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tv   Squawk on the Street  CNBC  August 22, 2012 9:00am-12:00pm EDT

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significantly. they're going to have a benefit of the housing market, the benefit of the consumer net worth going up. so think small, think global, but buy really dominant companies in a small cap world. >> it's been a pleasure having you here today. thank you for your time. >> great to be here. >> scott, great having you. i'll see you on friday and this afternoon and steve i'll see you back this afternoon. right now it's time for "squawk on the street." good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla. some weak export data out of japan. a trade deficit adding to concerns about the global economy. greece's prime minister kicks off a series of meetings with eu officials as he looks to buy time, he says, to push through those necessary reforms. >> so we start the road map this morning with the markets. hitting some multi-year highs in yesterday's session but now what. will the fed minutes this
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afternoon make a difference? is it time to sell some winners in the land of cramerica. profits nearly two times estimates for toll brothers. we'll see if existing home sales agree with that. >> dell disappoints full-year estimates telling wall street its turn-around will take some time. is there any hope for pc names like hpq with earnings out later tonight. at bhp cancels a huge capital expansion program. what does that tell us about the world's second biggest economy? first, though, the s&p 500 hit some new four-year highs in yesterda yesterday's session before closing on the downside. the nasdaq touching its highest levels since december of 2000 all setting the stage for a key event on wall street's radar, the minutes from the fec meeting. investors will look for any hints the fed might or might not engage in a third round of
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quantitative easing. jim, we know they changed as little as they possibly could but these minutes will tell us how close they came to doing anything at all. >> true. but i still think this rally began, this 10% rally, when germany acceded to spain's wishes and the ne' er-do-well countries. the fed may have beenin consequential to what was going on in europe and we need to see europe complete its rescue of spain. i do think, by the way, program selling came out left and right yesterday. >> oh, yeah. >> everywhere. >> we hit the level and immediately pulled back. a telltale sign at around 10:30 was when apple turned. it hit the fresh intra day record high and started going lower for no apparent reason and that's when the markets turned. >> what about the computers in cr cramer's brain, were they selling? >> i think we need to slow down, we need to do a little
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consolidation. i was glad that the banks did well yesterday. a lot of that is changes in washington about the programs that are used to help underwater homeowners. i think the housing bull market is exemplified by toll today can be back but we need to stall out a little. i think you'll start hearing that september is always a horrible month. i think you'll hear, wait a second, the fed may be on hold. i just urge people to go through your portfolio. a lot of bad stuff went up with good. dell was kind of going up with the tech rally or holding in and then dell was horrible last night. >> it was, it was. the telltale sign would be after labor day. that's when a lot of people come back. hopefully the volume will improve. we've been about 40% below average volume for pretty much the entire summer so it will really be seen when traders come back in full force in september and we'll see if the volatility contracts in the months of september and october are really predicting the moves that will happen to the markets. we're in the low 20s compared to where we are on the current
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contract, which is about 15. >> if germany falls through, we'll blow through. if germany balks, we will go back and retrace a lot of the 10%. >> a lot of key meetings. those fed minutes, we've seen them shift the market to the downside when they were more hawkish than you thought. it's not impossible that this afternoon there could be some movement, right? >> we'll hear about jackson hole. look, i don't want to downplay the importance of the fed here. >> right. >> but i coudo think when you s europe clear up we started putting higher priced multiples on a lot of companies, including technology and industrials. those could pull back very quickly if we don't see resolution in europe and bernanke says it's all clear. >> shares of toll brothers setting to open a new 52-week
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high doubling wall street's estimates with its second quarter earnings with orders jumping 57% on unit basis. toll says it is enjoying the most sustained demand the company has experienced in more than five years. toll's results are poised to add to a rally that has seen the s&p 500 homer builders index soar more than 148% in the past 12 months. we have been hearing so many calls, take profits on the home builders and here you have toll, one of the biggest gains that we've seen out of the home building sector, a double in the past 12 months, and it continues to move higher here. >> we had a downgrade last week, a valuation downgrade, but it's very difficult to undervalue toll when the orders are up 57%, the gross margins have increased, the backlog, i think that's the best measure of the future up 59% in dollars. average price of home goes from 557 to 576, $576,000. now, again, if you see a reversal in toll today from this very bullish opening, that will
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be people saying, hey, listen, i got in toll lower. i just don't want people to read into anything about the stocks right now. there's so many people with big profits. you're going to continue to think people say i'll lock in, i'll lock in. geez, the toll number was much better than i thought and all regions other than the northeast are on fire. the downgrade of apple where the analysts said that'll do. as in the movie "babe." that's great, thank you, i'll take it. >> i saw a lot of people buying apple. people were saying apple was over. look, apple was over when they reported that bad quarter. i'm hearing things about the iphone 5 that are so unbelievable you want to temper your enthusiasm. but i think the tempered enthusiasm is kind of -- when we hit that wall of the s&p, when you get that four-year high, you get that 10% move-up, people say, listen, 10%, there's lots of different technical traders that say listen, whoa, i want to
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book some gains. >> we interviewed on "fast money" the analyst who downgraded toll. the price target goes to 650 a share. he said if you're in apple a long time you might want to book top some profits. you don't know about the tv set top box and what kind of pressure that could put on all margins. it's priced in his view to execute to that level. so if it falters at all, it's sort of a you know what -- you've got to give him a little bit of props because he did cut the stock when it hit an all-time high as opposed to an analyst who downgrades a stock once it's down 20%. >> it's been a rocket ship. i last night said, look, if you divide by 10, you have a $65 stock because it retreats at 59. we wouldn't think much of it if it did, but in this world where retail is looking at apple, where institutions own a lot of apple, that will freak people out. i think apple is inexpensive. i do believe that the iphone 5
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is good. if you listen to tech data yesterday, which was just -- the numbers -- they actually mentioned apple. i hope they don't lose all the business. i love the guys from tech data. they just said apple is on fire -- wow, falling off a cliff. but the numbers for apple ipad devastated dell. there's so much here that's good for apple, but i understand that the stock, if it wants to take a breather, it's going to take a breather. >> speaking of dell, by the way, trading lower in the premarket despite beating expectations with its latest quarterly earnings. the company forecast for the current quarter and full year did fall short of estimates. it is being hurt from a shift from desktop computers to laptops. desktops down 9%. and 170 for the full year is way below 190 where the street was. >> and they had a june analyst
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meeting. so this was a really horrible quarter. a couple of things that really stood out to me. brick business, down 15%. asia pacific off 12%. indian china week -- first time, revenue coming down. ultra books terrible. lenovo didn't see that. emc owns a big stake in that, emc and dell broke up their partnership. it looks like that was wrong. michael dell has been saying listen, we could be a 3-device country. you'll have your ipad, your network, notebook, ultra book and your cell phone. well, it looks like that the pc is the casualty here. i think that this was a good number for apple. people are going to view it as negative for everything. a little negative for intel. they did blame the product transition from windows 7 to windows 8 but this was a monster bad quarter. it was really -- i go through
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all the data and it was just horrible. i took four pages of just like, wow. including tony, who i know you like very much, take that this was a dramatic decline, used the word dramatic. never like to hear dramatically lower for guidance. >> for the people who wanted to believe there was a turn-around in place at dell, you look at some of the higher margin, higher growth businesses and they are starting to slow. that's really the concern. storage was up about 6% year on year after three straight quarters of 20 plus percent gains year on year. high margin businesses up 3% and that is the lowest rate of growth in six quarters, so even the higher growth, higher margin businesses are showing signs of a slowdown. that's not good at the early stages of a turn-around story. >> the one thing going forward, we have gross margins up and there was a great piece, ubs, it's called -- i absolutely love this. this is the most oxymoronic research i've come across in a long time.
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disappointing, as expected. what i mean by nature, shocking as expected. >> you knew you new. >> yeah. so the question is is it a mitigated disaster or unmitigated disaster? i thought it was unmitigated but people with a lot of puts, a lot of short selling and they may think it was a mitigated disaster because it was an expected sglaf eed disaster. >> was this a surprise or not. >> a nasty unsurprise? >> that may have been it. >> and then you wonder with hewlett-packard. remember we had that headline hewlett-packard raising estimates for the current quarter. there are some analysts on the street even today saying hugh hewlett will probably miss the revenue side action even though they just came out saying what the revenues would be. and remember, they didn't raise full year and that raised some questions that day when they didn't raise full year as much as they raised the current. >> they're really talking about earnings, 9 billion, $8 billion
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charge the beginning of august. i think the revenues are very much in doubt. i refer to the tech data conference call where they talk about a plummeting business in hewlett-packard. look, hewlett-packard, it's going to be disappointing. is it going to be surprisingly disappointing or unsurprisingly disappointing? i want to stay away from hewlett and dell because of apple. even as i recognize apple on a trading basis -- >> so this isn't even a value base to be made for hewlett-packard. you had a lot of value investors increasing their positions or establishing new positions in hewlett-packard. i think it was something like 9 million shares. one of the biggest holders increasing the shares. whitworth increasing his shares of hewlett-packard, all seeing that this is potentially a turn-around. >> calling it his single best idea. >> i like the pal sheet, the hewlett-packard bonds have not been that great. i like meg whitman, but remember meg whitman, unlike ron johnson
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who's probably 31.4% finished with the turn-around, she's saying 2016. 2016 is an olympic year. didn't we just have the olympics? that's a long time. okay, so when we get to rio, i might look at hewlett-packard. how old will gabby be then? >> so when meg smiles at you, you will go to rio? >> when we start getting a lot of olympic chatter, i'll take a solid look at hewlett. maybe we'll be pretty far long in the turn-around. >> let's talk about bhp. moving lower in the premarket trade. the net profit for the year to june 30th fell 35% in wake of a slump in commodity prices, weaker chinese demand as well. bhp also saying it will delay its $20 billion olympic dam copper expansion project and will not approve any new projects until at least the middle of next year. they were talking about capital management in the context of this sort of environment where they are seeing rise in costs on top of lower commodity prices. >> i think they needed to
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curtail spending. there might be something political too. australia put in a carbon tax. they also talked positively not near term about china but longer term. i know this one sounds like it is terrible, but i have to tell you, if bhp is not being negative longer term, and i think that those who are panicking out of this have to recognize that bhp was already marked down a bit because of china. it's not new news. >> i think the other positive, if there are positives out of this, is the discipline when it ms. to capital used. not only are they curtailing new projects and scrapping this expansion plan but they're also -- they raised the dividend but not by as much as many expected so they're conserving here and that could be seen as a good sign going into a tough time. >> remember we've got a negative spin, but consensus by 2%, not 2 cents. i think that you want them to curtail cash. do you really want them spending like a drunken sailor in an environment where the near term isn't that good.
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but they're realists. it's interesting, this carbon tax. we had an appellate court decision yesterday, the d.c. court of appeals against the epa, good for southern, good for american electric power. there is a backlash going on by some companies against carbon taxes in a time of tougher economic environment. bhp cannot be that happy. australia said over and over again there's no adverse effect from carbon tax. it's interesting to see the greens getting a little push back here. >> this would be considered adverse, i would imagine, in australia. >> yeah. bhp, pretty big. it may be the australian -- it's like botswana with the beers. bhp is australia. >> sticking with metals before we go to break, gold is having a bit of a run. 1644 this morning. is that -- what do you think that is? >> i like that. >> is it a tell on the fed or something more than that? >> i think it's a tell that maybe -- gold has been wrong at times. i think it's a tell, again, that the germans are going to be
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willing to reflate. you mentioned yesterday the fxc versus -- there's been a remarkable run in the euro. it's funny because you would expect it to go down if they're reflating. they'll print euros to bail out spain. i think this is a print euros to bail out spain. i'm going to watch bbva because they had a 50% run off the bottom and spain is down today. we need to see spain get a bailout. i know that the fed notes matter. i want to see the madrid notes. >> all right. >> there's got to be 50 shades of madrid notes. >> i can't believe barnes & noble -- >> barnes & noble and church & dwight. who knew? >> they'll have to have metrics x 50 shades just like you once reported x harry potter. >> amazon probably couldn't move the amazon needle, no, because there's not as much as books but that was a remarkable book in
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terms of moving the needle of a company. >> unbelievable. when we come back goldman sachs strategist will join us. taking one more look at futures, some moderate futures as we kick off this wednesday morning. a lot more "squawk on the street" is back in a moment. ♪ [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. ♪ join mercedes-benz usa on facebook for the best summer sweepstakes. you have to dig a little. fidelity's etf market tracker shows you the big picture
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carnival cruise is getting some cheers this morning. for about 50 bucks a day the cruise is offering an all you can throw back, throw back using their words, drink package on a test run basis. the deal only applies to drinks that cost $10 or less. it does include tips. the package is called my awesome bar package program -- my awesome bar program. what should carnival's drink package really be called? tweet us and we'll air your responses throughout the morning. >> that's the best they could do? >> my awesome bar program. i'm thinking like sloshed or shipwrecked, right, jim? >> shipwrecked is a little tricky when it comes to carnival. >> that's true. >> it's a very well run company. >> pricing never took the hit some people were afraid of. >> my family around that time
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were planning our vacation and we were going on a cruise in europe. there were no price breaks, no sales. we were waiting, nothing. >> and disney cruise is doing quite well. one of the holdouts. >> absolutely. coming up, counting it down to the opening bell with cramer. hear the stocks he feels is worthy of your attention. take a look at futures. looking at a down day across the board. will we reapproach those highs on the s&p and dow? we will see. more "squawk on the street" straight ahead. 's put some musi. [ woman ] welcome to learning spanish in the car. you've got to be kidding me. this is good. vamanos. vamanos. vamanos. gracias. gracias. gracias. ♪ trece horas en el carro sin parar y no traes musica. mira entra y comprame unas papitas. [ male announcer ] get up to 795 miles per tank in the 2013 passat tdi clean diesel. that's the power of german engineering. see your local dealer for special lease and finance rates
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a few minutes before the bell on a wednesday. let's get cramer's mad dash ahead of the market open. >> i'm blocked by carly ray jepson by the youtube. i've been waiting to move on to titanium, it's not happening. >> that's the song of the summer. >> williams-sonoma reported a fantastic quarter last night. keeping with toll brothers, this is a housing theme. west elm, the catalog company usually for apartment owners, nice stuff, higher than ikea, and pottery barn. pottery barn up 11.7 comps. they have a starbucks, they have the new single server espresso. i love shopping here. i love pottery barn. the prices are really terrific. it's a great midrange. this is a good story. it has not kept pace with others, including bed, bath. i like it very much.
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>> interesting. what is this company? >> the donkeys when you go by on the road, they do the pumping once you finish the well. now, this is a really interesting call. citigroup top pick. why? they reported horrendous numbers, horrendous so it was immediately rumored that they would be the next takeover target. i usually don't like to recommend stocks on a takeover basis but i am heartened that citi says the numbers are so low that they can beat them. is it lufkin for sale, i don't know but boy, that stock has come down. >> it's been an active week for names where a takeover is seemingly looming, like best buy. >> yeah, it's interesting. jpmorgan cut its target. web bush says stay away. i say stay away. declining fundamentals. really hard to put together any sort of buyout. this industry has been very challenged. i want to point out that one of the things that has happened over and over again, there's two
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groups of companies in retail. the one that say amazon can't destroy and one that say they can. there are a lot of brick and mortar that are doing great well, witness williams-sonoma. this group is still very challenged by amazon. i don't want to own it. >> in the meantime the opening bell a few moments away. another big day of trading. we'll get to it. "squawk on the street" comes back in a moment. [ male announcer ] while many automakers are just beginning to dabble with the idea of hybrid technology, it's already engrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. sleep train has your ticket to tempur-pedic.
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on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire.
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td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? you're watching "squawk on the street" live from the financial capital in the world. the opening bell set to ring in a little less than a minute. it comes a day after the dow lost 68, that's the worst loss in about three weeks. a little bit broader range, 144 points for the dow. also the largest since august 3rd. and the spx finally touching that 1422 that we talked at the top of the show about how some computers were waiting for that number, and they moved when it hit. >> the algos strike back. >> take a look at the opening bell here this morning. s&p at the top of your screen.
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at the big board this morning, it's pioneer natural resources, an oil and gas production company, celebrating its 15th anniversary. i saw you talking to someone from there just a moment ago. over at the nasdaq, the rose brushia educational foundation, a nonprofit dedicated to reducing the number of child abductions in the united states. our own sue herera is helping do the honors over there along with our good friend, wilbur ross. a good cause. >> a couple things that stick out to me that i think we have to talk about. a sunrise. a remarkable guy came into a situation that everyone thought was really unsalvageable. came on "mad money" literally last week and said listen, the turn is for real. the stock was at 6. congratulations, mark, job well done. >> big rise in the stock,
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they're up 60% or so right now. retail continues to be the theme today. we had results from a number of retailer, not just williams-sonoma. also take a look at american eagle outfitters. that stock is up two plus percent. investors like this. they like the sort of discipline, the turn around that is going on. they are shuttering their children's operation because that's just not working out. >> and chico's, one i didn't expect. i thought it had gotten too rich. this is one of those themes, a lot of stocks -- i thought target got too rich. the price targets get overrun and chico's, a very solid turn-around happening. multi year. >> we talked about housing at the top of the show. toll with some remarkable guidance today. some of the most sustained demand they have seen in five years, but architecture buildings have not kept place. the purchase component of
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mortgage apps has been weak for maybe five out of the past six weeks or so. so the data is not clean across the board even though everyone is hot on the sector. >> we want to see construction spending up, from 45 and change to 48 and change but you need to see it over 50. i know that don wood, the ceo of federal realty, is really the only company that's building new shopping centers. that's what we need to see, new apartments built. now, toll brothers does make you feel that there will be eventually a shortage of high-end, and i do like the action in the banks. let's hope that continues because that's such a big part of the s&p. but you're right, carl, construction is not back here in this country and that's why caterpillar -- they were so downbeat in that interview over the weekend. maybe they lowered expectations in that interview. facebook is up. >> is it? >> it's worth noting. >> it is worth noting. we point out when it's down so it's only fair to point out when it's up sharply and it is higher
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by 1.4%. maybe -- maybe there is some support around 19. >> look at zynga. zynga has a couple bucks in cash. zynga is up. amazing. >> is it too early? >> i clicked on a survey last night for zynga. i almost filled it out on words with friends, they did a survey. one of the things it said, do you flirt with the person that you play with? i play with my daughter so i was repulsed and turned it off. >> don't you play pinkas? >> trounce pinkas. yeah, that flirting. i love my daughter, it's not happening. not happening. >> i thought it was interesting, the cover -- the front page of "the washington post" today, typically not a big paper for stock stories, it's all about facebook and the grow to which you can get big by giving away your product basically for free. >> i hope that business model works. here's what i wanted -- i want to do a bottom line on facebook and what's happened because i did like it very much before
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they moved to mobile. i think that facebook is a cocktail party. it's a large cocktail party. you don't go to a cocktail party to buy things. you go to google, because you have an intent to either buy something, click on something, you go to amazon to buy things. you go to facebook for a cocktail party. it's not a great venue -- when i'm at a cocktail party, i don't hey, carl, i've got a good ford car for you. melissa, i want you to buy a red hot chile pepper t-shirt. a cocktail party is a terrible venue. when they moved to mobile, i feel they became a cocktail party. >> it's possible i might just say i just got this ford fiesta and i love it. >> something to talk about at a cocktail party. but if i want to go do it, i'm going to do it at a different site. if i'm going to look, i'll google it. google is an action-oar yengted site that does great on mobile. facebook is the gnt of stocks. >> 900 million members doesn't move you. >> well, it's a monster energy
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for that group. i hope they're not drinking g & ts as younger people. we had like carly ray jepson and "call me maybe" which is deeply stuck in my head and i'll have to see a crist to gpsychiatrist out. i will tell you you can sell songs. this is a good example, you hear the song on youtube, look at it on facebook and then you go buy it on apple. apple is a site to buy. facebook is a cocktail party. or let's call it a rave. >> a rave, okay. glow sticks. lollipops. >> geez, raves, wow. i mean, you know. >> it takes you back, doesn't it? >> yeah, i never did a mosh pit in my whole life. >> apple is lower today. 650 will be the level to watch. >> and that is moving average level? >> no, just a psychological test here.
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look, it's held 650 in recent sessions. well, this is a year-to-date chart so it's hard to see that. >> look, we've got sluggish -- again, i understand people wanting to talk breather. now, there were a tremendous number of people yesterday who were bear that say came on. the commonality of many of the bears is that they have sat out a lot of this rally. but i do think that i understand anyone who desires to take profits ahead of september, which you're going to start hearing a lot of chatter as always being a bad month, i get it. i urge people to think longer term, but watch spain. >> just so i'm clear before we go to mary, cramer's net short position is at its high for the year today? >> no. no. i'm not allowed to short -- >> in the hypothetical cramer land. >> i understand the profit taking. i want to take a little longer term view because i do think if europe comes back, there's much to like. >> let's head to mary thompson
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who's in for bob this morning. >> good morning. as expected, weakness across the board. fairly broad-based decline. the dow off its lows of the day, down about 25 points right now. the only group we're seeing some strength in right now are the retailers. traders saying there are a couple of things they'll be watching today. of course existing home sales at 10:00 eastern, the fed minutes at 2:00. also angela merkel will be speaking at 11:00 eastern today. they'll be waiting to see if she makes any comments to move the markets at all and jean-claude junker will be speaking also. the net of it is is that we're seeing a bit of a risk off trade today, notable because of the weakness in the euro after hitting a six-week high against the dollar. the s&p failing to hold that four-year high yesterday. traders taking note of that as well. home builders and retailers look strong today. tech is the weak area. that's because yesterday after
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the closing bell dell cam out and reported earnings ahead of expectations, revenue were light but most disappointing, the company lowered its forecast for the full year. weakness there has spilled over to its rival, hewlett-packard. analog devices also coming in with weak revenues. that's weighing in on the chip maker. and a software company below expectations, lowering its outlook for the current quarter and down today despite raising its dividend in the wake of that. home builders are strong as well. if you look at it, the home building index almost double where it was last year at this time. the reason for today's strength, those better-than-expected numbers from toll that you were speaking about earlier today. we'll see whether or not some additional signs of strength, whether there is some in the housing market when we get those existing home numbers later. then we want to notary tailers which in the last six months have been outperforming the s&p
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500. today some good numbers from a number of retailers. better-that-expected earnings from the likes of williams-sonoma, chico's. the only disappointment expressed, a teen retailer coming in with disappointing results and lowering its forecast as well. so it is the weak spot now. right now the dow is down 21 points, again off its worst levels of the day. >> fabulous summary, mary. again, there's some good, some bad. lots of time to get out and just some good and bad. let's shift to bonds and the dollars. >> thanks, jim. when trends start to shift, sometimes you have to be patient, but many on this trading floor always try to be early. and things are changing. look at the behavior and look at the main headlines today. retail sales for june in canada were much weaker than expected. july, deficit on trade in japan, wider than expected. as mary thompson pointed out, junker has been talking but the
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headlines that hit this floor that grabbed traders' attention, don't look for any decision on greece before, yes, october. so let's look at the charts. two-year note rates is coming down pretty quick. open it up year to date and look at all the work we did around this 180 to 182 era. let's look at the euro currency, two-day chart. everything seems to be aligning with some reversals except for this euro. it still looks pretty good even though it's come down a bit. if you open it up to june 1st, still doesn't look like its trend is changing. and the last chart and this is important. many believe that mario droegge was looking at this chart on july 26th when he made his big comments. look at it now. yes, it's much steeper than it was, but it is starting to flatten a bit. pay attention to this chart. jim, back to you. >> let's check out the latest news in energy metals and go to
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jackie. >> hi, jim, great to see you. wti and brent price is backing off a little bit. a little higher on concerns about supply. of course the tensions in the middle east. goldman out with commentary supporting that view and that was driving prices up. but my saudi sources are telling me there's no reason to expect a supply shortage, that saudi has no plans to cut back. if we don't see the tensions with iran increase, which there's no reason to think they will at this point, we should expect to see prices stable. of course traders will be looking to this afternoon's fed's minutes for a little commentary there. that could move prices. anything that comes out of europe could move prices as well. i just want to talk about gold prices as well. pretty much flat this morning. above the 1640 mark and not looking for much action in gold before labor day and before that fed meeting, the september fed meeting where we get a little bit more color. so right now things quiet in the commodities complex. carl, back over to you. >> jackie, thanks so much. thanks not so quiet on the economic data front.
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we were expecting existing home sales out at 10:00 a.m. eastern time. dow jones has just released them. up 2.3% to 4.47 million. c consensus was right around 4.5 million. 20 minutes early, it's not the first time we've got some statistics out when they were not expected. >> someone broke the embargo. look, toll brothers is a better read. really it's very important for the bulls that toll brothers not give up this gain, i think. it's such a terrific number. >> it's important but at the same time you just got through this whole monologue -- or this whole discussion about how it is prudent to perhaps evaluate stocks that you made gains on and to -- you wouldn't blame anybody for taking profits and not too read too much into the action of the stock price today. >> that's why i said it's not important for me. it's important for the bulls. >> got it, got it, got it.
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>> this is the time of thing that i do fear, that it will reverse. like apple not holding that level that you mentioned. i just think this is not -- i'm not speaking cautious, i'm speaking empirical. it looks like it wants to go down. so i just enthusiastfst think io stand in the way of anyone taking profits after a 10% rally because that would be too much grief. >> but the qualities of the names you would be more prone to sell or not? >> i think technology is really where i'm concerned. tech data was quite bad. dell is not bad that much. maybe someone says dell has a lot of cash, they can keep buying stock. but technology is an area that's run without the fundamentals running with it. i don't know a lot of other areas that could be really weak other than the industrials. if the german-spanish compact -- kind of like the spanish civil war. if that breaks down, then i think that you'll see the industrials pull back. >> do you think the dividend play continues even at these levels?
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>> i think if you're increasing dividend it works. >> cisco? >> i think cisco is a go-to name if it comes down because i think chambers has redeemed himself. i compared him yesterday to desean jackson. he also reminds me that we have a p.u.p. list, physically unable to perform. he was on the m.u.p. list, it seemed like he was mentally unable to perform. he's off that list and he's going to suit up. >> in full pads. >> yeah. he's part of the bull team. >> turn-around for john chambers. wow. carnival cruise line offering a $50 all you can drink package called my awesome bar program. what should it really be called? we want to know so tweet us. we've got your responses straight ahead. as we head to break, take a look at this morning's early movers on this wednesday on wall street. hi. i'm henry winkler.
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take a look at the dow heat map. lots in the red but the biggest loser is hewlett-packard off the
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back of dell's earnings last year. cautious comments about the adoption of the win 3 upgrade cycle sending hewlett-packard shares lower ahead of its earnings row lease later on today. some are pointing out it's not just pcs that will dog hewlett-packard, but also printing. printer business is not a good one right now. >> no, it's not. also remember lenovo did take a lot of share on this kind of computer. and i really think that hewlett-packard is again an example of when you say what has moved up. hewlett hasn't moved up but i think it's more of a dangerous stock because that group can still move down. i know you understood the buyers coming in, but i don't see anything that keeps tech up in the air here, given the tech data is such a broad supermarket of what's not happening. i do like apple, obviously, but apple is part of that that bounced off the 649 level.
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apple is suy generous and the only one. >> if i'm meg, right, and i was looking at the calendar of earnings and i knew dell was coming in the night before us, preannouncement looks pretty clever, wouldn't you say? it does take some of the edge off going into sgloetonight. >> that's a great pointing. i like her very much and i think she's very wise about these things. she's i think going to turn this around but it's a multi, mill tie, multi-year thing. >> the cruise line carnival is offering an all you can drink package on a test-run basis all for just 50 bucks or so. it's calling the package the awesome bar program. we know you can do better at marketing that line. >> my awesome bar program? genius. >> we're asking you what should carnival's unlimited drink package really be called? andy writes the i can't believe it's not seasickness program. gary writes an ocean of booze on your cruise. john writes call it drink till we sink.
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that hurts. and tamra tweets carnival should call its new drink package ship-faced. >> what? >> that's right, you heard me. >> that's recommend sichminisce was said yesterday about facebook. the dow is down about 6 points or so. a lot more "squawk on the street" ahead. coming up, are you sailing smoothly through this market or are you sinking? there's one way to stay afloat nowadays, and that's with jim cramer. six stocks in 60 seconds when "squawk on the street" returns. . you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work.
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let's get to simon hobbs and see what's coming up at 10:00. >> in the next hour of "squawk on the street" we're going to intrude on the pain of two beaten down teches, dell and hp both reporting. which offers you a better investment opportunity. we'll have an exclusive interview with the ceo of
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intuit. and we'll talk about toll brothers. you would have more than doubled your money in toll over the past 12 months. can the rally continue in the home builders. that in the next hour of a great show. in the meantime let's get to 6 in 60. 6 stocks in 60 seconds. ebay. >> that's done. discover financial tie-in with ebay makes paypal the winner. that's very, very big. >> paypal the engine of this company. >> yes. >> bvh. >> a downgrade by deutsche bank. i wouldn't take profits in this one. >> piper jaffrey recommends buying amazon. >> amazon is a stock to watch because google has fallen a little, apple can still be the leader. >> kayak. >> kayak i think it is a little expensive. >> costco? >> i don't know. we like costco but haven't they always been reluctant to jack
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prices up for people? >> absolutely. tiffany. goldman says it will report a negative number. >> adrian shapiro saying listen, it's going to be bad next week and you want to buy it. i think it's a brilliant call. >> more on those names. we'll see what's coming up tonight. >> we have iff. i've never -- this is a company i wish they had done tv earlier. he's a remarkable man. they had a major turn-around. also we're selecting our quarterback for our fantasy along with our tight end, kicker and defense. carl, it will not be an eagle, but i might wear an eagle jersey because i had a giant jersey on yesterday and i felt awful and tried to burn it after the show but victor cruz is very good. >> you probably have an eagles jersey on under that suit. >> i have 21 eagles jerseys, including one that says cramer. >> i haven't heard you talk about what you might be buying. >> i think the financials are very cheap. i think the margin improvement is dramatic. i also like any retailers on a pull back.
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i like domestic again. these are a rotation name. i like the drugs very much. so i just say you can go back into things that have stalled, but other stocks that have been great might stall. >> you made clear today you don't think the fed is the dominant dynamic. >> i'm worried about spain. i like the fact copper is up, that's good. the ball particultballtic freig that's good. you need to see bbva go up because they are at the fulcrum of what could go wrong in europe. >> so when the minutes come out this afternoon, you want to see them say what? we are happy doing as little as possible. >> right now that would 'em bolden me thinking that people would sell, along with bernanke, that he's saying, listen, i have your back. all i wanted to do is have our back. i don't want him printing money. i like interest rates. actually a gentle rise is not
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the end of the world. it shows there's a little demand in machioney. >> one of the best hands of poker being played by bernanke at this stage of the hand. >> i'm all in, bernanke, by the way. >> we'll see you tonight. >> great to have you back. when we come back, an exclusive with the ceo of intuit on the back of those earnings. [ engine idling ] [ engine revs, tires squeal ] [ male announcer ] more power. more style. more technology. less doors. the 2012 c-coupe. join mercedes-benz usa on facebook for the best summer sweepstakes. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things
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welcome back to "squawk on the street." let's get our road map for the next hour. another strong dose of housing news as toll brothers reports profits that were nearly two times estimates. so is the housing bottom in for good and is toll your best bet as a momentum play. >> and even with the slight pullback today, the broader indices hit highs yesterday but with the fed minutes out later today and jackson hole just days away, how much longer can we hold on to the gains. >> and dell reported second quarter earnings down 18%. the company's outlook far short of expectations. what does this mean for hewlett-packard out tonight after the bell. and the pressure continues in the middle east.
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could an attack on tehran come from israel? housing is top of our agenda. we do have those numbers from toll brothers but in addition we have july's existing home sales. those figures released moments ago. here's more details on the data and why it emerged early. over to you. >> as you said, simon, basically two stories about the existing home sales data from the national association of realtors. headline numbers, existing home sales in july up 2.3% to 4.47 million units. the median home price $187,300. that's down slightly from june, but up again 9.4% year over year. nar chief economist lawrence eun saying in terms of what happened in july there were more upper-end sales and fewer at the
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lower end of the price spectrum, under $100,000. there's now a 2.4 million available inventory. that's down 24% from last year. a 6.4 month supply to exhaust that inventory. six months is what's considered normally. as to the story of why such sensitive market moving economic data basically got out early, number one, chief economist saying there will be an investigation, but what we've been told so far is this. normally the nar puts out the information early on what they describe as a, quote, invisible computer link. well, somehow we're being told that in essence someone at bloomberg got access to that link, tweeted the headline number. i was in the room with about 30 other reporters. at that point all bets were off as far as the lockup and the presentation by mr. eun and other nar officials. again, nar saying number one, there will be a complete
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investigation and if in fact somebody was able to access what is supposed to be an invisible link, that too will change between now and the next time we get data. so the headline numbers and what we know in essence about why the data got out earl. >> no way to run a country. hampton now on twitter officially. @hamptoncnbc. some breaking news this morning as well. the congressional budget office out with its budget and economic outlook this morning. >> good morning, carl. the congressional budget office is out with a slightly bullish new forecast for the nation's short-term economic future, projecting that the federal budget deficit for the fiscal year that sends september 30th will total $1.1 trillion. that's a bit less than their $1.2 trillion estimate in march. this will be the fourth year in a row with the deficit over $1 trillion.
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the reason for the downward is an increase in economic activity and the cbo expects it to continue at a modest pace with real gdp growing at an annual rate of 2.25% from the second half of the year. that's up from 1.75 in the first half. but for 2013 the cbo is projecting a grim year due to economic tightening from the so-called fiscal cliff which the cbo will assume the country will go over. as a result, they are projecting a recession-like position with negative 0.3% and a jump in the unemployment rate from 8.2% to 8.8%. carl, back to you. >> thank you very much. i'll take it. now back to the earnings blowout over at toll brothers, the largest luxury home builder in the u.s. reporting a higher quarterly profit. isi group analyst steven niece joins us on the phone. he has a hold rating on toll. steven, it seemed like toll is
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firing on all cylinders. is the hold rating -- on a p.e. basis, richer than apple, chipotle and underarmor. >> it really is for me. if we look around what we see in the industry, the field research, et cetera, their luxury market is doing the best out there, but i think, you know, the equity markets figured that out by and large. >> so it is just valuation that's holding you back on toll? >> it really is. i think we probably have upside, i would call it 20% or so, over the next 15 months. but in this -- in this sector, that's not nearly as much as what a lot of investors look for. >> if you're saying, though, that the luxury market is the strongest so far in the housing market, why would you want to rotate out of toll and get exposure to something else?
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are you anticipating that the luxury market will slow down and there will be larger growth to be had in the broader market? >> we don't think the luxury market would slow down. we think that would have to be driven by the economy because this is much more a consumer confidence type purchase. so as long as that consumer, the white collar consumer feels comfortable. i think the results in the luxury market will continue to be good. i think the move-up market is the other area we've seen a lot of strength. i think that will accelerate. also active adult, which is the 50 and older type community plays in both the second move-up and the active adult market. >> what i do get, stephen, when you said there was probably 20% upside, that seems like a big percentage upside. are you participating there's greater upside in other home builders? 20% for any investor is a pretty decent return.
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>> exactly. it is. i think there are other builders that have significantly more upside and i think given the strong run with the group overall. one of the things were just a little uneasy on where the group is given the short run. we've gone straight up virtually nonstop. >> if 20% over 15 months is a yawn to you, what's a screaming buy? >> yeah, i think polty is probably the single name that i like most. i think it's got -- it's a tremendous turn-around story that, they have really executed well and driven operating profit pretty nicely. d.r. horton is trading basically on par with the group and it's arguably one of the best-run companies out there with some of the strongest operating margin as well, so i think that makes more sense.
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and i think lenar has done a great job and has just executed on the land side better than anybody and i think that sets them up for accelerating growth and profits as we go through the next year too. >> interesting. back to toll for one second. you said something that caught my attention, which was the active adult population. is there a big demographic play in luxury homes, because so much of what we talk about are retirees who don't have enough to live on in their twilight years. are they taking money perhaps out of financial instruments like stocks and moving into real estate? what drives that? >> we're finally starting to see that. most of those buyers into active adult will pay cash and they will sell their primary home and really downsize into that. it hasn't taken off like a lot of the rest of the market yet. and i think that's because really that's the most discretionary purchase. i think that a lot of baby boomers have delayed their
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retirement and, thus, have delayed the purchase of the home as well. >> all right, stephen, thanks for joining us. stephen east of isi. next on the program we'll talk about the market more broadly. the indices of course are hovering around four-year highs but we're bumping up against this resistance on s&p, 1400, just above that. it's major and we've had it arguably for decades. we'll talk about it after the break. stay with us. [ male announcer ] when a major hospital
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the rally that just will not ease up as the broader indices continue to hover right around four-year highs. how much longer can we hold on to some of these gains? art cashman joins us here this morning. let's review yesterday first and what you call an outside day and why that's important. >> well, you opened up and got a higher high than the previous day. then reversed and closed and closed with a lower low than the previous day. so it's an outside day. it was outside the extremes of the previous day. and old trader folklore says that that often happens when the market is about to reverse, that it's had a sharp enough change of mind to have a widespread range. >> does it matter that this
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outside day is set around a very tight range on the market? >> it will -- that's the other exception. the market had for days narrowed its range to a point that usually is seen only around the days immediately before and immediately after christmas. i mean it was an oddity. so for them to widen the range got folks believing that there may be a signal here. now, it's not a point of certitude but has enough of a history it gets everybody's attention. >> where are we for the feds this afternoon? that doesn't seem to be the accelerated talk that you can get on occasions, it seems to be relatively muted. >> well, it's muted for a couple of reasons. number one, you've got jackson hole coming up behind it which is assumed to be an easier place for the fed to give a signal. number two, fed minutes traditionally are pretty well laundered so it's tough to figure out exactly who's there.
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there is no accounting of punches thrown, it's just a few people express this, several others express that, so you don't get many clues. what we will be watching for is if there appears to be enough of a pushback to a qe-3. is there resistance there that bernanke is going to have to overcome. >> so the other potential measures, delaying the exits, the proclaimed exit from low interest rates, other things they might come through with, are those not terribly relevant with where we're trading at the moment? >> not at this pointing. traders are really wondering is there a big surprise here. will the ecb and the fed get together, and perhaps even the peoples bank of china. you've got everybody moving reserves around at rates around, and you've got to be careful that they do appear to be act together because otherwise you could look like you're going into currency wars and that's not what you want to have happen.
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>> we just heard from the cbo and we are looking at a fourth year in a row of a trillion dollar deficit. fiscal cliff, is that getting a lot of discussion around here? because we're going to have david costen on from goldman and part of the rationale of his 1250 target is the market is underestimating the difficulty it will take, it will be to get congress to come to an agreement on the fiscal cliff. >> well, no, so far the market has adopted a kind of scarlet o'hara attitude, i'll worry about that tomorrow. so the fiscal cliff is far enough off that i don't find a lot of animated conversation about it. there is the other thing that we discussed before which i dubbed the rationality put. aft after lehman went under, if they see something coming, they won't let it happen. they'll talk about it and step in, as they did with aig. >> this is different -- forgive
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me, because you're bounded by the date of the election. you know nothing can happen before the election. so even if the market started falling off in anticipation of that, they couldn't get together because they don't know what the result will be. >> no, no, that's what i'm saying. they'll worry about that tomorrow. >> so after the election. everything will be fine until after that? >> well, you have other factors. you have the election itself. the fiscal cliff is something that people are concerned about, but it's not a topic of everyday conversation. a topic of everyday conversation is what's going to happen with the election. are we going to see the two houses locked in the hands of the republicans and the house? >> that's why this missouri race is so key, right? >> absolutely. so this is all going on. meanwhile, across the pond, other things are happening. >> so what's your take, art, on why people are not willing to take profits with the markets at multi-year highs at this point? is there a fear of not being
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long the markets when the ecb/europe/the fed does something? why are we here at the stand still? we reach those levels and sort of hold on? >> i think there may be a couple of things going on, whether it's hedge funds or others. to be part of the market has been the most profitable strategy so far. a lot of other theories have not worked. now, if you look at the market in terms of the economy, you've been basically a naysayer. you've stood back and said, wait a minute, 1.5% gdp growth. why are we at new highs again? but if you believe in lean and mean and profit margins, then you've been it in. so i think they're afraid to give up their positions. lastly, and this is kind of a wild theory that's going around. that in search of yield and some return, people think that several players may have very huge positions in options around the 1400 area.and that's kind o.
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we're on a tether, working around that area. and we'll see. and that's why whether it's a reversal or not, if we start to widen the range and get away from there, then those positions will become untethered. >> like a dog on a spike in the backyard? >> exactly. >> have you heard of this carnival cruise program, $50, all you can drink? >> they haven't heard of me, i guess. >> i knew i'd get a good line out of you. thanks, art. >> for more details on the fed minutes, tune in at 2:00 this afternoon. our own steve liesman will give us a preview now of what exactly we can expect. hi, steve, good morning. >> good morning, simon. the market likely will be faced with a classic fed dilemma, weighing the difference between what the fed says it's going to do versus what it will actually do. we'll likely read in the minutes a lot of discussion and debate about quantitative easing. the trouble for the markets is how much that discussion will tell us about the likelihood of real policy action. deutsche bank saying its analysis today that we continue
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to believe policy makers will refrain from further balance sheet expansion, although a discussion of these options will likely be apparent in the meeting minutes. but deutsche bank goes on to caution the important consideration is that simply because policy makers discussed an option does not mean that action is imminent. barkley's saying the reason for caution is that the economic data right now just doesn't justify additional qe. barkley saying the committee's decision not to take further action at the august meeting was in part because it expects growth to accelerate modestly in the second halff th year and it views financial market conditions as not having worsened to the degree as in some previous fed programs. they say the some of the economic data has improved in the past several weeks. take a look at jobless claims. the claims have trekded down from an average from around 385 in june just above 360,000 right now. no one at the fed is impressed
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with the data. at the margin growth forks have barely been nudged up to the high 1% range. some fed officials continue to hold out with just a little bit more qe, we could get over the threshold into a virtuous circle of consumer demand, spending and investment. so we'll see how much talk there is for qe and how much support there is but it's tough to say there's going to be real action. melissa, we'll have to wait until the jackson hole beach by ben bernanke next week to get a real read on how close the fed is to pulling that qe trigger. still to come, goldman's chief u.s. equity strategist gives us a peek inside his latest report on where hedge funds are putting their money to work right now. back in two minutes. powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading. so we built it.
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to dream. to create. to work. if you're going to do something. make it matter. the euro nearing its highest level in seven weeks against the u.s. dollar. todd, it's always good to see you. right now the euro is holding at
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124.70. the seven-week high is 124.88. what would you like to see? >> i would like to have a pull back at 124. i think the focus is in greece. the greece prime minister is kind of on a road show right now. he's going to meet with the eu groups. junker, i think he's heading to berlin to meet merkel and friday he's in france. i think he's going to champion this $11.5 billion fiscal measure. on the flip side we have the fed minutes. i think that's going to 55 the euro/dollar trade a boost here. >> what do you think will bring us back down to 124, todd? >> i think if anything it's this key technical reversal yesterday in the s&p. don't forget the euro, dollar and s&p are highly correlated. we got tee nidenied from highs seen since april, 2008. it looks like the path of least resistance the next couple of hours is lower which will present that buying opportunity
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in euro. >> what would be the downside risk at getting in long at 124. >> i want to put about a 100 pit stop which is 123.00. this trade is only meant to carry us through the first half of september. 127 is the figure for the profit. >> three weeks is not very long but it encompasses a lot of events. all of these meetings in europe, jackson hole as well as i believe a fed meeting depending on where you go in september. >> yeah, there's a lot of key events coming up. of course this risk is quite anemic in low volume but central banks, specifically the fed, ecb and more importantly china is willing to do what it takes to support the global economy. i think central bank is to the rescue and that's going to allow that risk trade to push higher. >> todd, good to see you. for more, catch money in motion at 5:30 eastern time and check out currency class at
10:26 am shares of dell taking it on the chin after second quarter earnings beat estimates but the company's outlook much farther short of expectations. just how worried should we be about the pc market and what does that mean for hewlett-packard tonight after the bell? well another great thing about all this walking i've been doing is that it's given me time to reflect on some of life's biggest questions. like, if you could save hundreds on car insurance by making one simple call,
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about an hour into trading and some of the stories we're
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squawking about. tjk discover financial rising to highs. toll brothers jumping to new 52-week highs on the home builder's better than expected quarterly results. and existing home sales up 2.3% in july according to the national association of realtors. the numbers coming in just shy of consensus estimates. let's talk about -- let's talk about dell. dell has reported second quarter earnings that actually beat expectations at the eps level. the company's full-year outlook, though, did fall short of what many on wall street had hoped for. time to sort through the numbers and find out what this could mean, also for hpq, hewlett-packard, which reports tonight after the bell. joining us now a senior analyst and on the phone aaron rakers also joins us, enterprise hardware analyst. let me kick off -- let's kick
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off with aaron. aaron, what did you make of what you heard from dell last night? >> yeah, i mean clearly disappointing on the pc side of the house with a down 14% growth rate. in that the consumer segment particularly down 24%. clearly a disappoint. i think somewhat disappointed, although weaker than expected. that offset -- the enterprise solutions business up 6% and growing in terms of north of 50% of gross margin. so clearly disappointing. expect to see the stock down as it is but still feel there's long-term value here. >> just stand by for a minute. we want to go to jackie for inventory numbers. >> yeah, we have some breaking news from the department of energy on oil supplies. looking at crude oil, the eia weekly data right now, we're seeing a draw of 5.4 million barrels. we were expecting a build of 1.2 million barrels. there was a initial prop on the wti price.
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looking at it now, it is higher, 97.06 at the moment. in terms of gasoline, we were expecting a draw of one million -- excuse me, 1.5 millions, it was a draw of a million barrels so a little more in lin with expectations. on the distalate fuel we get a build of a million barrels. watching that oil price, it's happeningi hanging out in line. yesterday we did see the epi data that was out saying the u.s. fell by six million barrelling. that was more than expected and saw a pretty much muted reaction to that. looks like it's much of the same at this point. there are still more potential catalysts today. if we get any more news on europe and also what comes out in the fed's minutes this afternoon so we'll be watching those aspects very closely. back over to you. let's return to our conversation about dell and of course hpq, hewlett-packard reporting tonight. we're joined by the senior equity research analyst and on the phone we still have aaron rakers as well.
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your frustration is large at what dell had to say in today's "wall street journal" they quote you as saying they haven't delivered the data points that they promised. are you talking about the fact that they said they'd have record full-year earnings at dell at the beginning of the fiscal calendar or is it the product mix that disappoints you? >> yeah, a couple of things. dell has been very consistent in their message about strategy, they want to de-emphasize pcs and derooi growth from enterprise business, but the milestones they have laid out, they have not delivered. i was pointing to the target of 214 the industry gee was the same and it's still the same. but the revenue decline is much faster than expected. so the milestones they laid out, they have not been hitting those. that was the point. >> aaron, you were expressing your disappointment as well. you said enterprise had done reasonably well. i have here that you have a $17 price target. from where we're trading now,
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that's 50% upside. are you sticking by that rating? >> yeah, we are. and we did this morning. we do feel as though when we look at the value with the stock trading at less than three times enterprise value, given that this is a well-known long-term transformation in terms of the company moving away from the pc business, and i would also point out main taking other gross margin profile within the segment, we feel as low the weakness on the pc consumer side is definitely a disappointment, but the long-term transition or transformation of this company continues to play out. >> and it's that transformation that i want to ask you about, aaron. the move to enterprise has been i guess sort of gaining traction. but in the most recent quarter there have been some speed bumps. storage growth is the smallest year over year increase after three straight quarters of growth year on year and then you look at services and that's also showing signs of a slowdown. are you concerned that perhaps it is the economy and there's a problem in this turn-around
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story? >> well, i would balance that with what's been relatively strong performance on the server side where they have led the market in the latest product cycle from intel. they were 13.5% there year over year this last quarter. in the storage side definitely disappointment. it wasn't worse than what we had anticipated, but definitely worse than the street. i would point out that that 20 plus percent comp that you're citing reflects some of the acquisitions that they have done so a nonlike to like compare. that 6% is now the first true compare post some of the acquisitions that they have done. >> i don't fully understand what's going on. dell has recruited one of the former hp executives who were involved at enterprise to lead an enterprise at dell at a time when hpq is saying enterprise is not what it should be and we're writing down $8 billion of value there. are they all chasing the same thing? are they doing it in delay?
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is one wiser than the other? why the contrast? >> yeah, you know, i think the hiring of the person you're talking about is definitely positive for dell because that's the -- the enterprise side is where they need help. clearly on the hp side, historically they overpaid for some of the acquisitions and that was the reason we are seeing those writedowns. there could be a few more write downs at hp. that doesn't mean that he doesn't have the operational skills to help dell's business on the operational side, which is why we think they hired him. >> aaron, does the landscape change markedly after windows 8? is it a matter of waiting for that platform to be unveiled before you dive into this name if you're not already in it? >> yeah, i think it's that. i think it's the macro as well. dell does about 30% of their pc revenue from the consumer side, so you've got 70% that's still
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tied specifically to commercial and enterprise. windows 8 is obviously much more of a consumer-focused upgrade. that should help but that looks to be more of a 2013 story and really a reflection of the company's weak guide over the next couple of quarters. >> so of the two stocks, aaron, obviously hpq is reporting tonight, which do you think offers the most upside? >> we do have a hold rating on hpq. we feel as though they're earlier in terms of their longer term transformation. we also feel that hpq's balance sheet with $22 billion of net debt is a bit of a challenge as well, whereas we've got dell with north of 25% of their market cap sitting in cash today. >> okay, gentlemen, we'll leave it there. thank you both for your advice on both dell and hpq. and of course tonight on "closing bell" they will have the latest earnings out of hewlett-packard after the bell. that's on "closing bell" and of course "fast money" -- >> we'll be on the conference
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call. let's get a quick market jvflash here. brian sullivan is back at head quarters with details. >> we're taking a look at ebay and also discover financial services together, because they are related today and they are both higher. the story now is that they are teaming up to offer paypal through discover financial services basically merchant site, i don't know, payment processing. in other words, you swipe things, they're competing against that mobile payment app. basically a merchant will have to upgrade their device to allow paypal to be accepted but it's about seven million different merchant locations. recently i know a company, mcdonald's, saying that in france they're testing out paypal. there's a lot of folks that have suggested that paypal could be worth as much or more than ebay, its parent company. still, they are both rising on that news. everybody rushing to figure out the best way to enable people to pay. >> sometimes we wonder why the company is not called paypal
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instead of ebay. intuit reporting last night. when we come back we'll sit down with the company's president and ceo, talk about the latest quarter, growth within the cloud and the worries over rising competition in a few moments.
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or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future r everyone.
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dow down around 30. we continue to look at the focus of the buyers today. tends to be things that are related to housing, after toll's fantastic guidance and stellar quarter earlier this morning, but there's a bit of a halo effect going on as well. names like whirlpool, masko, lowe's, bed, bath and beyond, names you would associate with housing but not necessarily in the sector up today. >> the other home builders are up sharply as well.
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we're also tracking a lot of the retailers out there. express is one that we haven't talked about yet this morning hitting a 52-week low in today's session. express came out with a fiscal second quarter sales miss. an underwhemg third quarter forecast. it cut its year-end and lowers its same store forecast over the year so pretty dismalresults sending the stock lower by 9%. >> what's also interesting is you had very bad trade data in asia overnight chiefly on the 25% fallen exports from japan to the european union. everyone else is worried about world trade but maybe it's because of the fed this afternoon, these markets are actually holding on very well in that environment. >> some of the losers surrounding technology, dell is the worst performer on the s&p, but also this -- i think this bhp news, postponing or cancelling this copper expansion project in australia, scaring some people out of the names like u.s. steel, caterpillar, big industrials. also hewlett-packard riding the dell wave down.
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so industrials and tech two of the areas you'd like to see outperform in this kind of market not doing that today. >> those are cyclicals because you realize on both sides of the atlantic you have that indication that a recession or slowdown in growth looms. on the one hand because of the trade data out of the european union but also what the cpo just head on the fiscal cliff. officially the united states is projecting a recession. >> a recession-like climate. >> recession-like climate next year on the basis of where we are at the moment. >> and a deficit for the year of more than a trillion dollars for the fourth year in a row at a time where it does not appear that congress, as your point with cashin earlier, is nowhere near getting to it. >> let's focus on the energy market right now. not long ago the energy landscape looked much different than it does today. the u.s., not china, was the world's biggest consumer of energy. u.s. refineries were on the brink of bankruptcy.
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key benchmarks for oil were trading at nearly the same price. sharon epperson takes a look at how quickly the landscape has changed and what this means for you. sharon. >> melissa, so much has changed in so little time. there's an unprecedented differential in oil prices that's nearly ten times what we saw just two years ago. now, these price differences have had an impact on our refineries and infrastructure. there's been a monumental shift in oil demand fundamentals and it started late in 2010 and 2011 when unrest in tunisia sparked the arab spring. we saw a series of demonstrations and protests in egypt, yemen and libya which halted all production there for seven months. the loss of oil supply into the atlantic basin ignited a rally in the crude that is viewed as the benchmark for oil prices. the elevated price of brent encouraged north american oil and gas companies to drill and finding abundant supply helped
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the u.s. and canada become the fastest growing energy producers in the world last year. it also created a glut of oil in the middle of the u.s. where our existing infrastructure was unable to handle, leading for plans for new pipelines to transport it all. with more u.s. oil supplynd increasing demand for refined fuels from overseas, several u.s. refineries have found new life and profits, processing to export to foreign markets. now, u.s. drivers haven't benefited from the increased refinery production, unfortunately, due to production issues in the north sea. brent crude supplies remain tight and that's exacerbated a rally that's already taken oil prices to a three-month high. u.s. gasoline prices over the past year have tracked the brent price and as a result, now that the summer is winding down, drivers here are paying more at the pump on average than they did a year ago. simon. >> interesting, sharon. thank you very much. let's link in with rick santelli working on the next
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hour of "squawk on the street" back in chicago as well, rick. >> welcome. absolutely. thank you for all the great hospitality at the wonderful new york stock exchange. traders everywhere are great. all cut from the same cloth. hey, we're going to talk about a little static regarding tax policy at the top of the hour. why? there's two different types of ways to score tax policies. dynamic scoring and static scoring. we'll touch on both those issues, top of the hour. flac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ♪ ha ha! i've got a nice long life ahead. big plans.
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small business software maker intu it trading near all-time highs as the company navigates into the mobile cloud computing era. they reported earnings after the bell, swung to a profit but missed on expectations. joining us exclusively is brad smith, ceo of intuit. john, why don't you take the first question. >> will do, melissa, thanks. brad, why don't you talk about the quarter and the fiscal year, because i think people get a little confused about intuit's seasonality. we see a lot of analysts raising price targets after this quarter.
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you did some things like spin off the website's business and you're bringing on demand force to that same business unit. what is intuit doing in terms of maybe de-emphasizing revenue and emphasizing margin >> i would be happy to. first of all, our fourth quarter, we just finished up a strong year at intuit. grew revenue 10% on the top line and earnings share up 16%. what happened in the fourth quarter is we had portfolio reshaping. we made a couple of devest churs in the fourth quarter and an acquisition. when you move the numbers around it gets a little difficult at first blush to see whether we were at or above expectations. this morning most of the analysts came to the conclusion we were at the high end or above expectations. next year we've got a 10%, 12% revenue both and 14% bottom line growth. very strong performance in otherwise pretty tepid environment. >> some people are happy. tell me about the small business picture, because a lot of people don't realize you've got really good insight data into how small
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business is doing. hiring up just about 2%, but overall, their revenue is down a bit. how is that affecting you and what does that tell you about what we're looking at for the second half of the year? >> you're right on target. most people think of tourbo tax as the primary target we have. our revenue comes from small portfolio. we pay 25% of the u.s. economy flows through quick books which is our small business product. we have a really good visibility into how the business is doing. unfortunately what we're seeing right now is they are hiring employees but at an annualized rate of 2%. in terms of small business revenue, the revenue they're getting in their stores is down about half a percent month over month so it's still a pretty choppy environment for them. that's when our products and services become most in demand because we help them save time and save money. we're able to continue to be there when they need us most which helps our business continue to growth. >> melissa, i believe you had a question. >> i do. plans for global expansion,
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brad. you said accounting is 30% global. i wonder how you plan to expand in other countries and provide a customized product that would be appropriate for their accounting stand dar standards in their country. >> thanks, melissa. the answer is platform is a service. what we have is we have a quickbooks online version. we spent time actually gleeblizing. what we've enabled now is the ability for a local user in any country or third-party software developer localize the aspects we can't get right in the first blush. you can select the flag and it will change the entire language to your local language and change the tax to your tax jurisdiction. if you want to make modifications to semantics or your report, that will go into the cloud and enable all the other people in that country to benefit from it as well. we rolled that product out july 1th. to date we've had customers in over 78 countries begin to download and use the product. we're still very excited but
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still in the early days. >> we done pretty well, brad, on cloud and mobile. a lot of software makers from the p.c. era are not doing as well. you're also on the board of yahoo! which has its own challenges as a content provider making some of those mobile shifts. tell me, what are some of the opportunities and challenges that you see, especially in global expansion as you tackle mobile and how to really make that payoff longer term? >> i think mobile is the key catalyst for globalization. the computers move to the palm of our hand. what we used to hear about is the digital vibe is an economic issue but now people have phones. phones are getting increasingll smarter day day by day. tools that used to be reserved for a pc are now in the hands of millions of people. it's driving engagement up 3x of what people would typically do on the web or the desktop. they're using a mobile device. that's fertile ground for all the companies to begin to go in and serve more customers and
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monetize the customers. >> simon, you want to get in here or are we done? >> no, i -- as you wish, john. continue. continue. nothing to do with me, mate. >> okay. just last question then. about mobile and monetizing it. we see facebook having trouble with that right now. what do you think is going to be the key to figuring out how to do that? >> i think it comes down to the business model. what we're seeing is transactions occurring on a mobile device or not having an issue. if you make a payment using your mobile phone, there's a transaction fee, it transfers just as easily from doing it on a desktop or phone or mobile device. subscription services working on mobile devices but advertising models, the ability to find a way to get that ad to the user without being disruptive is challenging. that's not the business model we rely on. so far, a good transfer from the web over to the mobile we device
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and ability to monetize. >> thanks for taking the time to talk about the details with cnbc. guys, back to you. >> john and brad, thanks so much for your time. tweet time. and today we're talking -- taking it to the bar, for about 50 bucks a day carnival cruise line is offering all you can drink package on a test run basis. the deal only applies to drinks that cost $10 or less. >> no top shelf liquors? >> no. that's your basic, cheap white wine. >> wine and well, as they say? >> it's called my awesome bar program which brings us to this morning's -- >> but hearing you say awesome is really awesome. >> by the way, this won't work, guys, if you're cruising around the uk. you will go bankrupt. that brings us to today's tweet question. what should carnival's unlimited drink package really be called? tweeters@cnbcsquuk street. at optionsxpress
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a wednesday morning, simon just told you, the cruise line carnival offering an all you can drink package on a test run basis for 50 bucks or so, it's calling it the my awesome bar
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program. so our question today is, what should carnival's unlimited drink package really be called because that needs help. someone in marketing is not doing their job. ralph writes, the shark food program. i guess you take to it another level. and that's what you got. don nld writes, the high proof cruz, give our cruise a shot or two. you sure look pretty, hiccup. do you know where my cabin is? a lot of good responses today. people are creative. thanks for bringing our attention to it today, simon. good eye. i hadn't seen this yet. >> i'm still focused on the number of simpson stamps. >> how many? >> 640 million, simpson stamps. they ordered twice as many as they would have elvis presley. and wonder why the post office is not as successful. what's coming untonight? >> exclusive with the ceo of key y kayak. and marianne bartels.
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>> see you guys tonight. simon, see you for the close in europe in a few minutes. in the meantime, if you're just joining us, here's what you might have missed this morning. welcome to hour three of "squawk on the street." here's what's happening so far. >> t.a.r.p. was a failure because it was supposed to do more than just shovel money into the banks and have potentially a break even for the banks. t.a.r.p. was supposed to help. the money was supposed to go from the banks and into the economy to restore lending. that was the stated goal. preserving home ownership. preserving home ownership was a fundamental reason why t.a.r.p. gets passed. the housing policy, you know, and it was going to help up to 4 million people. it didn't do that. >> half of directors doen own this stock. here's a guy from what i head, still has $200 million worth of stock. he's got skin in the game. >> what's wrong with that?
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>> suddenly started putting higher priced earnings multiples on a lot of companies, including technology and industrials. those could pull back very quickly if we don't see resolution in europe and bernanke says, listen, it's all fear. there's so much here that's good for apple but i understand that this stock, if it was to take a breather it's got to take a brooelter. >> yeah. >> take a look at the opening bell this morning. >> existing home sales in july up 2.3% to 4.47 million units. have you heard this, carnival cruise program? $50, all you can drink? >> they haven't heard of me, i guess. good wednesday morning here at the new york stock exchange. let's get a check of the market on this wednesday. the dow at this hour down 55 points after losing 68 yesterday. s&p is down to 1408 and nasdaq, 60 points above.
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american eagle one of today's biggest gainers after reporting reports that met analyst estimates. stock up more than 4% today and more than 40% this year. tech stocks showing weakness after dell reports a mixed second quarter. gives a disappointing outlook. those results weighing on hp as well. out with quarterly results after the bell tonight. road map for today. exclusive look at hedge funds. goldman's david kostin is sitting with me. plus, does silicon valley need adult supervision? two ceos will give their advice to the mark zuckerbergs of today. and president obama maintaining his lead to the white house koding to the latest poll results but with mitt romney so close bed hind, can he hold on to the lead new mexico untuntil? and gold rallying. with a. look at where the commodity is heading next. all that and more is coming up in the next hour. but first, goldman sachs out
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with the quarterly hedge fund trend monitor, tracking hundreds of hedge funds with $1.2 trillion of gross equity positions. where have this money managers been betting their money? joining us here exclusively is david kostin and david kominsky. i was going ask you where are they putting their money and than i thought, well, so many of them are underperforming why would i care or do i want to know and then run the other way? what do you think about their performance so far? >> i think there are three things to think about in terms of hedge funds thus far this year. first is performance. second is leverage. the third is portioning. i think that relates all of those to your questions. from a performance point of view a typical hedge fund is up around 5% this year. put that in context. 80% of the hedge funds positive results this year. compare that with mutual fund industry, mutual funds up around 10%. and work it up a little higher than that. why the hedge funds performing
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the way they are? part of it is the leverage. there's a short wind in their portfolio. while the longs are doing well, the shorts are retard or drag a little bit on that performance. from the perspective there it's been some leverage, our calculations show around 43% net long positioning and that's basically taking it up but at the wrong time and taking it down at the wrong time as well. >> let's explore that, david. taking up the leverage at the wrong time. when you look back at past period where's lef raj was utilized by the hedge funds at the wrong period of time. were the hedge funds too early, were they long? what what does that tell us about the next six months when you look at how they underperformed? >> a little bit in the context and the horizon. there's a lot of concern about issues involved in the fiscal cliff. and so there's been a reluctance. stealth rally particularly here in the midway through the third quarter. i think some of the comments from ecbdraghi.
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there's been a reluctance. look at the fundamentals. no earnings growth or limited, 3%, 0% is expected earnings growth in the third quarter. reluctance to step forward to market here. >> it makes sense to you in your strategist role. it makes sense to you that they played it cautious here and that the stealth rally, in fact, they may have looked back months from now and say, we were right. >> correct. yes. that's my view. i think the portfolio manager that i talked to in my travels around the country is that most people are relatively benign view of the risks involving the fiscal cliff. and the idea that that's going to be addressed in the lame-duck session of congress. that's some people have that view and that's pretty optimistic view. my experience might suggest that politicians are not in the mood of coming to resolution so clearly. we still have the experience last year. ten days, market fell 10% around the whole issue on the debt
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ceiling and negotiations. the concern is that that might happen. again, certainly a risk coming in to it. think about the contraction that would take place in the first quarter if it go over the fiscal cliff, the proverbial cliff. that's a concern i have. i think a lot of the funds themselves are also concerned about this issue. >> wouldn't a rational player look back at what happened last year in those ten days and act differently this time around if you were in congress? >> in congress, yes. if you're an investor you might look at that and a precedent and say i want to be mindful of that precedent and be more cautious. >> that leads you to your target of 1250? >> yes. >> which you've been stubbornly stuck to even from this run from 1320. >> we started at 1258. we went as high as 1420. we come down 1257 and now back up in the a little over 1400. i acknowledge the cycles. my concern relates to the fact that we have very modest earnings broet next year. the u.s. economy is growing at a muted rate, 2%, looking into 2013.
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it's hard to see why you get a big "p" expansion. the fiscal cliff issue, sitting here now in the late summer, i think relatively complacent about the risks associatesed with that. if congress were to move forward and address the issue that would be a positive sign. >> i think it's important to remind people, carl, most of the other strategists that have a much more bullist outlook on the s&p, they don't dispute the earnings estimate. it's that multiple expansion. you have a certain assumption, let's say, a bit more muted than some of the more optimistic strategists that relates to the multiple expansion. remind people why you have a certain target on the s&p earnings that may not be as high as others. >> it's a good question. the framework that i think about is the economy, we think about earnings, then we think about valuation. the economy is a historical analysis which shows that we are in stagnation. the united states is in stagnation. fifth consecutive year. 93 examples in the last 150 years. 93 examples of country that have been in stagnation for long period of times. and the experience, the the common experience is that the
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p.e. multiple is constant. it's a flat multiple. if you will, that's an assumption we're using in this environment. and to the extent we add policy decisions that would make it more confident the multiple to go higher, the fiscal cliff would be one issue. >> if i'm an equity investor and able to craw myself back, let's say, in december of this year and complete this ensentence. back in august when i was looking at the s&p and thinking about the issues, i should have done what? fill that sentence? >> give vefocus in on the dividd stocks. companies delivering strong cash flow and raising the dividends, i think those stocks tend to perform well. i think the market continues to see huge flow into bonds, virtually no funds going into equities. i think the idea of income is an attractive component here. >> was there something magic about what draghi said in june? do you think even he anticipated p rally awe new?
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>> no, i think the implication is that people look at risk reduced in europe. i think that's been the case. obviously big dates coming up in september when the german constitutional court, elections, votes in some country. after labor day, people will swing back, focus on u.s. election and focus on what are the implications of the fiscal cliff. that's where you have multiple risk in the market. >> you don't see an armageddon trade in europe coming back? >> no. >> really? >> no. >> that's important, right? >> the valuation in europe is still attractive. that's pretty attractive. my colleagues and portfolio colleagues, goldman sachs around the world. europe, valuation catch-up. that has undertraded the market. if you look at how beta trades and the actual delivered returns in equities in europe, actually lower than you would have expected relative to the performance of global equities. >> you have 1250 year end target. do you have a target out there for next year yet? >> 1350 if you look at 12 months
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out. the middle of next year, 1350. revisit that. earnings this year, $100. very confident about that. next year, $106 of earnings. relatively modest earnings growth. we'll revisit that. zero growth expected in the third quarter. yet a big hockey stick expectation in the fourth quarter unlikely to be realized. >> great choice. showing that hockey stick. >> crystal clear in communicating every point you have. david, please come back. the sme group this morning, rick santelli with today's edition of the santelli exchange looking attacks policy. >> absolutely. thanks, carl. you know, back in the '70s when i went to school, there were models back then, modeling is an art form that goes way back. it's not just about markets. it's not just about budgets. but a lot of the models were highly wrong. they were major wrong. population's one area. weather models. think about it this way. ever see the laser pointers. stand 20 feet from a wall and
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try to hold it steady and you have somebody bump you. boy, the thing goes all over. now pretend you had one of those laser pointers really powerful and you were trying to hit a spot on the moon. if somebody nudged you you would miss the entire moon completely. a little error when yinterpretig some of the issues gives you garbage in, garbage out. this morning we had glib glen hubbard on, wonderful interview. he said something i found fascinating. let's run the tape. >> if you lower the tax rates you do have some feedback effects of higher revenues both because of behavior changes and faster growth. >> now, what i find fascinating is there's two types of models. there's a static model and there's a dynamic scoring model. and many people, including mr. hubbard, allen sgrooan greenspa weighed in on this. it's inaccurate to say that the
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cbo have static changes. they have made changes. guess one thing they don't include in the dynamic revision or updates. they don't include economic macro economic feedback which mr. hubbard was directly referring to. i think everybody understands some of that. just think art, believe me, there's a lot of debate as to, you know, does the laugher curve work as well. you know, the second, third, and fout time. it's like somebody trying to scare you. you know, if they hide around the same wall and they do the same thing you jump the first time but not the tenth time. so their behavior feedback, a, is very difficult to model and, b, over time, if you don't have significant policy following, maybe that macro economic feedback is less so the debate rages on as to whether we should include more of it. but one thing is for sure, there is a dynamic implication, a tax policy. i think the truth lies somewhere in the middle. carl, back to you. >> good way to put this morning's interviews in context
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because there were a lot of good ones. rick. thank you very much. want to get back to headquarters with what market flash. >> carl, las vegas sands, lbs. imperial capital upgrading the name on a total enterprise value basis. they like it. trading under 12 times teb, total enterprise value, it was 14 times a couple months ago. you also had mario on squawk box this morning. back to you. >> thanks. when we come back, two corner office veterans weigh in on the kids running things in silicon valley. do these young ceos need some adult supervision? carly and gordon bethune give us a look at that. [ male announcer ] it's a golden opportunity to experience the ultimate expression of power... control. [ engine revs ] during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection.
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it's been a tough week for facebook and groupon, both in the headlines for high profile investors selling shares calling into question the long-term effect. let's join in carly fiorina and gordon bethune. both are cnbc contributors.
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good to see both of you. good morning. >> good morning. great to be with you both. >> carly, we don't mean to over simplify this argument on on the board of facebook brought up the question of whether or not adults are leaving some kids in the room and i wonder if you were on the facebook board and a fellow member had sold 90% of what he owned, if you would think he even belonged on the board and if you would be worried about management at that point? >> first, i think we have to remember that facebook went public in large measure because investors wanted to get their money out and make some return. and, in fact, mark zuckerberg, i think, was reluctant for a while. so i don't think we should be particularly surprised that peter teal has sold shares and remains a shareholder. i also think it's a little bit unfair to be taking mark zuckerberg on now. this stock was over-hyped by wall street. i said to so from the very beginning and the fact that the stock is not meeting the over-hyped expectations may not
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be mark's fault. on the other hand, as i've said many times on this show, running a public company is a distinctly different experience and requires different skill sets than running a venture-funded start-up. and so mark would do well to take the advice of people who have done it before and i hope his board is providing him with that aed vice. >> gordon, i wonder when you read some of these headlines regarding the company in houston, what you say do yourself, do you shake your head? and to carly's point about out-sized expectations, some of those the company could have managed leading up to the ipo, not just afterwards. >> carly is exactly right. meeting expectations and managing the street is a skill set maybe every inventor or intelligent man like zuckerberg has. i think he needs help in setting expectations and managing the earnings prospects so that people understand what he's doing and how he's going to achieve those goals. and right now it's not clear.
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when you have an insider dump a large percentage of his share, especially a board member, it sends a really bad signal, regardless of whether you've warranted it or not. there ought to be a board discussion about those kinds of moves. >> gordon, can we follow up on that? walk us into the boardroom because you've been in the boardroom, when an insider is a significant shareholder decides to liquidate. carly points out this was above board. if you were in that boardroom, give us the dynamicses of what other board members are saying to peter thiel as he stays on the board. >> i'm sure they're disappointed. one, i hope he gave them an heads up. that would have been inexcusable. it sends a signal to the marketplace, whether it's okay or not okay. if the ceo sells a large percentage of holding or inside investor that happens to be a board member, that sends a long signal. that's probably at a time when you're trading tirks po price
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that you really can't afford to send those kind of sing signals. >> carly, let's pretend for a moment that a company like groupon was interested in bringing in senior management to help oversee operations. is that something that a senior manager would even be interested in? are you going in to have absolutely no voice once you're in at all? >> well, i think potentially it is something a senior manager would have interest in. but it's something that that senior manager should have a lot of long hard discussion with the ceo and the board about. the difficulty is when a founder who has been incredibly successful up to this phase in the company's development digs in their heels and says, i don't need my help, i don't need any advice, i've taken us thus far, unfortunately that happens a lot. i have no indication that would happen in groupon or facebook's face. companies can't make it to the next phase because of founder isn't willing to accept that different skills are required. it's a little bit like saying i
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ride a jet ski really well, therefore i can power an ocean line perp totally different experiences. >> it's hard. you want to foster the innovation and give the kids a freedom to event and yet there is something about running a big public company that is different in scope. guy, appreciate both of your insights. carly, see you next time. >> thanks. straight ahead we're going to count you down to the close in europe about nine minutes to go and change. actually eight and change. [ male announcer ] when a major hospital wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] [ yawning sound ]
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ethanol production rose by 4,000 gallons last week but with an estimated 40% of the corn crop used for ethanol, it's heating up with half a dozen states petitions the epa to bring down corn prices. bertha coombs is here with a debate. >> carl, warping. georgia is one of six states with big livestock production that have petitioned the eda. the governor there, nathan deal, says that the rfs, the renewable fuel standard, is contributing to high corn prices and that is devastating his state's $20 billion but ethanol producers can reduce corn demand and prices in 2013. economists also say that will offset the corn demand while
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also reducing the price of corn without a waiver. >> they could reduce corn ethanol use 2.6 billion gallons in 2013 without any waiver, just because they have credits from prior years. >> purdue university's wallace tyner and colleagues calculate it by using credits known as writtens. they would make up to 20% of next year's 13.8 billion gallon ethanol target. they assume a drought would bring prices to $8.57 a barrel. if they use thoet rins, 2 billion of them that would reduce it by 65 cents, bringing it's below $8 a bushel of corn. a major waiver, about 40%, would knock prices down about two bucks or so. but it's unclear whether refiners would actually reduce ethanol use if the epa issues a waiver. refiners may not have to cut
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back because a waiver doesn't compound to ethanol remains 15% cheaper here than gasoline, despite the fact that the price has narrowed quite a bit this year. and that helps bring down the costs. >> if an ethanol waiver was granted, refineries are liable to make no changes at all because the logistics and distribution system is constr n constraining the type of fuel they produce and what we eventually sell to the consumer. >> as one trader put it, a waiver debate comes down to a question of cheaper corn or cheaper gas. read more about this complicated system in the market insider section of >> interesting debate. when you've got an expensive corn and expensive gas. thanks so much. a few moments left in europe's trading day. we'll get the close on that and details on the impacts here in the u.s. exclusive to the military, and commitment is not limited to one's military oath. the same set of values that drive our nation's military
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well, it's been said that the potential for market moving headlines out of europe is increasing with andrea hmerkel holding key meetings this week. >> greece is the immediate focus. and then, of course, next week and the week after, spain and italy. don't forget the ecb meeting that everybody is concentrating on is two weeks tomorrow. so you've got the ecb meeting, what will draghi say and angela merkel will be in madrid with the spanish prime minister. that sets up something in the
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diary. i'm not sure if we will be disappointed or a big announcement. what's interesting today is how we book profits. today is a bearish day in europe. this is the european close. >> the european markets are closing now. >> outside america there's a huge concern about the contraction we're getting now in global trade. the figures from japan are important over night with a trade deficit extend ing there. in particular, because exports from japan to the european union are down 25% in six months. that's a very big figure to put around other asian nations are experiencing the same downturn. it's an a. real indication that europe may now be going into recession despite the fact that the asset markets have recently been more positive amix the minors that are taking this on the chin today. we've got here iron/ore down 18% over the last six months. concern about where we're going
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with china and global growth in general has taken a big mark down on the european markets today. in particular, you can see that this this sector is lower. angela merkel, these are the big mine no, sir. canceling 20 billion euro copper expansion today, clearly the management dl believing that things may not be as boy glauoy hard commodity prices. you must remember the context from which we are moving in europe if not here in the united states. on this very big price action that you've had during the course of the summer. so this is is a chart that runs from the day before mario draghi said he could do everything to save the euro. in that period of time, it's up 22%. this is the end of july. the euro stocks top 50 blue chips are still up the 14% and here, of course, the dow has gained 3.6. interesting though is this bearish comes in today the way
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that even bulls have been effected earlier in the session, germany auctioned two-year notes, chats, at a 0% interest rate. in other words, people quite happy to part money with the german government for two years for low, low interest rate on the basis that it would be safe. as we've gone through this more bearish attitude at the end of the session, a rally at the short end of the bull market which has pushed that interest rate into negative territory. i mentioned to you that italy and spain is the focus two or three weeks down the line with the ecb meeting on the 6th of september, two weeks tomorrow. nearer term, it is all about greece. we are now basically in greek week in europe and you will be aware that the head of the euro group is now in athens. he has a meet that starts with the greek prime minister in an hour and a half's time. 1:00 new york time. we're looking for a news conference after that. then of course the french and germans meet tomorrow and then
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angela merkel meets with the greeks and the french meet with the greeks. so i think probably in reading between the lines the best thing you can expect at the moment is some sort of language that suggests that everybody is together and there may be the possibility of movement in relaxing the terms for the greeks. i think anything more than that at the moment would seem optimist i optimistic. certainly germany has been kicked way down at tend of september to deal with the group situation. i think it's considered spain and italy, carl, are the most imminent problems that have to be dealt with. >> i like the way the greek prime minister put it, we just need a little more air to breathe to get the economy going again. time does not mean more money. that's his argument. >> that's not the analysis that everybody else has. certainly he estimate it is you delay hitting the budget targets by two years you actually need 20 billion euros. he's not going to say to the germans at this stage, hey, time to give the greeks more money,
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is he? that's for negotiation further down the line. the possibility that tehe ecb might forgive some debt. >> i like how you sigh greek week, too, con knnotation from universities. >> that inappropriate? >> no. >> to garksgas, as well? >> yes. the markets are drifting very close to the lows in the day for the dow. down 68, was the lowest session. the lowest point in the session, just off that. right now essentially the markets are in wait and see mode right now. waiting for the minutes from the fed which will be released at 2:00 eastern time today. and in light of that, the markets have been held in a fairly familiar row range for the dow jones industrial average, last ten minutes to 70 points or so. let's take a look at some of the sectors that are moving today. consumer discretionary in a broad based decline has been the only one that has been showing any strength. homebuilders credit there. and then some of the better
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performing ones which include health care and technology, despite that earnings warning from dell today and telecom also weak. market gur row pointing out to me this will be the eighth day of declines for the telecom sector if it folds through the session. essential lip what's happened is there a rotation. telecom is now a laggard as we push through end of august. financials also a little bit weaker today. down movers include hewlett-packard weaker on the back of dell earnings. and home depot, though, benefits from the strong numbers from the homebuilders and walmart also along for the ride with retailers showing better than expected numbers. toll brothers came in with stronger than expected results. as a result, home building group is higher today as it has been pretty much for the last year. the home building index is double where it was at this time last year. toll brothers saying that they are seeing some of the best levels of demand they've seen or
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sustained demand i should say in the last six years. we want to point out discover financial is benefiting from the news of this announcement with paypal. it's going to hand out cards to paypal clients and citi is out with a note saying if you have transactions on this new network, basically reaching 100 billion, could add 5% to discover's earnings. that's a ways away though. carl, back to you. >> see some of our adding to some of our losses here, mary. thanks so much. get to our capital markets editor gary kominsky with his op-ed tackling a report out by jpmorgan's fund. >> i need -- i forgot my papers, carl p i have my intern bringing me my papers. thank you, sir. you can step off now. >> are you going to explain that at all? >> that's my baby. great job, by the way. we listen to david kostin. chatted after the conversation, how clear and concise david is.
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you understand exactly what his thinking is. coincidentally because there's always multiple points of view, obviously. i did get an e-mail yesterday from andrew goldberg, chief strategist, in the funds group. now, the interesting thing is let's take a look. david focused on earnings growth decelerating. this is a good chart. here is a picture, again, from jpmorgan talking about where we have seen earnings growth slow down. david did mention that if you go further out you've got this hockey stick expectation for what is going to happen next year. but in terms of what's priced into the market now, slow earnings growth. here's the kicker. next chart. it's a very confusing picture. what they are saying is if you historically go back and look at relative performance, stocks have done worth when year over earnings growth is high and it does better when it's low because stocks are always anticipating the price and unsustainably the high earnings. very complicated.
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the point here is that two different opinions about what to expect when earnings growth is muted. their point is they don't dispute the fact that earnings growth is muted. they say when you look at relative performance of equity versus other asset classes they do better because you don't have that built-in anticipation of the higher earnings growth. >> you agree with kostin? >> again, my point of view if i had to have one right now is i think that kostin is right if you look at the expectations for early 20 13, which we didn't show on this picture but at hockey stick expectation, i'm much more on the kostin camp that you cannot get the earnings expectations that are out there right now which are theoretically being priced in. but here again, always like to have multiple opinions. they're saying they don't disagree with his work for the rest of the year but the market does better in this type of environment. >> interesting. should have your assistant on all the time. >> he did a great job. look at him. stay awake over there, buddy. let's hop over to rick santelli in chicago. very special talking nat gas
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exports. >> we have republican congressman from the great state of oklahoma, 5th district, james lankford. welcome, congressman. you know, congressman, i'm holding a letter in my hand signedly 30 members of congress and it was sent to secretary shu probably about two weeks ago. really the topic is lech questiliquefy national gas and fact that countries that don't have special free trade agreements with u.s. need to go through the energy department to get export permits. you know, we constantly fight with hands tied behind our back. what's the hold-up? you know, if the current administration is about jobs and creating a healthier economy, this seems like a layup, low-hanging fruit. what do you think? >> seems like a simple thing to me. it's providing predictability. we've got billions of dollars of investment that could go into the american economy right now and doing export facilities outside the jonts united states. jobs are sitting around ready to go in natural gas. natural gas is very low here in the united states right now.
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we sell it overseas. we're going to get four, five, six times the price overseas that we're getting here in the united states right now. this does seem like a simple layup. all we lack is federal predictability. before billions of dollars of investment can go in, someone needs predidn'tibility do know that it's going to be there and the time lines are going to be fulfilled. >> did you get a response from fr energy secretary chu? >> not so far. that's 34 republicans and 10 democrats have all signed on this letter from oklahoma, texas, louisiana, and oklahoma to be able to sign on and say we want to be able to do this. our industry needs to have this. make the decision and so we can get something planned and moving. >> the more i read to try to find a logical reason for this to be occurring, i arrive at a place that's the greens, it's the environmentalists. they're just anti-fracking completely.
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listen, i understand taking care of the planet, but why can't we get, you know, government and industry to sit down, work this out, come up with procedures everybody can expect as opposed to dragging our feet. from my perspective the natural gas explosion, liquefied or dry, is coming and it doesn't look like a force is going to be able to stop it. your thoughts? >> that is exactly what that is. there are reasonable people that question sit down in the environmental lobby area and come to conclusions on this. they tested the water issues and found that to not be an issue if now they're trying to focus on the fracking aspects of methane coming out during the fracking. when you look at real numbers and what's really happening it's a very clean fuel. it's extremely abundant worldwide. we know how to tap into it in the united states. other parts of the world are going to learn how to do it like we are. for the next 25, 30 years we could be exporting massive amounts of our natural gas until the other parts of the world catch up. it's not only a economic development for us but strategic development. if we want to compete head to head with russia and eastern europe for the alliances and
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relationships, the way to do that is through natural gas. russia is the supplier in the eastern europe. we could be their supplier. provide us strategic advantage as a nation, as well. >> i know this is a difficult question to answer. but in your opinion, if everything went your way, if the export permits were granted and facilities were billed, over the next several years, how many jobs do you think that could create? >> there's no real way to guess. it's in the thousands. right know exploration for natural gas has dropped to very low amounts right now. the price is so low that what we're finding right now in natural gas and what we already have online is enough. if we were able to increase our production just a little bit, if you're talking about thousands of jobs, and millions into the billions of dollars in additional investment. and so it's a very big deal. we have the potential right now of just moving. if we move more toward natural gas and providing our own well, well over a million and a half jobs online here in the next couple of years just providing our own energy. we talk about exporting some of
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it as well. you add that everyone more. great high-paying jobs. ask the folks in north dakota what it's like right now. it's there. whether it's $15 an hour at dairy queen or mcdonald's or or $60,000 plus in low end starting job in the energy industry, you apply that. this is a great economic development for us. >> thank you, congressman. and don't give up the fight. back to you, carl. >> i won't. oh, no. rick, thanks so much. straight ahead, why choosing paul ryan as his running mate might not have given mitt romney the advantage he was hoping for in the presidential race. ious ln emily skinner, each day was fueled by thorough preparation for events to come. well somewhere along the way, emily went right on living. but you see, with the help of her raymond james financial advisor, she had planned for every eventuality. ...which meant she continued to have the means to live on... ...even at the ripe old age of 187.
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chase sapphire preferred. there's more to enjoy. coming up next, with facebook worth half of what it once wurks they say it's a buy. almost. stocks on edge is the rally loses steam. one bull isn't backing down approximately he'll tell you why the s&p is going to 1575. and halftime exclues i've, bill o'brien, ceo at one of the largest exchanges speaks out about restoring investor confidence. carl, se see you in 14 minutes. days before the political conventions kick off president obama maintains advantage in the race for the white house with a four-point lead over mitt romney. that's according to the latest
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nbc news/"wall street journal" poll. chief washington correspondent john harwood joins us with more on that. interesting internal on these numbers, too. >> no question. we have a race that hasn't moved all that much during the course of the spring and summer. you can see that in the head-to-head between barack obama and romney. the president still holds the lead. 48%-44%. that's sloightly down from what he got in july. we do have a new player in this race. that's paul ryan who is the vice presidential running mate for mitt romney. he has been introduced to the american people for a little bit over a week now. his ratings are very, very mixed. 33% favorableable, 32% unfavorable, which is a consequence of how polarized our politics are and how much media barrage there is once somebody is announced. there's an issue introduced by paul ryan which is the medicare issue and the ryan budget. whose issue is that? when you look at president obama and mitt romney, that is an
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advantage for president obama, 50% say they agree with president obama more than mitt romney on the medicare issue and the mitt romney and paul ryan's desire to shift to a fixed voucher system. 34% support that ryan/romney position. ultimately though, the number one issue in in election is going to be the economy. what's the mood on the economy? you can see it split right down the middle. 50% say the economy's recovering. 46% say it isn't. that's where ultimately this election is going to be fought out until november. carl? >> john, a lot of discussion this week about whether or not we're over-playing the todd akin news out of missouri. it is consequential, you agree, yes? >> yes. we always over-place any development in the race. that's the nature of media, things get distorted and blown out of proportion. however, i think this is very unhelpful to the republican party. party leaders know it. that's why they're trying to get
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todd akin out of the race. it's going to race the profile of issues, which is an advantage to democrats. democrats would rather be talking about social issues than the economy. republicans, precisely the opposite. >> before we let you go. have you ever covered a hurricane before? >> i have. i used to work for the st. petersburg times in florida. now called "the tampa bay times" which the forum is going to be the site of that republican convention in tampa. and, yes, i have lived through hurricanes in florida. honestly, a lot of fun to cover. incredibly dramatic stories. i'm really not hoping it hits tampa in this convention. that would make it kind of a mess. >> yeah. yeah. still tropical storm. we'll see what monday morning brings. thanks, john harwood in washington. when we come back, how to play the latest rally in gold.
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now to gold. hovering near the highest level since early june, since touching a five-month low back on may 16th, gold is up about 7%. question is, where does it go from here? michael is a precious metals and mining analyst. dan is director of technical research at j and a capital markets. thanks for coming in. >> good morning. >> michael, begin with you. ask you, what do you think is at work here? is this the jackson hole rally in advance? why the run-up? >> i think -- that's correct. i think jackson hole has something to do with it but we've got to look back longer term. gold prices have been basing really well. we've seen improvement in the euro versus the dollar. we've got etf accumulation into the gld in august up from being up from the down in july.
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other commodities like oil and copper are firm. i think things are setting up quite well for firm not only into jackson hole but after jackson hole as seasonal influences the impact of price. >> dan, walk me through a couple of charts. it sounds like the we bust through in the near feature, we might be talking much higher numbers. >> we generally like gold here as a trading opportunity. i mean, keep in mind, gold and the broader commodities markets have been in a secular bull market for over a decade now. the lows in the commodity cycle occurred back in 1998. but since 2011 we see gold and a lot of the commodities came in and they've been basing quite nicely. i think key for the gold charts here is going to be to hold about 1500. that's the lows that you see to that lower trend line. but it's also a key retracement about a 50% retracement of the entire run since the breakout from the 2008 highs. as long as gold continues to hold that level, i think there's a good chance you go and take
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out 1650, 1700. if we can do that we would be looking at the retest of the highs in the trade, around 1900 or so. >> do you think that's possible before the end of this year or is that more of a 2013 dynamic? >> certainly possible before tend of this year the way the charts are shaping up. the open on gold this morning was around 1640. i'm not sure where it's trade right now. again, between 1650, 17 00, we're really right there. inching up against that breakout so you can see it rather soon, if my opinion. >> michael, it's a little bit unrelated to gold but some of this vhp news regarding copper is a little concerting postponing or cancelling the big expansion in australia. is that more related to china or are there any tells in that copper play to the gold market? >> yeah. interesting observation, carl. i would look t eight differently. i think that big global mining companies like bhp are looking
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at their capital budgets saying, hey, let's hold back a little bit because, you know, cost have been going higher. you know, my price have pulled in a little bit. i look at it as a positive because you may see some less longer-term supply hit the market which should keep the fundamentals more favorable for longer term. interesting dynamics going on right now. >> interesting take as we watch charts. guy, appreciate the insight. michael and dan, thanks very much. >> thanks, carl. meanwhile, keep those tweets coming. as you might have heard, carnival cruise line offering a all you can drink package for 50 bucks. the package is called my awesome bar program. we're asking you, what should they really be calling this? tweet us at cnbc squawk st. d#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile,
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time for squawk on a tweet. cruise line carnival is offering an all you can drink package all for just 50 buck or so, called the my awesome bar program. our question this morning is what should carnival really be calling this package if marketing were really doing their job. forrest, they should drink like a sailor. on the rocks, please. robert writes,


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