Transcripts For CNBC Closing Bell 20140711

We are. We got a papal disconsent im sue herera in for kelly evans. Kelly will be back on monday. Were watching a market that is having a rough week, as you know. Its been very volatile, but its trying to end on a positive note, and if it closed right now, it would be positive. Well take you through the final hour of trading. Plus, we have these stories also ahead today. Is the consumer sick or are some retailers, though, using them as an excuse, as they might do . Right. Are they blowing it . Are the consumers doing the weather . Theyre pinning their problems on the shopper. We dont know if thats appropriate or not, but were going to debate it. Rentacenter, the Container Store, walmart, all of them saying consumers are hurting them and their bottom lines, but is that legitimate . Were going to take a closer look at that. Ah, yes. Meanwhile, wells fargo, the nations biggest Mortgage Lender. So, when its newest chief Financial Officer said in an interview people are just not buying homes, that got a lot of attention, and john scluzbury will be here in a closing bell first interview to clarify that. They had earnings out today. The stocks been down. Well talk to john coming up. Speaking of homes, do you own a home . I know we do. But if you do two separate homes, by the way. Two separate homes, thats right. Are we married . Yes, just not to each other. To other people, right. This is coming up later, saying you are a new part of the class of fools. Todd shone berger says that owning a home is for suckers and should not be interested part of the american dream. Youll want to hear the reasons hes saying that, later. And final hour of trading, lets show you how weve been trading so far. The dow was down 54 points on the open this morning. This trading pattern will look very familiar. Weve seen this the last few days. Selloff on the open and then a gradual comeback through the afternoon. Were coming off the highs of the day, up eight points right now. Nasdaqs up 15 points, technology back today after lagging the last few trading sessions. And the s p 500 index at this hour is trading up a point at 1,965. Lets kick it around in the closing bell exchange, beth lily, ken mahoney and Michael Gapan from barclays and our own rick santelli. Just in the last few minutes, gang, the white house came out and said that the annual budget deficit will fall to 583 billion, much lower than last year, and they say that next year, the deficit will be below 3 of gdp. Beth lily, i guess good news. Its not moving the market today, but good backdrop there. Incrementally, were Getting Better on financials, arent we . Absolutely, and i would contend and we contend that the economy is definitely improving. Its slow, but were getting traction, and all the signs are that things are improving, that, you know, we see employment back to prerecession levels. That 8. 7 million jobs that we lost have now come back, but theyre in lowerwage jobs. And so, youre seeing a slower consumer, but we do believe that there is traction in the economy and things are improving. Ken, do you agree with that at this point . I mean, because we have seen better jobs reports lately, yet, there seems to be a large disconnect between main street and between wall street, and that seems to be widening. Yes. Its been that way for a while. You know, this is going to be a tug of war for the bulls and bears through the next couple weeks, no doubt. If you look at it here, history is on our side here. Twothirds of companies that report typically report where they meet or exceed earnings expectations. Now, this has been a tough week, no doubt. But i think the market still has a lot going for it. Theres a lot of cash sloshing around. You still have underinvested bulls. And you still have a lot of Money Managers kind of having this performance anxiety. So, granted, not a perfect market, but well still go with the choppy market but with an upward bias. But even as we wonder about the health of the economy, there are those who fear that the easy money policy will start now to fan the inflation flames, finally. Ed daiki, pimco is out saying its time to buy t. I. P. S. , treasury inflation protected securities. Would you agree . No, im not a bond buyer at all. I prefer equities over bonds every day of the week. I think the thesis pimcos had for a long time, which quite frankly has been a good thesis, the new normal of slow growth, low Interest Rates, i think theyre in the ninth inning of that call and i think the opposite is happening now. I think the economys picking up, picking up more than people expect. And what you have to ask yourself, the consumer isnt buying, but you know who is, Corporate America. Corporate americas buying everything in sight. Theyre buying back their own shares, theyre buying other companies, and now thats why the earnings per share looks so good. What was that, rick . Thats why the earnings per share metrics are often quoted as a great positive. If they had bought back all their stock but one share, their earnings per share would be through the roof yeah, you know, michael, what about that . Because there are those that say that Corporate America is not growing from the bottom line. Theyre using their bottom line to buy growth. And therefore, you have to look at the earnings and the metrics a little differently. Do you buy that argument or not . I do. At least theyre doing something to improve that bottom line. So, activitys better than not doing something. I agree with the basic flavor that everybody has presented, that soft growth doesnt have to be fragile, soft growth and moderate growth will get it done over time, that equities are likely to bubble higher. And a combination of corporate activity on the Balance Sheet as well as a gradual improvement in fundamentals will keep earnings per share doing well and equities likely bubbling higher. So, i would just echo the sentiment that youve heard from the other guests so far. I dont know if wed want to use that bubble word. I dont know, michael, about that. I mean, i know what you mean, however, im a little worried about it. Very fair point. Very fair point. Hey, rick, for some reason, i thought of you when i saw those budget deficit numbers came over the wires just a short time ago. Im glad you did, bill yeah, i know. Im glad, because you know what . Everybodys crazy okay . Heres the analogy. A family of four has a dozen credit cards that are maxed out and they put them in the bureau drawer. Thats our 17. 6 trillion debt. On their new credit card, theyre way below their limit. Thats the United States of america right now. Yes, its a great improvement. We had 08, 09, 2010, over 1 trillion deficit. Now theyre getting in line with where they were in the Bush Administration going back. Definitely a huge improvement. But the fact of the matter is, until it goes into surplus, the tail were dragging along, which is approaching 18 trillion, is not getting smaller, and the office of management and budget and the cbo both agree on one thing, once we hit around 2017, it all goes back the other way. So, i mean, you dont buy the notion that you can only turn the ship slowly, you cant turn it on a dime . I mean, we are improving, though . Oh, no, i agree its an improveme improvement, just like jobs are an improvement, but when people wonder why the economys underperforming, its because we cant differentiate between a big debt were carrying and smaller deficits, or the fact that a credit card isnt really income, its debt. And ed deicke, this still doesnt make you want to buy tips . No, not at all. The one thing thats happened is everybody said when the government started spending less money, they wouldnt hire anybody and unemployment would get worse, but Corporate Americas stepped up and started hiring people. In fact, Corporate America is complaining that they have a lot of positions to fill but dont have qualified applicants to put into those positions. So, i think job growth is going to continue to be stronger than people anticipate, and i think thats going to be the engine thats going to drive the economy and eventually start to turn around these deficit numbers over a period of time. And youre right, its not a speed boat, its the titanic. Bad analogy, but nonetheless. Its a big ship, not a small one. [ everyone talking at once ] common denominators were speaking about today is that Balance Sheets of Corporate America, which have a lot of cash. And in boardrooms across america, theyre looking at how to deploy that cash. All of it is shareholder friendly. So, whether they buy back shares, raise your dividend or buy other companies, all of the above, its very shareholder friendly, and thats a very positive for this market. Right. You know, beth, though, i worry a little bit that there are some valuations out there that are stretched. Do you view the market as undervalued, fairly valued or slightly overvalued . I would still say fairly valued beth. Weak. Beth. I would say that the market is slightly undervalued. Really . I mean, we saw a big year last year, but were still finding areas to put money to work. You know, carl icahn was out today talking about being very selective with investments. And i would reiterate, were using the dips to buy stocks. We think its slightly undervalued, but not overvalued, because what are you buying, beth . What are you buying . Theres two stocks to talk about, bioscript and orbcomm. Bioscrip is a Home Infusion company, new ceo. Hes coming in, expanding ebitda margins, hes cleaning up the company. Theres consolidation in the industry of the Home Infusion. And hospitals are trying to push people out of the hospitals into home care and bioscip is a direct beneficiary. And the other is orbcomm, which is a Satellite Company transitioning to a telematics company. Theyre launching a bunch of satellites. Youll see a rapid acceleration in ebitda, margins are going to expand, and we think both stocks can double over the next several years. Classic stocks. And totally misunderstood by the market. Okay. Michael, final word to you, if we could. Is the market underestimating the fed taking away the stimulus, the october date . I mean, i hear a lot down here about the fact that theyre worried that the market is complacent. Even though they know the punch bowls going to be taken away. There were a couple fed members out today who said the markets underestimating how soon thats going to happen. Does that worry you . Michael . Not as much, because i would say even that worry that its going to come sooner than you think, the feds been clearly communicating where this is a tightening cycle thats going to start later and be slower than normal. So, even though it may start a bit sooner, on balance, its still going to be more accommodative than they would have been in a regular tightening cycle, and thats generally positive for stocks. So, i would say that its a worry, but if you have a long enough time horizon, it shouldnt be too much of a worry. All right. Thank you, folks. Appreciate you stopping by. Have a good weekend. Thank you. Thank you. See you later. We ha 50 minutes left in the trading session with the dow up 15 points. Its been a narrowly traded day, but a day much like weve seen this week, down in the morning, down 54 points in the open, now were coming back and finishing, at least right now, positive. Were going to talk some earnings, specifically wells fargo coming up next, because the new cfo, John Shrewsberry is breaking down earnings. Its a first on cnbc interview. And well get his view on the housing market, a perspective you dont want to miss since wells fargo is the nations largest lender. And also, a consumer funk. Weve been talking about it all week, blamed for disappointing earnings from some retailers, the way weather was used as an excuse last quarter for many other companies. Well, two pros will weigh in on an issue that could affect your portfolio and your wallet big time. And a little bit later apes together strong. Oh, yeah, youre going to rush to see that, arent you . Im going to rush to see that one, oh, yeah. Will the new apes movie breathe moji not the hollywood receipts . And which studios stand to make the best gains through labor day . Yes, were talking about the end of summer. I thought we just started summer. We have. Far from the end of summer. The pros are going to chime in. That and more coming up on closing bell. Stay tuned. If you have moderate to severe rheumatoid arthritis, like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. Humira can lower your ability to fight infections, including tuberculosis. 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The nasdaq and the russell are leading the charge higher, so its like weve seen the last few months in this market, unlike this week, but we are seeing plus signs and green arrows today. And the bulls will take that, right . So, lets go to dominic chu on the movers in todays trading session as we close out a week. Tgif, dom. Tgif, for sure. Lorillard and reynolds on the back of the tobacco side of things. They are convening merger talks. Lorillard up 2. 7 . Then, Shire Pharmaceuticals issuing a statement confirming that it met with abbvie to discuss the terms of abbvies 51 billion takeover proposal. Shire up 4 there, abbvie down marginally on the session as well. A tough day for private mortgage insurers. Thats mgic, thats raid radian, genworth financial, all moving lower, some by a lot. Mgic down about 9 as the federal financing House Authority issues proposals to tighten requirements for private mortgage insurers that do business with both fannie mae and freddie mac. The agencys saying the proposed rules will help ensure that approved insurers have sufficient liquid assets to pay possible claims. And were going to end with the big one, wells fargo lower after posting secondquarter profits that matched wall street estimates, but its mortgage revenue dropped 39 as lending volume did fall from the same time last year. Bill, sue, its interesting, because we kick off Big Bank Earnings season a lot more besides wells fargo to come next week. Back to you. A lot will be reporting at that time. Thanks, dom. On wells fargo, about a month ago at the Morgan Stanley financials conference, wells new cfo, John Shrewsberry, gave his candid take on housing and he has a unique perspective, because wells fargo is the largest Mortgage Lender in the u. S. Listen. People just are not buying homes at the pace. People are getting priced out. Thats a possibility. Its a regional set of explanations, but its just not quite where we manniimagined th would be. Well, John Shrewsberry joins us first now. Its a first on cnbc interview. He is also a member of the cnbc cfo council. Welcome, john. Nice to have you here. Welcome, john. Hi thanks for having me. Lets start with the home situation. You said last month that people were really not buying homes, that maybe they were priced out. It didnt improve this month. Can you expand on your thoughts on that and whether or not its the specter of higher Interest Rates or insecurity about the job picture . What is it, do you think, thats Holding People back . Sure. Well, actually, in the Second Quarter, just to be clear, our Mortgage Business was way up over the first quarter, down from a year ago because a year ago we were still at the end of a very low Interest Rate refinancing boom. But this year, actually, this quarter things looked really good. Originations up by more than 30 and our pipelines up by 10 billion. But whats Holding People back from what we might have thought was going to happen in the purchase market is a combination of available supply. Its just a little bit harder to find a home in certain markets, either because people are priced out or because new Home Development isnt what it was before the crisis. So, i think thats at the margin one of the items that were looking at. That in addition to demographic factors like people forming families later, people not getting as excited about housing as they used to. But its still a great business for wells fargo. But will it only get more difficult down the road . The last couple of times we spoke with your predecessor, tim sloan, we talked about the refi market and how that had pretty much dried up because of rates stabilizing and nudging a bit higher. People had done the refiing. They were done with that. Now, as the fed begins the process of raising rates at some point, taking the easy money policy away, will we now start to talk about Mortgage Origination dropping like it did for the refis . You could. So, the refi market has basically gone away. Were at this point at about 25 refis and 75 purchase market in our own production, which is reflective of the broader market. The purchase market should, frankly, benefit from the fact that affordability is still really good, right . Home prices are up 8 year over year, but theyre still moderate compared to where they were at their peak. And rates, while theyve moved up a little bit, are still at generational lows. So, if long rates move up materially over time, absolutely, that will have an impact of curtailing Mortgage Origination, but people still do form households, they still do need to buy homes, they still do move from time to time. And it is an enormous market, and were happy to be a leader in it. John, you know, theres been a lot of talk about some banks moving back into subprime lending, primarily because Interest Rates have been edging up, people have been reluctant to get they cant make the qualifying for a traditional mortgage. What percentage of your business at this point is subprime . I would say negligible. We dont really see it in the marketplace. Theres no place to go with it. If people want to make those types of loans, they have to hold them on their Balance Sheet because theres no securitization market for that activity. The loans were seeing made today are agencyqualified loans or jumbo loans that end up staying on the books of banks. And weve talked so much about Mortgage Origination with you folks for obvious reasons, but commercial lending was a bright spot for you as well. Sure. And its one that we all watch very carefully because were waiting for that ice to thaw to get the economy moving more when banks do start lending again to major corporations or even to the Small Business out there. Give us a sense of how that market looks right now. Sure. Well, we had great growth in our c i loan portfolios. And i wouldnt describe it as banks not willing to lend, but rather as borrowers reluctant to borrow. Or not qualified. Well, in the middle market and where c i loans get made, its not really a question of qualification. Its about people having a need where they want to put the money to work expansion, capex, hiring, building an extra plant, things like that, or some amount of m a. Were the largest middle market lender in the country. We have 140 offices that are out there region by region facing off with borrowers, and its been growing and were happy about it. Our borrowers are a little bit more optimistic. So you are seeing that pickup now . Are we saying that were seeing a material pickup in that critical part of the lending in the Financial Services industry now . Were saying its a pickup. I dont know whether its material, but certainly to wells fargo its a pickup. All right. Well take it. John, thank you so much. Welcome, john. Looking forward to talking to you in the future as well. Great. Thank you very much for having me. John shrewsberry. Yep. We have what, 40 minutes before the closing bell . Yes, we do. About that. The dow and the s p lets see, the dows up 18 points on the trading session. S p is positive as well. And we have earnings to look forward to. A lot of them next week. An avalanche. Well tell you which ones to watch for and how they could move your money. That will be coming up in a minute here. Plus, Box Office Receipts down some 20 from last summer, will the new planet of the apes movie give hollywood the boost it needs . Some are talking oscar for the main ape, cesar . Are they really . I havent heard that. Seriously. I havent either. I just did, though, now. Yes, you did. Find out which stocks stand to gain if the Box Office Booms again when bill and i come back. I am sorry, my friend. The cadillac summer collection is here. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Well, the Summer Box Office has yet to impress moviegoers and the revenue theyre not generating. Last weekend and the holiday july 4th weekend was down 34 compared to last years. And that was with bad weather in much of the country. Yes, and they didnt have a big blockbuster release. But still, will dawn of the planet of the apes, which is being released today, is that one going to save the summers Box Office Woes . The films have done exceptionally well in the past in this series. Just take a look at how much revenue it has generated throughout the seven films over the years that it has made, and its a total of 867 million. Wow. In that time. So, hows it going to do this summer, were wondering . Yes, we are, indeed. All right, Julia Boorstin joins us, cnbcs Julia Boorstin, and paul deragarbedian, senior media analyst for r enremtrack. Do we need another planet of the apes . Do we expect this to save the summer . Well, theres a lot of pressure on this movie to perform because the Summer Box Office is down right now. And remember, were comparing to a summer of 2013 that was a recordbreaker and had so many big films, and it kicked off with iron man 3 with an Opening Weekend of 174. 1 million. This summer kicked off with the amazing spiderman 2 in the 90 million range. So, theres a big difference there. But remember, one or two movies can make all the difference. And certainly, dawn of the planet of the apes is getting great reviews. People are really anticipating this one. And look, the summer isnt over yet. Weve still got this movie and the purge and guardians of the galaxy and lucy and sex tape. Right. And theres a lot of big movies on the way. But yes, we dont want to be sitting on top of a deficit thats nearly 20 , but that could all change in the course of a month. Our rentrack data shows that a summer can bounce back very quickly. Right. If movies do well. But fourth of july weekend definitely was down big, no question. Julia, i will say it is getting good reviews. The New York Times was almost apologetic. Saying i really, really do like this movie, then the daily news is talking about a possible oscar nod for andy serkis, playing cesar in this movie. So, the reviews are coming out well. Reviews have been very positive, over 90 of critics rating on rotten tomatoes. The thing about having a really big movie is in order for it to be huge and stay big, you need to be able to get what hollywood calls all four quadrants, men, women, young and old all in to see it and great reviews helps expand beyond that fanboy audience, but paul makes a good point, that its not just about one movie. This movie is not going to be as big as iron man last summer. Right. Its about having enough big movies to sustain the momentum. And i think the issue now is that theres just so much competing for peoples time. Television is better than its ever been. You have the world cup, which has been keeping people away from movies. And movies really have to be event experiences, the kind of thing that are worth driving to the theater, paying a lot of money for popcorn and a soda thats going to be better than staying at home and watching it on vod. Do you think, julia, that the lineup that paul just gave us, the movies that still have to come out are good enough to do that . Well, i think were definitely going to see some improvement. I mean, just here in hollywood im hearing positive anticipation for guardians of the galaxy. We have a teenage mutant Ninja Turtles sequel coming out in august. So, a lot of big films are coming out. I dont think well see something on the scale of iron man like last summer, but i think its not over for hollywood. I think theres a shift towards the big franchise film. I think at end of the summer, executives will say, what are the movies we can make that will be the event films, not the smaller, artier films that people can stream online. Paul, have you seen the new planet of the apes movie . Yes, i love these movies and i love jason clark. Hes a terrific actor, was in zero dark thirty, and serkis getting oscar potential there is Pretty Amazing to be behind all that makeup and, yet, have that emotion that projects on screen in such a big way. And i think this movie can create that momentum that julia was talking about to get us back on track. Can we knock down a 19 deficit by labor day . That would be very tough. But of course, hollywood is looking forward to tw2015, whic will kick off with the next avengers movie and youll have a lot of big films in that summer. So, a year from now, well probably be looking at a 20 advantage over 2014s summer, because its going to be maybe the biggest summer of all time. And one reason the summer looks so bad is that universals fast furious was moved out of the summer to next year. I think the numbers would have been a lot stronger if we had still seen that movie this summer. Great point. Cant wait for the next avengers movie. Ive missed john steed and emma peel. Ill tell you, its been great. Thats a different avengers, but i like your thinking. Yes, me, too. Thanks, paul. Thanks, julia. Heading toward the close maybe we have to go see the movie. You go see the movie. I dont know. 30 minutes to the end of the trading session. Were closing out whats been a volatile week for the stock market here. It sure has. The consumer, are they really in a funk . Well, thats the excuse being touted by several retailers out with disappointing earnings news. Find out from the pros if they think the retailers themselves are perhaps more to blame. And then later, someone here is calling homeowners a new class of fools thats his word. Storys trending hot on our website, by the way. The author of that piece will make his case coming up here. And as we go to the break, cleveland rocks after basketball star lebron james decides to return home to the cavaliers. Its fantastic lebron is coming back. Were going to have a winning basketball team, the Republican National convention. Its a great time without all of that now its even more fantastic go, cleve all right. A new volkswagen turbo. So why are we so obsessed with turbo . Because theres nothing more exhilarating than a powerful ride. And you can get that in places you might not expect. Like the passat. And also in the funtodrive jetta. In fact, volkswagen has sold more turbos than any other brand over the last ten years. That is a lot of turbo. Hurry in and you can get a 1,000 turbocharged reward card when you lease a new 2014 passat s for 219 a month. Welcome back. Plus signs with the dow up almost 30 points now. Weve had about an 85point range for the industrial average. Down 54 points on the open this morning, and it has crawled out of that hole. And nasdaq has been the better performer of the major averages so far today. Well, remember last quarter when it seemed that most of Corporate America blamed weather for bad earnings . And weve seen that recently, too. All week, several retailers have been blaming the consumer, in the funk, so to speak. Consumer funk, they call it. Consumer funk for their negative earnings news. Dominic chu rounds up the consumer funk blamers for us. Lets talk about rentacenters ceo, robert davis, because he said, it wasnt me as well, quoting shaggy from that song back in the day. Saying, again, that macroeconomic pressures are hitting already financially constrained consumers. Rentacenter, you put payments down towards buying a refrigerator over time pap that business for the lowerbudgetminded customers and even theyre saying the economy is hurting customers as pell wp then, walmart. U. S. Ceo bill symmonds saying its not getting any better, but its not getting any worse. That tells you that maybe their core customer, perhaps more budgetconscious, is, again, feeling at least like they want to hold off on some of the bigger spending theyre going to do here. So, again, walmart saying that. Then youve got the Container Store, which is the funk one, right . Because the ceo says we are experiencing a retail funk. He also said that while consumers continue to buy autos and homes and even highend furniture, they are maybe not spending as much on some of the stuff at the Container Store and other retailers. Then another big one to talk about, of course, is the dollar stores. Budgetminded as well. This time, family dollars ceo, howard levine, saying that customers and the consumer has not benefited in this recovery. Their consumers have not benefited in this recovery. So, ceos weighing in. It was weather the last time around. This time, theyre saying that the economy is to blame. It remains to be seen whether or not people do actually open up their wallets and start spending that hardearned money. Guys, back over to you. Dom, thanks. So, lets talk about that. Is it fair to blame the consumer for the poor performance of some retailers or are they just not hitting their marks . Thats the big question well put to diane swonk, chief economist at Mesirow Financial and ed aruma at Keybanc Capital markets. Ed, let me start with you. Which do you think it is . The consumer is being pressed on a lot of different frorngnts, b are the retailers inappropriately blaming the consumer for their woes . Look, ultimately, if you have the right product, the consumer will shop. So, i think, yeah, there has been a lack of newness, a lack of freshness, a lack of exciting things for the consumer to buy. That said, we think the macro pressures have been intense, particularly for the middle and lower income, so thats certainly weighing on the retail environment. What do you think, diane, are they just reaching, grasping at excuse straws to blame it on the consumer here . Well, theres not just excuse straws. I mean, there is sort of savvy consumers have learned that they can shop for price and wait it out, and they do. This is something in the Auto Industry that they wait until the promotions are there. But we also do see a real split by income strata. The top 20 of income earners, over 150,000 earners in households have accounted for about 80 of all Consumer Spending between 2009 and 2012. Thats a little bit lagged data, but we know in that same period, the lowest percentiles of consumers, those earning under say 30,000, they shrank what they spent. And the biggest expenditure for the lower income households were transfers to others in their household. So, you have sort of more people in a household having to support. You also have a demographic change going on. Since 2008, the birth rate has been falling dramatically, which hit backtoschool sales last year, and im certain it will do it again this year, and also its showing up in summer sales. If you dont have a lot of kids, 5yearolds, 4yearolds out there to buy things for, youre not going to be spending as much money. Also, 50yearolds, another place where were growing in the market. They already have a wardrobe and theyre taking a lot of parttime jobs instead of fulltime jobs thats still out there. You dont need to you get a uniform for that, dont need to buy a lot of clothes, so its hitting the soft retailers hard. So, youre buying more than i am right now. Yes, indeed, i am. But im very cautious about it. Yes, you are. I clip my coupons and all that, because ive got little ones and big ones in the house. But ed, that goes to your point about freshness. I know youre more bullish on the high end of things, but the retailers, this is not the first year that the mix that the retailers have put in the stores simply has not been that attractive, especially to teens. I mean, the teen retail space has been a disaster. Yeah. I mean, look, theres that lack of excitement, specifically, though, for the teen, there are lots of other things that the teens focusing on. Their cell phone is increasingly important. So, i think instead of teens differentiating themselves through clothing, theyre spending their money on their phones. Yeah. Are there too many issues the gaming issue, we were talking about movies earlier, and the gaming issue is more profitable than movies right w now. Are there retailers out there . Do we need to see consolidation . Absolutely. This has been going on for the last 20 years and continues to go on. Lets face it, with the Online Presence now in retail and using your phones to compare shop, absolutely. That is another process we havent yet seen fully played out. So, ed, who are the winners and losers here . Who do you like . We continue to like the high end. We continue to like nordstrom. We continue to like tiffany. We think that consumer continues to spend and hasnt been as impacted by some of these macro pressures that were seeing. And on the other side . That could go in the other direction. Youre right on that. Were actually avoiding theyre getting more money, and they are actually, the really highend consumer, the highend vehicle sales doing extremely well. It really is amazing to see the break in the consumer in terms of spending out there, what theyre spending on. In fact, if you want to track Something Like highend iphone sales, things like that, you can break it down by income category and its only in highend households. Its amazing. Very quickly, ed, who dont you like . Whos going to suffer in this environment . Were actually avoiding fossil right now. We think watch trends have been slowing and were obviously watching closely for the emergence of the apple iwatch. That could place pressure on fossil. Youve helped us segue to something we have coming up. We do have. Thank you, both. See you later. You know sh, the overabundance of retailers, you were saying that 15 years ago. A long time ago. There have been too many retailers. And i said there can never be too many stores. Wrong there are too many stores. Up 30 points on the dow right now. Weve got 19 minutes left in the trading session. The secondaries, small caps have been leading the way to the upside right now. Ebay, google, ibm, just a couple of the tech names out there with earnings next week, so well go live to Silicon Valley next to preview the results that really could move the markets big time. And later, you were wondering if the amazon drone thing was for real or just for publicitys sake. Well, it seems like this may be for real. The Online Retailer is now asking the faa for the green light to test delivery drones in and around seattle. But will the Online Retailer behemoth get grounded by uncle sam before takeoff . Were going to look at that coming up when we come back. Stay tuned. Financial noise financial noise financial noise really. So our business can be on at ts network for 175 dollars a month . Yup. All five of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. Breaking news on a story weve been following all week involving a rival to uber. Thats right. Dominic chu has details for us. Whats going on, dom . Sue, bill, all day weve been talking about the launch of the Ridesharing Service lyft in new york city. Now, remember, the state had been asking lyft to cease its operations, not launch today. Well, now the state Supreme Court of new york has weighed in. Theyve given new york state a temporary restraining order or tro, barring lyft from operating within new york city. In the joint statement by new York Attorney general Eric Schneiderman and superintendent of Financial Services benjamin law ski, they said that instead of collaborating with the state to help square innovation with statute and protect the public, as other Tech Companies have done so, lyft decided to move ahead and simply ignore state and local laws. Lyfts arguments are a disingenuous attempt to decide oldfashion lawbreaking that jeopardizes public safety. They go on to say that we are pro innovation and pro competition. We are committed to fostering a competitive marketplace where each Market Participant is treated fairly. So, again, the new development here is that lyft has now been barred from doing business, at least for now, in the state of new york, guys. Back over to you. I love watching all this. With air b b and uber and now lyft, as technologys way out ahead of regulations and laws, and theyre having to play catchup in many cases. Disrupters, right, guys . Disrupters, for sure. Yep, thats what theyre acting as, or trying to in this case. Thank you, dom. All right, as we get closer to the close, 15 minutes before the close, heres how were shaping up on the markets. Were in the green for all three major indices. The dows up 27 points now, about a threepoint gain for the s p and the nasdaqs up 18. As we all know, its all about earnings, and earnings season picks up in earnest next week. Big tech names will be out front and center. Josh lipton previews some of the numbers to watch from Silicon Valley. Josh . Yeah, bill, Analysts Expect earnings for that tech sector to climb 7. 5 . Now, that would be less than telecom and Consumer Discretionary stocks but more than financials, utilities and the overall s p 500. Analysts predict Revenue Growth of 5. 4 , double expectations for the overall market. Yahoo kicks things off tuesday. Analysts expect flat yearoveryear growth but Cantor Fitzgerald saying ceo marissa mires focus on product improvement and User Engagement they think will eventually pay off. Intel also reporting tuesday. Remember a few weeks ago, the chip giant raising estimates because of stronger demand for commercial pcs . Intel now expecting Second Quarter revenue of 13. 7 billion. That stock at a tenyear high. Question for investors, though, is whether any of that pc optimism is spreading to the consumer side of the business. Wednesday we hear from ebay, which is down about 6 this year. But i talked to s ps scott kessler, and hes telling his clients to buy, saying paypals going to remain a dominant player in the Digital Payments market. He also thinks its still attractively valued. On thursday, google investors are going to focus on search volume and search pricing, which has been falling. Thats because advertisers dont want to spend as much on mobile ads. Sue, back to you. Josh, thanks. We have a little bit more than ten minutes before the closing bell. The dow is in the green, as we just showed you. The s p is also on the plus side, 23 points to the up side on the dow. So, do you think inflation will soon be on the rise here in the United States . Pimco seems to believe that. Cnbc. Coms jeff cox will be here to talk about the investment that pimco has been steering some clients into that makes money when inflation goes higher. Well talk about that in a minute. Before the break, though, they are rockin in cleveland they are. So, heres a Cleveland Cavaliers fan cheering on Lebron Jamess return. There was this guy walking down the street just screaming his head off. And we thought, wow, hes leery crazy. But i checked espn. Sure enough, what a great day for cleveland. So excited. Lebrons coming back home n hap. 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I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. Welcome back. The fed says its not worrying about inflation right now. The question is, is pimco . They are advising their clients to put money in treasury inflation protected securities, t. I. P. S. , in order to prepare for what might be ahead. Cnbc. Coms jeff cox has been following this story closely and he joins us now. You know, 2013, jeff, was not a good year for tips. Terrible. What do you make of pimcos move or recommendation, anyway . Well, sue, as long as were talking basketball today, lets talk about playing defense. I think thats what pimcos really talking about here. They dont have a really aggressive inflation forecast, but what theyre looking for is inflation thats above trend for what the feds been talking about. And of course, you know, that is the biggest market worry now, that the markets worried that maybe the feds getting behind the curve as far as inflation goes. That cpi measure that t. I. P. S. Tracks, theyre operating at multiyear highs, about twoyear highs. In fact, the housing index is about a sixyear high. So, this is just a way to protect your portfolio in case the fed is wrong, in case we start to see inflation pressures come up. And as you say, very good performing asset this year, about the third or fourth best in the fixed income category. There is no inflation, or at least when people are not expecting it that much, right . Its like, you want to buy low, and this would be low, considering. Exactly, and this is how inflation works. It comes out of nowhere. Again, the markets worried about this. Pimco is somewhat concerned about it. And i think their rationale is pretty sound, that they think that, you know, look, when you look at some of the internals as far as inflation goes, food prices, the housing prices, and the economy in general. If were going to see an upswing in the economy, we can expect some inflation to come, and this is a cheap way to protect yourself against it. Do you see inflation coming, very quickly . Oh, absolutely. I think theres no doubt about it. And especially if the economy improv improves, you know, the signs are all there. Okay. Thanks, jeff you bet. See you later. Well take a break, but a few minutes left in the trading session, come back with the closing countdown as we close out this week. And after the bell, a wall street pro explains why he thinks Home Ownership is foolish. His controversial piece getting a lot of clicks on our website. Youre watching cnbc, first in business worldwide. Collection is here. Summer during the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. [ jackhammer pounding, horns honking ] [ siren wailing ] visit tripadvisor miami. [ bird chirping ] with millions of reviews, tripadvisor makes any destination better. [b ll rings] with millions of reviews, time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Three minutes left in the trading session. By the way, people ringing the close bell today are the volunteers of america. So, we salute the volunteers in our country and the role that they play in the economy, dont we, david darst . I love that, being from the volunteer state of tennessee, originally. Governor aaron v. Brown issued a call in 1848 to fight, and he asked for 1,600 and 32,000 signed up. So, go volunteers of america and go volunteers of tennessee. I can throw you anything and you pick up that ball. I love that. Heres what we did this week. Yeah, this is a weekly chart for the dow. Volatility came back. And as we pointed out earlier this week, july typically is the most volatile month of the year and has been for the last 20 years. And this week is a good example of that with problems overseas, our own issues involving the fed and so forth. And heres the volatility. When all is said and down, the dow is down about 0. 75 . What got even hit harder were the small cap stocks. I want to call them the secondaries. We used to call them that. But the russell down 3 on the week. And it had been the leader to the upside up to this point this year, but not this week. Tenyear yield. This is the biggest decline in the yield weve seen since march. I was just reading earlier, just in percentage terms, the yield on the tenyear down 5 for the week, david darst. Bill, and the 30year is 3. 37 , which is ultra low. Yeah. So, that may be sending some signal that counteracts the good jobs report, the other good the ism, the philly fed, the Chicago Purchasing Managers index. But are we the ones buying those bonds to push those yields down . Wouldnt it be the europeans who are more concerned about their Banking System because of what happened in the Portuguese Bank this week . Theres that flight to quality effect. The four things keeping yields down the fed wants to continue to stimulate. Number two, the worry is still lingering about deflation. Number three, the treasury cannot afford high Interest Rates. So, five years ago, when president obama came in, six years ago, the total debt of the United States was 5 trillion. Today its 13 trillion. And the threeyear was yielding 3 . Today its yielding 0. 5 . So, thats three. And number four, as youre hinting at, france and germany, france is at a 160 and germanys at a 115 right now, and thats a way of stimulating europe, so were going to follow them down. Thats the thesis. That has been the thesis for a while now. Nice to see you, mr. Volunteer. Thank you. And happy bastille day to all the french. It is that time of year again, isnt it . Madam due farge, we honor you as well. That is it for the closing bell. Were going out with gains for the blue chip averages for this friday. Stick around. More on come on the second hour of the closing bell. And we welcome you to the closing bell. Im sue herera miles per ho. Im filling in today for kelly evans, who will be back on monday. Bill griffeth is joining me as we speak, but heres how we finished the day on wall street. The Dow Jones Industrial average managing to close in the green by about 28 points on the trading session. Nasdaq pulled into positive territory as well, up just under 20. And the s p 500 was up just under 3 points. So, were going to have a lot to talk about in terms of the market with a terrific panel thats joining us in this afternoons session. Lets meet them, shall we . Why dont we do that . Who put this watch on . Weve got an android watch to show you later this hour. Its very cool. Rebecca patterson from bessemer trust, Chris Wayland from pro bond rating agency, mark la presti from lopresti law group. Cnbcs robert frank is back at hq. And in a few minutes to wrap up this friday of trading will be fast money trader steve grasso, whos busy doing that trading thing right now. Finishing up the books. Mark lopresti, whatd you make of this week in the markets . Here as i said, volatility did come back in a big way here. It certainly did, bill. I was happy to see what happened today, a little more of a quiet day after what was a roller coaster ride yesterday. We seemed to see the markets shrugging off some of the renewed concerns in europe with the bianan spirito matter, we h lot coming down in regulatory action. Banks reporting next week, citi and bank of america on monday and wednesday, respectively, both in talks with justice for multibillion dollar fines. So, next week is also going to be interesting, and traders and investors are going to be looking to see whether or not the banks have adequately accounted for these litigation reserves. Right. You know, rebekah, one of the things, obviously, that roiled the markets was the Portugal Bank situation. My question is whether thats an isolated incident or whether it is once again kind of foretelling the fact that europe still, even though weve re recapitalized some of those banks, that doesnt necessarily mean we wont have any problems. Isolated incident or a harborin of more to come . I dont think its a harbiner of what as to come. When we get the asset quality review later this year on the european banks, im sure well get a few more names. What i think this week was a good reminder of is that the bond markets in peripheral europe have become very, very crowded, everyone in search for yield, portuguese and greek and cypriots, whatever bonds and to the degree you have that link between the banks and the bonds, youre going to continue to have contagion throughout europe, and some of that is going to spill over here. Hang on, chris. I want to go to steve grasso, whos standing by there. Hes crossed his ts and dotted his is on the trading day. Are you long going into the weekend . What are you expecting . Whatd you think of this week, by the way . Bill when sue just asked that question, it doesnt matter whether its contagion or not, investors are looking for a reason to sell the marketplace. They got a couple reasons this week. And i think there, as the other gentleman said, were waiting on bank earnings. I dont think anyones getting crazy with what theyre expecting next week, but you want to go to if Energy Starts to fail, for those stocks that have been outperforming, if they start to lose a little bit of their luster, youre going to see this whole market come in again. I think people would rather be selling this market than buying it at the levels were at right now. Chris, to rebeccas point about the fact that some of the big players are in all of the bank debt throughout europe, from spain and portugal all the way down to greece, because the search for yield, theyre so desperate for yield. Many of them had great years last year. Its been a lot tougher for the big fish this year. Thats what worries me, is if we start to see that Tipping Point and they start pulling out, thats what whats your perspective on that . Well, theres clearly too much money chasing too few opportunities. I mean, we had a d rating on banco spirespirita santo, by th way. But they have far less capital than u. S. Banks and theyve tried to basically push that problem off because they didnt know what else to do. The europeans have adopted our approach, throw lots of money at it, very late. They waited years yeah, they waited too long. Theyve had austerity in many of these countries, so its hurt credit. So, was the selloff overdone this week here, when we got word of the problems over there . I think ultimately, most european banks are state credits. I think if push comes to shove, the government, and in turn, the eu, would bail them out. Right. Because if they didnt, they would have big problems. Its just like the u. S. , by the way. Too big to fail is not done. The fdic has discretion as to who they pay under dodd frank, and guess what . They will pay out uninsured depositors for the same reason. Theyre slowly nudging the punch bowl, but theyre still leaving the safety net there. Clearly. Our wealth correspondent, this is the week we were told consumers are in a funk right now, and it was even hitting the highend retailers this week. Whats going on . Yes, this really has been so far a highend lowend consumer economy, but i thought the two most important messages this week came from a couple billionaires on our air. First was wilbur ross, of course, the great financial investor, saying he is now selling six times the amount that hes actually buying right now. So, hes a net seller in this environment. I thought that was interesting. And jack bogle wrote in the wall street journal that when theres a difference between perception and reality, reality always catches up. And i just think that theres so much irreality right now when it comes to risk pricing and asset pricing. I just think the wealthy right now feel like thats eventually going to catch up, probably sooner rather than later. Irreality, is that a word . Its A Robert Frank word. Now it is. He should trademark it. Yeah, youve got that going. Steve grasso, was that your point . Yes. Its exactly my point. No one wants to rush in and buy the market at alltime highs, unless they know its a sure thing. And we know the markets never bring with it sure things. But the problem is, theres been so many funds that have been underinvested, so they had to chase equities. And we know how that all ends. So, most of the smart guys, most of the big guys probably want to lighten up. They know that that selloff is eventually coming. Right. Weve all turned blue waiting for it, so now they want to keep a little bit of powder dry when they do get it. This is important. And yet, the bank of america report on hedge funds this week showed that even coming out of the end of this week, most big funds, certainly marketneutral and macro funds, were continuing into next week with a heavily long position, which you have to question. Right. To franks point what else are they going to do . We cant chase the s p. That always ends poorly. A complacency issue, though, which is worrying a lot of people. I dont think we are that complacent. When you look at the vix today at around 12 or so, you say, okay, were complacent, but you have to remember, the vix has a curve, and one year out, volatility is pricing at 17 or 18. So, people do have protection on. Thats a good point. You just dont see it in the spot vix price. Well this perception of complacency, i agree, volatilitys low and it has a zero bounds. The more it stays near zero, the greater the risk it bounces back. But nobodys protected in fixed income. A year ago, chairman bernanke opened the kimono, he had a presence conference. People in the market were slaughtered. People in the tpo market got annihila annihilated. Year end, no more taper and we had 4 targets for the tenyear, and look where we are now. There is no way you get rates to go up with all the money in the street today. There is just absolutely no way. What about pimco telling clients theyre buying treasury inflation protected securities . Would you . I think inflation is a problem. I think the ststatistics gross understated. Look at what retailers were paying workers ten years ago. They were the same. And prices are not. Okay . But the metric the fed uses doesnt focus on that. Right. Theyre focusing on another part of the economy, which we can argue probably until were blue in the face whether or not thats a good thing. Lets do that. I dont think t. I. P. S. Are a bad idea. I dont think having some inflation protection in your portfolio at this point is a bad idea. We had been underrate commodities. The last two years, were now neutral. We have started looking at inflationprotected fixed income in our portfolio. Just a baby step. Right. Inflations still low, but its rising. The trend has changed. But its in assets. Let me give you an example. I was in the mortgage state before. Two years ago, nonperforming loans was at 25 annual return trade. Right. Its a singledigit trade today. So, investors are being forced to accept lower returns, which is another way that inflation could hurt you. Yeah. People always got to remember, you dont just lose it with rising prices. You can lose it with lower returns and losses due to volatility. And stevie, im going to give you the last word. We were in silly season this week. We were all talking about a Company Called cynk. We were talking about 50,000 potato salad on kickstarter. Right. And crumbs was being bought out, maybe . So, maybe, to your point, maybe you are acting like the markets started to top out here, huh . You know, when you look, the other gentleman was bringing up hedge fund performance. If youre looking for those that performed, theyre looking for catalysts, deals or m a. Those are the guys eventdriven hedge funds have outperformed. Theres only so long, to your point, that that can go on. So, i think we are a little bit topee here, but you know what, weve all been wrong. All these talking heads, including myself, have been wrong on this pullback for quite some time now, but that doesnt mean that its not coming. Exactly. But steve, you and i were both right on this show on new years eve when we predicted that 2014 would be the year of the activist, because to your point, its the catalystdriven investor that can generate alpha in these markets. Thats true. But even carl icahns cautious right now, too. He said so yesterday. Thats right. Thanks, everybody. Steve, see you later. Be sure to catch steve and the rest of the fast money crew coming up an hour from now. Theyll be asking a top fund manager where he Sees Opportunities in small cap stocks after the huge small cap selloff that we saw this week. Do not miss fast money coming up next hour here. Another backdrop to the market is the crisis in the middle east, which has been heating up today. Of course, as israel steps up to its offensive into gaza in retaliation for hamas rocket strikes. Nbcs Martin Fletcher is in tel aviv with the very latest there. We keep hearing about some booms going off there in tel aviv, martin. Whats going on . Reporter thats right. Well, its been booms all day here in tel aviv, about every hour or so weve had sirens and rocket attacks, but theres been no damage in tel aviv, anymore. The iron dome system has successfully destroyed those rockets over tel aviv. Debris does fall down. There has been some damage from falling rocket debris, but there have been some other strikes against israel. The first of the rockets fired from gaza that really did any damage hit a gas station today. It destroyed the gas station and dozens of cars. Eight people wounded, one seriously. Then this evening, there was a big rocket attack against a southern city, a direct hit on a house. Only one person slightly wounded. There have been very few casualties. Nobodys been killed in israel from those 550 palestinian rockets that have been fired from gaza in the last two weeks. But israel in its retaliation has been devastating parts of gaza. The death toll of palestinians in gaza today went over the 100 mark, about 101 palestinians have been killed, many of them women and children in those israeli attacks. The israelis say theyre aiming for either the homes of militant leaders or the stockpiles of weapons or secret bunkers, but many of them are hidden many of those targets are in populated centers. So, thats why theres so many civilian casualties. Israels hoping that its devastating assault on gaza would persuade hamas to give up its fight, but quite the opposite is happening. Hamas and the other militant organizations are continuing to rain rockets on tel aviv. And this evening, today, rather, they even upped the ante by warning Foreign Airlines to stay away from ben gurion airport, israels International Airport in tel aviv, saying theyll target the airport because its also a military airfield. And they said in their statement they couldnt guarantee the safety of foreign planes or passengers. Martin fletcher in tel aviv. Martin, thank you very much. Stay safe. We will switch gears and talk amazon, which is asking the federal Aviation Administration for permission to Start Testing delivery drones. I love that story. I know you do. Bring it on. Theres going to be a drone arriving at your home. But should the Online Retail giant have high hopes that it hopes this gets approved . Well talk with a former top official from the faa. Maybe she has the answer. Oh, i dont think were going to like her answer. Maybe you wont. Or amazon. Also later on closing bell, wells fargos new chief Financial Officer expressed his concerns about home sales right now, and todd cyclonebeschoenbe not surprised. Todd says anybody buying a home right now is a fool, his word. His article is heating up cnbc. Com right now, and he defends that controversial position coming up in just a few minutes here. And he was the first person to legally buy pot in Washington State. And then not todd schoenberger. No, no, not him. And then legal, on line one. Yes. Then he became the first person fired for legally buying pot, but you wont believe what happened next. Mike boyer is here exclusively to tell you about his wild story. Cant wait for that. Youre watching cnbc, first in business worldwide. Bill and i are back in a flash. Really. So our business can be on at ts network for 175 dollars a month . Yup. All five of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. The biggest market mover was lebron james going back to cleveland, but the dow had some slam dunks of its own. I love it. There you go. Dominic chu. The dow and s p all over the place, big names. Well start with pocke proctor gamble, lack of performing sooiting a lack of progress. Also, call. Com to the down side, not a dow component, but still a big company. Goldman sachs removed the stock from its conviction buy list, saying several catalysts have already played out. Then Gilead Sciences losing ground after the chairman ron weidman asked the company to defend the 85,000ayear cost of the new treatment for hepatitisc. And amazon. Com asked the faa for permission to conduct outdoor drone tests near its seattle headquarters. You can see that the stock is up toward session highs, up by nearly 6 on the day. Bill, sue, back over to you guys. All right. Thank you very much, dom. Hang on. Ive got to get this selfie out to twitter here. There we go. Youll find out what thats about in just a few minutes. Will amazon succeed with its plea to the faa . Joining us to talk about that, rebecca mcpherson, the former faa assistant chief counsel for regulations. Welcome, rebecca. Nice to have you here. I guess that is the question, do you think they will be successful . Well, i think theyll probably be successful in one way or the other. Im not sure theyre going to get an exemption request, but they may get an experimental certificate that lets them do the exact same thing that they requested. Well, are we splitting hairs there, or i mean, eventually, are they going to be able to use drones to deliver products . Well, i think eventually. The question of whether theyll be able to do that is whether it makes sense financially. Theres already a very robust Delivery System in this country. There are issues theyre going to have to deal with with the drones. Ultimately, we dont know what the faas final regulations are going to look like and how expensive theyre going to be. Anybody else as excited about the possibility as i am, or am i getting carried away with a pr gimmick here . I just picture my, like, nephew, a High School Kid with a bb gun, shooting down drones. Oh, yeah. I hadnt even thought of that. Thats nice. Hes a good kid. Okay. I just picture lots of kids like him thinking its a target. As someone who flies in private planes occasionally, i worry about the drones interfering with civil aviation. Id like to hear from rebecca on that. The regulation, i understand it, is you can fly a drone below 400 feet for recreational purposes, right . Well, under controlled circumstances. So, you cant fly them too close to an airport, because at that point, the height makes a really big difference. Okay. And theres no question that these drones, if they are in the same air space as civilian aircraft and are not adequately controlled present a real risk. Keep in mind that the faa only requires you to certify an engine for a large airplane up to essentially an 8pound bird. These drones are bigger than 8 pounds, and if theyre ingested into the engines, theyre going to be a problem. With that said robert frank. Theyre going to have to figure something out. Robert frank, youre not out of sight, out of mind. What do you think . Is this just jeff bezoss pipe dream . Is this going to be a reality . I think this proves its an economic plan for the company and it would be a great strategy if theyre allowed to experiment with this. I just wonder, the faa has taken so long with these regulations because i think its very complicated. For instance, during the sun valley conference, all the security guards in sun valley this week are keeping an eye out for drones, because they worry about some kind of intelligence or photos taken from drones. You know, there are a lot of highend communities, like the hamptons, that have banned drones, or certainly restricted them. And i think some places like new york city, how many drones will be allowed in the air in new york city . You can picture them crashing, falling. So you know, whatever the regulations are going to be, and theyre going to have to figure it out, its got to be really nuanced, by community, what you can take in terms of photos, what you can use for delivery. And of course, the air space. So you know, if you allowed drones worldwide, you know, nationwide, how many are allowed in the skies . Yeah. I mean, we also have to point out that the faa and ill be blunt about this has some catching up to do from a regulatory perspective with current private aviation. I have, not to the same extent that you do, chris, but the privilege of occasionally flying on private aircraft. And usa today did an expose in a fourpart series about two weeks ago about how the private Aviation Industry is able to get through these loopholes, these exemptions to continue to fly what are essentially 50, 60, 70yearold, in some cases, aircraft designs that are not subject to the same commercial aviation safety requirements and things like landing lights and seatbelts and shatterresistant wind screens. So, the notion that, somehow, this Regulatory Regime around drones, which have to be registered, regulated are there going to be licensing requirements for pilots . Right. I think its a pipe dream, but we give jeff bezos a whole lot of runway, if youll excuse the expression. Right. To try to figure out stuff like this and well see where it goes. This technology is certainly out in front. Small aircraft often dont have radar. Thats right. Theyll have no warning that theres a drone in their area unless they happen to see it. And this whole discussion just highlights, its not an easy question of just yes or no on the drones. Absolutely. Thats right. Absolutely. Its very, very complicated. Rebecca, thank you for joining us to highlight some of that as well. Thanks for joining us. Absolutely. You bet. Home ownership is for suckers. Its not my line. Its not you. Nope. Its our next guest. Todd schoenberger will be joining us. Why he says only fools believe owning a home is the passport to the american dream. Thats straight ahead. And lebron James Heading back to cleveland, and the citys going crazy. Its fantastic lebron is coming back. Were going to have a winning basketball team. The Republican National convention. Its a great time without all of that now its even more fantastic go, cleve all right ah, thats the very muted reaction. Well show you whats really going on in cleveland today later on the closing bell. You wont want to miss it. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. Its all about latency. About speeds and feeds. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. I mean, Home Ownership has long been a symbol of attaining the Great American dream, right . But according to land coal capitals todd schoenberger, owning a home right now is a suckers game and will leave you suffering from buyers remorse. Pretty strong words. Hes got an op ed hitting up cnbc. Com that says just about that, and hes here to explain more. Also with us, real estate analyst danny baab and cnbcs very own diana olick. Yeah, we have todd in an undisclosed location. Hes hiding right now. So, make the case. Yeah, what are you talking about here, todd . All right, look, guys. Real estate, heres the problem youre going to have, though. When you look at Growth Prospects for housing thats taking place, the numbers do not support that we are even close to a housing recovery. What we saw in, obviously, the break from 2009 with the implosion. But going forward, theres nothing to support that youre going to see the growth that everybody keeps telling us about. You have a millennial generation thats clearly in debt, you have a debttoincome ratio thats continuing to rise for americans. People just dont have the cash right now to go out and buy a home. And if you do buy that home, youre now facing higher maintenance costs, higher property taxes. It just doesnt make a lot of sense to go own property right now. Danny, what do you think . I mean, theres pride of ownership, but does it make Financial Sense to want to buy a home right now for most people . And will it be the nestegg that has been the case for previous generations in this country . I think its impossible to predict. I think as we start to see minority buyers become more prominent, as the harvard Study Released a couple of weeks ago is indicating will happen around 2025, thats a long time from now. If youre trying to time the market and flip a property and use it as a get rich quick scheme, i think youre a complete fool. If youre trying to move into something because rent prices are too high, you want the tax break while there is still one for home interest, and it just makes Financial Sense for you for where youre at. I dont think its overall a blanket foolish decision. No. Let me, diana, pick up on that, because you have really followed the increases in rental properties very, very closely for us. And rents in many parts of the world and many parts of this country are extremely high. They are, absolutely. So, look, Home Ownership is not for suckers. Home ownership is just not for everyone. We talk about the millennial generation, about them being more mobile, about them having more debt. Theyre also younger, theyre marrying later, theyre having children later. We have to start thinking of Home Ownership as less of this quick investment where were going to make a lot of money and more of, look, its a place to live. I disagree with that. Because if you only look at it as an investment, youll say, why buy a car . Because the second you drive off the lot, youre losing money on that. You live in a home, you nest in a home, you raise a family in a home and you pay a mortgage, which is forced savings. That is, youre building savings in that home, even though we had a crash, a historic crash. Home ownership does yield returns in the long term. Todd . Okay, diana, youre talking about exactly what ive been trying to say. Youre talking about investing into the home. Therefore, if you are investing in that home, building that nest egg, dont you want to look at a proper rate of return then . And keep in mind, lets look at the risk component of this. I mean, if you do buy that home, chances of you actually being able to sell the home at a profit are actually minimal at a profit . Absolutely, youre going to sell at a profit, but not if you sell it six months after you buy it. You have to have the time horizon. Okay, so, todd, youre saying that even long term. I mean, i dont know how long out you want to go. Youre saying youre just not going to make any money on a house if you buy it right now . You cant say that. Im not saying that. However, there are better opportunities out there right now with a lower risk correlation. Look at the stock market right now. Why would i go into something with a house where i go and actually buy property because you cannot live in a stock. You cant live in a stock. You have to rent [ everyone talking at once ] hold on. Diana, hold on. Then you have higher maintenance costs, property taxes continue to go up in this country. Why would i buy something with all these other ancillary expenses that are out there when i could just simply rent . I could move, if i wish, or i could continue to rent in that same location. Because renting is more expensive and because renting, you cant do a lot of the things that people like to do to their homes. Such as . Investing in a home is not just a monetary return, its something people like to do. Why is house hunters one of the most popular shows on hgtv, all of the renovation shows . Because people like to renovate, they like to compare to other peoples homes. Its human nature to nest in a home, raise your kids. Its the economic factor, todd. I think a lot of things youre talking about are procedural economic factors. There are also other factors to discuss, sociological factor. We have a younger family that wants more mobility, fine, thats not going to change, but people also want to feel like they have a stable place to live who believe and understand that over the long term, 15, 20 years, they will get a rate of return and theyre not paying on top of that for a tax break. Its not a one fits all solution to rent or to buy. Look, i say step away from the Property Side of this. And youre right, i guess if you continue to put money into this and youre building equity, you might actually get something out of it. However, i look at the risk part of it, the ancillary part of it, plus, the back end generation, and millennials are not going to be able to pick up the slack to increase that demand. I think its a suckers game right now. Youre foolish to buy property. Okay. Well, you got everybodys attention, for sure. Weve all been talking about it. Thank you all for an intelligent conversation on an important issue in our economy right now. Thanks, guys. Have a good weekend. When we come back, does the u. S. Need a ronald reaganstyle overhaul . Thats one of the nations bestknown turnaround experts says. The storys heating up the web, but is it hot enough for the hot list . Thats next. And why am i standing here holding my hand like this . And my wrist. Because googles making a big bet on wearable technologies. Here they come, folks. This smartwatch is on the way, but will americans really buy all these gadgets that are getting smaller and smaller here . We will hear from a top google executive later on the closing bell. Stay tuned. Trading inspires your life. 250 tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. One of the biggest moves and newsmakers occurred way off of wall street today. Yes, and if you havent heard by now, i dont know how it would have been possible not to have heard about lebron james leaving miami and south beach today. He is going back home to cleveland and the area around lake erie. Dom chu joins us with how thats been playing out in both communities, dom. I mean, just think about it. If youre in cleveland right now, its just about the only thing youre talking about, and i can guarantee you that just about every local newscast will be leading with this story tonight. So, just take a listen to the enthusiasm from cleveland fans in cleveland about this return. To ohio. Take a listen. Its fantastic lebron is coming back. Were going to have a winning basketball team. The Republican National convention. Its a great time without all of that now its even more fantastic go, cleve everyones going crazy. People yelling, screaming, running around the office like wild animals, i promise. Oh, my god, im super excited this is going to be great for the city, great for everyone here. We got our highway back thats a wonderful thing thank you, lebron you have done a wonderful thing for cleveland. All is forgiven. We love you. So, you think they like it in cleveland, right . I mean, its not just them that are talking, its not just them talking about this whole thing. Its even made the national stage. In fact, it came up during todays White House Press briefing. Take a listen. I know that the president is a big fan of lebron. The president also has had an opportunity to meet him personally a few times, and the president does consider him to be a fine young man. And of course, a lot of residents and even Business Owners want to talk about the economic impact, and it could have a real benefit. Take a listen here. The biggest, most exciting part of this is jobs. Its going to create jobs for people, and that is what im most excited about. Well, bill, sue, its hard to think that one man can have that much of an economic impact, but in this case here, if he does bring the hopes of a championship and more buzz, it could really have a dollar and cents impact, guys. Yes, but rebecca, you take issue with the idea that hes going to create jobs . I mean, i would love to see jobs created, no matter how theyre created, i guess, as long as its legal, and god bless lebron if he helps clevelands economy. I think psychologically, its a huge, huge lift for the city. For sure. Maybe theyll sell shirts, concessions. When you consider that Johnny Manziel is also going to cleveland. Johnny football. But hes not going to and i think south beach is k survive. I did some financial digging. Turns out, lebron will pay about 1 million more in taxes every year. But because florida has no state income tax, ohio has 5 and change. But he bought his mansion in miami in 2010, when prices were still really weak for about 9 million. Realtors tell me he could get at least 12 million for that. Hell be fine. So, hell be okay. In case we were worrying. Yeah. And when he gets back and starts paying the state income tax, hell remember why he left before. Thats right. He will. Does he have a team he can win with . And i was joking earlier, maybe you start to sell miami condos again. Maybe that markets well, with his departure, we short miami businesses one way or another. You have to look at that, too. Or pat riley. Thank you, dom. Coming up, lets get to todays other hot stories. Every month on cnbc, the employment report, as you know, is a big story. But today on cnbcs website, a different kind of jobs story. Its quite a popular read. For that as well as the other two stories that make up the cnbc hot list right now, weve got allen wastler, the managing editor there. What have you got, allen . Hey, bill. Right now were leading with an analysis looking once again at the job skills gap. This is always a big debate and we follow it up every time after the jobs numbers. Employers saying, hey, weve got jobs, we just dont have enough qualified candidates to fill them. On the other hand, labor advocates say maybe youre just not paying enough to attract the talent you need. This is always a big topic on the website. Our story has attracted over 1,600 comments from readers already and racked up 93,000 unique visitors to it. Big subject. Our number two one right now, lebron and the reaction on the twitterverse. And its the same. Everybodys excited about it. And then number three. I love this. Yahoo s Marissa Mayer and aols Tim Armstrong walk into a bar. Actually, it happened out of the conference thats going on in sun valley. One of our reporters spied them sort of, you know, talking late night over drinks. What could they be talking about . It started all sorts of rumor speculation. We asked our readers what do you think theyre talking about, and we got some hilarious responses. Bill, its a fun friday afternoon story. Its always fun on our website. So, there you go, guys. Of course it is. Thanks, allen. Take care. Appreciate it. You, too. Have a great weekend. Earnings season about to hit full steam starting next week. Well preview the big names that could move the markets. A lot of big banks. A lot of big banks. And if there were such a thing as marijuana fairy tale, this might be it. A Washington State man who made sure he was the first guy in line, literally, to buy legal recreational pot this week, said he was fired from his job because he appeared on television buying said marijuana, legal marijuana. But today he has his job back. It has a happy ending. How this controversy went up in a puff of smoke. Oh, stop. Youll meet him, coming up. Its back its the beginning of earnings season once again, and we have a big week ahead of us next week. Financials will be very much in focus. Citi kicks off the earnings frenzy, and thats on monday. And well also hear from some big consumer and tech names like j j, google. Rebecca, what do you think investors are looking for . Well, it depends what your point of view is, right . If youre a trader, a stockpicker, youre looking company, company, what are the beats and then whats the guidance . I think people are going to be looking forward. We want to know what the ceos, cfos are looking for into 2015. 14s pretty much wrapping up already, if you can believe. I think well see relatively better guidance. I think were going to get decent beats out of this earnings season. Really . Not every sector, but i think overall when this is done, were going to look back, and shocking, because it happens every quarter, were going to have positively surprised, i think nicely. Understandably, chris will be watching for banks next week. Right. What do you think . Does wells fargos report today give us a clue to what well see next week . Wells in the top four is the best of the bunch. Weak revenue, really had to work hard for their earnings. There was 500 million for the reserve releases in their number, so it was 10 of the total. They marked down their Mortgage Servicing rights again. So youre going to see that throughout the industry. Theyll tend to cluster with their auditors in terms of that. But unfortunately, unlike the rest of the market, i think guidance from the banks for the past couple of years, its been negative. In the current year with a miraculous plus sign next, and thats what we saw now, i think the feds zero rate environment is going to be hurting banks for years. Mortgages are going to get smaller and smaller as a percent of revenue. Trading . You know, people forgot to taper. Right. That means less trading revenue because the fed has to execute in the market. Absolutely. All that easy revenues gone. We are seeing, though, loans picking up. C i loans. A little bit. Yeah, but that is one bright spot, and thats important from a macro perspective, because what weve been missing from the economy is a money multiplier. Right. Money is printed but not circulated. No consumer. The thing about Interest Rates, if you dont have consumer demand for credit, you cant raise rates. The plane will stall. You know, we were talking about airplanes before . You cant raise rates if theres no demand for credit. Mark . And that story carries over into our consumer and retail stocks, right . I mean, we saw them lagging this week with the malaise of the consumer. This has not been a recovery that has been across the board in terms of all income levels. So, that doesnt change and is not expected to in the near future. I think youre going to have a hard time seeing any significant improvement in the consumer and retail stocks, and the banks, obviously, in addition to their regulatory woes, similarly affected. Right. Well, im having a hard time seeing anything right now. Were going to talk about that next, because wearables ive got the watch, youve got the glasses theyre supposed to be the next big thing in mobile computing, right . Can you read with those on . Want me to keep going . Lets see. What am i supposed to say here . Yes, items, such as google glass that im wearing here, highly touted. But up next, sue and i will get some handson experience with some new google gadgets, coming up here. Meanwhile, on monday, were going to look at another gadget, but one with a future that maybe is not as bright as blackberry. It tops our special look at ten brands that may vanish. Who wrote this . Blackberrys not going anywhere rebecca and i are aghast at that story i got one, too. I got one, too. Going to be just fine, but well look at that after this. When the world moves, futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. [ female announcer ] f provokes lust. It elicits pride. Incites envy. And unleashes wrath. Temptation comes in many heartpounding forms. But only one letter. F. The performance marque from lexus. Googles android wear, such as the gwatch by lg, grabbed the spotlight at the google io conference, entering the fast, crowded field of wearable tech. So, what sets this product apart, and will people open their wallets and buy it and wear it . That will be the question that were asking here. With google technologys daniel sieberg, who joins us to show us some of the wearables coming our way. Were all wearing them right now, as a matter of fact. Very cool. Ive got my watch on. The watch on here. Absolutely. Want me to hold something . One thing, these are becoming more fashionable now, finally, the google glass. Yeah, theres a practical side of it, of course, and a functionality, as well as being stylish. And we can talk about the lg gwatch. Hold that up and well look at it. Yeah, these days, most people pull out theirit. And we can talk about the llg watch. And most people pull out their phone more than 100 times to get information. But with the android wear, i get a notification here for an email, i can scroll through it. And you can have your boarding pass for a flight on your watch. I use my iphone, but you dont have to do that with this. Thats cool. And if you get a call, you can do this. I just happen to be getting a call right now. And you can take it or swipe it. If i swipe away, it will be dismissed and it will go to voice mail. Apple is coming your way, when the iwatch is coming out. Is it fashion, or functionality . There are more than 1 billion people worldwide with an android device. Were going into the living room, and into the car. And apple hasnt said officially that october is the date. Im just saying the date ive heard. And screens are getting smaller. So, who is this for . I think its a mix. You mentioned glasses, and the size of the screen. With google glass, its on your eyes, on your wrist, another size. On a tablet, a laptop, theres something for everybody. And what about the pricing about all of this . If youre really, really into technology, price point isnt an issue. But if youre trying to decide, do i want another device in my life, how important is pricing . For some people, its important. But this one goes for 229, the samsung gear live goes for 199. For folks interested in getting that information when and where they need it, this is going to be really valuable for them. Im watching the new planet of the apes movie. It just started, excuse me. And this one, there are eight different shade models. Five different prescription models. And were also partnering with luxotica down the road. So, lots of ways to combine functionality with fashion. Thank you, daniel. Up next, legal pot made its debut in the state of washington. And this man, the first guy in line to make a purchase of legal pot. And then it cost him his job. And then it didnt. A lesson, marijuana and h. R. Training, coming up next. Well, for one Washington State resident, his 15 minutes of fame burst into flames. Earlier this week, he waited until 20 hours to be first in line to buy legal, recreational marijuana. Then he was fired from both of his jobs for being on the news. Then just yesterday, an offer to be hired back to one of them. Mike joins us exclusively. You waited 19 hours to be the first to buy in spokane. Why . I wanted to be the first in line, and i got there. Then what did your employers say . Well, they said some of the customers had seen me, and i had 24 hours to submit to a urine test. Well, its legal now. So what is that about . Alcohol is legal. There are so many layers to this story. Or a poppy seed bagel, that will show up, right . So ive heard. Anybody have a question for mike . Well, do you understand why your employer initially took that action . Even though it is legal, there are some companies that say they have a duty, if theyre publicly held, or a legal responsibility to keep the workplace safe. So, do you understand why they took that action . I understand where theyre coming from, i dont blame them at all. Theyre still good companies, they had to do what they had to do. And now we need to figure out where to go from there. Are you going back to work . They offered me my job back, and i said, give me some time until monday. If i cant find something else, ill go back on monday. Did you hire an agent . Do you have bigger fish to fry, is that it . No, no agent. I might as well spend some of this publicity and see what happens. And i hear that the marijuana you can purchase these days is stronger than you could buy in the 1970s. Well, the stuff i bought was 24. 5 certified. And this is a huge industry. Go to northern california. Literally thousands of people growing it in homes, in tents. Legal under state law, illegal under federal law. Well good luck on monday. See you later. That does it for us on closing bell. Well turn it over to fast money, which starts now. Fast money starts now. Our traders tonight, playing the bullion bounce. Gold staging a big comeback this week. The best since august of 2011. After six weeks of gains, and its not