tv Squawk on the Street CNBC July 12, 2013 9:00am-12:01pm EDT
thanks to jim o'shaughnessy and brian. my grandmother was rosie mcgraw. thanks to you, the illustrious aussie. aussie for beer. anyway, "squawk on the street" is next. ♪ everybody get up snoet good friday morning. welcome to "squawk on the street." i'm carl quintanilla. what a morning shaping up. futures are steady but the news flow is strong. earnings from jpmorgan, wells fargo. a warning from u.p.s., a flurry of stock downgrades elsewhere. pay attention to the ten-year yield, too. it is down about to basis points for the week. that is the biggest decline in more than a year.
we begin with jamie dimon, jpmorgan chase ceo sitting down with jim cramer in just a little while. his bank out with earnings that did handily beat estimates, results from rival wells fargo, also above expectations. senator elizabeth warren leading a new charge to break up the banks with an updated version of the 1933 glass-steagall act. >> the company warns q2 and full year will likely fall short of expectations. and carl icahn kind of sweetens his offer for dell. what's it going to mean for that vote next thursday? we will discuss. >> big day for us here. as we said, jamie dimon will be here at the nyse. cramer with an exclusive interview at 10:00 a.m. eastern time. a lot of things to talk about in the program. are you ready, skee daddy? >> i've got the ceo on my left here, i'm listening to you guys,
i've got elizabeth warren on "squawk." here's what i have to say. this has become a capital market story. that's how they're trying to portray it to put it in english, they have too much cash so they're not able to deploy it in a way that say a wells fargo is. so they're trying to make it all up in investment banking which they did very well. i think people will be disappointed with that interest marg margin. they'll be shocked at how much mortgages went down. and then they'll look at the whole panoply and say you know what? geez, they're still making a ton of money. >> $6.5 billion, a big number well ahead of what had been estimates, at least. and as you point out, banking certainly look strong. corporate and investment bank. we didn't see the weakness we thought we might and fixed income a bit because of concerns about that last month -- june particularly, or even may we saw jeffries which reported a may ending quarter. it was pretty strong. >> yeah, at the performed well in june. >> do we think their trevails have made them better with risk? >> i think the control
situation, jamie dimon, ceo, is going to be asked more about controls. obviously that came up in the journalists call that was earlier. i think what they're trying to portray this quarter as is when rates go up, they're going to make a ton of money. and they're going to make it in banking. i mean, they're not really talking about make it and swinging the money around. that's going to make it so like someone like elizabeth warren who was fabulous on "squawk" with the combat is toothless with what this quarter is about. >> last quarter up 27%. >> yeah, i did look. you look at these numbers and you come back and say, well, wait a second. big decline, 7%. and this was before rates went to two-year highs. so what will mortgage originations look like next time? it is the interest margin. i compare that with wells fargo which also reported. and wells fargo has got a tremendous credit story. these are two very different
animals. a 7% decline origination in mortgages and then you make it up in reserves. that interest income down 1%. you know, it is a quarter that is not apples to apples anymore with some of the other industries -- players in the industry. i think if you try to shoehorn it, you'll be saying what the heck is that stock doing up? why isn't it down a couple bucks? but if you portray it as a company with a great balance sheet, maybe too much cash versus what they can invest, and you look at what interest rates might be doing and they say that they see that would be a great benefit for them, that interest margin going to be stable, you come back and see jeesh, you know, this is a cheap darn stock. >> how do you square with -- what wells and jpmorgan appear to be saying and that is consumers want credit in this environment, with what u.p.s. is saying about the industrial economy? customers want cheaper freight. there's too much capacity. the industrial economy is softening. and they think that's going to persist on the back half. >> u.p.s. was actually a stunner.
>> i know, it's funny, i made a couple calls just to check in and say anybody out there expecting this? i talked to a couple guys. both say big surprise. and the language. you know, again, this point of the industrial economy -- >> wasn't that amazing? i mean, because here you have in the jpmorgan call, you've got a lot of good things about big corporate. you've got this very small number to the small business, $9 billion. look, jpmorgan's been committed to lending to small business, so i can't figure that out. you've got u.p.s. really saying this economy is not doing that well, but you've in the transports on fire. a lot of people are playing u.p.s. as a way to be able to play the global economy rebound. and they're saying wow, you've got that wrong if you're playing us for that. >> also fairly big hedge fund name, surprisingly. some of the bigger hedge funds in there, just for purposes of sharing that. because it's seen as another internet play as well. there's sort of parts of their business you can imagine. >> biggest economy, amazon.
>> amazon's got good noons and decent gross margins. this is a day -- first, i have to point out brian sullivan said something very important this morning. look, don't make the snap judgments. these bank quarters are really hard. u.p.s., it's a couple-line release. i mean, there's an information overload problem. i only say that because i don't want to -- we're glib. i'm glib, okay, because i'm looking at these lines. here's jamie dimon talking in this ear. elizabeth warren talking in that ear. but overall, the consumer -- the actual lending is still tepid. i think that's a big takeaway. that you could understand why bernanke is saying you know what? it's not the time to end this game. >> although we've been doing it for a very long time. and one of the key questions has been, you keep adding to the balance sheet of the fed, but the money's not getting out there, the banks's not putting it out there, or the demands, which is it? >> one of the reasons i want to
talk to jamie dimon, you've got people in washington saying they don't have any cash. the systemic risk is not great. and meantime i look at their cash position versus, say, the european banks? i mean, fortress balance sheet, this is fort knox. this is not just a regular fortress. i mean, this is where the gold store. operation grand slam for those of us who recall goldfinger. >> goldfinger. >> we are above our record close. here's "usa today" today. pretty nice analysis from a mom & pop kind of paper saying the market's going to have to graduate to a real economy market, one that reflects the economy. >> and a fabulous piece. and i think what the market is trying to transition to is just exactly what they're talking about. and then you get u.p.s., which is like a slap of a, you know, a largemouth bass right in your face. >> what am i supposed to make of that if i'm out there today looking at results as we are from wells and jpm feeling fairly good about it, seeing the
market right here new highs? and then i get -- is it a one-off from u.p.s.? should i look for fedex and say are they seeing it, too? >> fedex went up ten points. rumors of an activist. >> i know. that was ridiculous. >> wow. >> 6%. >> ridiculous. >> it was ridiculous. >> i don't know, you get $9 billion in small business loans versus -- this is jpmorgan -- versus $294 billion in large corporations. i've been musing with some of these executives i've had on "mad money." big business is doing fabulously. isn't it the expense of small business? do you run into the possibility that regulations are too hard for small businesses not worth starting it? do you run into the possibility that a bank is afraid to make a speculative loan, which is what a small business loan is? i mean, say i want to buy a building, buy a piece of land with david, okay? in brooklyn where, by the way, 40% of the transactions are priced over the offering, okay? and we want to get a $5 million loan to do this.
well, that's the kind of loan that the bank examiners will go nuts about. but that's the kind of loan where we'd put 25 people to work instantly. what are they going to do? what is jamie dimon going to do? who is his master? >> right. that's a great question. i think i know the answer. it's probably you're not going to get your money. >> no, you're not going to get your money. >> or you're going to get it at such a height, you're not going to be able to get it. >> the commercial rates are so different. i'm, like, wait a second. my house? you're getting me a 3? i get a 6 for commercial? i'll fail! i'll fail with that commercial loan! they don't want to make the commercial loans. well, no, maybe the government doesn't want to make the commercial loans. >> so commercial loans at jpmorgan were up 9% year over year. that number should be more like what? >> well, i want to see the small business -- by the way, jpmorgan is so committed to making small business loans, i want to see that double, i want to see 9
billion go to 18 billion. in the large scheme of thing, jpmorgan's become the banker to large corporations. and this is an investment banking quarter that basically says game, set, match, we won. i think it's a rather impressive banking quarter. >> i don't think there's any other way to pull it up. $2.8 billion, 19% higher than a year ago, net revenue, $9.9 billion. they had some dva adjustments. when you take them out, it looks even better. >> and that's why the stock is up. they're positioning themselves for when interest rates go up. when interest rates go up, they'll kill it, okay? but they're saying they're not going up. meantime, wells fargo is killing it right now. >> they are. it's funny, talking about, of course, these enormous banks that have only gotten larger. whether it's wells or since the crisis or jpmorgan having bought bear stearns, for example, that does raise that question about breaking up the big banks. a bipartisan group of senators proposing legislation to bring back a version of the 19 positives glass-steagall act which, of course, went by the
wayside in the '90s. senator elizabeth warren of massachusetts, the bill's main sponsor, appeared on "squawk box" a half hour ago. >> the central premise behind a 21st century glass-steagall is to say if you want to get out there and take risks, go and do it. but what you can't do is you can't get access to fdic-insured deposits when you do. that by itself, a little bit, helps bring down the size of some of the financial institutions, and it says at least one portion of our banking sector stays safer. >> all right. >> yeah. well, why did glass-steagall start? they want to defuse the excessive concentration of financial power. and they wanted to prevent unsophisticated investors. i remember your documentary, how many risky investments did they get? i also know that during this period of tremendous crisis as joe pointed out when he challenged the senator, the
professor, i think he was giving a little professor stuff, that these banks saved the system. and it wasn't these banks that put things at risk. >> as kernen made clear. >> bank of america -- i mean, of course, now, they all potentially would have gone down, were it not for t.a.r.p. now, that's an argument you can have with jamie, for example, that i've had and he'll say number of the deposits were coming in at the height of the crisis. i mean, we were -- it was bad. >> yes. >> over. >> right. it was systemic risk. >> some would argue it should have been over. we should have started again. we would have gotten back and had a much sounder financial system. >> the libertarians were combined with the socialists to be able to make it so we had a swedish government banking solution which i think would be a disaster. elizabeth warren wants to go back to the days when small is beautiful. and i don't know whether small cuts it in the global economy. and should jpmorgan, because they took advantage of the fact that the government wanted them to buy banks, should they now say hey, thanks a lot? we understand we've got to give
it back now that we spent a huge amount of capital and really lost a lot of money? the anti to do what they did was huge. now, wells fargo, i mean, geez, look at this. the net chargeoffs, $1.2 billion, down $1 billion, but nonperforming assets down $21 billion? >> that's incredible. >> that was wachovia and goldman. they have managed to redo that balance sheet in record time. >> they did have some very nice tax advantages that came along with that wachovia deal. >> true. but stumps, ceo, going back and forth with him, too. good lenders. >> but that does dovetail with what we've seen with credit card delinquencies. >> credit cards were unbelievable for jpmorgan. by the way, plus 10%. you know, if you step back for a second, you've got to say to yourself, i cannot believe how well these banks are doing. but there's always nitpickers. and the nitpickers tend to rule.
and so what are the questions on, well, litigation expense, one of the questions. so the journalists go, what are the questions on this goal? wait a second. if rates really go up, is it really going to work for you? i don't know. it kind of has to. it kind of has to. they need a little yield curve. >> yeah. we're going to learn a lot more in just about 45 minutes when you and jamie sit down here. or stand. i'm not sure where we're going to have you. >> i'm not either. i apologize to our viewers in advance that i'm going to have to do some serious -- this is a crunch-time day because jpmorgan, jamie dimon's coming here ten seconds after he's done talking. >> on their analyst call, he's coming down either by car or subway, whatever way he can get here most quickly. >> is he a subway kind of guy? kind of. >> i think he would be. >> what happens if someone challenges him on a subway? he'd give it right back. he'd give the guy a beatdown. he'll go down there and give him the business. speaking of all that, we've got more news.
carl icahn in his bid to acquire dell. more on his latest offer straight ahead. after jpmorgan chase finishes its earnings conference call, jamie dimon will appear on this program. cramer's live and exclusive interview with one of the most powerful men in business is coming up. futures, relatively steady. action going into a friday session. opening bell is in about 15 minutes. clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade.
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carl icahn is keeping the pressure on in the battle for dell. remember the shareholder vote is only six days away. it's next thursday, july 18th. this morning icahn is improving his offer. you've got to actually say that that is the case. he gave a hint of it yesterday. and this morning, a few moments ago. comes out with a somewhat complex addition to his offer. but i can break it down for you fairly simply. it's probably worth, some would say, maybe it's worth 75 cents a share. could be at least. if you tender into his $14 a share tender, remember, 1.1
billion shares is what he's looking for at 14. for every four shares you tender, you get one warrant that has a seven-year term that can be converted to stock at $20 a share, meaning if dell shares were to rise above that during that seven-year period, you would be in the money. now, under options theory, you know, you assume 30 vol. >> right. >> in their own stock option plan, they assume 37. let's assume 30 vol. it's worth 3.54 divided by 4, 75, 80 cents, but hey, that's something. it is something. and it is interesting as well because if you assume michael dell -- let's say the vote goes down. by the way, it is extraordinarily close from what i'm hearing now. even with iss and all the other proxy advisory firms, it's going to be a really close vote. remember, they need 50.1% in favor not including michael dell. if you don't vote, that hurts them. that hurts the dell side, right? so they need affirmative votes.
if, in fact, it gets voted down, then you get the icahn recap plan, and michael dell still conceivably controls the company. this could dilute the company if it were to rise above $20. i know it's complicated, but it's icahn. he just keeps coming whether it's appraisal rights or the warrant, he isingi desperately to see what he can do. maybe he wants the vote to go down and do his recap plan. i don't know. >> the government did well with the warrants and t.a.r.p. >> yes. >> the warrants with drexel. >> warrants with drexel. yeah. you know, so again, for every four shares you tender under the recap plan that carl already has in place, you will get a warrant seven years in term. and if, in fact, the stock is above 20, that warrant will have real value under options pricing strategy. you could argue it's worth 75,
80 cents. >> yesterday in this letter calling for appraisal, he tries to tell shareholders ts a no-brainer. is that a virtuous argument? >> i don't know. i mean, that letter about 1968? now he made his money in convertible bonds. oh. maybe. >> he's coming at it from several angles. >> yeah, he is. listen, if he gets people to want appraisal rights, they're all voting against, the deal goes down. i mean, he's coming at it with everything he can to mount a real no vote. >> no, he's not because he's not doing the twa light poll part of the recap. >> we still have the big question, does carl really want to owe this thing? >> i mean, it's a moving target. >> i know. just a moment ago until the opening bell, cramer will give you the head start you need. his "mad dash" is next. stick around for his live and exclusive jamie dimon on the heels of jpmorgan's earnings at 10:00 a.m.
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♪ all right. it's a friday. our last "mad dash" of the week ahead of that market open. we're going to talk valero. >> valero, we were getting preannouncements that you don't want to see. there were people who were making a case for the refiners just yesterday. david, the refiners were getting this great benefit of low-cost crude, heavy crude in our country, refining it, shipping it overseas like they've never
done before. suddenly have you noticed, the price of crude in our country, it's the same as the world market. this is the old squeeze. the refiners were horrendous stocks for years. well, guys are making a case maybe saying they'd do an mlp. >> you think we're going to miss here? >> they missed. it's done. >> the margins and that's it. >> look, these companies are very clever and they generate a lot of cash. i think it's the time for the oil companies, not for the refine refiners. and i think some of the companies are going to look good when they finish. >> still trying to figure out that moving oil. >> well, i'm getting financial calls that people are using that as the commodity. choice. a pension fund, hedge fund against inflation because iron and, aluminum and grain is not working. give me something as a hedge, i'll take crude. >> crude is working. so are you. you've got a lot of work to do, man. get back on that phone. we've got the opening bell minutes away. "squawk on the street" coming right back. you think about risk.
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earnings from jpmorgan, jamie dimon's coming on the show in about 30 minutes. wells fargo, a warning from u.p.s., jim. and a flurry of downgrades on names scattered all over the space. target, pfizer, bmy. >> what's interesting is the analysts -- they are victoring, but at the same time, this is one of those moves. we mentioned that in "usa today." people don't believe it. everything's up too much. you see why are the downgrades? they're not because things are bad. it's because of valuation. well, valuation downgrade, as we know, if the market keeps going higher, how do you get back on? >> yeah. i mean, that's the same way with shorting a stock. don't short it on valuation. you'll potentially suffer pain if we're in a momentum market. >> right. >> and how do you downgrade bristol, bristol, they're trying to reposition it as a biotech. suddenly we don't like bristol because it's too expensive? i mean, is it too expensive if rates stay low?
too expensive if they discover new drugs? i find that the problem with this kind of call like target, if things get better, you're going to say geez, what was i doing buying target on that downgrade? >> with that in mind, let's get the opening bell here at the new york stock exchange. at the big board, rich investment solutions and alps celebrating the launch of the u.s. equity high volatility put write index fund. mimedx, maker of biomaterial products and bioimplants. just to delve quickly into that target downgrade, deutsche bank cutting it to hold. stock, as you said, within 2% of their price target of 74. some worries about the holiday season which i did not know. there are six fewer days between thanksgiving and christmas. we're going to hear a lot more about this. >> people talking about harder compares. you want harder compares? look at gap stores, okay? now, gap stores, near not taking it up, i think, this was an amazing number. banana republic, okay. old navy up 13%. people are concerned that retail
is going to taper off. i think part of it is gasoline. part of is is when you look at jpmorgan's number, credit cards are up, mortgage original ratio down. maybe consumers will be challenged in the second half. i think the consumer is doing pretty darn well. maybe if you're target, you don't do -- yeah, you look at year over year. remember when the number comes out, people sell. i mean, that's what happens. they just jump to a conclusion. let's watch restoration hardware, okay? this is the hottest of the retailers. they're growing at 40% comps. that's a great number. they just priced a giant slug of stock at 70. it's below. that's my tell for retail, not the target downgrade. >> are we going to start hearing the drumbeat on prices at the pump? consumers are going to be strapped? >> i'm tired. other than red lobster. >> doesn't even work. other than darden, that's it. >> yeah. they're the only guy that uses it. >> is that because we live in
new york and we're not driving 30 miles to work? i'm looking at some of the twitter feed. people in st. louis said i paid $3.15 a week ago, it's $3.50 today. the national average went up 4 cents overnight, average for unleaded. >> but does that really translate into spending less on do you go fewer nights to red lobster or olive garden or anywhere else? i mean, maybe there's more efficiency per gallon, you're going further these days. >> well, it's a higher tax. when we raise taxes. >> absolutely. >> then we have less disposable income. >> don't make sense, but we see the argument, i don't know if it always plays out. >> i think you're right to talk about it, be questioning about it because so many people are going to say, let's sell target. it hasn't played out that well. it's a theoretical construct. now, look. the housing stocks, when mortgage rates went to the two-year high where they are now, they killed the housing stocks and then you had a big week in interest rates, going down.
you had utilities having one of the biggest weeks, and suddenly everyone is buying housing again. if gasoline -- i mean, i hate to sound like jpmorgan, the man, not the company, but gasoline fluctuates! >> yes, it does. >> last night on "mad," you covered the war of the dollar stores. dollar general is getting smacked. >> yeah. that downgrade. dollar general's up 26% for the year. so this is not outrageous. they are going to put up a lot of stores. i prefer five below. when i first heard five below, i said oh, my, recreational equipment is going to go next. it is not a camping store. it should be called below five. they're doing quite well. so i mean, you run into this situation where family dollar did not report a great number, but no one was looking for one. dollar general's been the hottest stock in the group, and people want to ring the register. this ring the register concept has been going on. the analysts have been fighting this move. they fought this move. it's not like -- remember they used to bump price targets? >> yeah. >> now i get just as many downgrades on valuations as i get price targets bumped.
>> well, they're trying to be more honest in some way, intellectual, maybe. i don't know. none of it's going to matter. >> he said with an eye roll. >> i saw a bump on netflix because they're doing another version of "arrested development." "house of cards," you were so right. >> i heard that's really good. i haven't seen it yet. >> i'm raising my numbers because of "house of cards." i'm raising numbers. >> netflix is up 1%. u.p.s. down 5%. and the banks are okay, jim, but nothing great. wells fargo's up 1%. so that's a pretty decent move there. >> yeah. i mean, these stocks did run, and i think that the market looks soggy today. you know what? let's not forget the impact of the u.p.s. on everything. i mean, u.p.s. was not supposed to happen. it didn't fit the script that we were going for. >> it doesn't. >> and that is the biggest loser on the s&p. zielink is responding to an upgrade after amd. >> all these telco companies.
t-mobile is not a joke anymore. we know sprint's going to have all this capital. suddenly all these companies -- zeilink -- and the ceo is a fantastic guy -- he's going to tell you, if you want that high-speed video on your cell phone, you need zylinks. not everybody has that. when you cece enthat up, that's a wave of spending that's not att and verizon. that's t-mobile and sprint. i think people think sprint's going to spend a fortune. >> they're already actually changing their pricing plan. the stock is up -- this is the stub -- the stock is up 2.4%. remember, softbank now controls sprint. it ended up being, what, 80%, right? but this morning or yesterday, they announced a plan to roll out a new pricing plan, unlimited -- >> it's going to be a price war. >> yeah. >> unlimited data, excuse me. >> verizon's only a few points off its high.
no one seems to believe there will be a price war. at the same time, verizon, they're on the hook for how many iphones? >> yeah, craig moffitt's known from a couple days ago has gotten a lot of attention. it's not clear that they're going to have to pay them for them. kudos to him. he started his own research boutique and going through filings from vodafone from 2011. all right. well done. >> you have to destroy iphones to preserve it? you know, kind of like what they did with agriculture in the '30s? >> it was a big number. >> it got a lot of buzz yesterday. a lot of buzz. what was the one i wanted to mention with you, jim? oh, kroger. the downgraded kroger. they say the relative overperformance -- outperformance is the biggest since the '01 recession. it has run up a lot. >> i think that kroger is another example of a company that made a very smart acquisition a la gwinnett. these are companies that are saying this is our chance to be able to dominate being the number one supermarket has real advantages in this country. i would not downgrade kroger.
again, what, sell kroger? buy it back at 36? move into fareway? >> they're not the number one supermarket in this country. >> who? >> kroger. walmart is. >> i forforgot, it's the age of aquarius. costco and walmart. i am the little cramer squeezed by costco and walmart. >> if we do a kroger doc, you do it, okay? >> wow! >> you'll be the supermarket -- the three amigos of supermarkets. >> holy cow, i'll be there private label. that's where they're making their money. >> let's get to bob pisani who's on the floor. happy friday, bob. >> hey, guys, not far from the u.p.s. post. i'll tell you, the big topic outside of jamie dimon and kudos to jim on that, the important thing is china. shenzhen down 1.6%. this is from a shocking comment from the minister of finance overnight. he didn't think there would be a
big problem with the gdp growth rate of 6.5% to 7% in china. what? wait a minute. the official number they have is 7.5%. now, the second quarter gdp numbers are going to come out on sunday night. and the big speculation is this guy, the minister of finance, has essentially been sent out as a stalking horse to tell everybody the numbers are going to be disappointing on sunday night. this has very big implications for materials growth and commodities. a lot of people think this guy is leaking information essentially. i'm trying to make sense of the u.p.s. announcement. i know you guys were talking about it. slowing industrial u.s. economy is the shock because they've been talking about lower yielding shipping solutions. they've been talking about people trying to figure out ways to chip things cheaper for a couple quarters now. that wasn't a surprise. the slowing u.s. industrial comment was the big issue. and i think that's the other, the second kind of negative that we've seen this morning. other than that, on the banks, jpmorgan and wells fargo, just great numbers overall. just a quick comment on the
mortgage stuff. mortgage revenue is basically unchanged at wells fargo. a quarter of all mortgage originations in the country for wells, dollar value of mortgage originations were up slightly. i'm not trying to say that higher rates are not a negative, but look at the numbers. for jpmorgan, overall originations were down, but only because refinancings are such a large part of the overall business, about 70%. applications to purchase a home, dollars, up quarter over quarter. i'm not trying to guild the lilly and say higher rates are positive. they're not. where we are now, 3.5% to 4.5%, they are a modest negative. i don't think by itself that is going to derail the housing recovery. that's the way i feel about it. i'd love to hear what jamie dimon has to say about it. folks, it's been a great week for the global markets. put up these numbers. s&p, not even leading the world. we're only up about 2.5%. germany had a great week. china before today also. japan and spain are up. and the biggest thing is emerging markets. finally, finally, may have found
some kind of bottom after some of these companies like the philippines, peru and thailand dropped to% in the last two months. we've seen some nice rebounds this week. jim, kudos on the big get for jamie. here's what i want to know from jamie dimon. what's preventing corporations from expanding right now and borrowing more? we know they're hoarding their deposits. what will get them to increase capital expenditures to increase hiring in the united states? i think that's the number one question down here on everybody's mind. jim, back to you. >> you've got a great point. and thank you so much on those comments. and i've got to tell you, you don't feel strong about america as much as you feel strong about jpmorgan. >> you look at the delinquency trends, though, from their slides, it's all good. sorry, i'm not holding it up to everybody. >> the liquliquefication of the consumer. >> you can see we're at 143
yesterday on an intraday basis. here we are at 1.35. how wild is this? open the chart up to two weeks and notice that we basically settled 25 -- yes, 25 -- basis points higher last week at around a 1.60 yield. bob said the emerging markets are doing better. of course they are. ben is feeding the beast again. risk on. you know, when it comes to the emerging markets, it really is a central banker's story. it's really a gentle ben story with regard to accommodation. look at a ten-year. okay? a ten-year is down three basis point since a much hotter ppi. nobody cares about ppi. it's all about ben. if you look at that chart and open it up, we are 21 basis points lower than yield. but the 5 is still winning on that some of that reversal of flatteners that surprised everybody from the midpoint of the yield curve. now, let's open this up a bit. let's look at the dollar index
for a couple of weeks. boy, have they had a big move. just last week we closed around 84 84.5. now, granted it's rebounding a little bit today. my guess it's a little evening up that isn't much about interest rates as it is just about the dollar index's wild ride. in the last chart is a ten-year boon. the world is a very interconnected place. and i know europe has its fair share of problems. but also down 18 basis points on the week. back to you, jim. >> thank you so much, rick. why don't we check out the action in energy. geez, energy, and the metals. bertha coombs has the story at the nymex. >> good morning, jim. you know, interesting, gold giving back a little after four straight gains days of gains. 5% right now in two years. the difference in wti, nymex crude has found stability after yesterday's big profit taking. also still up for the week but
really take a look at what's happened here since the beginning of july. over the last couple of weeks here, we've seen this massive move-up in wti nymex. it is the big mover, much better than brent. and that's also resulted in a big move up on gasoline, up more than 10% since the beginning of july. and that is translating into more pain at the pump. we've seen a 7 cent increase in the last week, a national average. but to your point earlier, carl, they are seeing a much bigger increase in the midwest because of that big move in wti. the holly frontiers, the western refiners have had a nice discount for an awful long time which meant lower prices in the midwest, but now they are catching up. back to you. >> yeah. one viewer telling us, bertha, up from 3.14 to 3.59 in three days in st. louis. i can only take him at his word, but i can't imagine why he'd want to make it up. >> it's so amazing. there's so much oil in this country. pumping at the same rate at 1992. we're sending out more refined
product. where's the outrage? we're shipping refined product around the rest of the world. >> it may come. >> i think it's one of the great untold stories. they're so busy investigating the banks. maybe they should talk about whether it's right to send all this product overseas. companies will tell you it's certainly right because it's a free market. and i'm not against free market. anyway, it's something to watch. >> yes, absolutely. bertha, thank you for that. here's what's coming up on "squawk on the street" -- >> later, an exclusive interview with jpmorgan chairman and ceo jamie dimon. we'll discuss earnings, the economy and everything else. you won't want to miss it. later on "squawk on the street." we're cracking down on medicare fraud.
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going to want to address? >> i think i have to address this notion of whether this country is going to start, as bob said, is this country going to have enough business formation to be able to make enough money for a big bank? because, you know, i've got to tell you, they're making a lot of money, but they're not making it the way we want. the market's satisfied because interest rates going higher will be good. but that loan demand, by dimon's own admission, is soft. when is it going to get stronger if we keep pumping money into the system? >> yeah. if it hasn't gotten stronger by now, today's taper, i finally said the word. god, it's been so nice not to say that word for a day. >> they need taper. look, this is a company that is making a fortune, all right? and they are doing it investment banking. how many things do you write, okay? i could sit here and say because obviously there's a populist
strain here which says they're too big and yet they're not making loans. i want to know whether they have so much capital. we've got to be worried about the requirements. and so, again, come back to this, you know, let's find out why people don't take loans. and i think it's a risky thing to take a loan. it's a risky thing to make a loan. so let's find out more about that. >> the willingness to take risk. that has been mr. bernanke's been trying to push that. but you've still got to get people, whether they are running multinational corporations, and yes, they can borrow at will. will they still make the larger capital expenditures that perhaps they don't need to? >> right. >> beyond what they have to do to run their business. >> but did they have a problem with controls that has made it so there's blowback? and the more cash they take in, the more the regulators love it. >> yep. >> the less bernanke likes it. >> it's funny, i'm looking here at their presentation they put out with their financial results. leverage ratio update. to your point, to new regulations that are coming or
may come, jpmorgan laying out a bit of a road map in terms of their leverage ratio. remember, we've only recently been talking about leverage ratio. we talk about capital ratios, but now how leveraged is your balance sheet to your assets. >> the volcker rule. >> and they're saying although compliance will not be without impact, it is manageable. and giving you on page 4 of their deck, so to speak, that comes along with it, what their thoughts are on that. interesting. i haven't seen that before. zbloe >> no. >> in terms of actual trading revenue, he said it was running above their forecasts. he was obviously right, up 18%. >> yeah, a great point. he called it right, jeffries called it wrong. this is obviously a difficult market, but they're making some money here. >> as volatility increases. >> yeah. that's kind of what you were hoping for. obviously, their position for higher rates over time, they do better in volatility than i thought they would. and investment banking. david, is anyone -- are they kind of unchallenged?
>> well, no, they're challenged. i mean, goldman sachs is definitely a challenger, as is morgan stanley. maybe the credit suisse of the world, ubs, maybe not. i'm sure i'm forgetting some others. they are challenging. advisories revenues as we knew, m&a down sharply, but underwriting of debt securities is a huge business. it was very strong. equity underwritings. we've seen a lot of ipos and secondaries, quite strong. >> you know, we don't want to talk miss. wealth management up double digit. i mean, people are giving them money -- x by the way, we were talking off screen about the delinquencies. you know what? we would have -- i don't think you'd ever believe how low delinquencies are five years after the crisis. >> that's a great point, yes. >> and credit cards, people are taking them down again, but they're not doing it in any way that would be considered a bubble. >> right. >> and then finally, i mean, they did set some money aside for litigation reserves. >> right. >> which is a story that will not go away. >> no, it won't go away.
i want to ask jamie about that and mortgage lending. what if there's a bubble in housing? i didn't see it from these guys. >> no. meanwhile, we should point out, the market is concerned today wells fargo is the big winner, up 2.5%. jpmorgan shares up about on.6%. >> by the way, one of the reasons why wells fargo has been down the last couple days, john stump did a remarkable job. it was not an issue. people worried maybe mortgages weren't that good. these guys blew the doors off. they are a better lender than other companies. the delinquencies, what they've managed to do -- you know what the government should have done? everybody's going to hate this except for john stump. they should have said, listen, you guys take this foreclosure problem. >> exactly. >> dimon's done okay. >> dimon's on the way. consumer sentiment in a few moments. and that's not all. people find out state farm does car loans as well as they do insurance, our bank is through. good point. grab an edge. look there's two guys on the state farm borrow better banking sign.
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since july of '07. listen, real quickly, throw up a portuguese ten-year chart, this baby's up about 50, 60 basis points just in the last several hours. you know, there's a lot of political issues and parties that agree or disagree with following through on their bailout. this is a ten-year note you want to pay attention to. back to you guys. >> rick, thank you so much for that. jim, you're not going anywhere because you're going to interview jamie dimon in a minute. what's coming up tonight on "mad"? >> we're spending time on these ipos. epizyme. a way to be able to address cancer. this is tailoring the cancer drugs to you. we know there are very high-profile in the news who say i'm genetically disposed to this. this company could have the answer. >> that's 6:00 and 11:00 eastern time. meanwhile, the interview you've all been waiting for, cramer's exclusive with jpmorgan's chairman and ceo,
jamie dimon, in a few minutes. keep it right here. at farmers we make you smarter about insurance, because what you dont know can hurt you. what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers are four times more likely to get into an accident? 'sup the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum -bum ♪ out there owning it.
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♪ our road map begins with the man of the hour, jamie dimon of jpmorgan. cramer's going to interview him in just a moment right here at the nyse. we'll get his reaction to earnings, thoughts on regulation, the economy and more. jpmorgan's shareholders, what they want to hear from jamie dimon and how they think he's doing now as ceo. then former congressman barney frank joins us live to react to what dimon says. all of that coming up in the next hour. the markets at record territory. joining us now, lazlow, good morning. >> thank you. >> this is certainly consistent with what you've been saying forever now. markets headed higher. you're saying there's still plenty of room ahead. >> yes. we still haven't had what i call the capitulation phase. you still have negative attitudes.
there's two stories in the paper earlier this week about this quarter earnings are going to be bad. we've heard that every quarter for the last three years. tuesday morning i walked in, there were three notes from technicians saying you've got to be saifl. this points to the down side. i still think you haven't hit the sweet spot the market. >> is this all about sentiment? what tells you we're headed higher? >> most important is flow of funds. we don't talk about it that much anymore because of high frequency trading and hedge funds. in the aggregate, no better indicator than money flows. what we've seen throughout this whole market is people keep buying. >> but is it people or is it corporations? >> well, it's all of the above. you know, it's not just the fed. and we haven't even gotten close to the most critical situation, which is selling into strength. people do not take advantage of rallies to sell, so that tells me we keep right on going. >> now, your trading philosophy appears to have morphed a little bit this month. you say traders would be smart
to take short-term profits quicker, that the wind is not to our backs the way it has been in the recent past. what does that mean? >> well, i think we had a little situation where the fed sort of gave us pause. but i think we're through that because i think it's surprising, right away, i think the fed and the government has realized we probably overdid it. we probably said it a little bit too strongly, and they backed off right away. and you saw it again this week. and they really retraced all their steps. so i think that we're back to where we were. >> really? 1700 remains your target year end? >> no, my target was 1700 by december. >> by december. >> now, if we get to 1700, we will revisit. >> not that far away, lazlo. >> no. >> i think that's the point, isn't it. and congratulations, you nailed your colors to the mast, lazlo. you were up there with the bulls and you've succeeded in what you predicted, and you should be congratulated for that. but if 1700 is the year-end
target, that's 1%, 2% from where we are now. the next six months, you're basically saying that the market's not going to go anywhere? >> no, it wasn't my year-on target. it was 1700 between now and december. remember, i bought the december 170 calls. now, if we get there before december, we will revisit. >> right. >> when they raise it, we may hold. we may actually drop it. >> from what you were saying, we would expect you to be raising because you were so bullish. now you're opening up the possibility that perhaps you wouldn't necessarily raise it. >> there's a possibility. again, the way i feel right now, it's not likely to happen. but again, to me, this is a long trip. and people want to know when we get to l.a., i'm saying let's get to chicago first. >> speaking of transport, i just wanted to ask you about u.p.s., actually, because they came out. they cut their earnings forecast quite significantly and talked about a lot of trade down among their customers. at the same time this week -- and we saw the imf and cut its global trade forecasts. we've seen s&p warning that cap ex globalry rly is turning ove.
what these important industrial tells pointing to weakness, does that worry you about sort of either the call here for equities to keep going higher or just the fundamental strength, you know, that we should be building this rally upon? >> not necessarily because, again, i think the market is a discounted mechanism. if somebody is on page 1 of "the new york times" or page 1 of "the financial news," the market knows that. you're not going to surprise the stock market. to me all these sort of things -- >> will you surprise u.p.s. investors today? >> individual situations you can have. in the aggregate, oil, interest earnings, all of these are the job to the market to forecast. as long as the market is comfortable, yes, you'll have individual aims and yes, you'll have the fed do things. but looking beyond that is what the market does. >> the market hit a high in october 2007, though. was that discounting what was about to happen? >> i think you could see the financial stocks. we actually took citibank off of
our recommended list at 44. we didn't see the severity of the crisis. but we did see that there was some cracks in the windshield. >> lazlo, one last point. everybody knows, your philosophy knows you make your money in the early part of a bull market, right? that's when the sweet etch riches are won? >> and the last quarter. in bull markets, you make 40% in the first quarter and long bull markets, you make another 40%. >> interesting because a lot of the media coverage now talks about the length of the bull market and why that's a danger. you disagree? >> one of the things we noted early in this rally in '09 is when the financial stocks do very, very well, that market will be very sustainable. the financial stocks in the first two months in '09 doubled. that told us, this isn't just a 30%, 40%. this is one of duration and lasting. and so far it's worked. >> lazlo joining us on a day where that call for higher equity prices looks pretty good. thank you very much, sir.
just a few minutes away from our exclusive with jpmorgan's jamie dimon. also talk to a couple of shareholders about what they want to hear from dimon today. stay tuned after the dimon interview. we'll talk to former congressman barney frank live with his reaction. big morning shaping up for the dow, up 12%. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
within minutes. as we wait for jamie dimon to arrive here on the floor of the new york stock exchange, let's bring in two jpm shareholders. charlie is vice chairman and director of research with ariel investments. and david katz is chief investment officer with matrix asset advisers. jenltsm gentlemen, good morning to you. welcome to cnbc. >> charlie, this is the first big public appearance in an attempt to split off the chairman and ceo role. he comes with an interesting message, a pretty strong message in saying yes, identify beaten expectations. i've done it by taking $1.5 million out of reserves but i can do that because i believe in the recovery and i believe in this country. charlie, i mean, how do you feel as a shareholder? >> i feel great. i think people have been underestimating this quarter. he's reducing those reserves not just because he feels good, because he's seeing in the data very good credit performance. we've got mortgage improvements that are way ahead of what
people expected. credit card performance, way ahead. people underestimate the importance of credit to a bank. it's what takes bank stocks down. it should be what takes bank stocks up. it was a great watquarter. >> david, you have $34 million invested in jpmorgan? >> we do. it's one of our largest positions, and we agree with what the last guest said. one thing to add on, he does not have to a choice. he's got to release those reserves because the credit tranches are so strang. if he had his way, he'd probably want to keep them in reserve. in credit trends are moving, banks have to release those trends and it really is a positive trend and it should affect the stock price in the next 6 to 12 months. >> we've spoken about it so many times on cnbc, when you see him suggesting today that loan growth is quite soft and then on the conference call, the chief financial officer saying they may accelerate cost cuts, i don't know if that means more than the 17,000 staff, who knows? maybe they're just going to do it more quickly, does that
concern you, david? >> no, absolutely not. what you have is the immediate impact is that it slows some growth down in terms of loans. but as you get a more normalized interest rate curve, the net interest margin starts to improve. the company said on the call that they expect a rising rate environment and a rising rate environment willing very good for their earnings. we think it's a positive for jpmorgan. it's a positive for a wells fargo. and then if you go to the trust companies, it will be a significant positive because they're going to start to be able to charge on their money market rates. >> charlie, everyone salivating over the prospect for higher rates and what it will mean, what it will do for their earnings. are we jumping ahead of ourselves? look at the ten-year today. it's already come back down towards 2.5%. >> yeah, that's a great point. i would say six months ago, i felt like a contrarian predicting a big increase in interest rates. and now it seems like it's overwhelming consensus, almost to the point of being a dangerous overwhelming consen s
consensus. i do absolutely believe the ten-year is going to 4 % relatively quickly. you're right, if that ends up being wrong, that's got some implications. >> david, what about the effects of the falling value of some of these bonds on the balance sheet? i mean, the fixed-income trading is up 18%. do you believe that that -- the ability of the investment bank to trade the market, to trade the volatility -- more than outweighs the losses on the balance sheet? >> well, the banks did not get a lot of credit as the book value went up as the yields went down significantly, and their bond portfolios went up in values. we don't think they'll be adversely affected as rates go up and they take modest downsizes to their book value. so if you take like a metlife, their book value might decline, but their earnings power increases significantly. the same with jpmorgan. their book value went up nicely this quarter even though the rise in hurts might have hurt their bond portfolio a little bit. >> charlie, what would you say to other investors at the moment
about whether to further invest -- i mean, look at this stock, up 25% year to date, it's up over 60% over the last 12 months. do you add to positions, charlie? do you think about booking profits? are we potentially overextended on the financials? >> absolutely not. we are not overextended. on an historical basis, 1.4 times tangible book for jpmorgan, one times tangible book for morgan stanley is still very cheap. they posted probably a 15% return on tangible equity at jpmorgan. in this environment, it should be trading at 1.6, 1.7. we have a long way to go in these stocks. >> i know both of you will stick around and listen to the jamie dimon interview. david, briefly, if you had a question, what would you say to him? >> basically we listened to the call. everything is moving along very nicely. and you know, we're very pleased. we look forward to him telling the public more what he told the investment community, which is it's business as usual, very profitable, great franchise. >> and we look forward to him joining us very shortly down
here at the new york stock exchange. for the moment, charlie and david katz, thank you for joining us. >> thanks for having us. breaking news here on twinkies, by the way. you can rest easy, america. the twinkie is now back. twinkies are now available on store shelves at walmart right now. walmart was originally planning to make twinkies available midnight on sunday. a full day before they went on sale at other stores across the country. but it seems they couldn't wait to start selling the golden pastries. twinkies are now available at select walmart stores acountries. so if you've been waiting all these months to get your fix, now is the time. >> can the day get more exciting? >> i don't think so. up next, the man of the hour, jamie dimon, chairman and ceo of jpmorgan, will join us right here on the floor of the new york stock exchange. another cnbc exclusive. she's always been able to brighten your day.
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we are watching webmd, the health information provider, surging higher. now expects to post its first profit in six quarters. it's also pointing out that a couple weeks ago there was a research report put out telling people to short this one. that spooked some investors. analysts also saying we're seeing short covering this morning. remember, carl icahn, your biggest shareholder in this one. back to you. >> got some breaks new here. janet napolitano resigning as homeland security secretary. she'll be taking a senior post at the university of california system. of course, the former governor of arizona. we were just discussing how long she's been in that job which has to be a trying position. >> oh, can you imagine running homeland security right now? >> i know. >> it's a pretty thankless task, isn't it? you do it right, that's what people expect. if you make a mistake. big day here at the stock exchange, the earnings season and the markets. two big banks reporting, jpmorgan and wells fargo.
let's get back to kayla tausche at hq. >> profits for both jpmorgan and wells fargo which reported about two hours ago jumping in the quarter for jpmorgan up 31%, for wells, up 20%. both beat estimates handily and both set aside less money for bad loans. revenue at each bank roughly flat. loan growth also stagnant as demand falters. investors fear the worst for wells fargo, the nation's biggest home lender in a quarter where rates spiked. still, wells managed to surprise to the upside, underwriting $112 billion in mortgages. that was a rise from the first quarter, surprisingly. the bank also kept its margins from collapsing. they decreased just 2 basis points to 3.46%. now, as rates do continue to rise, jpmorgan's cfo said it will feel a significant impact in the mortgage market in the second half of the year. mortgage origination at jpmorgan already down 13% in the second quarter. and mortgage production income down 38%. overall, loan volume at jpmorgan, also down which was
eating into margins, hitting a record low 2.2%. maryann lake said that was also due to setting aside more cash in the quarter to comply with continuing regulation. that regulation is an elephant in the room right now. of course, washington introduced stringent new requirements in recent weeks over banks' leverage ratios. analysts spent a good half of jpmorgan's conference call peppering executives with questions about how exactly they'll reach it. the bank disclosed a 4.7% ratio which is close to the 5% level needed at the holding company. but it needs to reach 6% for the insured subsidiary. analysts were raising questions about that. its basel iii level within reach. analysts said the bank would already surpass the bar, its basel level above the required level, too. for the quarter where the banks are a bellwether of the economy, at least in hind seat there's nothing to fear, but there's also few things to cheer. back to you. >> a lot of questions posed to dimon on that front.
kayla tausche over at hq. one of the more colorful characters to emerge goes on trial monday. mary thompson has a preview of the s.e.c.'s case against the man known as fabulous fab. hey, mary. >> hey there, carl. now a doctoral candidate at the university of chicago, he grabbed the attention of wall street, the government and a nation still reeling from the financial crisis back in 2010. a former vice president of structured prurkts at goldman sachs, the now 34-year-old tourre stands accused of misleading investors in a synthetic clal ralized debt obligation by allegedly misrepresenting the role played by john paulsen's hedge fund. in an e-mail to a friend, tourre famously described the target for the securities and his role, writing the whole building is about to collapse. the only survivor, the fabulous fab. the s.e.c. will try to prove he purposely stayed quiet on
protecting the underlying securities or that fraud was being conducted by omission and commission. paulson who made billions betting heavily against the housing market was essentially short the cdo, one made up of subprime mortgages his fund helped select. he profited handsomely. the investors on the other side lost money. alongside tourre, goldman sachs settled with the s.e.c. for $550 million without admitting or denying wrongdoing. the firm has helped pay for tourre's legal bills though it initially tried to distance itself from the native of france. tourre hassen denied that he acted alone. opening arguments are on monday morning. we will be there live covering all the action. kelly, back to you. >> mary, thanks. such an important case. mary thompson with a preview. we're getting closer to our interview with jpmorgan's jamie dimon. in fact, just minutes away. we'll be right back here on
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david, as we take stock of mortgage originations, credit card growth, commercial loans, you name it. >> right, reserve release obviously helped lower tax rate. jpmorgan shares doing fine today. wells fargo seems to be the bigger winner. hear his take overall on where we are in terms of what is continued softness and borrowing patterns from commercial enter surprises and the like. and on that note, i would point out, u.p.s., those shares are down. that warning about the industrial economy here in the u.s., weakness, and it's got me wondering whether that is u.p.s. focused or there's broader implications. i do notice shares of ge are down about 1%. when you think, okay, industrial economy, where am i going to go and think maybe weakness i don't expect. >> exactly. remember, it was wedbush who told us that capex had ground to a at all. it was surprising at the time to hear that kind of assertion, but you have to say the numbers this week back it up.
>> although some of the things u.p.s. cited like that customers choosing cheaper freight options, that's not new. that's something fedex has said quarter after quarter. >> it's the industrial economy i think that's got people a little concerned. spl >> absolutely. there was a lift for the likes of fedex and u.p.s. when the global economy was recoverying. they had to sort of ship things by air going into the holiday season. that helped them a couple quarters. now that's slowing. >> they've also made mistakes investing heavily in asia when that wasn't warranted. >> great point. >> jamie and jim are ready. jim, take it away. >> let's get to jamie dimon, chairman and ceo of jpmorgan, fresh from your conference call. a couple takeaways that i see. fabulous quarter. high-quality problem for jpmorgan. perhaps too much capital and not enough lending. >> yeah. so thanks for having me here. thanks for being in this beautiful new york stock exchange floor.
the bastion of american capitalism. yeah, you know, look. the american economy is getting -- slowly getting stronger. so the lending will come back when people have a little more confidence. they start to do more capital investing. so we're kind of confident that you'll see growth over the years as america recovers. >> now, it's pretty clear from the conference call, emphasized repeatedly, that when rates go up, you will make a ton of money, even at these levels of originations. >> i think you've got to separate when rates go up, all things being equal, it may knock down mortgage originations. >> right. >> but if you have a healthy economy, that will filter through all books of business. all things equal, rates going up is a good thing as long as the economy is growing. >> this was a quarter where i did not see you viewed as much as a consumer bank even though you have a tremendous amount of capital. the big money was made in fixed income, in equities. this is something i didn't expect, the street didn't expect. >> no. our folks on the trading floors did an outstanding job -- of course, all products, fx, rates,
commodities, securitized -- particularly emerging markets because they're more volatile than most, that we built a huge flow business. we deal with a lot of clients around the world. so you're right. tell me more. we're proud. >> 7% origination decline. i'm on the wells call. wells is not seeing those numbers. i know you're friends with john stump, the ceo. is he just outmortgaging you? >> yes, he is. i love john stump. they do a better job in the mortgage business than us. >> you'll admit that someone's doing better than you? >> absolutely. they've been doing better for a long time. remember we had the old bear stearns wamu. at the end of the day, we're going to have a great mortgage business. we believe, the way john does, it's an important product. we're going to be really good at production, really good at servicing. we've just got a little more wood to chop. >> it just seems that he wants to make the loan and you don't. >> our shares have gone up, 9% to 11%. i think you'll see our share go up over time. remember, they're the largest. >> how much of your decision to
lend/not lend has directly to do with the fact that i don't know if the government wants you to lend or they want you to hoard. >> are you talking about on the balance sheet now? >> yeah. >> commercial loans. yeah. well, look, we have to adjust -- we have a new regulatory environment. so all banks have to adjust to it. and that doesn't mean you have to withhold more for liquidity, more for capital. build up the capital ratios. eventually you'll be back to business as usual. that may take another year or two. and these are global requirements. so we have to meet the requirements, you know, in 60 countries around the world, not just the united states. >> so the eventually means you'll have enough capital or eventually means you'll soften and regulators are not going to be so anti-bank which i know you feel they are. >> i think what's happening now, we're getting near the tail end of basel iii leverage and capital ratios and maybe by the end of the year we'll know what they are. they have these new conservation buffers which will tell banks what they can do. the c-card is new. it's a couple years old. all those will determine how
aggressively banks can grow, return capital. but what's the most important thing is we're building client businesses with great franchises. of course, all of our businesses, that's what we're in business for. >> right. i look at the big cap. $294 billion in large cap. what the heck? $9 billion in small business. i know you want to lend to small business. is it too risky? is the government going to say we don't want you to make them? >> no, small loans are $18 billion. credit card, another $5 billion or $6 billion. small business is not a huge number. so we're one of the biggest small business lenders out there. our origination is kind of flat. i do think it's a little bit hard harder. small business is not completely recovered like large companies have. i think spa small business will recover with the economy. when the economy starts to grow, you're going to see small business take off, and their credit needs grow. >> but if it hasn't taken off yet, the federal reserve chairman has done everything he can. has he not done enough? >> no, i think they've done a lot. i think we just have a moderate
recovery, but i personally think -- our view at jpmorgan is that it's strengthening, it's broad based, there's almost no sector, large company, small business, consumers, housing, there's nothing that's not going to look better. if we're a little lucky and got backwind on the fiscal side, you may see stronger growth in america. >> but your cfo talked about if we have a continuation of these mortgage rate increases, refis go down big, obviously what's the level where housing just goes down? >> i hope she's watching because i want you to know, marian, you did an outstanding job today. what she was talking about is that all things being equal, if rates -- mortgage rates now 4.5%, refi is going to drop. but that's okay as long as the economy is doing well. that's just one little part of the business. >> okay. now, a big part of the business that seems to be working is this trading that i mentioned. what does the volcker rule ultimately mean? what does regulation ultimately mean for long-term profitability, for return on equity? >> yeah.
so the volcker rule is not written yet, and we don't do real prop trading. most of our business is client-driven trading. and we are hoping when the volcker rule is finished, that we continue to do all the things we do. we deal with 16,000 clients around the world. they come to us, great prices, research, execution, and that's good for the investor and the issuer. i want to point out, since i'm on the new york stock exchange floor, that the united states has one of the best economies the world has ever seen and the widest, deepest, most transparent capital markets which were part of the engine that made this country great. so let's make sure we're all done with these rules, that we've still got this. this is outstanding. >> we have the united states senate, okay? senate, 100 of them, one of them very important, elizabeth warren, comes out and says, listen. enough with this. banking should be boring. it's dangerous, high-risk practices. you need to take steps to keep glam blers out of your banks. are you a gambler? >> no. you'd be surprised at how risk
averse we are. banks are loans. the riskiest thing we do is loans. banks historically always trade a little bit, did m&m m&a adv e advice. >> what are you coming at this as a man of peace? elizabeth warren wants to break up your bank. >> no, but the proof is in the pudding. people come to a company because you do something for the client. >> okay. >> so if your customer stats are going up, if people are giving you business, presumably it's because they like what you do for them. this company, we never lost money in the cries. we helped a lot of people, cities, schools, hospitals, not-for-profits and part of it was our diversification. we were a port in the storm. we'll be a port in the next storm. and our clients are hopefully happy with us. that's why we're here. >> you don't buy the rap that these banks, your banks, wells fargo, too big to fail, too difficult to manage, to
difficult to jail, too hard to regulate. >> i would say that we all have an interest in a sound and safe financial system. >> okay. >> there's no one that doesn't want that. and i think a lot of rules and regulations will make it a lot safer and sounder and we all have an interest in getting too big to fail. it's not right in america that anyone feels like a jpmorgan is too big to fail. so the rules in place, we think are going to accomplish that over time. and eliminate some of these issues. and if a company does badly, fire the management. fire the board. claw back comp. bury the company. and let the system take care of it. and it doesn't hurt the taxpayer and the economy. and i think the tools were given to regulators in dodd/frank, it could accomplish that. >> you believe the regulation floor will not repress lending and will bring about good things in the united states. >> look, listen, when you say regulators, there are so many. we have hundreds. some of them will maybe do a little bit of suppression on lending. and i think over time, you're going to see products -- the cost of credit go up. you're not going to see it overnight. but you are going to see the
cost of credit, revolvers and certain things go up. >> 14 months ago you said you were barely a democrat because you felt that the democrats could be too anti-business. i'm not hearing that today. i'm not hearing there's anything to the party. >> i haven't changed that. i am very pro-business. i think business -- i think big institutions are great institutions. they treat their people well. they've been at the forefront of social things like, you know, benefits for gay and lesbians and helping veterans and we pay our people well and medical benefits. >> apple pie. >> so these companies do fabulous things. i'm not talking about jpmorgan. i'm talking about all these great companies out there. we make mistakes. we have bad apples now and then. >> let's take i a break. this is jim cramer with jamie dimon. stay with us. rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain
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you've actually talked with me and said, listen, we let you down. how do we know they're in place? how do we know it's not impossible just to discern what's really gone on in a big bank? >> remember, this company did rate through the crisis, a real crisis. we trade around the world. we make loans. we move trillions of dollars a day. we're a good company. we had these flaws. and the anti-money laundering -- >> had, you're using past tense. >> no, we've got to fix them. some compliance, some mortgage, some were industrywide, some were unique to us. we were compliant. so we said control, number one. we've taken our best people, enormous resources. i'm talking thousands of people. so it's not just resources. we're getting rid of all the backlog, building new systems, putting better front-end/back end in place and it will make us a better company. obviously we had the london whale problem which we've also fixed. companies should acknowledge -- if you acknowledge your faults, can you fix them. if you deny them, you don't fix them, so we're going to fix them and i think we'll make
regulators happy with what we're doing. >> part of the problem with the new regulatory regime, you can't pick up the paper without seeing it, it's because of what went wrong with jpmorgan. >> yeah. it was very unfortunate. >> and a lot of people have left the bank who were people who you put in who were your friends. how do you deal with that? >> first of all, i think the management team is as good as i've ever seen. and you all saw today marian lake, excellent. gordon smith in commercial, outstanding. doug, commercial bank, outstanding. mary erdos, we've got fabulous people. they're not new. they were all there. very seasoned. very experienced who got bumped up. so we had too much turnover. >> okay. >> the london whale, a little bit succession, getting people in place. and a little bit because we reorged. and we had to do. it was unfortunate, but companies move on. >> here's something that mystifies me. i'm a private client of the bank. i think the single best strategist on wall street, he was recommending impactly the opposite of what the whale did.
why not just say, listen, what the heck? we've got the best strategists on the street. why don't you get with the program? >> first of all, i agree with you on michael sambolis. that's number one. the whale was meant to be a risk-reducing thing. it morphed into something which i don't even know what it was. and we already said it was bad strategy, badly done, unjustifiable, we admitted it, we confessed to the whole world. we've gotten rid of most of the risk. we changed it. we don't do it anymore. that's live. >> would you have quit if they separated the chairmanship from the ceo? >> no. i was very clear, i would never leave my company high and dry. i wouldn't have liked it, but i would never would have left the company high and dry. that decision about the chairman and ceo is the board's decision. >> but you care about the stock. the stock would go down if that happened. >> if they separated the role? >> yeah. >> i think it might have gone down because that creates so much uncertainty inside a company. you know, why did a ceo leave? is there dissension at the board level? my board -- the point my board
made is that this should be a board decision based upon their knowledge of the company, the people, succession. it shouldn't be rogue. there's no evidence to separate it works at all. but again, for the audience out there, if you're a shareholder, here's what's important. the board meets every single time without me. the board sets the whole agenda. the board hires and fires me. the board is deeply engaged in succession. they know all the senior people. we've got these wonderful practices. that's what's important. not separating chairman and ceo. remember, enron and worldcom had separate chairman and ceo. >> right, didn't work. >> didn't work. >> now, tapering, all right? what i'm hearing from you is that this country is very strong. so it obviously can withstand tapering, if not ending. exodus of the fed, what does it do to the bank? what does it do to the country? >> let me put this one in perspective a little bit. we all want normalized rates. >> right. >> rates have been suppressed kind of around the world for a long time. i believe in the process of normalization. you're going to have some volatility. you're going to have rates go up. i don't know why anyone should be surprised about that.
i'm not talking about next month. i'm talking about over the next couple years. but look past the volatility. remember, 6 billion people on the planet don't care about that. >> right. >> what they're going to care about is jobs, growth. as long as the economy is strong, then i think it would be fine. >> well, then where is the job growth? in this country? >> you've had 200,000 jobs i think in the last six or seven months. i think the country would be doing 200,000, 300,000. to me that's the important thing. the other thing you mentioned i just want to mention about america, i get the benefit to travel the whole world. this country, not only does it have the best military on the planet, it's got the best universities, the best businesses. it's got low corruption. the wisest and deepest capital markets. it's hugely innovative from steve jobs to the factory floor. it's got a wonderful work ethic. we've got a royal flush. we don't have a divine right to success, but we've got an unbelievable hand. if we play it well and now we've got natural gas, shale oil. >> you know i like that. >> we have a gift from god here. america is going to come back and it's going to blow people's socks off when it does.
>> ben bernanke is going to retire. why not, if asked, take the federal reserve job? >> you talking about me? >> yeah. >> please. no, i do not. >> you're not qualified? jamie dimon not qualified for the fed chairman? >> every single person i know would say jamie should never be fed chair. >> all right. surprised there have been no indictments of some of the people who did wrong? i know you were anti that people did wrong. speaking of next week, shouldn't they have indicted somebody who actually did bad things in banking? >> i think if someone did something wrong, they should go to jail. one of the great things about america, failure is not illegal or wrong. you can't just say it failed. but i do think america looked at the crisis -- and this is too bad, and there was no -- anywhere old testament justice. what they saw is people got overpaid and some of these people lost all their money, their reputation, all that. if someone did something wrong, they should pay. you've got to be specific. did they do something wrong or you like the fact that they failed. you make investments.
they don't always pay off. it doesn't mean you're a criminal. >> last question. america next year at this time. where's unemployment? where's gdp? >> i'm not -- you're better at this than i am. gdp will be stronger and unemployment will be 6.5%. >> 6.5%? thank you so much. that's jamie dimon, chairman and ceo of jpmorgan. back to you. >> thank you very much, jim. a lot of information into a short period of time. want to get reaction from former massachusetts congressman barney frank. i trust, congressman, you've been able to listen to some of that. good morning to you. >> yes, i heard it all. >> we do have obviously the chairman of the biggest bank in the country by assets saying that the company has acknowledged their faults and tried to fix them. said they've been a port in the storm. said we'd be surprised at how risk averse they are. how do you view them in terms of risks to the financial stability of this country? >> i view them as a very well-run bank. and the very fact that a well-run bankheaded by a very
responsible guy had the problem it had in london is an illustration of why i have been pushing the commodities futures trading commission not to exempt even the best-run american banks from regulation of their derivatives overseas which can impact us. and i think that's the perfect example. yes, it's a well-run institution. and yes, it was a well-run institution that ran into problems. you need both. you need a private sector that is vigorous and well run, and you need a set of rules that govern. so i agree with much of what jamie dimon said, and i certainly agree with him in his recitation of those who say oh, america is going down the grain and things are terrible. i appreciated his saying of much of what we did in the financial reform bill will be helpful. you did not hear in that interview somebody who shares the extreme did he cecries that wrecked american capital by trying to put responsibility in. >> we had elizabeth warren on
earlier talking about this bipartisan effort to reintroduce a form of glass-steagall. is that actually going to go somewhere? >> well, i'm not in the congress anymore. i doubt that it will. i would point this out. if glass-steagall had not been repealed -- and by the way, i voted against repeal in 1999. i'm not defending my past vote. glass-steagall didn't do anything about derivatives. some have said let's get derivatives out of banks. aig wasn't doing derivatives as a bank. frankly, you need to regulate derivatives. taking them out of banks may protect the private insurance fund, but it doesn't protect the economy from irresponsibility in the derivative area. people getting overcommitted on credit default swaps. similarly, i think the single biggest problem we had in the crisis and the one that the bill does address is the ability of people to make loans immediately sell the loan through a securitization and not stand behind it. we lost the discipline of a lender saying, i'm not lending money to you. you can't pay me back. again, glass-steagall did nothing about that.
so i regard the glass-steagall debate as something of a philosophical one. that is there are people who say, well, banks are just too big. i would want to see what they think the harm has done from them being just too big. in fact, i think the question is whether the activities of regulators whether they were done in or out of a bank. glass-steagall did nothing to regulate the kind of activities that caused the problems. >> mr. frank, we're still waiting for the volcker rule. i anticipate there was a point at which you assumed you would still be in office by the time that went into effect. that is certainly not going to be the case. what are your expectations there in terms of what we'll actually see? >> you know, when you run for office, you don't assume much of anything. but i believe there will be a very strong volcker rule adopted before the end of the year. part of the problem is we did not anticipate, when we passed the law in 2010, that the republicans would take over the house.
now, you need all the agencies in there. one of the things the republicans have done, they couldn't repeal the law. they knew that was too unpopular. but they've substantially restricted the funding that we had hoped to get to the securities and exchange commission and the commodities, futures trading commission. those two agencies got an agenc enormous increase in power over financial derivatives which had previously been unregulated and part of the slowdown has been that. part of it is that you have a very conservative court system in the district of columbia, they're the ones who hear any rules or regulations that are done by the regulators. the business community has flooded them with paper. the courts have held them to an extremely high standard to make sure they checked out every possible argument, and that slows it down, too. but with all of that, i am very confident that before the end of this year there's going to be a very tough volcker rule in place, which will do much of what glass/steagall had done that was relevant, that is, to protect the insurance fund. because that's what this separation does. remember, the separation of
derivative activity doesn't in and of itself doesn't prevent an aig and it protects the deposit insurance fund and i believe you'll see a volcker rule that does that. >> that's an important distinction and some of your comments getting a lot of attention even as you say them, congressman. appreciate your time. thanks so much. and have a good weekend. >> and now that i don't have to worry that they do. >> congressman barney frank, thank you so much. >> thank you. up next on the program find out how who jpmorgan shareholders feel about what jamie dimon said on cnbc. ♪
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with the jpmorgan ceo and chairman we bring back the shareholders in that bank, charlie and david katz joining us from matrix asset advisers. charlie, what did you think of what jamie dimon said? as an investor you may see these things perhaps differently than other viewers. >> i'll be a little boring, i agree with almost everything he said. the economy is getting better and as the economy gets better, the earnings will get better. they are already earning 15% on
tangible book so that number will be higher. interest rates going higher is going to be good. the credit is getting better. the u.s. is the best economy in the world. i just don't disagree with anything he said. >> yeah. i mean, david, there are issues here. there's a big question as we heard on the conference call maybe half the conference call was talking about how they raise their reserve ratio from 4.7% to 6%, that's a lot of cash that they have to find for a buffer. there's a concern over what he describes as a dramatic reduction in future profits for mortgages as a result of what is going on. how do you assimilate that, david, or do you not, do you simply trust that jamie dimon is the guy and jpmorgan is the bank? >> no, you want to look at the totality of the businesses, certain businesses are going to slow down with mortgage rates going higher, but as jamie dimon said, other businesses will do quite well and when you take it in the totality, earnings will grow very nicely and we agree with everything that charlie just said and jamie just said, it's good for jpmorgan and it's
good for the banking group and it's also very good for the economy. so, our takeaway from today is very upbeat about banks for the remainder of the year and we feel okay about the economy as we progress over the next 6 to 12 months. >> charlie, go ahead. >> the refinancing business in mortgages is going to shrink, but we think new home construction is going to be higher next year and not lower and a bank actually makes more money on a mortgage on a new home than they do on a refinancing. >> charlie, cramer point-blank asked him if wells fargo who shares more significantly today was outmortgages jpmorgan and jamie said yes. as an investor, how concerned are you about that? >> yeah, it's probably the one business they're in where they're not the leader. everything else, basic investment banking, corporate banking they're a mile ahead of other people. underwriting they're ahead. but in retail mortgage, wells fargo's ahead, i think they are gaining share which is, again, why we think returns will be higher next year as they continue to take share. >> yeah, that's going to be one
to watch, then. david, your view as well, is this a business, mortgage, especially that's going to be important enough to jpmorgan that they need to gain share and i imagine that as people compete for this space, that's going to drive down its profitability to some extent. >> they will gain share over time because they're one of the stronger players and it's going to help the overall profitability of the firms who are very comfortable with that business. when you're looking at a conglomerate bank, they don't have to be the exact best in every business if you take the totality of it, they have great capital ratios and generating huge amounts of cash and returning a lot to shareholders all good things and you are buying it for under ten times earnings. >> you know, charlie it's an obvious statement that this was a very important public meeting for jamie dimon to make. it was a year ago almost exactly to the day that he was on capitol hill being pressed about what he knew and what he'd said about the london wales, subsequent to that we have the revelations of the losses and then we have to fight off an attempt to strip him of his dual
ceo and chairmanship role, do you think that jamie dimon is back where he was, is he the ambassador and the spokesman for wall street or do you think he'll forever be tarnished? >> again, i hate to sound so positive all the time, but i've made the statement and i'm going to stand by it, i think he is not only the leading bank ceo, he is the leading bank ceo that we have seen in the last 50 years. you have to go back to i would say the original jpmorgan to find somebody who so more clearly out ahead of his competitors. there is no one else that you would want to have running a large investment bank, a large commercial bank, a large bank, than jamie dimon. >> and there gentlemen we will leave it, charlie and david, thank you both for joining us. have a great weekend, guys. >> thanks a lot. >> thanks for having us. >> wow. and with that we conclude what's been a pretty spectacular
hour for "wasquawk." he got a lot of new information out of dimon, but some of the things he said in the recent past, the things about united states being a great magnet for capital around the world. >> but that's important positioning for him, that's great positioning in this country. >> listen, every time you hear it, you do feel good about things. >> yes. >> it is one of his frequent tag lines if you will, i've heard it many times, but not that it isn't true. i think when you have a ceo, though, who is willing to say, hey, those guys are doing a better jonathan us, that's just not something you hear very often. that's one of jamie's strength being blunt and being confident enough to admit weaknesses as well as strengths. >> also the bit about saying i never would have left the company high and dry. there's a headline you could argue got ahead of the bank, this notion that he would take his marbles and go home if he didn't get both offices. >> there was plenty of opportunity publicly for them to push back against that and i'm not sure they really did.
we're happy to let that view be out there i think ahead of that move. >> no doubt, that certainly helped in terms of any -- right, the shareholders. when you talk about his leadership, he said, why don't you want to be fed chairman, he said god no. >> god no. we know there's a lot of fanfare with dimon coming down, treating him with kid gloves but it's the biggest bank in the country by assets and we tried to bring that to you and all the information that comes with it. >> david, have a good weekend. if you are just joining us, here's what you missed earlier on -- welcome to "squawk on the street" here's what's happened so far -- >> jpmorgan is out. the company has beat for four straight quarters and it looks like five $1.60 a share versus estimates of $1.44. >> i think jpmorgan will benefit from the higher rates, from an improved economic outlook for the second half of the year. they continue to manage the capital market side of the business as well as anyone,
trading, the fixed income side. >> when rates go up, they're going to make a ton of money. and they're going to make it in banking. i mean, they're not really talking about it making it swinging the money around. we want to get a $5 million loan to do this, well, that's the kind of loan that the bank examiners will go nuts about, but that's the kind of loan where we would put 25 people to work instantly. what are they going to do? what is jamie dimon going to do? >> he does not have a choice. he's got to release those reserves because the credit trends are so strong, if he had his way he'd probably want to keep them in a reserve but if credit trends are improving, banks have to release those trends. >> the american economy is getting -- slowly getting stronger so the lending will come back when people have a little more confidence and start to do more capital investing and so we're kind of confident that you'll see growth over the years as america recovers. good friday morning. we're live here at "post 9" at
the new york stock exchange and let's get a check on the markets where the dow is not doing a whole lot directionally up 16 points, though, the news flow hob out of control, jpmorgan, the warning out of usp, and s&p is at the flat line and the nasdaq is up five. shares of valero rallying turning around despite a warning that q-2 would drop. and goldman initiating coverage with a neutral. goldman remains positive on dollar general's long term growth prospects but says it's waiting for a better entry point to get more bullish. let's get to the roadmap this hour. cnbc speaking exclusively to jpmorgan ceo and chairman moments ago, what jamie dimon had to say about the economy and the global economy and too big to fail in a moment. plus, twitter increasingly important for media companies, we know a little bit about it here hours. the ceo of twitter is telling us how he's trying to impact tv viewers and what it means for their growth strategy going forward. not a good sign for the
economic, u.p.s. projecting q-2 earnings will not meet expectations. in addition u.p.s. lowering its full year earnings guidance, blaming a slowing u.s. industrial economy along with an increasing prenks for lower cost shipping as the main reason for slower growth. as cramer said today, in a relatively soggy tape. that was not, quote, supposed to happen. came as a surprise to a lot of people. >> and you can to elby the reaction, shares down better than 5% and as you say offsetting some of the positive momentum from financials this morning. we did get earnings from wells fargo and jpmorgan, and in case you missed it, jpmorgan chase chairman and ceo jamie dimon talking with us exclusively this morning. he sat down with our jim cramer right here at the new york stock exchange and in discussing the big quarterly results the subjects of mortgage lending in particular led dimon to give credit where credit is due even if it's due to a rival. take a listen to part one of our exclusive two-part interview. >> 7% decline, on the wales call, wales hat not seen those numbers. i know you are friends with the
ceo. is he just outmortgaging you? >> he is. i love john stump but we're going to build -- >> you admit someone's doing better than you? >> absolutely. i have they've been doing better for a long time, we had the bear stearns wamu and at the end of the day we'll have a great mortgage business. we believe the way john does it's an important product and we'll be really good at production and servicing, we've got a little bit more wood to chop than he does. >> it does seem he wants to make the loan and you don't. >> our shares have gone up. we've gone from 9% to 10% to 11%, i think you'll see our share go up over time. they are the largest. they are close to 30%. >> how much of your decision to lend, not lend has directly to do with the fact that i don't know if the government wants you to lend or they want you to hoard. >> you're talking on the balance sheet. >> yeah. >> commercial loans. no, we have to adjust. we have a new regulatory environment, so all banks have to adjust for it, that doesn't meanwhile you have to hold more
for liquidity or capital or build up the capital ratios, eventually you'll be back to business as usual. it will take a minute or two. these are global requirements. so, we have to meet the requirements in 60 countries around the world not just the united states. >> so, eventually means that you'll have enough capital or it eventually means that you think things will soften and the regulators are not going to be so anti-bank which i know you feel they are. >> what's happening now we are getting near the tail end of basel 3 and leverage ratios and capital ratios and maybe at the end of the year we'll know what they are. we have the new conversion buffers, and it's a couple years old and all those things will determine eventually how' gr aggressively banks can grow and pay dividends and return capital. we are building client businesses with great franchises, of course, all of our businesses. that's what we're in business for. >> right, but i look at the big cap, $294 billion in large cap, what the heck, $9 billion in
small business. i know you want to lend to small business. is it too risky? is the government going to say those are the spec loans and we don't want you to lend them. >> no. the small business is not a huge number. so, we're one of the biggest small business lenders out there. our origination's kind of flat. i do think it's a little bit harder, you know, small business is not completely recovered like large companies have. i think small business will recover along with the economy. when the economy starts to grow you'll see small businesses take off and their credit needs grow. >> it hasn't taken off yet. the federal reserve chairman has done everything he can. has he not done enough? >> no, i think they've done a lot. i think we just have a moderate recovery, our view at jpmorgan that it's actually strengthening and it's very broad based, there's almost no sector, large company, middle mark company, small businesses, consumer, housing, there's nothing that is not going to look better. if we get lucky and get backwards on the fiscal side,
you may see stronger growth in america. >> if we have a continuation of the mortgages, refis, where's the level where housing goes down? >> housing i was watching, i want you to know marion, you did not an outstanding job today. what she was talking about is that all things being equal if mortgage rates are now 4.5%, refi is going to drop, but that's okay as long alwaysed economy's doing well. that's just one little part of the business. >> now, a big part of the business that seems to be working is this trading that i mentioned. what does the volcker rule ultimately mean? what does regulation ultimately mean for long-term profitability, for return on equity? >> the volcker rule is not written yet and we don't real prot trading, most of our business is client driven trading and we are hoping when the volcker rule is finished we can continue to do all the things we do for clients. we deal with 16,000 clients around the world, they get great
prices and research and execution and that's good for the investor and issuer. i want to point out since i'm on the new york stock exchange floor that the united states has one of the best economies the world's ever seen and the widest, deepest, most transparent capital markets which were part of the engine that made this country great, so let's make sure when all is said with these rules, we've still got this, this is outstanding here. >> we have a united states senate, senate, 100 of them, elizabeth warren said banking is boring and you need to take steps to keep gamblers out of our banks. are you a gambler? >> 40. you'd be surprised how risk averse we are. first of all, the things that sink banks are loans. the riskiest thing we do is loans. banks if you go historically always traded a little bit, did m & a advice and you can design it any way you want, but let's end up with a good one. >> are you coming as a man of peace.
elizabeth warren said she wants to break up her bank. >> i think jpmorgan is a great institution, okay? >> i love the statesmanship. >> no, but the proof is in the pudding. people come to a company because you do something for the client. >> okay. >> so if your customer stats are going up, if people are giving you business presumably it's because they like what you do for them. this company was a port of safety in a storm. we never lost money in crisis. we helped a lot of people, cities, schools, states, hospitals, not for profits and part of it was our diversification. we'll be a port in the next storm and our clients are hopefully happy with us so that's why we're here. >> you don't buy the rap that these banks, your bank, wells fargo, too big to fail, too difficult to manage, too difficult to jail, too hard to regulate. >> i would say we all have an interest in a sound and safe financial system. there's no one that doesn't want that and i think a lot of the rules and regulations will make it a lot safer and sounder and we have an interest in the game in too big to fail. it's not right in america that anyone feels like a jpmorgan as long as they are too big to fail
and so the rules in place we think are going to accomplish that over time and eliminate some of these issues and if a company does badly, fire the management, fire the board, claw back comp, bury the company, and let the system take care of it and where it doesn't hurt the taxpayer and it doesn't hurt the economy. i think the tools were given to the regulators in the dodd frank which can probably accomplish that. >> you believe the regulation will not repress lending and will actually bring about good things in the united states? >> look, there are certain -- listen, when you say regulati regulations. we have hundreds, some of them will maybe do a little bit of suppression of lending and i think over time you will see products, the cost of credit go up. you're not going to see it overnight, but you are going to see the cost of credit, revolvers and certain things go up. >> 14 months ago you said you were barely a democrat because you felt the democrats could be too anti-business today. i'm not hearing that. >> i haven't changed that. i am very pro-business, okay? you know, i think businesses -- i think big institutions are great institutions.
they treat their people well. they've been at the forefront of social things like, you know, benefits for gay and lesbians and helping veterans and we pay our people well and medical benefits. >> apple pie. >> this is apple and mother. i'm not talking about jpmorgan, i'm talking about all the great companies out there and yet we make mistakes. >> wow. and that's not even all the good stuff. we'll bring you part two of our exclusive with jamie dimon a little bit later this hour. >> yeah, that's coming up and we'll also be talking to former s.e.c. chairman harvey pitt and we'll talk to him about his thoughts. and another big financial guest on "closing bell" wells fargo timothy sloan, that interview will be live at 3:00 p.m. eastern. but before we get to all of that rick santelli is talking about the fed. rickster? >> well, you know, i think it is the popular topic even more popular right now than the huge run-ups in portuguese rates. we have an individual on who
isn't always enamored with the fed or the programs or even aspects of the u.s. economy. yes, i'm talking peter schiff. peter schiff will be here at the bottom of the hour. be thinks qe will last longer than a twinkie, we'll see what he really thinks all at the bottom of the hour. ppen in a se. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. this is greta. she works in quality control.
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back, welcome. >> good to be back, thank you. >> i know you heard the interview with dimon a few moments ago, you probably had a chance to glass at the quarter. one of the early takeaways the london wale troubles have arguably sharpened their risk management if they're able to put up returns like they did in trading, in volatility like this, do you agree? >> i do agree. i learned from the experience as any good company would. >> what -- i mean, what surprises you about 18% revenue growth in trading in an environment where one of the early fears going into the quarter has been bond rates rising is going to end up hurting some of these banks as they report? >> i think one of the prime takeaway s in jamie dimon's interview really buttresses the fact that for an institution like jpmorgan it doesn't matter what the economic conditions or what the regulatory environment is. they've got a good mechanism for
success, and they are going to continue to succeed. >> dimon's point in the interview, of course, was that regarding this potential talk of a renewed glass/steagall is that we were a port in the storm, we'll be a port in the next storm. do you agree with that? is that a fair point? >> well, i think that this effort to try and reinstitute glass/steagall is entirely misguided. and is directed at things that have not caused any of the problems this country has seen, so i believe the whole effort is a huge mistake. >> really? would you say that to senator warren? >> i would. with respect to this. i think that the better issue is to make sure that when it comes to banking, safety and soundness is the rule of the day. >> and so what policy guides us to that? >> well, i think it's very simple.
the new rules that have been put in place and dodd/frank's efforts as well as basel 7 have all required banks in their commercial banking activities to be far more safe and far more sound. that's the right approach with respect to other activities, those things have to be walled off from commercial banking, and those things have to be regulated the way the securities business has always been regulated. >> interesting. you know, we'll probably hear from some viewers today, harvey, that say we've gone soft, that the distance between us now and the actual crisis has made us lose our conviction about the degree to which we need to regulate these banks harder. why is that not a fair argument? >> it's not because i think the problem wasn't that we didn't have enough regulation of the banks. the problem was we didn't have sufficiently smart regulation of
the banks. all of our regulations are really very retrospective in orientation and don't get at future problems. what we need are regulations that enable government regulators to prevent crises from arising or developing instead of trying to put out fires after they've arisen. >> harvey, do you think that the federal reserve now looking more closely at macroprudential policy and the emfa sills that the chairman put on financial stability in his speech just the other day signals that they are going to try at least to do that the next time around, or is this always going to be an impossible task? >> well, i think they are going to try. i think one of the difficulties that we saw was as the market started to crumble and the economy crumbled with it, regulators became quite fearful. nobody wants to preside over another great depression.
and so we saw a lot of activity that probably was unnecessary and some of which was counterproductive. >> finally, harvey, we had barney frank on earlier this morning. he thinks that we might see some, i don't know if you call it a finished version of the volcker rule, but something by the end of the year. does that sound like a reasonable timeline? >> i think so. i think the banking regulators have had a huge problem, because the volcker rule makes a lot of difficulty for legitimate banking activities, and that is what is what is causing the holdup on regulations. >> it has -- people are having to be very patient with regard to that policy. good insight, and a strong opinion, harvey, thanks so much for your time. >> good to be with you. >> harvey pitt, former chair of the s.e.c. well, it's a bird, it's a plane, it's a shark, yeah, that sci-fi movie taking twitter by
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well, forget about "snakes on a plane" did you watch sharks in a tornado? twitter went nuts last night over "sharknado," the bloody disaster flick of, yes, a tornado made of sharks which premiered on sci-fi last night, an nbc property, by the way, we're quite proud. "sharknado" still a top-trending topic on twitter but it's unclear whether lighting up the twitter universe necessarily translates into television ratings. our own julia boorstin talked about using twitter to drive viewership with the ceo of twitter in sun valley.
hey, julia. >> reporter: ceo twitter dick costolo said he's interested in making television more social and interactive, he wouldn't comment on all twitter ipo plans but he talked about the meetings he's taking here to explain the kind of twitter pow are we saw with "sharknado" to different tv and movie ceos that are here. >> i spend a lot of time talking to them about the conversation on twitter as the second screen to what they're doing with their programming and how we can make that even better and the ways that we can separate the signal from the noise when you think about the second screen experience and how we drive tune-in and all those kinds of things. >> reporter: twitter and key networks have the ability to be competitive as they are chasing advertising dollars but he says that twitter ads are complementary because promoted tweets, their ads, are designed to feel like content. >> i find that that enables us to talk to these kinds of advertisers in a way that's a
new set of -- a new set of investments they're making as opposed to trying to take, you know, some fraction of some other pie. >> reporter: dick costolo and twitter are some of the many internet ceos here this year. google's eric schmidt shed the conference is putting a growing emphasis on technology. schmidt chatted with apple's tim cook here saying the relationship has been getting much better. in addition to a shiftinglition of start-up ceos, bill gates and amazon's jeff bazos are also sun valley regulars. if you are wondering about facebook ceo mark zuckerberg, he is here, he spent some time with google's eric schmidt as well and last night he was hanging out with his wife new jersey governor chris christie in the sun valley lodge after dinner, but i have to say he's been doing a really good job of dodging the cameras, back over to you. >> yes, they have a way of doing that. i wonder, julia, i guess costolo didn't remark specifically on "sharknado" but i wonder what they are thinking there today and whether or not these -- this partnership with nielsen down
the road will help shed light on situations like that. >> reporter: well, i think they're really interested in understanding what people are doing when they're in front of the tv set, and increasingly as people are more likely to have a device like a smartphone in their hand when they're watching tv, twitter and nielsen together are trying to figure out how to make sure that people see the same ads or reinforce the ads they're seeing on television on their smartphone and how to really drive people to tune in in real time, obviously ads are much more valuable if they are shown live and not if you watch a show and tune in via dvr later, and the benefit that we saw with "sharknado" last night at least there was a big incentive to watch it live and not wait until later. obviously we haven't seen the ratings yet, but i would guess that that kind of twitter buzz would have an impact. >> yeah, we will find out. i think they've had some early numbers but nothing definitive. you can't watch that tape enough, julia, and kelly. did you get to watch it last night? >> of course, in typical fashion, i didn't even know about this, right?
i walk in home last night and i see basically what looks like a "sharknado," i wouldn't have known the word of it and having watched it and seen sharks in the air in a teared. >> julia, great stuff all week. thanks so much. our julia boorstin in sun valley. speaking of twitter, prepare for the twitter revolution, a documentary we've been working on with the docs team on cnbc. it does premiere, it's a while to go still, wednesday august 7th is the date, but mark your calendars. we'll take a look at twitter's business model and a lot more. >> you've gotten to do some really cool reporting for this one. >> yeah, this was a good one. costolo is a fascinating chief executive and the whole social change that twitter is bringing about. >> august 7th, stay tuned for that and make sure you stay tuned for more of your interview with jp ceo jamie dimon later, and is there relief coming at the pumps and a couple of
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the sessions when we opened on wall street and jpmorgan results are boosting the banks ahead of expectations but front and center is really what's happening in portugal. you have two markets that are noticeably off. spain is down quite substantially as you can see. there you go, 2.3% and portugal is also lower. as far as spain is concerned, this is the reason why the government it looks like is going to cut its subsidies that it uses for electricity and energy production which is kind of important because there are so many islands around spain that need to be subsidized is the argument but that's going to be cut, so some of the big energy providers you will probably not recognize are in negative territory. the bigger issue is portugal now where the bonds -- the yields have spiked substantially higher. the portuguese bond market has sold off because the turmoil continues really to notch one stage higher now that the socialists' position has suggested it wants the whole package with the european union and the austerity to be
renegotiated, they say the recession in portugal is simply too harsh at this stage and already you had, of course, the president earlier in the week really kind of mashing things up by suggesting there should be some sort of cross-party deal. in order to maintain the austerity and therefore eventually to lift portugal out of the bailout. i know rick will talk about this in a few moments of time but be aware you are spiking to 7.5% on portugal, over all for the week it's actually been a week where european equities have outperformed those here in the united states, but don't forget they've done far worse during the course of the year and still there's a 17% gap between how european top equities have done and how we've traded here in the united states so far this year. a lot more portugal to come. back to you guys. >> all right. you got that right. thank you so much, simon. have a good weekend. let's gettelli in chicago? >> thanks, karl. i would like to welcome our guest peter schiff, peter, thanks for taking time out of
your busy schedule. >> hey, rick, great to be on with you. >> all right. you know, in my tease for this piece, you know, i said what's going to have a longer shelf life qe or a twinkie. what's your answer? >> well, eventually qe is going to come to an end, not because ben bernanke wants to end it but because the markets finally leave him no choice. i think all the talk about tapering is talk. i think ben bernanke knows no more qe but not because the economy needs it. monetary stimulus is the last thing we need. that's the reason we had a housing bubble, that's why there was a financial crisis, that's why this recovery is so weak and that's why the next crisis will be worse than the last one, the fed is creating it with its monetary policy. >> now, nmany have used the analogy what's going on with ben bernanke versus the market in a sort of fashion resembles the bank of england's issues with george soros when george soros challenged via his trading of
the british pound. do you think that analogy works? >> well, i think eventually you're going to see a real attack on the dollar and on the u.s. treasury market and the fed's ability to maintain artificially low interest rates without destroying the dollar. we're going to come to that point. it's not there yet. and i think one of the reasons that ben bernanke had to do some damage control as far as talking back tightening is because he's already very nervous about the reaction that he didn't anticipate in the bond market and how it's going to affect mortgage rates and the housing bubble that he's trying to reflate. >> peter, one of the trading venues that handicaps the future had the top three post -- or people in line for the chairmanship as janet yellen and then second and third were pretty close between larry summers and tim geithner. out of those three, who would your choice be, if any?
>> i don't know, look, the good news is ben bernanke is leaving, the bad news is one of those three is going to replace him, you know, i don't know. i suppose whoever they end up going with will probably be the worst but, you know, you don't really have -- you don't really leave me any good choices there, so i don't even know how to answer that question, you know, i don't know which one would be worse -- >> if you were trading ten-year notes right now, we're almost out of time, would you be trading on the same side of the card for the next couple weeks with the fed or would you wait to challenge the way the market seemed to several weeks ago? >> well, you know, obviously the yields have backed up quite a bit in a short period of time, so a short-term trader, you know, it might be hard to, you know, just to continue to short the bond market but i think that's the big trade. if people are looking for, you know, what's the next potential subprime, other than, you know, buying some of the beaten-down gold stocks, i mean, i think shorting treasuries is the way to go. eventually the fed is going to
lose control of this, and i think the biggest danger is when you start to see the bond market and the dollar selling off simultaneously, you throw in a rally in gold and that's basically, you know, the triple threat. you've got all the warning bells that the end is near. >> well, listen, peter, we're out of time. thank you for taking the time. carl, back to you. >> all right, rick, thank you so much for that. let's get a check on commodities, too, oil back up again. bertha coombs at the nymex. hey, bertha. >> hey, carl, this has been a week of inflections in the commodity, gold was hammered so hard and it will have its best week in terms of a weekly gain. and silver is pulling back today, but overall we'll wait to see what the commitment of traders report is later on this afternoon to see whether we're seeing more people go in long on gold on the back of those dove ish comments from ben bernanke. in the oil pits it's a different story, it wasn't really so much about the dollar play, it was
really more about inventories. wti nymex crude having a pretty good week despite all the profit taking we saw yesterday. one of the things traders are wondering is whether this is a top. john kilduff at the kilduff report and capital saying we did see oil stop out around $107 a barrel, $108 a barrel, that's the 15-month high if it can get past that we'll see the momentum. the big thing that happened this week is we've seen that shrinking premium to brent, carl, and that is feeding into gasoline prices big time with gasoline a very big mover this week. back to you. >> all right, bertha, thanks for that. now, just as we're getting word via robert humm one of our producers if we close higher today, guys, it will be the strongest seven-day win streak for the s&p 500 since november of 2004. >> if we close higher. >> this is at a time we've seen gdp get revised lower and the
markets have basically been on a tear. >> it's certainly very impressive we're holding up. three to two declining to advancing stocks. good news here on the bank earnings being offset frankly by bad news on u.p.s. and particularly bad news on china. i'll get that -- to that in a moment. but here's the banks look, nice move up. wells fargo, good numbers, and jpmorgan good numbers and not as disappointing on the mortgage front as people thought. all to the up side. refining and marketing stocks strong. remember they've been under pressure recently. higher oil prices bad news for refiners because they've got to pay more for that oil to refine it into gasoline, so put up some of the refining and marketing stocks that have been going up. valero actually warned today despite that the stocks are moving to the upside. emerging markets have had a very good week. finally showing some signs of recovery, but not today, again, i find this a little bit disconcerting, they're down again today even though they had some positive up days. here's the things that worry me particularly, the air freight
stocks, u.p.s., of course, warned this morning. most of the analysts are worried that it's more the emfa sills of cheaper alternatives to the overnight travel, to overnight shipping, than it is on their comment about slowing u.s. industrial economy, so i'm a little okay on that. but still you see the weakness we're seeing here. here's another thing that worries me, the bond market. we're not seeing any real rally, this is the biggest etf out here, it's on the bottom but it's not rallying and we're not going anywhere and if the market starts to move, believe me the stock market is going to react. this is 9 thing that worries me most of all, sunday night we get the chi ness gdp numbers, officially they are at 7.5% the chinese government has said so, but did you see what happened overnight? the finance minister of china said i don't think there's a problem with a growth rate of 7% or 6.5%, oh, really? i can tell you it was a huge topic of discussion and a lot of people feel the finance minister was sent out essentially, guys,
as a bit of a stalking horse to go around and to warn people that we're going to have a disappointing number in china sunday night. and i think the bottom line, too, is the shenzhen market, the chinese market, dropped 1.6% last night. >> wow. >> so, it's unlikely the minister is just going to walk around talking to reporters giving opinions off the top of his head of something of that magnitude without at least vetting it through the leadership, i think it's unlikely. >> it's a great point, bob. try to have a good weekend. >> i will. hopefully the weather will hold up. >> bob pisani. and make sure you stay tuned for more of our exclusive interview with jpmorgan ceo jamie dimon. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you.
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i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. coming up next on the half, what a week for stocks as the markets get a big bernanke bounce. can the rally march into next week and what's the best way to play it right now? plus, is one hard-hit coal stock about to rebound? two traders go toe to toe, and a golden week for gold. is that rebound here to stay as well? carl, we'll see you in about 15. >> all right, sounds good, to the, thanks. jpmorgan ceo jamie dimon speaking exclusively to cnbc this morning, and if you missed it he sat down with jim cramer
here on the floor of the nyse, the second part of the interview began with the strengthening of those internal controls included those linked to the london wale, listen. >> controls are an issue. you admitted it, listen, we let you down. how do we know they're in place? how do we know it's not impossible to discern what's really going on in a big bank? >> this company did great through a crisis, a real crisis. we trade around the world, we make loans and we trade trillions of dollars a day. we're a good company and we had the flaws -- >> had. you are using past tense. >> we've had them. come compliance, some mortgage, some were industrywide and unique to us. when i looked at it, the fact is they were accurate complaints, we said control agenda number one, we've taken our best people, enormous resources, i'm talking about 1,000 people, not just resources, we're getting rid of all the backlog and building new systems and we're putting better front end and back end in place it will make us a better company. and we've obviously had the
london wale problem which we've also fixed. the company should acknowledge if you acknowledge your faults, you can fix them. if you deny them, you don't fix them. we're going to fix them and i think we'll make the regulators happy with what we're doing. >> but part of the new regulatory regime, why it got stepped up and why you can't pick up the paper without seeing it is because of what went wrong at jpmorgan. >> yeah, it was very unfortunate. >> a lot of people have left the bank who were people that you put in who were your friends. how do you deal with that? >> first of all, i think the management team is as good as i've ever seen. you all saw marion lake, excellent, look at the results of the investment bank, outstanding, commercial bank outstanding, mary erdos a lot of you may know, we've got fabulous people. they're not new. they were all there. wait. very seasoned. very experienced. who got bumped up. so, the -- we had too much turnover. the london wale. a little bit succession, getting people in place who could see me one day and a little bit because we reorged and we had to do it.
it was unfortunate, but companies move on. >> here's something that mystifies me, i'm a private client of the bank, michael semlosolos, he was recommending exactly what the london wale did, he said, what the heck, we've got the best traction on the street, why don't you get with the program? >> first of all a all i agree with you about michael, what the wale did, the irony was it was meant to be a risk reducing thing and it morphed in something which i don't even know what it was. we've already said bad strategy, badly vetted, badly done, unjustifiable, we've admitted it to the world and we don't do it anymore. that's life. >> would you have quit if they separated the chairmanship from the ceo? >> no. i was very clear. i would never leave my company high and dry. i wouldn't have liked it. but i would have never left the company high and dry. that decision about the chairmanship is the board's decision. >> but you care about the stock. the stock would go down if that
happened. >> if they separated the role? >> yeah. >> i think it might have gone down because it creates so much uncertainty inside a company and might a ceo leave and is there dissension at the board level. but my board -- the point my board made is that this should be a board decision. based upon their knowledge of the company, the people, succession, it shouldn't be rote. there's no evidence that separation works at all. but, again, for the audience out there, if you're a shareholder, here's what's really important. the board meets every single time without me. the board sets the whole agenda. the board hires and fires me. the board is deeply engaged in succession. they know all the senior people. we've got these wonderful practices. that's what's important. not separation of chairman and ceo. remember enron and worldcom had separate chairman and ceo. >> didn't work. >> didn't work. >> now, tapering, all right, what i'm hearing from you is this country is very strong so it obviously can withstand tapering if not ending. exodus of the fed, what does it do to the bank? what does it do to the country? >> let me put this one in perspective a little bit.
we all want normalized rates. rates have been suppressed kind of around the world for a long time. i believe in the process of normalization you're going to have some volatility. you're going to have rates go up. i don't know why anyone should be surprised about that. i'm not talking about next month. i'm talking about over the next couple years. but look past the volatility. remember, 6 billion people on the planet don't care about that. what they'll care about is jobs, growth. as long as the economy is strong, then i think it would be fine. >> well, then, where is the job growth in this country? >> you've had 200,000 jobs i think the last six or seven months, i think the country could be doing 300,000, 400,000, you may see that. that's the important thing. the other thing you mentioned, i just want to mention about america. i get the benefit of traveling the whole world, this country not only has the best military, it's got the best universities, the best businesses, the lowest corruption and the widest and deepest capital markets and hugely innovative from steve jobs to the factory floor, it's got a grit work ethic, we've got
a royal flush and we play our hand well, and natural gas and shale oil, we've got a gift from god here. america will come back and it will blow people's socks off when it does. >> ben bernanke is gloing to retire, why not if asked take the federal reserve job? >> you're talking about me? >> yes. >> please, no, god. no, i do not. >> not qualified? jamie dimon not qualified to be fed chairman? >> every single person i know would say jamie should not be fed chair. >> all right. surprised there are no indictments for somebody people that did wrong. i know you are anti- the people that did wrong. shouldn't they indict people that did bad things in banking. >> if someone did something wrong, they should go to jail. >> who did? >> one thing that is great about america, failure is not illegal or wrong. i do think america looked at the crisis, this is too bad and there was no -- anywhere old testament justice. what they saw is people got overpaid and no one had to pay it back. some people lost all their
money, their reputation, you know, all that, but if someone did something wrong, they should pay, but you got to be specific. did they do something wrong or you don't like the fact that they failed? you make investments, they don't always pay off. it doesn't mean you're a criminal. >> last question, america is un gdp? >> you're better at this than i am. my guess is gdp is going to be stronger and unemployment is going to be 6.5%. shares of jpmorgan were higher. better than 5% for united parcel after the company cut guidance. how that could signal the economy more broadly when we come back. don't go anywhere. oh, hey mike. what are you up to?
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ups saying today that it expects weak second-quarter results and lowering the full-year lowering guidance. they are citing the shares taking it hard on the news. joining us now is arthur hatfield on the cnbc news line. art, good morning. >> good morning. >> not such a great morning for ups here. what is interesting is you are trying to make sense of the federal reserve on the one hand making conditions good enough to end stimulus, payroll being better over the last six months and calling audible on the whole thing.
>> they cited four different reasons why they are coming up short in q2 and lowering guidance for the back half of the year. two are really related to international. not an impact on u.s. market but the global air freight market has too much capacity and we're really seeing customers and it's impacting both revenue and profitability. the things domestically they notice is the slowing u.s. economy. that's really based on lowered economic forecast that they are seeing, more so than really volume that they are seeing today. yes, things are going to grow a little slower in the back half but they are still growing m and i'll make one last point. this year, 2013, is still going to be a record earning year for the company. while they are seeing a relative slow down to the back half of the year relative to the first half, things are still looking pretty good for the company. >> okay. so art, just so we understand,
because some are still trying to get their head around this slowing industrial economy, you're saying it's just coming from tiny incremental shavings to gdp forecast because of wholesale inventory numbers? it's nothing dramatic? >> that is what the company is citing with regard to their forecast for the back half of the year. it's the growth rate that they are expecting that is going to be slower than what they had anticipated back in january and you're correct, as a result of lower economic forecast. >> art, why didn't the industry know that there was overcapacity to this extent and that customers were trading down? this then is new information. >> well, it isn't. fedex has been citing this for a couple of quarters and ups has cited this as well. we're seeing an acceleration and that's becoming a bigger problem than the excess capacity and what's happening when somebody goes from priority to economy,
they may length then their transit time by a day and then they are going to save themselves maybe upwards of 30%. >> right. >> so you're seeing that and i think that goes to a sophistication these days as much as people trying to save money, they are realizing that, look, we can move freight more effectively and save ourselves a lot of money. that balance is coming out to the extent of companies like fedex. >> still puts gross margins. art hatfield from raymond james. carl? >> pretty interesting. by the way, they are back. the twinkie available on store shelves right now. we're going to tell you where in just a moment. we're cracking down on medicare fraud.
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the country. it seems they couldn't wait to start selling the golden pastries. you can get yours at walmart stores across the country. >> what does that tell you about walmart? >> that tells me i'm going there. i'll tell you that. >> the supply chain management. have a good weekend. >> you too. >> let's go to scott wapner and the halftime. >> all right, guys, welcome to the "halftime report." trying to work on positive territory but all three of the averages are negative. golden eye with the precious metal on track for the biggest weekly gain in two years. can that run continue? delivering alpha is one of coal's hardest hit stocks right for a rebound. tr