blinks. john, busy week next week. we'll talk to you then. >> you got it. >> a hint for you, don't stand next to sarkozy next time. coming up, we'll have more of this morning's top stories. gm's raceo exit bankruptcy, plus we'll get the picture from the futures pits this morning.

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♪ that's the way you do it money for nothing chicks for free ♪ >> good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and carl quintanilla. the big story today, the new general motors already ready to officially exit bankruptcy. it could be as early as today. the company is spending the night signing paperwork, authoring the transfer of cash, real estate and technology and other property. the government backed bankruptcy process took just 40 days. yesterday, a court, a bankruptcy

court ruling let gm sell most of its assets to a new company. and the automaker will emerge without some of that debt. fritz henderson will join the company in the morning. the treasury department led 1 packages and remember, these warrants are the things that the government still held after banks took money from the tarp? that was the thing that was supposed to allow the taxpayers to make up? but this report says that the taxpayers passed about $10 million of profit from government bailout. today's watchdog report states uncle sam could lose about $1 billion if it accepts similar warpts that gol going to be purchased by other big banks that receive capital injections.

the panel is calling on the treasury to sell these securities in a public auction. the panel's chief, elizabeth warren, she's going to join us live in the next half hour to talk about this. this is a big bone of contention right now between big banks and the government. ten big banks have paid back the t.a.r.p. money. the last things on this is these warrants. they don't agree with the price that the government sloog to pay or asking them to pay. >> the small banks, the implication here is that the the government is not getting enough for the warrants. with the big banks, jamie mon is saying, take this to the auction because what you're asking for right know, you're overvalue i overvaluing. they're different. >> there were three har vad financiers who them they are develop these. i guess an auction would be the fair way to do it and let the

market decide. >> jamie wants an aukdz. maybe the big banks will pay more than the small banks. 66%. so it's 66% of what these academic things are worth? >> yeah. or 66 million dollars under. >> is that what it says? >> i'm sorry, $10 million under. 66%. >> mostcafornia state government offices will begin closing three days month starting today. thshutdowns are part of governor arnold schwarnegger's efforts to save money meantime, the s.e.c. will recommend that california's ious will be accepted as a form of municipal debt. some of the banks said they will no longer accept the ious. there's a high degree of risk involved in accepting them and some banks won't. >> i don't know if i would be pinning my hopes on the california legislature

eventually working things out and coming to a comp miedz. >> we doebts know, what do they have behind them? >> does it mean anything to you? >> yeah. general obligation from the state? yeah. general obligation bonds are near junk. >> in california. they're triple b minus, i think. >> but still, gos decides the fate of california? i think you really think the state is goi to declare bankruptcy. >> the syndicate, why they're leaving los angeles is because the business climate, he says, is almost as toxic as the air. just in the way that the city wants to amend contracts with corporat saying, hey, we're in big truf, we believe like something saved their their things and they're shay, no,

it's already - >> well, the california legislature, it's so wamky. to mistake sure that you this don't find those things. >> well, taxes aren't low. you're going to leave, right? >> that's not good. doesn't it feel toi like it's a microcosm of the problems we're going to eventually get? >> it hope not. it seems like the high tax states are the ones that have the biggest deficit problems. why is that? florida has no personal income tax, right, and it's not nearly -- >> florida runs into its troubles from time to time. every time there's a hurricane that pops up down there, the state hurricane insurance fund is database a lot of people say woefully underfunded. >> you would think that you've got a budget deficit, raise the revenue. that should make sense. but then all of the unintended consequences happen and you end up having people move and leave

and corporations leave and the revenue actually goes down, the tax rate goes up, but the revenue goes down. that's what we're looking at nationally. >> i think that's right. let's get a look at markets today on a friday. we're going to be expecting the gm news. it could be interesting to watch as they exit chapter 1. but we are lower this morning and asia had a rough night, again. the nikkei is down 8 straight, back below 9,300. we'll take a close look andee if the s&p can stay close to these 200-moving day averages. $69 a barrel, down 63 cents to $59.78. we're looking at the yield falling down, 3.348%. dollar/yen have been relative winners for the week. 92.62. they're talking about 9 as a technical level on dollar/yen. finally gold with dollar --

>> close. >> look at that. >> below 3.5% on the ten-year. >> and is there a chance we fall below 8,000 on the dow? >> and do we get in the low 8s on the s&p, too? it's a big reversal. >> do you think doug crass's generation of the low is in jeopardy? >> i think it was was. but listening to a series about what the most surprising thing in looking back, you know, at that sequence of events in 2001 where we thought we made a low and then we -- >> have you seen the chart, the market from 29 over the course of months and the overlay the markets from august? >> it looks -- >> it's interesting, interesting to watch. >> yeah. so that's bad news because after that, there was a pick up and another steep the drop-off. >> 30% and 40% up and down moves during the 30s. >> the vix was high back then.

>> let's ask ben likten style more about this. ben, you heard what perp talking about. >> what are the different points in technical levels that we can fall below. >> i would say everything frl dollar to the oil prices right now. markets are holding on considerably well in light of all of what's been going on. we're looking at a couple of key levels of support that was managed to hold right now while we've seen that decline which has been a mirror image, giving back a percentage of this right now below the 900 level now. again, this major level of support that i've been looking at and i think a lot of other traders, as well, is basically 872 in the s&ps.

again, you can look at it possibly as 8,000 in the dow. major critical levels at this point as far as i'm concerned and a breach of these levels would be a major concern and probably open the door to further declines and more selling. we're coming off a couple of major points, technical levels, highly publicized head & shoulders that we saw with one of the shoulders being roughly 928 in the s&ps. and, you know, the head being from the june highs. we're back into mid april levels at this point, which is a concern. things don't seem to have -- there's not much of a light at the end of the tunnel from some of the selling we've seen. some of the positive things are seeing oil prices come off with considerable levels, considerably to those levels that you just mentioned again, $60 a barrel. another thing we're watching is gold as it inches its way towards $900 a month right now. one of the things that we're watching right now seems to be

this kind of transfer of money into the bonds right now, into the 30 year, which nich, the real only positive thing out of that is going to be for those people that seem to have missed the mortgage refinance trend or wave that we saw a while ago that is possibly going start to come around again. but you know, again, we're seeing these declines right now which are disappointing. the market's inability to get anything going at a positive level, up above positive for the year was a disappointment. >> and i heard people, traders yesterday saying they were concerned because yesterday you had a lot of what seemed to be very good news. when you heard the jobless claims lower than expected, which may have been offset, some of the concerns for the jobs number the week before. you had alcoa giving us better than expected numbers to kick off earnings season. if that's not the type of thing that would inspire some confidence in the markets, if you don't see the markets moving strongly higher on news like that, what does it take to get

money off the sidelines? >> i think the money is on the sidelines at this point. i think it's a coin toss in terms of what it will take to get that money off the sidelines. but really, again, i don't think we're starting to see we're out of the woods at this point yet or the light at the end of the tunnel start to go develop into anything really -- anything prosperous. we've got issues right now as we look at gm. we're still in sort of the summer doldrums at this point with the market and very little has been able to get things going on that positive level. you know, a major concern, as i mentioned, is this dollar and we've been seeing major declines against the yen and that's one thing that's been weighing on it mostly. it seems like we're coming out of this phase right now where we were sort of looking at the market and it was focused on how things could be worse and sort of this relief rally that i had been talking about before. but it didn't really last and the low volume associated with

it was making traders skeptical of this rally that we had been seeing. up around 900 in the s&ps and their inability to get things going with 1,000 or 2,000 with this decline wooerve seeing right now. volume has been picking up on this downside activity. there has been new money coming into the market. it's been on the short side, unfortunately. >> ben, thank you very much. have a great weekend and it's good to talk to you. >> from the futures pits in chicago to the overseas markets now, in london where geoff cutmore has the layest out of europe. >> good morning to you. we're in negative territory. it fits the picture you were hearing from your technical analyst, i think, that we've got this the drip, drip, drip sidewayes and lower and as far as the markets are concerned, this is where we stand on the numbers this morning, joe. there are a couple stories out there that are not encouraging people to go out there and buy.

carlos scone saying he doesn't see an auto recovery in 2010 at all. two home builders, barettes and retrosaying they will increase construction of homes, but they're only going to build to sell and they're not going to build forward. which is why on this loser's list i think we're going to see on the construction sector people were looking more optimistic. elsewhere, storms brewing in the uk over a murdock newspaper. this is the news of the world and this goes back a couple of years. people were cracked or tapped into by journalists. now we're just following this to see how it unfolds. news international is not saying too much about it at this stage. they say the legal arrangements that they've made mean they can't talk too much about it. but it's got a political angle because the rm toer editor of the news of the world is now the head of the communications

operation for the conservative party, which is the official opposition here in the uk. so he's taking a little bit of heat at the moment and we'll just continue to monitor and see whether it has any broader implications for the political situation in the uk. becky, over to you from london. >> geoff, thank you very much. we've been following that story, too. geoff, have a wonderful weekend and we'll talk to you soon. if you have any questions about anything you've seen here on "squawk box," go ahead and e-mail us. thwod of business when we come back. where will you find the stability and resources to keep you aheaof this rapidly evolving wor? the are tough questions. that's why we brought together twof the st powerful nam in the industry. introducing morgan stanley smh barney. here to rethink wealthanagement. here to answer... yo questions. morgan stanl smith barney.

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time now for a check on the news outside the world of

business. was monica on yesterday? moca is back. goorning, monica. >> goodmorning. great to seeyou guys agai great to be with you. we'll start with president obama in italy wrapping up meeting with world leaders on the g-8 summer. next up, a tour of the vatican where according to the white house he will have a frank but constructive talk with the pope. roland burriss is expected to announce he will not run for the illinois senate in 2010. here is one of the weekend. in new mexico, one restaurant hoping to make it into the record book with what it claims is the world's largest green chile burger. it's a ten-inch patti topped with a half a pound of cheese. the owner is awaing word from guinness on the$18 mega ml.

>> wait a sec at a record? >> well, it' ten nches, one pound of burger me and a half a pound of cheese. they said the green chile burger was so great, it was hard to come up with a way to beat it. >> that seems like an easy thing to beat, though. >> but why? >> i can always remember the picture of the guy with the longest fingernails. >> howard hughes? >> no, no, it was the guy with the longest fingernails. it's part of the reason i don't have fingernails. that creeped me out. anyway, monica, thank you. >> more about beck we didn't know today. >> creepy, creepy. corpses that grow -- >> not forever. >> if you saw this picture -- >> no, i saw that. that's gross.

how does he -- you know. >> that was not the first thing that popped in my mind. >> i guess he could do it like this. >> oh, from far away? >> that's an advantage. >> helps with your back scratching. >> that guy could help you. >> i would probably move away. anyway, more tgif when we come right back. from movie release toes wild and wacky business headlines, we'll get to the stories grabbing our attention and leaving us shaking our heads thisorning playing thrghout

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bruin "bruno" opens up this weekend. it will get a lot of attention over the weekend. we're anxious to see how it does. the newspapers try to figure out the phenomenon that sasha cohen is. they say it offers more shock value for your moving going dollar than any her movie this year. they call cohen a master of "the times" says it offers both sucker and sucker bait for liberal minded viewers who want to see people who are tolerant,

quote/unquote, ridiculed if a movie. it's going to get a lot of attention. we've talked to one person who's soon a copy and they said it makes "borat" a little pg. >> i never saw "borat." people don't know it's sasha cohen and -- >> yep. >> makes them look like hicks. >> that's right. and it's outlandish and unscripted and -- >> you know, for nbc slaib universal -- >> he goes around the world. he goes a lot of things in the middle east. it's not all americans he's trying to parody. good some bad news for all of us here. that is, if you starve yourself you live a lot longer, starting to look like. the first studies were done on mice where you give them 30% fewer calories and they live longer. they want to see if that works in primates.

20 years ago they started with monkeys and it seems to indicate if you eat a lot less and starve yourself you live a lot longer. >> how much longer? >> 20 to 30%. >> fewer calories? >> no, 30% fewer calories, and then a fairly -- >> why would that happen as a bio -- >> because it seems like the cells, if they can detect there's not a lot of nutrients around, certain processes shut down that increase aging -- >> does that mean you're tired all the time or lack daction ad or -- >> i don't think. the substance in red win, resertrol, it would be fun to try, and people are trying to -- biotech companies that actually are trying to -- where you can take a pill of what's in red wine to see if it works. some people say it's not conclusive but pretty

conclusive. check it out in new york times with monkeys. >> food's too fun. let's not try it. nothing worse than being hungry. when we come back we'll get top stories on this friday. he hundreds a $20 billion hedge fund, now he's taking time to spend time with us. he's up in our boardroom, the man himself when we get back after a break. intrucing one a day women's . the first completeomen's multivitamin in ink mix. with more calcm d vitamin d... to support bone and . while helping you hyate. one a day mes 2o. refreshingly healthy. kn that connectivity is t reaching further, ster than anyone else. together, we'rhelping to shape the exchanging world. nyse eurext. powering the exchangi world.

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climate change a major focus at the g-8 summit in italy. the country's agreeing to limit

global warming. the president set to wrap summit talks, hold a news conference and head to the vatican to meet the pope. the fire storm over bonuses may reignite. aig getting ready to pay out millions of dollars in bonuses to corporate executives. kenneth feinberg may have something to say about this potential land mine. on the road to recovery. general motors expected to exit bankruptcy today and officially usher in a new era. what the future holds for a leaner, greener gm as "squawk box" begins right now. ♪ on the road again ♪ just can't wait to get on the road again ♪ ♪ well i find love is making music with my friends ♪ >> bob dillon. >> good morning. welcome back to "squawk box" on cnbc. futures in the red this morning. asia had another rough night overnight. the nikkei down eight straight and europe in the red as well.

some stop stories, gm has signed the paperwork. they will officially emerge from bankruptcy today and the president getting ready to hold a news conference this morning as the g-8 wraps up. we'll carry it live when the news conference happens. then the president is going to meet the pope. we both both stories covered for you. phil lebeau in detroit and steve sedgwick in italy. >> reporter: we're wrapping up in italy. sylvia berlusconi spoking as i speak and the president speaking in 55 minutes time. what can you say about berlusconi? he has scandals, but he can pull this off. this was going to be a nightmare, this conference, but he managed to get the world media, everyone else to italy, anravaged zone.

there's been no contention on the surface, which is a second success as well. there's been limited movement on free trade, limited movement on the discussion on the recovery. but one big success, undoubtedly, has been president obama. i've seen world leader after world leader coming up and talking to me and other news group saying leadership from the u.s. is back on the table. leadership on aid, leadership on climate, leadership on free climate. the australian prime minister congratulating the president for his leadership on this issue. president obama wrapping up in about 55 minutes' time. he will be talking about, hopefully, the latest deal to give more aid to africa, $15 billion is the number we've been thinking about. and also he'll be applauding the fact that world g-8 leaders have reached some accord to development levels in terms of climate. hopefully wushing forward to something with developing nations as well. china and india refusing to sign up to commitment levels but toward the end of the year in copenhagen we're examining to see some movement on the story.

that's it from italy. let's go over to phil lebeau and talk about gm. >> reporter: steve, the big story in detroit at general motors' headquarters, the company has signed the papers. reports this morning the company signed the papers to emerge from bankruptcy coming up at 9:00 this morning gm ceo fritz henderson will be anounding the new general motors and new structure at gm, including some major changes in the management. check out how they'll be stream lining operations at general motors, at least this is what will be announced. they'll be stripping out 450 top executives, most executives will likely be taking some type of buyout package. eliminating 4,000 white collar jobs. the keeshgs streamlining management, that means, trying to make general motors more quicker, more nimble as it operates outside bankruptcy. bob lutz will be a key figure, taking a new role with general motors. he's not retiring as scheduled at the end of this year. exactly ahis lead role will be in the management of general motors? they'll spell that out today at

9:00 this morning. whatever it is, he, fritz henderson, the other executives here at gm, they have got to do something to stabilize general motors sales. the u.s. market, they still lead it, they're number one here, but the market share is down to 19.6%, under 20%. chevrolet is 63% of gm sales. it's going to carry the water for gm. its success is going to be gm success in the future. we're going to be talking with ray young, cfo of general motors about the new general motors, the plan for the future, coming up this morning first on cnbc at 10:30. carl and becky, it is a big day here in detroit for general motors. just 40 days after going into bankruptcy, it emerges. now comes the tough part. convincing americans they can still believe in gm. back to you. >> phil, for those who are wondering whether or not this new gm is truly new, how should they take that lutz news? isn't that -- what does that do with the notion of out with the old, in with the new?

>> it's encouraging news. >> it is? >> reporter: i know a lot of people will say, bob lutz, a lot of people will say, listen, he's part of the old blood. he was here when they couldn't stop things. fact of the matter is, when you talk with people in the industry, if you went to any other automaker and said, bob lutz is available, you can bring him on in a lead role, he would be snapped up in a heartbeat. he's considered one of the people who has the magic touch in terms of understanding what the public wants. now, having said that, over the last five years he's done some great things with gm products but they still lost market share. it's going to be a tough job for him and fritz henderson to say, listen, we have the formula to win now that we're outside bankruptcy. >> phil, thank you very much. we will check in with you a little later this morning. at the allen & company conference in sun valley, ceos aren't just talking about the financial crisis, they are trying to figure out how to fix it. our julia has been speaking with the movers and shakers there and she joins us from idaho. good morning again, julia. >> reporter: good morning again,

becky. well, berkshire hath aware warren buffett tells me stimulus alone won't be able to save this economy. he says the housing crisis is the heart of the economic downturn. solving the glut of real estate in this country is a top priority. >> if you want to end the recession, as soon as possible, you do nothing to encourage new housing construction. very tough on the home builders but that is -- that's the prescription for getting supply and demand back into balance. >> reporter: what does that mean in terms of interest rates? >> well, you want low interest rates. the more affordable houses are -- people have to have a job, too, but low interest rates are a boone to housing in that they mean people qualify for owning housing of a given type that wouldn't otherwise. but we still have too many houses. the only way to do that -- we can either form more house holds, get all the 14-year-olds to live together, which they would like, or blow up a bunch of houses, which i don't think any of us would like, or produce more than the household formation and then we will use up the inventory and get back to

a vibrant economy. >> reporter: ceos here aren't seeing much of any green shoots but that isn't affecting the fun time. no one took up lebron james for a pickup game but warren buffett tells me can he and the cavaliers star will be teeing off. i asked him if james' power on the court extends to the green. >> he tells me he's never played. i've played 65 years. bet on him. he has a special set of clubs. phil from nike gave him this special set of clubs, so who knows. >> reporter: coming up in the next hour of "power lunch" it's all about the economy. i'll tell you what warren buffett says the other ceos are telling him. >> thanks. now to the aig story. the company is preparing to pay more bonuses. it's hoping for a blessing from the federal government to payment to several dozen executives. the company doesn't technically

need the okay of compensation czar ken feinberg but after the public outcry over the $165 million in bonuses in march, any additional payouts are viewed as a potential land mine. the payments are said to be delayed from last year, due next week. here's the take of the normal take here. isn't that incredible, after a 10 for 1 reverse split. it goes straight down. here's the daily news. aig heads back to the pig trough. so if you were to -- honestly, it's problematic. you cannot -- you couldn't pay out $10. you couldn't. >> i think you could maybe pay out $10. >> no, you couldn't. carl -- >> $10, not $11. >> this is $2.4 million and it's 48 executives. i don't know who gets what, but that's about $60,000 -- >> the last -- the last round of outrage was about -- >> is that schwarzenegger 60,000? >> i'm doing the math.

it is $60,000. >> it's problematic. it just shows you how difficult -- >> this is $2 million. >> $2.4 million with 48 people. it just shows you, it is problematic. the taxpayer feels like the only reason aig is around because of the money the taxpayer puts around. anything that goes to salary or compensation feels like it shouldn't happen, which is one of the reasons we're going to have a problem with the government running corporations. >> although there's understandable -- >> there's always an although with you. >> there is. >> why is there always an although -- i understand, because the taxpayer but all the money in. >> and you want it back. people don't look logically when they get mad about stuff. >> that's what i said, problematic. you couldn't pay out $10. >> no. >> you couldn't. >> in this environment it would be difficult. >> anything that goes to salary or bonus of any kind. and it's going to be -- it's going to be tough to get our money back. >> our guest host is among the world's largest hedge fund

managers, $20 billion under management. ken is founding principle of aqr. joe brings up the thing we keep coming back to. it's like a magnet, this issue of compensation. i wonder -- your thoughts on the aig news. on this last -- on this next round. >> i'm going to get in trouble because i'm going to agree with joe. is that bad? >> no, no, that's fine. a lot of people do that. you'll regret it later. >> and i might live to. >> i'm kidding. >> i think you have to divide it up. the country did bail out aig, but once we who do that, we want aig to succeed as much as possible. we don't want people to -- like -- if you owned any company you don't want to pay excessive compensation, which means more than you get in return, but you wouldn't want to pay compensation for them to run to a competitive firm. >> the problem is trying to make this something salable to the public. trying on get by with this, doing it without enraging the

public, which, good luck. >> here's the problem. and i'm not saying there was an alternative but i'm an anti-bailout guy in general. you're dead right. we have that problem now. the public is very smart as aggregate. suggestly we have the public running a company. so that's the core problem. you correctly point out that once you have that, you don't always make rational decisions. but the core problem is having the government own a company. and suddenly have the political process making economic decisions. so this is going to be a problem for a while. excessive compensation is a bad idea anywhere for any firm. and if we want to get our value back, we shouldn't pay excessive compensation but we shouldn't pay nothing because we won't own anything. >> this really came to a head when the president was criticizing hedge fund managers and banks in tarl when he was working with the chrysler bankruptcy -- >> you go to me intentionally, aren't you? >> we all remember that speech.

these banks aren't cooperating with the process. in his words, i do not stand with them. you did something about that, am i right? >> yeah. i wrote a note. i don't know if i need to defend myself. let me clarify. when the republicans were in office and they banned short selling i wrote a note, i think the president's done good work on fair trade. i don't -- i don't just yell at one side. i'm generally pro-market and i think so-called speculators and hedge funds get a bad wrap. i think what the administration did was -- this is well known now. when i wrote it it was a little more new. but they skipped the rules of bankruptcy. when you buy a bond, you accept a lower return on other securities to get more protection. that's the deal. if we change that deal after the fact, a lot of things go crazy. and i know some people, some very credible people, some friends of mine, think the damage is limited. it was only in the case of autos. i'm of the view that you can't send a little on those things. when you kind of skip the rules,

it opens up the idea that when -- when are you not going to skip the rules? if you do it one every ten times it's as bad as doing it more often. people don't know who to trust. >> is the capital structure infected? >> i think there's a cloud over it. this was a one-time thing. if it's never done again it will fade and not be that big of a deal. it certainly raises the precedent for anyone buying corporate debt they have to have it in the back of their mind they might be behind someone who shouldn't be ahead of them. what smells a little worse, frankly, someone who is more politically connected than them. that's not shocking. >> i think i can harbor a guess. >> well, you know, i'm not against unions in any way. i think there should be fair bargaining but clearly the president's political basis is more union than hedge fund. by the way, to say hedge fund, the governor of indiana made a lot of good points, it's not just hedge funds who invested in chrysler. one of the techniques that any

politician of either side will use, they're pick out the most vulnerable person to yell at and it's easy to say, we're not going to pay back those crazy hedge funds than those crazy indiana grandmothers. >> exactly. >> i lost but it's a battle. not a war. i think we came out in defense of investors. and the rule of law. and i -- i think everybody gets something wrong and right over time. i wouldn't say the administration has gotten everything wrong. but i thought they were wrong like that. >> did they reply to you? >> no. i was expecting a personal note. the president is going to talk from the g-8. maybe he has some thoughts for me. >> one shout out to cliff. we'll get to a lot more about the markets, whether you're long and short, some views of the economy so cliff's with us for the next couple of hours throughout the show. all good? >> all good. >> what's next? oh, comments and questions about anything you see on "squawk," squawk@cnbc.com is our address here. futures are a little negative. you see the euro/yen cross,

guys? >> whoa! >> yeah. a lot of damage. carmen just wrote in and said that today could be troublesome. >> two, four, eight, 10, 12, 14 today. what else did dennis say? >> you mean -- >> oh, yeah, any weird -- when we come back, we'll talk to the chair of the t.a.r.p. oversight xhe, elizabeth warren on some who bought government warrants did so for leslue. i ce aflac! you rely need it these days. how come? well if you're ht and can't work it pays youash... yeah to helpith everyday bills well if you're ht and can't like gas, the mortgage.... ...and groceries. it's like insuranc for daily living. .what's it called? uhhhhh aflaaac!!!! aflac. we'vgot you under our wing. oheah! that's it! a-a-a-aflaaac!

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the congressional oversight panel is releasing its latest t.a.r.p. report. this time focusing on the repayment, including the repurchase of stock warrants the government owns. now here is elizabeth warren, chairman of the oversight committee and professor of law at harvard university. thank you for joining us. we've been focusing on these warrants this morning. there's contention from the big banks that have paid back t.a.r.p. that the government is asking too much for what they expect to be paying for those warrants to buy them back from the government. your report, though, says the warrants that have already been bought back says the taxpayers have lost out on. >> that's right. i guess it's not surprising the banks say the price should be lower when they're on the buying end. >> but what happened? how did you analyze the price? i know it's difficult to get to some sort of price for these

warrants. how did t.a.r.p. -- the t.a.r.p. funds come up? how did they figure out how to come up with the first 11 banks to pay back and how do we evaluate it from here? >> you build a mathematical model and put in a lot of data and see how this thing comes out. in this particular case we also asked three harvard business school professors to do independent valuations. we didn't have them talk to each other. but to look at what we had done to see if it was reasonable, to see if this was the right model, to give us advice and they all came to the same position. that was that we did a reasonable valuation of this and we discovered at the end of the day that treasury in the first set of transactions was getting about 66 cents on the dollar for what seemed to be the fair market value. >> the big banks will push back and say, maybe that's not the best way to do it. ask for valuations. maybe the way to do it is come up with an auction, take it to

the public and let the market decide. >> that's exactly what the report says, too. the report says, this business of two-parties sitting down and trying to arrive at a fair market value is always going to be fraught with trouble. we point out there are options. that's the biggest and most obvious option, take it to the market and let the market sort through it, let them figure out what the price is. it's utterly transparent. no one has any problems. alternatively, you know, the government could hold these warrants over a period of time and let their value reveal itself. but the point is, what we really stress here are two things. the first one is enormous transparency in the process and the second is to say -- we talked about this before with valuations. we had a big report last february that was talking about the finance. when treasury put that money into the banks to begin with, what did they get back in terms of stock and warrants? we did a big valuation report and discovered that they had

given up about a third of the value they should have gotten. the difference this time is -- back then, we could only talk about it after the money was already gone. it was too late. we could shine a lot ight on itt the money was long gone. this time we have only had a few transactions. and today, next week, the week after that, treasury and the banks are sitting at the table negotiating these prices. so this report comes in a little ahead of the curve. says, look, we've done an evaluation on these first transactions. we think it's problematic. let's be really careful as we go forward with the rest of the transactions. >> why even go through the exercise? why not go straight to the auction? listening to your description of it, would you call it marking to model? that's what it sounds like you're doing. that's why we're heren the first place. it sound like you're -- three harvard business professors. you're kit kidding me, right? >> you preach to the choir on

this, but there are contractual restrictions. so the deals that the treasury negotiated with the banks back on the front end, last october and november, say that there has to be first an opportunity for the banks to buy back the warrants. in other words, treasury doesn't simply have the option to say right from the beginning, i'm going straight to the market. if the parties can't reach an agreement on the price, then you can go to the market. now, obviously, that should affect treasury's negotiating position. if you're reluctant to go to the market, you settle out cheaper. if you're enthusiastic about going to the market, i think you get a little stiffer on the price. >> is part of the problem that treasury doesn't necessarily want the banks to be completely out from under this t.a.r.p. program because they're not sure that the system can handle everyone and we're not going to see another downturn? >> i don't think that quite would fit with the numbers. what treasury's doing is facilitating getting them out, in effect, by taking less money

for the warrant repurchases than at least our model would suggest they should have taken. >> to the degree the government makes money on these investments, what should happen to those profits? there's -- barney frank has views about directing that money straight to housing. others say it's the taxpayers' money, it should go straight back to them. has the commission weighed in on that front? >> it absolutely has not weighed in on that front. i think you need a different kind of expert for that. my job is to make sure that the taxpayer is getting the maximum rate of return, the most dollars for the warrants in the repurchase. how the government spends the money is a whole question that is bigger than i am. >> elizabeth, thank you for your time today. we appreciate it. >> thank you. >> once again, elizabeth warren. coming up, our guest host, cliff about investing in the second half of 2009. the president is set for a press conference from the g-8

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welcome back to "squawk" on this friday morning. let's get a check of the markets on 7:30 eastern time. there's the futures. we'll be starting out in the red as we see a lot of risk aversion not just in the states but global markets as well. gm is out of bankruptcy. just took 40 days. ceo fritz henderson will hold a news conference on the business plan going forward and that will takela at 9:00 a.m. this morning. tasury secretary geithner will tell congress today th an explosive datives market, ote, blind-sided e government lasyear, helping spark the fincial crisis. he expected to propose today the sec and cftc regulate the derivatives market. this update just in on the madoff asset liquidation. as of june 30, 1.3 billion has been recovered.

there have been eight legal actions filed against related parties. i think the knelt losses were about 13 so they're a long way from recovering anything. that's gone. >> thanks, carl. etfs and commodities dominating investor interest in latest months. vice president of research at morning star and cliff of aqr capital management might have a few things to say as well. i wouldn't know what to do right here, john, to be honest with you. is teams like it makes sense just selling a bunch of options, selling calls, selling puts. it's so trendless at this point that it's -- it seems impossible to make money anywhere. >> it isn't -- the trend is not as strong as it was last year, obviously. and that's why last year trend following commodity strat gis were the market stars making about 10% on average. of course, what was a terrible

market for everybody else. this year they've been struggling. the trend following commodity strategies have been among the laggers. as you say. up, down, hard to know what's coming the next day. maybe you have the best word on this, joe. i don't know. >> i do. it's a little frustrating when the money itself seems to be behind the trend. i mean, that's not going to work forever. it would be nice to actually be able to gauge supply and demand of these things, get on a trend early and ride something that actually has some basis and fact rather than having just the fast money or the financials actually resulting in the trend. >> there's no question the explosive growth in exchange-traded funds that are offering commodity strategies, you know, has -- has had an effect upon the markets. we don't know if it's just a moderate effect at this stage or a powerful effect. i know forces in washington are looking into that and are concerned about that right now.

but it's -- you know, it's a new factor and one that's not yet been accounted for. people are a little puzzled as to how to fit this into their trading patterns. >> we do have an expert here. you were kidding with me but we do have cliff here. i was kidding with cliff off-camera with no momentum anywhere, how do you make any money? you're back to like riskless arbitrage type stuff. >> we stopped calling it riskless in 2008. it's two thing. it is the absence of trends. we do believe trends exist and there are momentums in the market and individual securities but we're big believers in valuation. what we particularly love and i don't think we're unique in this is something that's cheap and has a good trend. you have two things going on. you have basically a lot of trendless markets at the market level. and you have a lot of markets that -- at least according to our gauge, is close to fair value. valuation doesn't tell you a lot when it's close. if it's a little higher, a little lower, we can't measure it well. the peak of the tech bubble,

bottom of march of this year. valuation can tell you a lot. it can tell you what to do. when valuation near fair and not a strong trend we do think the way to make money, you can certainly do nothing. people always forget they have the option to do nothing and keep their portfolio pat. if you're going to try to make money, we think spread trades, arbitrage trades, i find it hard to admit, it would be odd for me to talk about something we didn't do. convertible arbitrage, we think the markets are gotten more fair but tread inefficiencies, the grease hasn't hit those yet. people are scared to go into those. i wish you were right that they were riskless, but lower risk, more -- >> but spreads -- >> more boring things that aren't going to make you -- well, they actually made you a lot of money so far this year but in general aren't going to make you a ton of money but ways

to grind out returns. we think are better plays than trying to guess which way the market's going. >> i don't want to make cliff mad here, but the hedge fund industry itself, on the upswing or on the downswing? the reason i say that is that i don't know how many empers had close. i can lose 40%. i've done it before. i don't have to pay myself to lose 40%, which is what most did. >> the hedge fund industry is still refrenching. obviously, last year -- they didn't lose 40%, some did, but most 20%. i don't know, the term hedged just doesn't feel very hedged when you're down 20. >> and then you have etfs -- i know there were oil etfs long on the way up, short on the way down and you still lost your butt. >> the lef regged etfs are a whole different world. you can own them safely for about five minutes and after that -- >> did you read this letter from

cerbrus. it kills us we are lost money and been part of the problem for you. we feel an obligation to you to turn it around but we don't know when or how much -- >> we're normally a bright spot in these times and bad markets but in this case we were part of the problem. >> can i jump in? you didn't upset me but we have to talk after the commercial about your comment. >> okay. >> no, i'm kidding. last year -- >> you're doing okay. i mean -- >> you know he's doing okay. >> life's not that bad. >> you do have clothes on. >> there's a correlation with who you invite on here, you know that, right? but if you look at hedge fund investing, last year was -- this is going to put it mildly, but was not a bright spot. we've been writing for years, and we're not the only ones, that hedge fund were more net low on the markets in general than had been let on. they are partially about extra return, partially about arbitrage strategies and also

more of a bet that markets will go up over time than a lot want to let on. if you walked into 2008 and you knew that, and i think you could have known that, you weren't surprised they dropped half the market. when you invested in them you took money out of your equities. you might stink in your hedge fund but -- >> 2008 was rough for a lot of hedge fund. it was a rough year for you, too. >> it was a rough year for us, absolutely was. but i can't -- this will sound -- i don't mean to be overdramatic here, but you judge thingd over the long term. hedge funds over the long term have done surprisingly well. you don't judge things -- everything's had a rough year. >> cerberus is not allowing people to take money out when they're making redemgs and they say we'll lower fees -- >> let me talk about gates, stop your investors from redeeming. i don't mean to make this a commercial but we didn't do it

partially because we run liquid things so we don't have to do it so i'm not bragging that much. people put up gate. people put up gates to protect your investors. >> but should you still be charging them -- >> if you put up gates -- there are people down only 5% or so last year who put up gates. no excuses for thap not going to name names. and people who charged -- cerberus seems like they're putting a cut in. if you charge anything or, god forbid your full fees -- >> i'll still going to charge you 1%. >> we're not going to charge you but it's not in our best interest to sell. that seems reasonable. we'll charge you the full fee. i'm not going to defend that. we've been talking about the abuses in hedge funds. i'll take the side of any argument, apparently, but there are pros and cons -- >> you have a future in tv. >> yeah. or politics. >> yeah. >> the first one is a compliment. >> cliff, think about what -- you finish that later.

i want to get a couple more comment from john because he's leaving in a second. john, index funds, which people talk about, you know, vogel, they're flat for 12 years. haven't made any moy in those. >> and then -- >> and then the greatest stock picker, bill mueller, lost all that he made last year that he made in eight years. so i'm ready to just stay in cash for the rest of my life, which is what we may see with a lot of the investing public. >> well, it does depend on what you're indexing. when you say index -- >> if you're going to play the -- if you're along the s&p. >> yeah. so you're talking about long the stock market. obviously, people have been indexing other assets and increationly so these days in exchange-traded funds where there's an index for just about every purpose. cliff can tell you about that. >> which one should we buy to make 20% this year? dpo well, that's why you have cliff over there. >> he told me all i can do is work these spreads. >> they could do it for you. >> we'll point out bill mueller was up 40%, 50% in the second

quarter. it was quite astonishing. i don't think it made up. he has a ways to go to make up for '08. he did have one heck of a second quarter. >> joe, you're right about the long term, it's something like eight years. but i know you're playing devil's advocate. if you look over 100 years, there's plenty of eight, ten years where stock investing doesn't make you moin. you don't just invest in stocks, but over that period bonds tend to do well. it's not corporate bonds but government bond. >> i'm saying you should diversify. >> it's radical, i know. but i'm also saying this show is great, i watch it every day, but when it comes to what you do as an investor, you have to take a long-term prospective. eight years ago everybody was stocks for the long run. a little contrarian investing and you hope to god i'm right. >> john, when you do discovery exactly exactly what we should do, you'll call us, right? >> yes.

and i'm looking to be a guest host at that point. >> thanks. >> john, call me first. >> yeah, go like this, cliff f you're going to do that. >> sorry. >> call me. thanks, john. >> thanks. coming up, we'll take a check on the markets this morning. yeah, i see you over there, joe. more furor over bonuses set to be paid out at aig. what is warren buffett saying about the economy right now? julia knows, she's in sun valley and she caught up with the ceo of berksre hathaway. a gal golf bag can hold. and while th leaves a little room for bas and tees, it doesn't leave roomor much else. the's no room left for delines or conference calls. not a single pket to hold the stressf the day, only 14 clubs pick up e right one and drivit right down the middlof pure michigan. your trip begi at michigan.org.

get a check on the markets, cme with kronus, michael of bank of new york mellon. what do you want to talk about, kevin? short or what the ten-year -- what is it now, 335? >> yes. >> are you kidding me? >> amazing me. where have we been, joe? i think that's important. obviously, decent amount of

supply placed this week by the treasury and quite well. we'll see how much that gets passed around later in the session today. but i think the key, when you put it at that rate, one of the things we're looking at is there's an excessive amount of volatility in the foreign exchange markets, especially in a developed world, u.s., the united kingdom, germany it, for instance, ten-year yields are clustering around 350. so it's kind of an anomaly to see this much currency activity when rate structures have stabilized in the short end and are clustering in the ten-year sector. so now that there's been some deleveraging, look for some -- the volatility in foreign exchange to die down. >> you agree with that, michael? >> well, it has been certainly very choppy in foreign exchange recently but not anything untypical from a typical day in

july -- a week am july. the market has been following basically developments not only the g-8 meeting this week but also more broadly the stock market and what's good for the stock market seems to be bad for the dollar. the decline in commodity prices overnight, the decline in global equity markets. we've seen the dollar inch up a bit and we've seen also the yen benefit as comments out overnight from the economy ministry of japan indicating that they're not comfortable with recent strengthening of the yen and they're following it very closely. so i think that really is the big story in foreign exchange right now. >> michael, angela merkel is out with some comment, obviously her final press conference after the g-8. she's talking about this idea of some other dominant world currency is not yet practical relevance in the near future. if so, why do we talk so much about it? >> because there are so many dollars held offshore. it's not just china.

it's other sovereigns that have developed an enormous treasure trove of petro dollars as well as u.s. dollars. they hold these positions. the threat is they could dump them if they're not happy. that's unrealistic threat, however, because of course that would be basically biting the hand that feeds you. so they've they put off discussing this from the g-8 and they're bound to back at the g-20 later this year. >> it made sense, nobody's been talking about china manipulating their currency, as long as they're on the attack with us. it could be as simple as that, couldn't it? >> absolutely, joe. i mean, china wants to have their cake and eat it, too. they wanted to be able to intervene in the markets, develop these what they consider to be now national wealth, not just to foreign exchange reserves and manage it as well. consequently, if possible, they want someone else to bear the foreign exchange rick. that's just -- >> kevin, don't they have the most to lose if the dollar continues to go down and then

we'll pay them back in devalued dollars. we could laugh as it's happening to the chinese. >> well, we'd be laughing and bad thingd going on here, too, for sure. >> but certainly not in their interest. >> that's right. it's mutually assured destruction through the currency. i don't think we're heading in that direction. if we can figure it out, i feel confident the governments understand they're deeply embedded in the system also. i think what's interesting is that from a trading standpoint, people seem to have a very keen understanding of what they call the yen carry trade about you the dollar is still the international currency of leverage. certainly with rates as low as they are here, it's the dollar that starts to boom up when people are deleveraging. so they understand it with the yen but they don't really notice it with the dollar. so it is perceived that the dollar is weak. in fact, it's quite stable and much stronger than it was last

year. >> really? >> yes. >> really? and you concur. okay, that's good. no one ever -- no one -- never did well defacing a currency. i don't think anyone in history has done well. kevin, thanks. good to see you. i miss you. he was in studio for -- >> you did miss him. that was a good show, too. >> michael, you've been in before. we'll see you again hopefully. have a good day. >> bye, guys. we're minute away from the president's press conference live from italy. >> tonight there's a big death cab concert you have to tivo. >> we're going to italy to hear from the president quickly as soon as the takes the stage. later in the show, former lose louse congressman richard talks hedge funds with cliff. 7

up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after e eak.

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it's sound stage tonight at 10:00 p.m., channel 13 in new york. i mixed it in with the animal orchestra. >> why would you want to infect your own favorite music? >> we've been doing this a lot lately where you play a song you like and then you -- and then you bring in the true genius of the walrus, and the belugas. let's look at stocks. people know "stocks to watch" after -- >> is that rye our ratings are so high right before 8:00 a.m.? >> or because of me. ibm was downgraded, which -- when do you think of that, cliff? you don't -- i don't need a deser tags, but 102, it's down from -- what's the high, 130? >> 130. >> now goldman goes to neutral. >> nothing particular to goldman. i'm not a huge fan. there's a huge amount in ratings. there's a small amount -- studies show there's a small amount of pop when they make the

change but whether that's self-induced or not. so i'm not a huge fan. i remember i brought an academic to goldman 15 years ago to say there's a pop had there's a change and all the brokers got mad because if you just bought the recommended list there was to pop. academic came thinking, i'm the one guy telling you it works and they didn't like it because they said, that's -- i'm not a fan of self-side research as a way to make money. >> goldman made comments about dell, downgrading ibm, upgrading dell to buy from neutral. changing cost on u.s. software to neutral. seagate upgraded to buy. a target of 16. that's like -- oh, okay. . market weight. that's like kissing your sister, right, from 14.5 -- >> why did you look at me with you said that?

>> i thought he said kissinger's sister, henry kissen center. >> finally, cvx after the bell -- i was going to make a comment about where kissinger sit. that could be interesting. why single out a place in the country. north, south, east, west, individual states. why do it? i don't need the mail, right? i don't need it. >> someone needs to stand up for incest. >> exactly. finally, chevron warning second quarter earnings would be hit by sharp decline and u.s. refining margins and any benefit from higher oil prices were offset by a weaker dollar. it's kissing sisters if you're in blankety blank -- oh, i just said a state with two words. >> or the south anywhere. >> the animal orchestra gets me out of -- >> we'll hear from the

president, we thin at 8:00, alough he may be a little delayed. here's a le picture of the podium when sill yeah berlusconi just finished lking. he did say they must fight hedge fund speculation, cliff -- >> oh, cliff! >> -- in commodities rkets. >> i can s something about this? europe is run by inse socialists. >> hold the thought. oh, god, i'm -- >> hold the thout. >> you've got sarkozy and bro and -- >> we'll comb back to you. >> hh prices sink, it's specators' fault. we said, we're waiting forhe president, getting rdy for pres conference from aquilll'aquila, italy. fithe same tools t ps use, so you can be a disciplined trader. by selectingrom eight advanced triggers,

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gm's transformation. general motors about to emerge from bankruptcy leaner and meaner. we're live at the finish line in the motor city.

warren buffett in sun valley. >> i believe in the stimulus and i probably believe in another one. >> find out what else the legendary investor had to say at this media summit. >> anybody that looks at it as a panacea is making a mistake. let your momentum carry you. but is that good advice for investors? the "squawk" scholar, a pioneer in momentum investing will tell us about this strategy. "squawk box" begins right now. welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernen and i'm here with becky quick and carl quintanilla. our guest host is one of the world's largest quant, hedge fund guy, quantitative manager, $12 billion under his management. what does that come out to if you make any money at all?

i look over with truth love at cliff, managing founder of aqr management. he will with us for the rest of the -- i can figure -- >> i have to correct your math. you're doing the math right but this is a common misconception. two-third of our assets are traditional assets. that's been the case since goldman sachs. we've always been a mix. we're a third hedge fund. still -- it's a big firm but not a $20 billion hedge fund. >> $20 billion under management? >> yes, but most is institutional fees. i'm not complaining. >> no. we are waiting for the president to speak. he's expected to hold a press conference at any moment. at the g-8 summit in italy. 's going to be in thisroom. i think it was going to be in another room but theg couldn't guarantee all the u.s. press corps could get in there so they changed at the last

second. let's turn to steve sedgwick who's been covering the g-8 since it began in l'aquila with a report card. steve, what have you got? >> reporter: yeah, as we wait for president obama to pretty much wrap up proceedings -- we've already heard from sylvia berlusconi any and gordon brown talking about the achievements of g-8. when the g-8 says something, very often different from when the g-8 actually does something. for that we'll go back to glenn eagle in 2005 when they said they would up aid to africa by $50 billion. they didn't do that. president obama will talk about that among other things how they agreed $20 billion u.s. dollars for food aid programs, more sustainable programs. the problem is, being, there are question marks already about

whether this is new money, whether it actually will ever be achieved as well. sylvia berlusconi, has one of the worst records of aid, spending 1 of 1% on national gdp on aid. a lot of aid agencies are absolutely up in arms at berlusconi is hosting a conference with a whole day devoted to aid. that's pretty much a reality check on what the g-8 does and says swlg. it's a similar thing on some other things we've been talking about. yesterday was dominated by the fact the g-5 turned up, the likes of india, brazil, china and yet they didn't get on the table a firm commitment from those developing nations to agree with what the g-8 had kind of agreed on the previous day and that's work toward reaffirm goals, copenhagen climate change talks. when you look at what the g-8 achieved on the first day, a lot of question marks. steve harper concerned as well

as climate change. it's been fudged a little bit. as indeed, i'm afraid, have a lot of these issues. >> thanks for that. we'll keep an eye on l'aquila. as soon as we see the president, we'll bring him to you. weesh getting flashes on the wire that this is official. gm supposedly coming out of bankruptcy protection. talking about completing the asset sales. this is something we've been waiting for. general motors has been in bankruptcy for the last 40 days. phil lebeau is standing by at the company headquarters outside detroit with the late owe that. >> reporter: we know they expected to be closed officially by 9:00. the fact we're seeing some reports trickling out of bankruptcy court in new york that the sale has been completed, not a surprise. expected to happen this morning. coming up at :00, fritz henderson along with the new chairman, whitaker jr., will talk about the new general motor. they'll be eliminating 450 top executives from the company.

most executives will be taking buyouts, leaving the company, along with 4,000 white-collar workers. those are the latest job cuts from general motor. the same point they're going to make being streamlining management. they want this company to be quicker to react, much more nimble in bringing the product, marketing plans in front of the ug people. that also includes bob lutz not retiring this year. it's unclear if lutz will be at the press conference but he'll be taking a new role with general motors, a prominent role being having a say in the future of this krngs how it deals and interacts with the public and new vehicles coming out. general motor needs to stabilize sales. that's the bottom line. they cleaned up the balance sheet through bankruptcy. now this company with 19.6% market share has to stabilize market share and grow it. perhaps when we're in the worst auto sales slump we've seen in 15, 20 years. most of the focus will be on

chevrolet. 63% of u.s. gm sales. it will have to carry the water for gm if they'll be successful out of bankruptcy. coming up at 10:30, cfo of general motor, we'll be talking to him about the new direction for gm. this essential essentially done. at 9:00 we'll hear about the new game plan for general motors. back to you. >> good job, phil. thank you for that. we'll see you later. let's move back to this allen & company conference where these guys -- they don't care about going to a nice place. >> sun valley is a nice place. >> they don't care about going to a nice place. work with me. some of the most powerful ceos gather he. it used to be just media and technolo technology, but -- >> now it's everybody. >> everybody is there. anybody who's anybody. coca-cola, nike, american express -- flo lebron. >> our people want to go out there.

aaron was there with maria as well. >> i don't know. you know who else is? >> julia is there and she caught up with two of the conference's most sought after attendees. >> i did. you're right,there is a wide range of ceos here with different perspectives but te agree on one thing. the u.s. economy is not out of the woods just yet. i sat down with google ceo that said this economy and everything that comes with, it titder inventories, tighter credit, this is the new normal and everyone better get used to it. >> we're pretty sure the worst is behind us but we don't know what the future looks like. we don't know -- everyone knows how difficult business is today around the country and around the globe. but we don't know what the shape of a recovery looks like. government projections indicate the rove will begin by the end of this year if not earlier. unemployment will continue to get worse for a while, which is very difficult for the people. i would say the mood is somber

or sober and people are ready for the long term. >> reporter: warren buffett echo's schmidt's sentiment and so many here in sun valley wanting to catch up with the other koracle of omaha. >> they would probably say the decline has stopped -- most of them would say this in their business -- but there's been no rebound. now, that doesn't mean there wouldn't be a further rebound. dent mean the recession start tomorrow. what they're saying is a flat line after a big descent. >> so there's been lots of attention here at this conference about social media company twitter. i asked buffett if he's ever had a chance to use the twitter service. >> i have not tried twitter although i met one of the co-founders from it. he's from a little town in nebraska called clark and he went to the university of nebraska for a couple years, so it can't be all bad. >> coming up on "squawk on the

street" i spoke with google about their plans to revolutionize personal computing. i'll have that and much more from my interview with google ceo. with we return being we have a squawk slar coming up. a pioneer, ready coming to give us investment strategy. trade data coming out today and that could have a big impact on where the markets. art cashin with a friday's edition of he traitor's edge." dg everythi...

tdd#: 1-800-345-25 including who i trust look after my money." tdd#: 1-800-345-2550 "the dust might be settlg... td: 1-800-345-2550 that's gat, but i'm not." tdd#: 1-800-2550 td: 1-800-345-2550 "i guess'm just done with doing nothing, you know?" tdd#: 1-800-345-50 tdd#1-800-345-2550 "oh, i'm n thinking about movingmoney. tdd#: 1-0-345-2550 i am moving it."

we are awaiting the president's press conference. president will be speaking at g-8. you can see a shot of the podium where he'll be speaking and the gate where they're awaiting his arrival. in the meantime, our next guest is a "squawk" scholar, one of the pioneers of the momentum investing field. joining us is toby, professor at university of chicago. research associate at bureau of economic research. our guest host is cliff of aqr management. we should point out for full disclosure purposes that toby

has held a consulting relationship with aqr in the past, in addition to consulting with other funds. thank you for joining us. cliff, i would like to start talking about momentum investing. i realize you have a new fund coming out that goes into this momentum investing theory. why don't you explain this theory. >> i'm sure you know and a lot of your viewers know that one of the main things that have been discovered in academia is the power of value investing. academics should not claim to discover this. guys like warren buffett, graham and dodd have been doing it before academics. the two professors i work for, in the mid and late 80s discovered a very systematic approach to value, buying all the cheap stocks and selling all the expensive stocks, actually added return over time. you didn't have to pick them particularly smart. i had to write a desertation.

i turned my site to look at price momentum. it turns out this issen the price momentum of the tech bubble. this is not buy five hot stocks and ride them. this is do the 1,000 stocks that are doing well, have a small tendty so keep doing well against the 1,000 that are doing poorly. we find two things. one the answer is, yes, and yes for 80 years in the u.s. in a fantastic array of other markets. b, you wouldn't want to do this alone. it's probably the only reasi gr i graduated. sometimes value doesn't work. when one works the other -- it works less well but when one does particularly well the others pick up the slack. the geeks call that negative correlation. >> toeb y talk about that, how when we talk about markets being efficient, how do you actually make the idea of momentum fitting into this idea that

markets are the most efficient place? >> well, that's a very good question. first of all being thanks for having me on this morning. i mean, the momentum anomaly is one of the biggest challenges to market efficiency. a lot of people like to point to, you know, the tech bubble object what or what's happened recently, market krashs, as evidence that markets aren't rationale. to are relatively infrequently. momentum, that's existed for 80-plus years in lots of different markets, different asset classes, its a challenge to do a market hypothesis. having said said that doesn't mean academics like myself are looking for a possible risk-based story but so far those stories haven't yielded any fruit. most of the risk-based stories popular among academics seem to go in the wrong direction when it comes to momentum. all academics agree momentum is a real phenomenon in the data

and most stories out there for them are behavioral stories which is really an inefficient market story. >> toby, momentum works until it doesn't work. most investors have questions where they say, is there any way to try to predict when you'll see that turn, when the momentum shuts off and goes the other direction? >> well, you know, i think it's very tough to time anything. i think what you just stated about momentum is true about value, it's true about growth, it's true about markets, true about almost any strategy you can think of. and, you know, as someone who looks at a lot of data and approaches things from a quantitative perspective, i think it's dicey to try to time these things. >> if anything, you've got to believe, particularly for practitioners like us, we would love to time our own product, do better getting in, getting out. momentum look like the stock market, goes up and down. when it goes up or goes down spectacularly is hard to time. the best thing you can do to

protect yourself against the downs is listen to me a little but not a lot. put your money in value and markets in neral that tend to move the other way -- dwroo we're look at pictures from the g- this is a shot of the president, president obama being arriving athe g-8. he'll be getting outhere and making his way into the room we've been wchg. that's the room where he'll be making his pss conference. i happen to know fo a fact he loves momentum vesting. no, seriouy, let me reiterate what cliff was sayi. i think one of the reasons you want to combine momentumith sothing like value is it does sm out those transitions. the periods when momentum does have tough time are exactly e periods whk value tends have very good ride. that's a nice combination. since i don't thin it's very easy to ti these tngs, that's one way thatet you out of the trouble. >> diversification beats timing. >> any da >> cliff, you made theoint momentum tends run stronge and longer on the de. do tt mean when you look at

a momentum fund you tend to be long fund? >> tt's a great question. there are ways to use momentum to try to time markets but that's not what we're dog. we're buying a lly invested rtfolio of stocks th have better poe men item the market and ere's evidence that in up markets it wins a by lot and in down markets it wins by a little. >> cliff, let me stop you there. we're about to listen to the president give this final press conference out of the g-8. >> i apologize for being a little late. good afternoon. we have just concluded the final session of what has been a highly productive summit. here in l'aquila. before i discuss what we've achieved the past three days i would like to take a moment to express my thanks to prime minister berlusconi, his staff, the people of iitaly for his extraordinary hospitality and hard work in setting up this summit. and particularly i want to thank the people of l'aquila for welcoming us to your home at this difficult time.

we've seen how you've come together and taken care of each other. and we've been moved by your courage and your resilience and kinden. i'm confident that l'aquila will be rebuilt it's splendor will be restored and it's people will serve as an example for all of us in how people can rise up from tragedy and begin anew. we will keep this place and its people in our prayers and thoughts in the months and years ahead. we've come to l'aquila for a very simple reason, because the challenges of our time threaten the peace and prosperity of every single nation. and no one nation can meet these challenges alone. the threat of climate change can't be contained by borders on a map. and the theft of loose nuclear materials could lead to the extermination of any city on earth. reckless actions by a few have fueled a recession that spans the globe and rising food prices

means that 100 million of our fellow citizens are expected to fall into desperate poverty. so right now this defining moment we face a choice. we can either shape our future or let events shape it for us. we can let the stale debates and old disagreements of the past divide us or we can recognize our shared interest and shared aspirations and work together to create a safer and cleaner, more prosperous world for future generationings. i believe it's clear from our progress the past few days, the path we must choose. this gathering has included not just leaders of the g-8 but leaders from more than 25 nations, as well as representatives from major international organizations such as the u.n., imf, wto and others. after weeks of preparation and three days of candid and spirited discussions, we've agreed to take significant measures to address some of the most pressing threats facing our

environment being our global economy and our international security. let meout outline what i believe have been most significant items that emerged from l'aquila. first, there was widespread consensus we must all continue our work to restore economic growth and reform our national and international financial regulatory systems. i'm pleased that the united states has taken the lead on this reform at home, with a sweeping overhaul of our regulatory system, a transformation on a scale we have not seen since the aftermath of the great depression. but while our markets are improving, and we appear to have averted global collapse, we know too many people are still struggling, so we agree that full recovery is still a ways off. that it would be premature to begin winding down our stimulus plans and we must sustain our support for those plans to lay the foundation for a strong and lasting recovery. we also agree that it's equally

important we return to a fiscal sustainability in the mid-term, after the recovery is completed. second, we agree to historic measures that will help stop the spread of nuclear weapons and move us closer to the long-term goal of a world without nuclear weapons. in prague i laid out a comprehensive strategy for pursuing that goal. in moscow president medvedev agreed to substantially reduce our warheads and delivery systems in a treaty that will be completed later this year. this week the leaders of the g-8 nations embraced the outline i proposed in praying, to encourage nations to meet arms control disarmament and nonproliferation commitments and destroy nuclear weapons so they don't fall into the hand of terrorists. i invited leaderers from the broader gruch nations here to attend a global nuclear summit i will hold in washington in march

of next year where we will discuss steps we can take to secure loose nuclear materials, combat smuggling and deter, disrupt and destruct attempts at terrorism. we face a real-time challenge on nuclear proliferation in iran. at this summit the g- nations came together to issue a strong statement calling on iran to fulfill its responsibilities to the international community without further delay. we remain seriously concerned about the appalling events surrounding the presidential election and we're deeply troubled by the proliferation risk iran's nuclear program poses to the world. we've offered iran a path toward assuming it's rightful place in the world. but with that right comes responsibilities. we hope iran will make the choice to fulfill them and we will take stock of iran's progress when we see each other this september at the g-20 meeting. third, we took groundbreaking

steps forward to address climate change in our time. the g-8 nations agreed that by 2050 we'll reduce our emissions by 80% and work with all nations to cut global emissions in half. 17 of the world's leading economies, made unpress denned commitments to reduce emissions and significant progress on finance, adaptation and technology issue. in the united states we've already passed legislation if the house of representatives that puts us on track to meeting this 80% goal. we made historic clean energy investments in our stimulus, as well as setting aside -- setting aside new fuel efficiency standard to increase mileage and decrease pollution. we believe the nation that can build a cleaner economy is the economy that will lead the 20th century global economy. we did not reach agreement on every issue. we still have much work ahead on climate change. but these achievements are highly meaningful and will

generate significant momentum as we head into the talks at copenhagen and beyond. finally, we have committed to investing $20 billion in food security. agricultural development programs to help fight world hunger. this is in addition to the emergency humanitarian aid we provide. i should just note that going into the meeting, we had agreed to $15 billion. we exceeded that mark and obtained an additional $5 billion of hard commitments. we don't view this assistance as an end in itself. we believe the up. of aid must be to create conditions where it's no longer needed, to help people become self-sufficient, provide for their families and lift their standards of living. that's why i proposed a new approach to this issue. one endorsed by all the leaders here. a coordinated effort for plans by countries from themselves with help institutions like the world bank, when significant, as

long as sustained financial commitments from our nations. i also want to speak briefly about additional one-on-one meetings i had with leaders i had here outside of the g-8 context. they were valuable and productive. we spoke about how we can forage a strong, coordinated and effective response to nuclear proliferation threats from iran and north korea. we also talked about challenges we're facing in our economy, how we can work on climate change. ultimately, this summit and the work we've done here reflects a recognition the defining problems of our time will not be solved without collective action. no one corner of the globe can wall itself off from the challenges of the 21st century or the needs and aspirations of fellow nations. the only way forward is through shared ands. ent effort to combat threats to our peace, our prosperity and our common humanity, wherever they may exist. none of this will be easy, as we

worked this week to find common ground. we have not solved all of our problems. we've not agreed on every point. we've shown that it is possible to move forward and make real and unprecedented progress together. i'm confident we'll continue to do so in the months and years ahead. so with that, let me take a few questions. i've got a list that i'm working off of. i'm going to start with peter baker. peter? >> i'm sorry, your mike is not working. >> hello, that's better. we were told you made your appeal for the food security money during the meetings personal by citing your family experience in kenya, your cousin and so forty. i wonder if you could relate a little bit of what you said then and talk about what your family experience -- how that influences your policies and

approach. >> >> what you heard is true. i started with this fairly telling point that when my father traveled to the united states from kenya to study, at that time the per capita income and gross domestic product of kenya was higher than south korea's. today, obviously, south korea is a highly developed and relatively wealthy country and kenya's still struggling with deep poverty in much of the country. the question i asked in the meeting was, why is that? there had been some talk about the legacies of colonialism and other policies by wealthier

nations. without in any way diminishing that history, the point i made was that the south korean government working with the private sector in civil society was able to create a set of institutions that provided transparency and accountability and efficiency that allowed for extraordinary economic progress. and that there was no reason why african countries could not do the same. and yet in many african countries, if you want to start a business or get a job, you still have to pay a bribe. that there remains too much -- there remains a lack of transparency. and point i was trying to underscore, as we think before this issue of food, we have 100 million people who dropped into

further dire poverty as a consequence of this recession. we estimate a billion people are hungry around the globe. and so wealthier nations have a moral obligation as well as a national security interest in providing assistance. we've got to meet those responsibilities. the flipside is that countries in subsaharan africa and elsewhere in the world that are suffering from extreme poverty have an obligation to use the assistance that's available in a way that is transparent, accountable and that builds on rule of law and other institutional reforms that will allow long-term improvement. there is no reason why africa cannot be self-sufficient when it comes to food.

it has sufficientariable land. what's lacking is the right seeds, the right irrigation, but also the kinds of institutional mechanisms that ensure that a farmer is going to be able to grow crops, get them to market, get a fair price. so all these things have to be part of a comprehensive plan. that's what i was trying to underscore during the meeting today. [ inaudible ] >> what's that? well, the point i was making is my father traveled to the united states a mere 50 years ago. and yet now i have family members who live in villages. they themselves are not going hungry but live in villages where hunger is real. and so this is something that i

understand on very personal terms. and if you talk to people on the ground in africa, certainly in ken ken ken kenya, they will say part the problem is institutions aren't working for ordinary people so government is a vital concern that has to be addressed. now, i want to be very careful. africa is a continent, not a country so you can't extrapolate from the experience of one country. and there are a lot of good things happening. part of the reason we're traveling to ghana is because you have a functioning democracy, a president who's serious about reducing corruption, and you've seen significant economic growth. so i don't want to overly generalize but i want to make the broader point that a government that is stable, that is not engaging in tribal

conflicts, that can give people confidence and security that they're work will be rewarded, that is investing in its people and their skills and talents, those countries can succeed, regardless of their history. all right. michael fletcher, washington post. >> reporter: thank you, mr. president. as you've pushed for an agreement with -- to reduce nuclear stockpiles between russia and the u.s., part of your rationale has been that you want to have the moral authority to then turn to north korea and iran to get them to suspend their programs. why will they listen to what the u.s. and russia have to say? what would it matter to them what we have to do? >> i don't think it matters so much necessarily that they will listen to the united states or russia individually. but it gives us the capacity as

the two nuclear super powers to make appeal to the broader world community in a consistent way about the dangers of nuclear proliferation and the need to reduce that danger and hopefully at some point in time eliminate it. so there are countries that have decided not to pursue nuclear weapons. brazil, south africa, libya have all made a decision not to pursue nuclear weapons. part of the concept behind the nonproliferation treaty was, countries could develop peaceful nuclear energy, they would not pursue nuclear weapons if they were significant inner tos sig and u.s. and russia would significantly reduce their nuclear stockpiles. part of the goal here is to show

that the u.s. and russia are going to be fulfilling their commitments so that other countries feel that this is an international effort and not something simply being imposed by the united states or russia or member of the nuclear club. and i am confident we can rebuild a nonproliferation framework that works for all countries. and i think it's important for us to establish a set of international norms that can be verified, that can be enforced. when we are speaking to iran or north korea, it's not a matter of single them out but a set of norms we expect everyone to follow by. >> reporter: mr. president, it seems yesterday morning you had a very spirited and lively

discussion within -- with the g-8, plus five plus one, ignited by president lula objection to the inadequacy of the g-8 as a forum. well-being i would like -- what was your argument in this discussion and whether or not you have the feeling that the days of g-8 are over? second question, but very light, after six months wheeling and dealing with these international forums, g-20, nato and g-8, do you find it more complicated or less complicated to deal with that than with the american congress? >> oh, well, on the second question, it's not even close. i mean, congress is always tougher. but in terms of the gs and

what's the appropriate international structure and framework, i have to tell you, in the discussions i listened more than a spoke. although what i said privately was the same thing publicly which is that there is no doubt we have to update and refresh and renew the international institutions that were set up if a different time and place. you know, some, the united nations date back to post world war ii. the others like the g-8 are 30 years owld. so there's no sense that those institutions can adequately capture the enormous changes that have taken place during those intervening decades. what exactly is the right format is a question that i think will be debated.

one point i did make in the meeting is that what i've noticed is everybody wants the smallest possible group, smallest possible organization, that includes them. so if they're the 21st largest nation in the world, then they want the g-21. and think it's highly unfair if they've been cut out. what's also true is that part of the challenge here is revitalizing the united nations because a lot of energy is going into these various summits and its organizations in part because there's a sense that when it comes to big, tough problems, the u.n. general assembly is not always working as effectively and rapidly as it needs to. i'm a strong supporter of the u.n., and i said so in this meeting, but it has to be reformed and revitalized.

this is something i've said to the secretary-general. one thing, i think, is absolutely true is, is that for us to think we can somehow deal with some of these global challenges in the absence of major powers like china, india and brazil, it seems to me, wrong headed. so they are going to have to be included in these conversations to have entire continents like africa or latin america, not adequately represented in these major international forums and decision-making bodies is not going to work. so i think we're in a transition period. we're trying to find the right shape that combines the efficiency and capacity for action with inclusiveness.

my expectation is that over the next several years you'll see an evolution and we'll be able to find the right combination. the one thing i will be looking forward to is fewer summit meetings because, as you said, i've only been in office six months now and there have been a lot of these. and i think that there's a possibility of streamlining them and making them more effective. the united states being obviously, is an absolutely committed partner to concerted international action, but we need to, i think, make sure that they're as productive as possible. >> hans nichols. >> reporter: hans had other obligations. >> yes, i noticed you're not hans. >> reporter: roger, we swapped. thank you for the question. i'd like to return to domestic issues, mr. president. health care.

the momentum seems to have slowed a bit. the senate finance committee is still wrestling with the cost issue. the blue dog democrats, members of your own party yesterday said they had strong reservations about what's developing so far. i was just wondering when are you going to be jumping in full force with this? do you have any sweeteners planned? what is your push before the august recess? >> well, we jumped in with both feet. you know, our team is working every day with members of congress on this issue and it's my highest legislative priority over the next month. so i think it's important just to recognize, we are closer to achieving serious health care reform that cuts costs, provides

coverage to american families. allows them to keep their doctors and plans that are working for them. we are closer to that significant reform than at any time in recent history. that doesn't make it easy. it's hard. and we are having a whole series of constant negotiations. this is not simply a democratic verse republican issue. this is a house versus senate issue. this is different committees that have different priorities. my job is to make sure i've set clear parameters in terms of what i want to achieve. we have to bend costs on hell care. there are specific ways of doing that, game-changers that incentivize quality, prevention, a whole host of things i've put

on the table that i want to see included. i've said that it's got to be budget neutral, and so whatever bill is produced has to be paid for and that creates difficulty because people would like to get the good stuff without -- without paying for it. and so there are going to be some tough negotiations in the days and weeks to come. but i'm confident we're going to get it done. and i think that appropriately, you know, all of you as reporters are, you know, reporting on the gym. with i'm trying to keep focused on are the people out in states all across the country that are getting hammered by rising premiums, they're losing their jobs and suddenly losing their

health care. they are going into debt being some are going into bankruptcy. small businesses and large businesses that are feeling enormous pressure. i'm also looking at the federal budget. there's been a lot of talk about the deficit and the debt. from my republican colleagues, you know, why isn't obama doing something about this? ignoring the fact that we got into the worst recession since the great depression. fair enough. this is occurring on my watch. what cannot denied is the only way to get a handle on our medium and long-term budget deficits is if we corral and contain health care costs. nobody denies this.

so my hope is that everybody who is talking about deficit reduction gets serious about reducing the cost of health care and puts some serious proposals on the table. and i think it's going to get done. it is going to be hard, though, because as i said, i think in one of the town hall meetings that i had, as dissatisfied as americans may be with the health care system, as concerned as they are about the prospects they may lose their jobs or premiums may keep rising, they're also afraid of the unknown. we are a long history in america of scaring people that they're going to lose their doctor, they're going to lose their health care plans, they're going to be stuck with some bureaucratic government system that's not responsive to their needs and overcoming that fear,

fear that is often actively promoted by special interests who profit from the existing system, is a challenge. so my biggest job, even as my staff is working on the day to day negotiations with house and senate staffs, my biggest job is to explain to the american people why this is so important and give them confidence we can do better than we're doing right now. >> reporter: is it pretty much do or die by the august reese? >> i never believe anything is do or die. but i really want to get it done by the august recess. kristy parson, hometown girl. is she around? she's not here? oh, i'm disappointeded.

so we have any members of the foreign press here? yeah. i'll use her spot for -- just so you guys have a chan to ask a question. >> thank you very much. >> i'm other. i can't hear you. can somebody make sure the mike's working. >> reporter: it's on? >> yeah. >> reporter: on this treaty i've been talking about the state sovereignty as a cornerstone of international order. how do you reconcile that with the concept of responsibility to protect, which used to be the cornerstone for -- >> i'm sorry. how do i reconcile that with the responsibility to protect? >> reporter: yeah. >> which used to be? >> reporter: the cornerstone of people in post war. >> if i understand correctly, on the one hand, we think that respecting the sovereignties of nations states is important. we don't want stronger nations

bullying weaker nations. on the other hand, where you have fashions that are oppressing their people, isn't there an international responsibility to intervene? it is one of the most difficult questions in international affair. i don't think there is a clean formula. what i would say is in general it's important for the sovereignty of fashions to be respected and to resolve con flicks between nations through diplomacy and through international organizations and trying to set up international norms that countries want to meet. there are going to be exceptional circumstances in

which i think the need for international intervention becomes a moral imperative. the most obvious example being in a situation like rwanda where genocide has occurred. gordon brown, during the last session told an incredibly powerful story. i may not be getting all the details perfectly right, but he said he had gone to rwanda, went to a -- some sort of museum or exhibition that commemorated the -- or marked the tragedy in rwanda. there was a photograph of a 12-year-old boy and it gave his name and that he loved soccer and he wanted to be a doctor being and, you know, provided

his biography. and the last on this exhibit said that "like before, he and his mother was killed. he turned to his mother and said, don't worry, the united nations is going to come save us." and that voice has to be heard in international relations. the threshold at which international intervention is appropriate, i think, has to be very high. there has to be a strong international outrage at what's taking place. it's not always going to be a neat decision. and there are going to be objections to just about any decision because there are some in the international community who believe that state

sovereign sovereignty -- you never intervene in any instance in somebody's internal affairs. you know,-- i think rather than focus on hypotheticals, what my administration wants to do is to build up international norms, put pressure economic, diplomatic, et cetera, on nations that are not acting in accordance with universal values toward their citizens but not hiypothesize on certain circumstances. take each case as it comes. richard wolf. >> i guess i have to follow on that, mr. president. is iran in that category? and are you disappointed that, while you came up with a statement of condemnation from the g-8, you did not come up with any kind of extra sanctions having to do with their crackdown on protestors? >> yeah, i have to say i read,

peter, your article and maybe some others. this notion that we were trying to get sanctions or that this was a forum in which we could get sanctions is not accurate. what we wanted was exactly what we got, which is a statement of unity and strong condemnation about the appalling treatment of peaceful protestors post-election in iran as well as some behavior that just violates basic international norms, storming of embassies, arresting embassy personnel, restrictions on journalists. and so i think the real story here was consensus in that statement, including russia which doesn't make statements like that lightly. now, there is the other story

there, was the agreement that we will re-evaluate iran's posture towards negotiating the cessation of a nuclear weapons policy. we'll evaluate that at the g-20 meeting in september. and i think what that does is it provides a time frame, the international community has said, here's a door you can walk through that allows you to lessen tensions and more fully join the international community. if iran chooses not to walk through that door, then you have on record the g-8 to begin with,

but i think potentially a lot of other countries that are going to say, we need to take further steps. and that's been always our premise, is that we provide that door but we also say, we're not going to just wait indefinitely and allow for the development of a nuclear weapon, the breach of international treaties, and wake up one day and find ourselves in a much worse situation and unable to -- unable to act. so my hope is, is that the iranian leadership will look at the statement coming out of the g-8 and recognize that world opinion is -- is clear. all right? >> thank you very much, everybody. >> the president of the united

states, barack obama, wrapping up his final press conference at the g-8. two big things that came out of it. one saying that the world avoided a global collapse but a recovery, a full global recovery is still a ways off, in his words. coming up next, we'll hedge our bets with our two-minute drill with our guest ht. "squawk"ontinues on this iday in just a moment.

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momentum. a few comments on things i've heard today. the idea of a second stimulus package came up. i've never been a fan of stimulus packages. but the idea of having a second one when the first one didn't work either because it was badly structured or hasn't kicked in yet reminds me of a medieval barber. i'm not a big fan of that. i do believe as a more generality and this is political and i apologize for it but undercover of crisis we're growing government quite large, that has bad consequences not just for the economy but for liberty going forward. finally, it took a while but i agreed with some of what the president said. one thing i would like to highlight that did not agree with is he again slipped in that irresponsible dangerous actions by a few brought us to this financial crisis. that's wrong. it's irresponsible. it's class warfare. individuals going crazy in real estate, government doing crazy things with real estate, and i don't let wall street off the hook. they were part