Transcripts For CNBC Closing Bell 20140728

Pressure we saw on the dow all morning has leavitted. The industrial average is up 25 points, although the nasdaq struggling to stay positive. Early selling gave way to some buying in the afternoon, once again. Yeah. An upanddown day and a big week for economic news. We have the jobs report on friday. Before that, on wednesday, we get fed day. Amid word of growing descent among hawkish members of Janet Yellens gang. Well talk about that with jim grant in a little bit. Plus, the tax inversion debate continues, the talk from washington to wall street. The president has upped the ante in his campaign to stop u. S. Companies from moving out of the country to save on taxes. This has a former treasury official now saying that the president , if he wanted to, could tie the hands of these companies with a single stroke of the pen. Is that true . And if it were, wouldnt president obama actually be doing that . Were going to get to both sides of that very interesting twist in the story, coming up here. Yes. And as mentioned, the dow is now about 25 points, still shy of the 17,000 mark that it has punched through this year. The nasdaq up about a point, the s p 500 up about two, right at the 1,980 mark, as people are sorting through the news flow, micro and macro, to figure out what the next move is here. Lets talk about all that, shall we . Its our Closing Bell Exchange with Peter Anderson from Congress Wealth management, cnbc contributor Richard Bernstein from Richard Bernstein advisors. Weve got jason pride from glen immediate, kim forrest from fort pitt capital group, and our own Rick Santelli joining us as well. Rich bernstein, i know youre a big bull in this market, and you know, this seems to be the typical teflon market right now, geopolitics, the earnings, all the other things that have been out there lately are not stopping this market, is it . Well, i think, bill, we have to kind of look at the backdrop here, sentiment. You know, the secular sentiment, forget the reports that come out every week, but the secular backdrop, people remain extraordinarily cautious. Right. And thats why this market appears to be teflon, because people already defensively positioned for the most part. So, you have to have something thats worse than what people are already expecting. I dont think were going to see that. Do you think gdp could qualify . There is talk out there after the negative First Quarter, the Second Quarter isnt looking all that great either. Granted, its a little bit of history now, but could that be the bad news youre referring to . Well, kelly, i would say yes. I mean, in the shortterm, the gdp report could have an impact positively or negatively, but remember, whats more important than gdp is corporate profits. The reporting period right now is coming in at least reasonably well, one would have to argue. So, i would say over the next three, six months, its earnings that are much more important than just gdp. And we just put up a chart there i want to show people. This goes back to the discussion on friday, talking with bob pisani about the growth rate. I said i thought the firstquarter growth had actually been much stronger than what it shook out to. You can see on your screen, it was 3. 4 . Now were on track for 8. 3 growth in the Second Quarter. You take the financials out of that, and were actually looking at about 10 . You hit that 10 that rich peterson was talking about on friday. Peter anderson, what are you doing in this market right now . Are you still buying at these levels . Well, you know, i run a pretty concentrated portfolio of about 21 stocks right now, and just prior to this segment, i just checked again, and more than half of those stocks are trading at valuations that are very attractive. You know, when you look at a peg ratio, for instance, half of those names are trading at a peg of about one. So, to me, bill, that says theres still legs left in this market. Peg being . Peg being, you know, the price earnings to earnings growth. Peg legs. That ratio, all right . It does have peg legs, in other words, those stocks do, yes. [ laughter ] you coined a new phrase, kelly. I like that. Cant resist. So, kim, what about you . I see youre expressing some concern still about what happened with ipad sales and that Apple Earnings report. Read through here for the broader tech sector. Well, the ipad is kind of a weird case here. Its used a lot in business, but its also used a lot in just regular consumers. So, its unclear whats happening there. But i did look at the deal between ibm and apple, and i still think ibms going to get more traction out of that announcement than apple will. But it does look like apple is probably more than happy to get that announcement and maybe drag some more sales in from large corporations buying into their device. Are you saying youd buy ibm but not apple here . Yeah, i think thats what im saying, especially for the long haul. Ibm is able to entrench itself into institutions in a myriad of ways. And its still apple is not that well entrenched in the corporate environment. Im curious, before we get to you, mr. Santelli, if anybody here is buying amazon on the weakness that we saw friday or a name like apple or even a starbucks, because we did have kind of a trio of disappointing moves in those names. How about you, jason pride, are you . Were not very active in each of those names. We are active more broadly. You know, our perspective here is that we are in this transitioning phase from the early stages or the early portion of an economic expansion to the latter portion. The fed is starting to have to tighten a little bit, vary ever so slightly, the markets are starting to recognize that were a little bit overvalued. Were not dramatically overvalued. Were kind of right in the middle of historical ranges. And the gains from here are a little likely a little bit more likely to be in that modest range than the extraordinary gains that weve seen before. So, investors are going to have to start repositioning themselves. It doesnt mean that its an end to the bull market. It doesnt mean that there are opportunities like an amazon or an apple that you can buy individual individually, but it does mean that the returns are likely going to be lower Going Forward and perhaps the volatility picks up a little bit. So, rick, you know, this week the fed meets, and in six months time that janet yellen has been in office and were sort of assessing how shes done so far, i know you like to give a grade to each of the treasury auctions when they come out quarterly. And i know who im talking to. What grade would you give janet yellen so far . Well, i guess i would give her an incomplete. I dont really see that shes brought anything to the table that i can draw any serious conclusions about. As a matter of fact, theres a bury democrat bureaucratic feel to it that ive lost whatever gps i had. And when it comes to how the economy is doing, i cant remember which guest pointed out in terms of corporate profitability, but exfinancials 10 , you know . Its like retail sales, exautos, exgas, inflation, exfood, exenergy. Well, we dont live in an ex world. We live in a world where its all put together. And wheres this big kickoff, you know . Its so interesting to watch all these debates quarter over quarter, have so many argue with me as to what the Second Quarter will be joe lovorni pops into head. Im not seeing a 4handle and its questionable whether well have a 3handle wednesday. So, when i look at the Interest Rate complex, were still basically under 2. 5 , under that in spain, close to 1 on the bund. I think that the sovereign market ive just described outside of spain has everything pretty much correct. And i continue to say that jobs do impress, but its the type of jobs thats much harder to define when it comes to all the different policy issues of the day. Well, its the fire extinguisher. Whether its john harwood and entitlements, whether its inversion, these are old, old, old issues that we failed to address. Now we have to hurry up and blame people. It makes no sense. Rich bernstein, do you want to respond to that . Well, rick and i obviously are going to look at this a little bit differently. All i would say is i think one of the reasons that the tenyear is still below 2. 5 , clearly, gdp growth was weaker than people expected. But also, a lot of people are worried about whats going on around the world. And part of our story has been that throughout this bull market, the United States would benefit from the rest of the worlds problems. And i think to some extent, thats what were seeing. You know, the fact that people are scared about whats going on in the middle east or scared about whats going on in russia, if that has a positive effect on longterm Interest Rates, the u. S. Is going to benefit from that, and i dont see whats so bad about that. Rick, is he right . Well, alls i know is most of the entire day we were talking about how the markets seemed to avoid geopolitics, but when its convenient, of course, we bring it into the discussion to explain low Interest Rates, because it seems as though its not very american to say theyre low, because we now need to grade on a curve for the United States of america economy. And i think grading on a curve is a real lame excuse for the fact that we have subpar growth. I dont think it makes any difference. I think we should just accept that we have a tenyear below 2. 50 well, some people will just accept and others will be more proactive. I mean, 2. 50 has to benefit the economy more than 3. It has to. Why cant we just accept that . What was growth after the recession in the 90s . Wed always get to around 3. 5 , 4 , wouldnt we . Rick, youre missing the point. No, i think youre missing the point. Rick, the economy continues to improve gradually. Right, gradually. And by the time im 70, well probably get up to the growth we should have had if we addressed some of these problems. But as an investor, you want gradual improvement. Booms are good for politicians, but bad for investors. No, you can speak for investors, but as a citizen, i want much better growth so we can have a better shot, have the same standard of living you were privileged enough to have. Im not disagreeing it sounds like you are. Sounds like youre disagreeing with me. What im saying is that i have to think like an investor, not like a politician, not like an economist. An investor likes gradual improvement. Booms are very good well, actually, youre not speaking as an investor. Youre speaking as somebody who informs investors. My firm runs 300 billion, of course im an investor. Well go with that point at this time. Very instructive, good conversation there and i appreciate it very much. Rick bernstein playing the part appreciate. And the New York Times pointing out that the typical Household Wealth has fallen behind in the last decade. Fallen behind, huh . Because we talk about income, but wealth in general has taken the hit on the tens of thousands of dollars on average after that slow growth decade we were discussing. A little Wealth Creation today, though. The dow is up see what i did there . That was nice . The dow up 22 points now. The dow was down 80, but weve come back. So, selloff in the morning, buying in the afternoon. Thats when weve seen. And the s p 500 still positive, nasdaq slightly negative this hour. Weve got about 45 minutes to go. Busy week ahead, though, on the economics front. We mentioned the jobs report on friday. And before that, the fed decision day on wednesday. And it all comes as some in the fed may be testing Janet Yellens leadership. Steve liesman has that part of the story coming up and what it means for your portfolio and your wallet. Also ahead, jim grant, founder and editor of the widely read newsletter bearing his name speaking with us xluveexclusive. Well talk fed policy, geeold a global instability. How is jim grant playing it . Well find out. Up next, though, could president obama actually stop companies from domiciling overseas to pay less taxes without congressional approval, that is . And if the president could do that, would he do it . The pros will weigh in on this controversial issue when kelly and i come back after this. 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And the russell, Janet Yellens favorite index, down a fraction today so far at 1,140. Perhaps it has her in mind. A report today, meanwhile, quoting a former u. S. Treasury official saying president obama could act on his own to stop American Companies from merging with foreign firms to avoid u. S. Taxes, and its by invoking a 45yearold law that would limit the financial incentives to do such a deal. Like so many issues, tax inversions have gone unaddressed due to an impasse between congress and the white house. So, if the president could, in fact, fix this issue by himself with a stroke of the pen, as has been suggested, would he . Joining us to talk about it, eamon javers and james, money and politics contributor. Steven shay has worked in treasury for both the Reagan Administration and the obama administration. Hes now at harvard law. This guys got the chops. He should know what hes talking about. Have we heard from the white house in response to what he has said here . You know, bill, i emailed the white house earlier to ask them about this, and they said nothing about it. They referred me to the treasury department, which hasnt said anything publicly either. So, theyre not saying just yet whether they believe this analysis, but the president has said that he wants congress to do this. Hes calling on congress to act here. And of course, theres some politics in all of this, because the likelihood of Congress Acting any time soon is probably pretty small. Conventional wisdom here in washington is we are not going to see a tax inversion deal between now and the end of the year, even though the white house is making a full court press to get congress to do something. Whether they can do it on their own or not is not something theyre saying, whether they endorse this Political Legal theory at this point. One thing about this, james stharks it might reveal how far president obama wants to go on this issue. In other words, is it a better play for him politically to say he wants to do something about it than to actually try and do something about it . It kind of reminds me about the debate about that trilliondollar platinum coin, where they wouldnt quite say, like they have their in their hip pocket. They wont say could we do it, could we not. They wanted congress to think about it, but i think its a political issue. Its a good issue with them. Probably like their holy trinity of tax reform, you have the interest, the jet plane deduction and now the corporate inversions. They think it really works for them as economic populism and i think theyd hate to throw away that going into a very difficult midterm election. Im going to sound naive here, jimmy, but who would be against closing a Corporate Tax loophole, if it meant more for the government coffer as here . Other than well, for one thing, this is a catalyst for Corporate Tax reform. Everyone knows the systems broken. Listen, there was just a st. Louis fed study that came out today, said the ideal tax rate would be 12 , not 35 , so we want to get this done, anything that takes pressure off congress on this issue, you could say is moving in the wrong direction. So people are clear what were talk being, eamon as well, there are two pieces of the inversion thing. When a Company Moves its address overseas, one is so it only pays taxes in the u. S. On sales here instead of sales everywhere, and the other piece is it can then make loans from the Foreign Company to the u. S. Company and then deduct the interest for u. S. Tax purposes, and its the latter piece that steven shea is talking about, that the president could maybe do something about it. And again, how likely in your view is it that he will . And kind of to bills point, who does this play well politically for ahead of the midterm elections, do you think . Well, look, the president and the white house clearly think that this idea of economic patriotism, which is said on our air, we heard treasury secretary jack lew use that term at the delivering alpha conference. Theyre talking again today about this in an op ed in the washington post. They think this is just basic common sense thats going to resonate with voters, particularly in an election year. Its a midterm year. The president s been raising a lot of money. He wants droots do well. He wants to stem some of those sixyear losses that we traditionally see president s have. So, they think this is good politics for them. Whether or not they agree with that legal analysis, though, and whether they think they could actually do away with this with a stroke of the pen is another question. Jack lew making the case today that the companies that are doing this are removing millions from the treasury and are hoisting that burden on to mnge average americans who have to pay for things that benefit those companies, like military and courts and the rule of law. Keep in mind that Corporate Tax revenues over the past 12 months are up 11 over a year ago, about 30 billion. Not like the Corporate Tax base yet is collapsing. But thats shy of what the estimates were. Thats the fear, though that youre going to lose the center of gravity here. That once this accelerates, the cow will be out of the barn, and youll see a lot of companies do this all of a sudden, and the tax base will erode quickly once companies decide, you know what, we can do this and there is no sort of public embarrassment to doing this the way there might have been years ago. Jimmy to kellys point, whether or not the president s just jawboning on this, when Steve Liesman interviewed him last week, the first thing he said when steve asked about the tax inversions, he pointed to congress and said this is a result of inaction by congress. I would think lets assume that this would be attractive to the democrats. Why isnt the senate then taking up a bill that would close these loopholes . I know Chuck Schumers talked about doing something along these lines. Why hasnt it gotten much further . It wouldnt surprise me if the senate takes the bill, nor if a few republicans vote for the bill. Its just not going to get through the house. Thats not where they want to go. Right. They want a comprehensive tax reform plan to bring that rate down somewhere close. Ironically, the longer that this is happening, the more leverage it will give for some sort of Corporate Tax overhaul. What were you going to say . The republican argument is that taxes are too high for american corporations as opposed to overseas and its the punitive american tax code thats driving American Companies overseas. They dont see it as economic patriotism, they see this as a question very much of Companies Just doing the rational thing in response to an irrational tax code. Right. All right, guys, thank you both. You bet. Thanks for joining us today. Well have more next hour with nick coalesce, whos been going through the numbers, figuring out exactly how much this affects the government coffers. 40 minutes left in the trading session here, the dow up 20 points, the nasdaq is down a fraction and the s p up about one point. Well look at twitter, losing ground ahead of earnings due out tomorrow. The social Network Service wiping out about 40 of its value so far this year. Two twitter pros coming up will debate whether to buy the downturn ahead of tomorrows report. And gasoline prices are finally a little lower. Jackie deangelis will explain whats behind the first big decline in gas and oil prices this year when we come back. Dont touch that remote. S to he. For the first time American Kids are slated to live a shorter life span than their parents. Its a problem that we can turn around and change. Revolution foods is a company we started to provide access to healthy, affordable, kidinspired, chefcrafted food. We looked at what are the aspects of food that will help set up kids for success . Making sure foods are made with high Quality Ingredients and prepared fresh everyday. Our collaboration with citi has helped us really accelerate the expansion of our business in terms of how many communities we can serve. Working with citi has also helped to fuel our innovation process and the speed at which we can bring new products into the grocery stores. We are employing 1,000 people across 27 urban areas and today, serve over 1 million meals a week. Until every kid has built those lifelong eating habits, well keep working. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. Welcome back. As we kick off a busy week here, markets moving in different directions. The dow and s p are slightly higher while the russell and transports are even lower. Third consecutive down day, and it all began after we interviewed the ceos of all the transport companies. Noer folk southern. We jinxed it, i think, when we asked why things are so strong right now. Lets talk to Bertha Coombs, find out why things are so strong for these stocks or otherwise, bertha. It is merger monday, and if youre an activist investor, good monday for you. Lets kick it off with Family Dollar, the stock up more than 20 , about 25 on news that its being acquired by dollar tree for about 8. 5 billion in cash and stock. The deal will unite two of north americas Biggest Discount retailers, but carl icahn, whos up about 100 million bucks or so, just today thinks theres still a better deal to be had. Well have to keep watching that. Meantime, another big deal with Online Real Estate Company zillow announcing it will buy trulia for 3. 5 billion stock agreement, sending both stocks higher on the day. And finally, El Pollo Loco surging in its second day of trade. The Mexican Restaurant chain more than doubled the stock price opening on friday. And kelly, i think they have one in yonkers. We should take a road trip. Yep. You just tell me when. Thank you, bertha. Youll love it. So, should you buy or sell twitter ahead of earnings tomorrow . Weve got david sieberg, what do you think . Buy, sell or hold on twitter right now . I think ive said it before on your program, im not a bull here. Im a bear. I think the stock at 38 bucks isnt a buy ahead of the quarter tomorrow. Look, you know, i look at it and say with the social media space, its all about user growth, its all about their ability to monetize and also user engagement. And if you look at user growth, its been decelerating. Were looking for i think the ninth straight quarter of deceleration in user why do you think its decelerating, david . I look at it and say theyre a one trick pony, really, right . You look at facebook, facebooks got multiple buckets to really grow their user base. Twitter does not. So, you know, facebooks got a lot more with whatsapp, with instagram. Theyve got the ability to really grow it and then monetize it. Chris, its interesting, because last time facebooks user growth wasnt that impressive, but theyre already so good and the mobile ad stuff was impressive. To that point when twitter reports tomorrow, whats going to be the most important thing to watch . Firstly, you cant be comparing facebook and twitter. Theyre two totally different beasts. Its not an applestoapples comparison. From our comparison at silverback social, were spending money on the twitter platform because there is nothing today as powerful as the twitter platform. So, when a company like Blue Rock Energy in syracuse, new york, wants to parachute into a conversation about energy, we spend ad dollars on the twitter platform, sponsor tweets, parachuting into the conversation in realtime. There is no other way that advertisers today can have that type of conversation in realtime. Until theres a platform like that that can offer a service in realtime, im still bullish on twitter. And if twitter is a company up 40 this year, i would take your point. Theyre down 40 , and in a positive market. Exactly. Listen, sometimes the trouble with wall street is wall street and they may not be looking at the right optics. Overseas, twothirds of their user base is overseas. They havent continually gone out to monetize whats happening oversees. Theyre reaching out to the nfl and viacom to have sponsor tweets that are going to be sort of little ad units like that. All right, david, heres a satisfied customer. Ive got to say, chris, with all due respect, i think the only reason people pay a premium in social media is to see user growth, right . We want to see that. Thats going to get the stock moving. So, when you look at facebook and say its trending at ten times next years revenues, so is twitter. What would you rather own . Id much rather own facebook at these levels. It makes 100 sense. Theyve got much more, many more avenues from a monetization perspective. So, i look at twitter and say its a one trick pony. Granted, they may have something up their sleeve, but think about how hard is it going to be for twitter to catch up to a company like a facebook from a user growth perspective, to gain those advertising dollars that youre talking about . Like it or not, chris, wall street compares facebook and twitter. I know you dont they shouldnt be. But it does. They shouldnt be. They do. And advertisers are looking to advertise in 2014, not 2007. Unfortunately, wall streets looking at optics from 2007. Chris, what gets them going, then . Let me ask you that, what gets them going . I look at facebook and theyve had the ability to make strategic acquisitions, to boost that user growth. Whats going to get twitter going, really . They have what, a billion in cash . What are they going to buy thats going to help them add Significant Growth to their user base immediately . Were saying theyre not growing fast enough, which is ridiculous in and of itself. Its absolutely growing thats not enough for wall streets expectations. Listen, this is a cultural issue right now. This is something in which the manner where we aggregate and disseminate information as a culture has changed, so advertisers are spending money on twitter. End of story. Really . Thats interesting. Im not seeing that. The latest thing that seems to be happening, after twitter captured the site guys is that a lot of people are turning back to things like whatsapp to message say their five closest friends, instead of being on twitter with its massively public and sometimes overwhelmingly so platform. Are you worried thats a trend working against it long term . Not at all. I think its working with it and if theyre reaching out to amplify and advertisers spending dollars listen, facebook doesnt have an account manager working with agencies like silverback. Twitter sees the revenue to be made and theyre hand holding throughout that entire process and theres no other platform like that. Two quick questions that only need yesorno answers. Chris, do you own shares of twitter . I do. Okay. David, do you tweet . The answer is i do, but not as frequently as i used to, i can promise you that. But i do tweet. Well follow up with a twitter conversation after this. Sounds good. Just curious. Thanks, guys, appreciate it. Thanks so much. And weve got more coming tomorrow. Twitter Ceo Dick Costolo will speak with us exclusively right after releasing earnings tomorrow. Well hear from him even before analysts. Julia boorstin joins us for that. Dick costolo, ceo of twitter, 4 00 eastern or so. Dont miss it. That is big. Got about a half hour to go now here and still the dow is up 25 points, a point on the s p 500 and the nasdaq slightly weaker along with the russell today, the russell 2000, i should say. The russell 2000, right . Which reminds us of this lady, janet yellen. Her leadership at the fed already being tested six months into her tenure. Our Steve Liesman and jeff cox take a look at some visible signals of dissent among ranks at the fed. Later, jim grant, founder and editor of grants Interest Rate observer, is going to give us his thoughts on that and where hes making money in these markets, just ahead. On is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Mixed day on wall street today, the dow up 20 points. Feels like a monday, i guess, with the markets, right . The nasdaqs down 2 1 2 right now, the s p up a fraction, the russell down half a percent, and we were pointing out, the transports are the group being hit the hardest. This is the third consecutive down day. Whatd you say they were down over that period . 3 . Something like that. Down 1. 25 today, coming off those alltime highs hit just a week ago. A busy week ahead on the economic front, janet yellen facing a test of her leadership at the fed. Steve liesman maps it out for us. Thanks, guys. Today could have an influence on what the fed does. Coming up on wednesday, adp. Thats the same day as the feds statement. Looking for 238,000 jobs to be created in the private sector. Thats just a string of 200,000plus that weve had. Secondquarter gdp, first read we get seen at 3 , just about reversing the firstquarter decline of 2. 9 . And looking at the prices, 1. 9 year over year is the number were looking for. The jobs report comes friday, looking for 230,000, a little less than private payroll because government has seen declining. Unemployment rate 6. 1 , unchanged. And were watching wages at 0. 2 . Now, as for the fed, only a slight tweak expected in the feds statement this week. Take note of the improving jobs market, but likely to be some behindthescenes discussions from some hawks and even some in the center who want to speed up the pace of tapering and or move up the timetable for hiking Interest Rates. Yellow likely to resist these calls to move faster, at least now, especially because the big gdp drop we had in the First Quarter and the housing data. She sees that as a key to recovery. It has been very mixed. But the question is whether the data in the form of higher inflation or faster job growth force her hand. Kelly . Steve, thank you. And stay with us. More reaction now to a possible fracture at the fed. We bring in cnbc. Coms jeff cox. Whats going on, jeff . Hey, kelly, how are you today . Kelly, you know, the talk that im hearing out there, basically, you know, what is the fed waiting for . The numbers that steve ran down there paint a pretty decent picture of the economy. Were waiting for those gdp numbers, which will be really important to see just how fast the recovery was in the Second Quarter from that dismal First Quarter. So, you had the comments from Richard Fisher in the wall street journal today coming out and making a very strong statement that basically almost questioning Janet Yellens leadership, saying how long are we going to wait, when are we going to start moving and when are we going to start maybe to face reality a little bit that its time to start the pendulum swinging in the other direction . Steve, your point is well taken that shes going to probably stay the course on the tapering portion, but do you think theyll ever get all the pieces to fit perfectly before they finish that and think about raising rates here . I know theyre datadependent, but not all parts of the economy may be where they want it to be when the time comes, do you think . I think theres a good chance either way on that, bill, and ill tell you why, because where we are right now is in this very uncertain realm of knowing how much slack there is in the economy. Theres a theory of where the fed went wrong in the 70s, and it suggested the fed didnt know what was happening with the total capacity in the economy. And thats a complicated way of saying how much room does it have to run. If things are shrinking, capacity is shrinking, if a lot of the people who are out there and left the workforce arent coming back, that presents one picture and it presents a picture of a fed thats going to have to move sooner. But yellen maintained that there are many people that can return to the workforce, keep them from rising too fast and she has room to run here. Essentially, the issue is room to be wrong when it comes to inflation and she thinks she has it, and i dont know how well finally solve that. I think it may be watching that wage number. Speaking of room to be wrong, is your point that the Richard Fisher op ed represents Something Like an intentional putting the fed on notice that hes going to be more public with disagreements . I think its a shot across the bow. And i wouldnt be surprised to see fisher be a dissenting member this week when that vote comes download for the feds statement. Theres a couple problems here. Janet yellen believes janet yellen is a labor economist who believes that the fed can solve the unemployment problem. And a lot of folks look at that and say, were having problems with structural unemployment. Its beyond the feds help. Heres the other problem. Some of the inflation indicators are exceeding or at where the fed wants them to be. And if the fed waits and waits and waits, its going to risk having to act rapidly and more aggressively than the market would like to, get behind the curb and push us back into a recession. Steve, we tease that maybe theres more dissent than normal at the fed against janet yellen, against this chair. Do you think thats the case . I dont. I think that its possible, as jeff says, that Richard Fisher is telegraphing a dissent. He might bring Charlie Plosser along with him. That would be significant, but it wouldnt cause the markets, i think, to rethink where policy is headed. What we need to listen to right now are guys like John Williams from san francisco, maybe jim buller from st. Louis, and whether or not theyre thinking that rates need to rise more quickly. The only thing id question back is a technical issue with jeff. Im not precisely sure Richard Fisher was dissent, too. Im pretty sure hes on board with the tapering process, but unless theres a proposal on the table and hes saying we need to raise rates now, i dont think hes on board with that, unless theres some i dont think so either. Unless theres some paragraph in the statement where he would say i dont agree with that anymore which is the idea of rates running below normal, but hes agreed to that several times already. I think fisher will like some language change in the statement that says, look, were on top of this, were aware inflation prices are starting to build, and if necessary, we will act. I dont think its going to be they sort of say that already, though. Dont we by the way, isnt it blord who already puts out his kind of statement about the statement, if you will, on his website to explain his views . He does, on the friday morning, and hes of the view look, Stan Druckenmiller said it they could do this, if they wanted to say heres where i stand relative to what the fed said, they dont have to do that by dissenting with the language. They still have that available. Excellent point. I want to point out, though, that Stan Druckenmiller and jim would have a similar view, and its as follows policy is very far from normal and the economy is less so. And at the very least, theyre looking for the janet yellen fed to square that circle. How can we be so far from normal on policy and yet so much closer when it comes to, say, a 3 economy . And i know yellens answers here, but those are the questions that the critics of the fed are asking. Just one thing to add here. I think yellen is going to win all of these internal battles as far as the fed goes. She is going to enforce her will, but i dont know if shes going to win the economic war down the road. That remains to be seen, as we like to say in television news. Can i just say to you guys that well have an answer to jeffs what the market things about jeffs question in the cnbc fed survey tomorrow. Oh, boy. Great tease. Will it end badly or will it end well . Thats what we asked people. We didnt even try to do that. I thought you were saying end badly or worse. Thank you, guys. 17 minutes left in the trading session here. The dow pretty much closing it up for the day early. Were up 23 points right now and holding steady. Were going to get another perspective on all this. Coming up, jim grant, the man behind the widely read newsletter grants Interest Rate observer. Hell weigh in on the Interest Rate debate and how hes playing the bond market. And more on herbalife. Results are due after the close tonight. That ought to be interesting. Well bring you the nutrition weight loss companys numbers the instant they hit the tape, break them down with some herbalife pros, and i cant wait to see what the market does with that. Its up 1. 3 right now, but it will be payperview viewing to see what it does after those numbers come out, so stay tuned. First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Yyyup. With xfinity internet soyour family can use all their devices at once. Works anywhere in the house. Even in the garage. Max whats going on . Were doing a tech startup. Were going public [cheering] the fastest inhome wifi for your entire family. Only from xfinity. Hey, look at that. Gasoline prices posting their biggest decline of the year. Jackie sdandeangelis, give us t happy news. Good afternoon, bill. Oil prices were lower today, and of course, crude oil is how we get the gasoline price at the pump, but we did see crude close lower, 101. 67 today, down almost 3 on the week, almost 4 on the month. You would think geopolitics would keep these prices high, and let me just say, they are supported, but you have analysts and experts out there saying we could see 100 barrel crude not so in the distant future. Now, having said that, the gasoline futures, theyve been down for 18 of the past 24 sessions, down roughly 8 in the last month, and that is translating for consumers to less pain at the pump. The lundberg survey reporting that the average price for a gallon of regular down 9 cents in the last two weeks alone, 3. 58 a gallon is what were looking at right now. And of course, this is significant, because it is the biggest drop that weve seen this year. And remember that summer driving season is the peak. And when we hit july 4st, that is the absolute peak. So, if we look at seasonality, analysts are saying all the trends show gas prices should continue to decline from here, and hopefully, that will mean that more spending for consumers will come interest their pockets out of the pain from the pump budget area and go into other areas of the economy. Guys, back to you. Jackie, thank you. On a related note, exxon is one of the biggest contributors to the dows slight gain today. Weve got about 12 minutes before the close with that Index Holding on to a gain of about 18 points after being negative this morning. The s ps up only about half a point. Well keep an eye on that, while the nasdaq has turned negative by about three. We have herbalife earnings coming up after the close. Cannot wait. Plus, a new study shows fist pumps, jess, fist pumps transmit fewer germs than handshakes. Somebody paid for this study . We want to know if you think fist pumps bumps. Well, fist bumps. Because a fist pump is yeah, its a different thing. 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The dow at the low of the session this morning was down 80 points, has come back, up 16 now. The nasdaq down three still. The s p is up a quarter point. Transports are getting hit for the third day running, not doing as well as they had been up until that point. Joining us right now to talk about Global Trends investments, we have got todd lydon joining us here. We were saying, you know, geopolitics just are not bothering this market. Why is that . They used to. Theyre not. They did, but i think its a little bad news. And sure, in our hearts, we feel bad about it, but you look at earnings, continue to beat, and thats but we would worry about trade, we would worry about the price of commodities, oil primarily. There were all these economic ramifications to those geopolitical events that would affect the market in a tangible way. Now thats not. Well, its not. And today, you know, people are enjoying the good weather, people are going to the beach. We tend not to think about it. That defines complacency to me. We are. We are very complacent, and thats a big concern with volatility at multiyear lows, the big fear is, when everybody comes back from summer vacation, we might see some gyrations in the market as we get into the fall. But some things we look at, emerging markets hitting multiyear highs, right . China etfs hitting 52week highs today, very interesting. More money flowing in. A little concern, though, highyield etfs, were seeing some money start to flow out there. Right. Weve had a run there for a while. Yep. We were just talking about this this morning on the high yield. Is that where youd put the money, with emerging markets, or is it too late . No, i dont think its too late. There are valuations, especially with concern over in europe and the middle east right now. Valuations are very low in europe, looks good. Emerging markets really look great, too. And you feel like youve missed part of the market move, diversify over into those areas. Another thing is silver. And im not always a commodities hound, but silver compared to gold, the silvergold ratio is way off historic lows. Usually its around 50, 50 ounces of silver to buy an ounce of gold. Right . Ill tell you, right now its around 65. So, that ratio is going to get back in line, and being that industrial metal, were going to see higher prices. Very interesting. Havent talked much about silver. Thats true. All right, stick around, tom. Well come back with a closing countdown. Bob pisani will also join ugg. And after the bell, jim grant will speak with us in an interview you will not see anywhere else on television today. Well talk fed policy, the bond market, global instability. Maybe well find out what he thinks of silver right now and where hes finding money making opportunities otherwise. Youre watching cnbc, first in business worldwide. Acturers a dy shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. If energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Developers are all about speeds and feeds. Its all about latency. 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. The ibm cloud is the cloud for business. Became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Coming up on the last two minutes. We mentioned, this was very much a merger monday. Two big deals that were announced this morning, dollar tree buying Family Dollar stores. Look at this, up 25, almost 25 on Family Dollar. Carl icahn among the shareholders there. And dollar trees up 1. 33 . We were asking you, what would you call the combined entity . Some of the favorites were family tree. Suddenly, it becomes a genealogy company. 2 tree. My favorite was the tree dollar store. A little inflationary there. At any rate, well see if it is consummated. Then you had zillow buying trulia for 3. 5 billion. Trulia as a result up 15 today, and even zillow rising a little bit. Now we wait for herbalifes earnings after the bell tonight. We all know the history with this company and all the angst and everything thats gone on with bill ackman. Look at the volatility just today on this stock, and its going out with a gain of about 1. 5 . I think you can pretty much guarantee its going to be volatile after the close when the numbers come out and kelly will have that for you shortly. Im running out of time here. Tom lydon, you probably dont buy herbalife, do you . I dont. Mostly hair care products. Yeah, we cant split hairs on things like that anymore. Bob pisani, big week coming up. Weve all pointed out im a little concerned with some of the internal action. The russell 2000 underperforming again today. Its down almost 5 on the month with the s p up and then transports today big. But the transports havent had that big divergence. This has now just started. Were now in a trend with the russell underperforming the bigcap indexes. I also see homebuilders. Leadership in the last two months. Theyre also now underperforming. So, there are little pieces here. S p was at an historic high last week. One day last week there were only 50 stocks in the s p at new highs. Whats that about . Thats divergence, thats what that is. For sure. If you talk about flows, smallcap etfs are losing billions of dollars this last month. So thats been the trend lately. Got to go at this point. Thats the first hour. Stay tuned. A lot more coming up, including herbalife numbers right now on the second hour of the closing bell with kelly evans. See you tomorrow. Thank you, bill. Welcome to the closing bell, everybody. Im kelly evans. And on this merger monday, heres how were finishing an upanddown day, a mixed one, and were waiting for key earnings this hour, including results from herbalife. Look at where were finishing up across the major averages with the dow going out on a gain of about 20 points. Of course, its below that 17,000 mark still, 16,981 is the level. Also a slight gain for the s p, adding about half a point now that alls said and done. The nasdaq under pressure, off about 4 1 2 points. We talked about twitter last hour and theyll report tomorrow. Dick costolo will be on the program. Joining our panel today, andrew apartmentie from height securities, kayla tausche, private investor at newmark and for more, fast money trader guy adami. Good to see everybody. Andrew, first to you. Theres so many individual names with big moves today. Weve got a couple inversion deals that are still out there, weve got the Dollar Stores, which weve got to talk about. Is this just open season for merger activity . Do you expect a lot more of this . Yes. I mean, going into this year, we thought it would be a big year for activist investors and mergers given the low cost of capital, so i think you will see more mergers. As we talked before we went on air, any company thats thinking about doing a corporate inversion, given the gridlock on this issue in congress right now, should really move ahead and do that. Or should they, given that there are now numerous op eds, numerous politicians saying if you do this, its antiamerican, practically . I think the issue on inversions is the democrats want to go back to march of this year and say anything thats happened since then is a no go. Right. And its not going to fly. So, our viewpoint is that anybody that does a corporate inversion will be grandfathered in, if congress ever gets around to doing something, and we all know how active and impressive their schedule is these days. Well talk with nick colis later this hour for more on inversions and what can be done around this strategy. I want to go back to markets. Newmark not trading all that great. We havent seen you in a while. I want to know where you stand these days. Its a quiet summer day here on wall street. But its still exciting to be here with you, kelly. And the stock, i mean, theres not been a lot of excitement since i was here last, although it seems like a very long time. But last time we spoke, you were pretty skeptical about equities. Im still kind of skeptical about equities. I dont know, maybe theyre up 2 since i was last here . Look, i think the key is still going to be the bond market. I told you that the tenyear would not go below 2. 5 . I was wrong. Im happy to confess that. But i think the key will be the bond market, even if nothing really much happens over the next couple of weeks. Kayla, i shouldnt chuckle because the bond market is so these things are so important. Its just that this debate, trying to summarize the debate people have been having in this market for fiveplus years now. Now it seems like the tenyear cant go above 2. 5 . Its been strange for several months at this point. I was talking to a trader right when the market turned positive midday today and i said what is the catalysts . And they said markets just didnt want to stay down. That was the only sentiment, the market did not want to stay down. I love that. Looking at earnings the way theyre performing now, they are not blockbuster, but they are also much better than expected. Looking at the data today, housing aside, the data is Getting Better. Everybodys looking at gdp on wednesday, the jobs number on friday, and the expectation is that the data will be good, and that with that backdrop, even amid all of the geopolitical concerns, theres no reason to sell this market. All the same, guy, do you agree with that diagnosis as to why we turned positive today . And what about goldman, which did turn a little cautious on the market on friday, at least for the next couple of months . Its great action in the s p today. Its a nice bounce. But again, id point out the tenyear, you know, trading below 2. 5 , ive beat that drum forever now with you. You know where my view is and rates are going lower. A point to the russell, the iwm, which you could argue potentially made a double top around the 120 level. I think it trades down to 108. Well see what happens when you get there. We have individual names that are great stories, but by and large, it is a quiet day. But i have to point out, the most interesting thing to me, you want to know . I know youre dying to know. I am. I love what you did with your earrings and your dress. That is very nice job. Oh, god. That tells us that its going on my pinterest page. It is really that kind of day in the market, isnt it . Guy is bringing his a game. Heres what i think is exciting, both guy and evan think equities will be under pressure here, but guy, because you think rates are going lower in tandem with that and evan because you think rates are going higher. No, no, its true, but i do believe there is an inherent contradiction here between the equity market and the bond market, and i think what yeah, it depends on what scenario you see until the end of the year, kelly. And i see a scenario where rates will rise and that will put pressure on equities because rates are going to be higher. But you know, it could happen overnight or it could take six months to happen. The hard part is getting the timing right here, and i have no idea. A line we just heard, andrew, from one of our guests last hour, he said small caps are losing billions. Im reminded of some of the pressure, if we can look at the hyg index, that weve seen in the highyield space recently. Is this a janet yellen effect . After the highprofile comments she made about areas of overvaluation in the market, those are precisely the areas that have come under pressure as far as Retail Investors pulling money out the last couple of week. I think the answer to that is yes, i think in part it is. The other thing, just to kind of make a quick comment here, is that if you look at bank lending from january to today, its been about 8 . If you look at it from mid2011 to january of this year, it was like 2. 8 . So, there are some tailwinds in the economy. Everybody is moving up their fed Interest Rate forecast into Third Quarter of next year. Our chief economist is actually in the end of the First Quarter of next year. But despite all that, on low volumes and your earrings, we keep grinding higher on the market. And actually, thats also all the more remarkable against the backdrop of International Tensions that weve seen. On that note, as weve seen some of these hotspots around the globe continuing to heat up, we want to bring into the conversation Michelle Carusocabrera to round up these flashpoints for us around the world. Michelle, when it comes to the activity today, i mean, is it israel and gaza that should be occupying our attention . Is it the situation in ukraine . Is it syria . Is it all of the above . Reporter i think it might be all of the above because theres just so much volume, kelly. Let me show you. Were going to start first in the middle east. There was a massive explosion at the main hospital in gaza. The Israeli Army Says it wasnt operating in the area and they claim the explosion was caused by two hamas missiles that were misfired. Hamas leaders deny this. Several people were injured and killed and now Benjamin Netanyahu says israel must be ready for a prolonged military operation. Its sounding longer than initially. Also, u. S. Embassy personnel have been evacuated from libya, as tripoli is turned into a battleground. Artillery fire slamming into a huge fuel oil depot near the airport. It caused a massive explosion and a fire that could be seen from miles away. In ukraine, new round of fighting. Russian separatists and the Ukrainian Army trading gunfire and artillery barrages again. The fighting so bad, International Inspectors on the site of the Malaysian Airlines flight 17 had to retreat. Then finally, to a different kind of battle. Theres a tanker full of 1 Million Barrels of crude oil from kurdistan in Northern Iraq sitting off the coast of texas ready to unload. The problem . Baghdad considers any independent sale of oil from kurdistan, a semiautomaticon mouse region in Northern Iraq, to be in violation of the countrys constitution. So, theyve hired lawyers in the United States to try and stop the oil from being unloaded. Remember, the kurds are eager to sell oil independently in baghdad so they can be financially independent, and perhaps one day form their own country. I mean, the list goes on and on, kelly. I know. And michelle, evan, is this rational behavior on the part of investors in this market . I think the only one that matters, not to be too brutal about it, i think the only one that matters is the russian ukrainian situation, and that only matters because of the possible knock gone effects in europe. And so, i kind of i mean, the libya situation unless there is some kind of, something happens youre taking the global gdp view, in other words, the only way this could have a effect on growth is if it hits northern europe, the biggest economy in the world. Or if theres sanctions that europe are forced to put on the russians, which it doesnt appear they want to do, at least all that seriously right now. But the white house today was saying they thought they had european support. Well see it when we believe it. I mean, they really havent been too quick to put the sanctions on the russians, at least so far. Andrew no, i think evans exactly right. You know, theres a problem in the europeans backyard. What michelle said is happening in iraq is really important, and ironically, its exactly kind of were going toward what biden said in the president ial elections should happen, which is that the sunni, shia and kurds all have their own independent states, and basically, you lock up the oil. So, thats going to take a long time to play out. I think from a market standpoint, if things really flare up with russia, that could knock on equities a little bit. Kayla . When you think about the industries that will be affected, obviously, in london youre going to get finance affected the most there, then youre going to have energy in france and italy, and then youre going to have other not gone effect in germany as well. And i think we forget how multinational a lot of these companies are. There hasnt been that much in the way of knock on effects, besides visa and mastercard, besides potentially bp and morgan stanley, which has a stake in a company over there. Those were isolated companies that had noticeable effects from what was announced last week, but who knows what will happen once europe announces this. And thats why, guy, same question to you, rational behavior on part of investors in the u. S. Market or complacent . Complacent. Ill throw Potter Stewart at you. I cant define what the market tops going to be. I dont know what the definition is, but ill know it when i see it, and we havent seen it yet, kell. Complacency is fine right now. Its worked. Think about it its worked for the last five years. I dont think its going to stop working tomorrow. All right, guys, thank you for now. Well leave it there. Catch guy adamie on fast money at 5 00 p. M. Theyre talking to the ceo of the Biotech Company working to cure hepatitis b. The ceo of Arrowhead Research is coming up. Thanks to Michelle Carusocabrera there as well. Carl icahn and others push for change at Family Dollar and hes finally getting it, the company being acquired by rival dollar tree for 800 billion, netting icahn a large profit, but is this marriage less about icahns influence and more about a red flag for Consumer Spending . Well talk about that next. Plus, herbalife, another stock making icahn a big profit, at least on paper. Will herbalifes latest Quarterly Report push them higher . We have instant analysis of those results, expected out soon. And jim grant of grants Interest Rate observer joins us exclusively on the closing bell. Youre watching cnbc, first in business worldwide. In a world thats changing faster than ever, we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back. We start with a earnings alert on norwegian cruise lines. Bertha coombs has the numbers. Theyre reporting bottom line numbers, a penny better than the expectation, 58 cents a share on an adjusted basis. The top line was light, though, coming in at 766 million. The company says that it was the first full quarter that they had their break ayaway ship, also t epic, higher end cruise lines and higher in richer earning. As far as their outlook for the Third Quarter, 1. 05 to 1. 10. Theyre reiterating that, but the street was looking for it to be lifted to about 1. 15. The same for fiscal year 2014. They reiterate 2. 20 to 2. 35. The street was looking for 2. 29 there. So, a little profittaking here after hours on the outlook, kelly. Bertha, thank you. Those shares down about 2. 5 . Its a merger monday on wall street, as two dollar retailers are Getting Better for a lot of dollars, 8. 5 billion, to be exact. Courtney reagan has the details now. Activist investors carl icahn, who owns 10 of Family Dollar, has been pushing for a sale of the company. So, while a new owner for Family Dollar wasnt unexpected, many are surprised that dollar tree, rather than Dollar General, was the one that actually made the offer. Dollar general and Family Dollar businesses are more similar than dollar tree and the synergy could be double that of dollar tree and Family Dollar, which management says are about 300 million after year three. The deal immediately expands dollar trees reach, albeit with two different types of dollar storms. Still, some speculate its not beyond possibility that Dollar General makes a bid for Family Dollar at some point here, too. Family dollar and dollar tree brands will remain separate, but the combination will generate 18 billion in annual revenue with 13,000plus stores in 48 states and canada. Bob sasser will remain ceo of dollar tree. Howard levine will continue to run Family Dollar but report to sasser and join dollar trees board. Edward kelly says Family Dollar could fittingly bring nearly 1 of incremental earnings to dollar tree, but hes downgrading dollar tree to neutral on the deal because he doesnt think its actually the best move for dollar trees shareholders. Bank of America Merrill lynch also downgrading dollar tree on the news. So, a lot of interesting movements here with this announcement, which was in some parts a surprise and some parts somewhat expected. Kelly, back to you. Thats for sure. Talk has been swirling, courtney, for a while on this one. Thank you. Lets talk more about whos driving this merger and who the winners and losers are. Gene urkin is an m a specialist at capello group, a boutique investment group. Gene, good to have you with us. Look, this consolidation happening from a place of weakness or strength, do you think . I think its happening because of strength. I mean, look, you know, i think this acquisition is being done just through the natural evolution. I think when you strip everything away, this deal is being done for several reasons. Youve got low borrowing costs, youve got a lack of organic growth, you get increased buying power, you get to grow topline revenue, and you get to get you make an accretive acquisition at a reasonable valuation. If 8. 5 billion is considered reasonable. And i want to bring in the panel, gene. Same question, everybody. Do you get a sense this is playing to the weakness or strength for the dollar store . I think the takeaway for most investors, especially those who have never been in a Family Dollar store or a Dollar Tree Store like myself, is that, look, this is not a stupid deal. I worked in the m a business for a lot of years. And whenever you see market peaks, you always see really stupid deals, and this is not a really stupid deal. So, i guess on that, i see the glass half full. Its not a stupid deal, but then strategy aside, synergies aside, market aside. I mean, when you look at this stock, Family Dollar, when nelson peltz tried to make a buyout offer for the company in 2011, he was going to pay 7 billion, and the company said that undervalues us. That is not actually taking into account where our stock will go, where this market will go. And even though samestore sales have been spotty over those three years, for that company and that board to have created 1. 5 billion in additional value for shareholders i think is pretty miraculous. And for a lot of companies that maybe didnt sell two, three years ago on those valuation concerns, now with the market as hot as it is, kelly, i think youll have to see some of the markets saying, look, where else is there to go . And andrew, i was just going to say, so everybodys clear as well, dollar tree, Family Dollar and Dollar General have about 30,000 stores. Theyve added about a third since before the recession, and thats the important justin lay hart was making in the journal, that gene, maybe this is forcing their hand to some extent because theyve proliferated so quickly. Yeah, no. I mean, i think its look, its obviously a great transaction for the shareholders of the target, because youve got names like icahn and paulson who are benefiting greatly. But really what you have here is you have the strongest operator in this business acquiring the weakest operator in this business, and it really benefits both, because you get, as courtney mentioned, you get a national footprint, including canada, over 13,000 stores. You get to expand your Customer Base and you get potential cost savings of over 300 million over three years. Andrew, whats your take on this . By the way, where does this leave walmart, which is going to be rolling out smaller format stores, acknowledging the competitive threat here . Yeah, look, i mean, i think that stagnant wages drive these mergers. Steve east, our chief economist, is actually seeing an uptick in wage inflation. So, that will be interesting to see if even for this core shopper, on the lower end of the spectrum. Yes, on the lower end of the income spectrum. I dont know what it really does for walmart. I think the bigger trend would be sustained inflation at the lower end of the market. I cant i mean, there are just, there are too many dollars to wrap your head around. But i mean, look, i think should walmart be more worried by this consolidation or should the Dollar Stores be more worried about walmart right now . Kelly, i would just add, i think from walmarts perspective, its going to make them more aggressive, as you mentioned in rolling out the smaller format stores. I think for Dollar General, its a net negative, because i think with this accusation, you get increased competition. And i think thats going to create some problems for Dollar General later on. Its not over yet, mr. Newmark. Well, well see. It could be a Dollar General next move, it could also be walmart making the next move. Yeah, but like i said, i think the important thing is youre not seeing somebody whos not in this business coming in and buying one of these companies. Right. Youre not seeing an lbo player kind of paying through the nose to compete in this space. What youre seeing are two strategic buyers, a strategic buyer and a seller coming face to face with industry consolidation. Thats a natural thing. Its not silly season just yet . Not silly season. Dollar general just lost their ceo, so you have to wonder whether theyre ready to take on an acquisition. I think this will motivate walmart. Thank you, guys. When Twitter Announces that theyre going to buy Dollar General, then you can worry about it, kelly. Gene . Yeah, i was just going to say, i dont think anyones going to come in and offer a larger bid. I think whats being offered and the 300 million breakup fee, i just dont see anyone else coming in. Dollar general has vetted this out and theyve just decided to grow organically and to pass on this opportunity. All right. Well, save what they call it for another time. Thank you for now, gene. Thank you. Up next, an exclusive interview with jim grant from the grant Interest Rate observer. Does he think the fed and observers are whistling past the graveyard when it comes to the market and inflation . Well get his moneymaking ideas that he says will work right now, straight ahead. Plus, somebody here has a simple solution to stop tax inversions. Just eliminate Corporate Taxes. He lays out the case later on the closing bell. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second 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. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. 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Like all standardized Medicare Supplement insurance plans, they help cover some of what medicare doesnt pay and could really save you in outofpocket medical costs. Call now. With a Medicare Supplement plan, youll be able to stay with your doctor. Oh, you know, i love that guy. Mmhmm. [ male announcer ] these types of plans let you visit any doctor or hospital that accepts medicare patients. And there are no networks. You do your pushups today . Prepare to be amazed. [ male announcer ] dont wait. Call today to request your free decision guide and find the aarp Medicare Supplement plan to go the distance with you. Go long. Welcome back. Interest rates, ininflation, bonds, global instability all on the mind of my next guest. Joining us is jim grant of grants Interest Rate observer. Nice to see you again. Thank you, kelly. Nice to be here. In the last couple months youve been on this program, youve warned about high valuations in parts of the market like biotech, like junk bonds, where weve seen some selloffs, and about market values, generally, and this remains the focus of debate, especially after some comments from janet yellen. Looking at the market today, are we overvalued or are we just overvalued in parts of it, and if so, which parts . I think the main theater of overvaluation is in the credit markets, in particular, the sovereign debt markets. I can think of no value less appealing, compelling, than say that of the swiss governments tenyear note yielding about nothing before tax, 0. 5 , germany around 1 . Years and years ago, walter badge, the great financial journalist, which seems like an oxymoron, but there was at least one straight journalist, said john bulk can stand anything, but cant stand 2 , meaning the teensy, tiny Interest Rates presented a clear and present danger because people not getting income would speculate on anything, right . So, here we are. Were not 2 seems like a very high yield in some places. So, i think that the central bank imposed Interest Rates are the source of Global Financial instability now and in the future. And if its the case then that this massive trade into, for example, european sovereign debt is ending, is unsustainable, what do you think is the next leg of this move . Where do people, perhaps if theyre taking money out of that space, put it . If there were the mirror image of the swiss note, russian common stocks at five times earnings might be the mirror image of that in terms of valuation and youre willing to take on jay carney here . Yeah. Well, we at grants mocked jay carney for making the lows in march. And as we mocked him, we made at least 2014 todate high in russia, but i am very bullish, not on the russian regime, but on the values within russia. Many of these stocks are trading at three, four and five times. The russian index is at five times. Lukoil, which is meant to be a commercialminded sorry, a westernized Energy Company is yielding 6 or something. Its at 58 or 60 of book value, and like six times or five times variants. These values are extraordinary, and to the extent that saner, cooler heads prevail in ukraine and russia, this dispute, these stocks stand to do very well. So, in buying them, it is actually on the side of peace and prosperity and rationalism. And what about sanctions, which are still being discussed well, they are this is a trade not everybody feels comfortable making. Most trades that are any good make you uncomfortable going in. Thats a great point. You can have comfort or value, but you cant have both. Yeah. Point taken. If people but the sanctions are both present and looming, and the scarier ones for russia, the ones that are looming. You know, its how you get to 2. 5 , 2 1 2 times earnings valuation on gazprom or how you get to a five or six times valuation on the russian drug, russian index. The risks are selfevident and frightening, but sometimes the worst does not happen. Sometimes it does. Thats the gamble. This is truly a gamble. One usually not to conflate the words investment and speculation and gambling, but this is a gamble. What about the u. S. , where janet yellen kind of hinted that there was speculation going on right. She should know. In parts of the market. I mean, the Federal Reserve has so little selfawareness, they say it appears to us that someone has suppressed volatility and compressed yields and expanded multiples. Who might that someone be . And yet . I mean well, the fed has, in fact, i say the fed has imposed, has manipulated us into a period of quite eerie stability and measured volatility. It has manipulated us into a time of remarkably artificially low credit spreads, even with a backup of junk bond, youre not able to invest in the class of asset, formerly known as high yield. The stock market, i dont know, but in terms of credit, its mostly risk without the prospect of much reward. And so, what does that leave in terms of good choices here for investors outside of russia, for the moment . This is almost as contrary as russia, which, by the way, is trading according to economists at less than iran. But one form of investment that is almost as thoroughly hated as russia, almost, is gold and gold mining shares. Ive talked this before. You mentioned this last time you were on and theyve rallied. They have. Some years they do, and some years they dont. But gold to me is a very sound inoculation against these kind of hairbrained, or at least wildhaired doctrines of modern central banking. If you harbor doubts, as do i, about the efficacy of five years of money printing or quantitative easing and suppressed Interest Rates and you wonder how this unprecedented experiment is going to pan out, then you can do worse for yourself than to hedge against some unscripted monetary outcome, say the tokyo gold fund or the first eagle gold fund. Theyre diversified portfolios of mining shares, which are depressed both in absolute and in relative terms, relative to the price of metal. Would you prefer i was just going to ask you, relative to the price of the metal. I myself, Scrooge Mcduck fashion, love to just hold the stuff in my hand. Do you have it under your bed . No, i wouldnt tell you about that. But you know, so, gold is to me the legacy monetary asset and it stands to benefit from the demonstrated as opposed to the theoretically likely crackup of these monetary arrangements. When you look at inpos, two quick questions, one is activity where people have cited both the lack of earnings for some of these companies, the number of companies and the size of them and how poorly some of the smaller ones are trading as evidence of a, i dont know if bubbles too strong a word there. Is it healthy . How wha do you make of it . It is part and parcel of the cycles of markets. We are a regime of a long term weve been in a longterm equity bull market. Weve been 32 year on bull market. We have had these wonderful 0 funding costs, and of course there will be ipos. And of course, the markets testing the idea of what constitutes sanity in a business plan. Well, i think the evidence of loco as the latest ticker itself was interesting. It was ever thus. I mean, from the 1960s, the 80s, the 90s, we have seen these cycles. It doesnt mean its the top. What it does underscore is this aint the bottom. Final question, real quick, on the issue of tax inversions. Is it antiamerican for companies to do a tax inversion . Do you expect a lot more of them to happen . From a shareholder point of view, should they be happening . I am not sure its unamerican. What we have done at grants is look at a couple of these things from the point of view of are they actual functioning, profitable businesses worthy of being invested in . And we have concluded in two cases they are not. You know, the inversion, its a gimmick. And what people have to do is look behind the gimmick and see whether there is actual cash flow, whether the debt is growing faster than the equity and whether the debt coverage is adequate and whether these businesses are, in fact, commercially viable. And in some cases they are, and in some cases, we find that they are not. That to me is one less this is the gimmick of the hour, right . Inversions. So, in the case of any gimmick, one wants to see the substance of the business. That to me is the clear and present challenge for an analyst. Do your homework. Yes. Turn it in on time, too. Jim, it is good to see you. Thank you so much for being here. Thank you, kelly. Really appreciate it. Tax inversions are a hot topic on wall street and in washington. My next guest says it wouldnt be an issue if we got rid of Corporate Taxes. Why he says that could end this practice and also give the economy a huge boost in the meantime. Plus, handshakes, theyve sealed deals on wall street and main street for years, forever, but they could be going the way of the dinosaur in favor of fist pu bumps. It may be all because of germs. Tell us what you think in our poll. 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. Welcome back. Take a look at shares of herbalife. The companys Quarterly Results are out. By the way, herbalife to this point had beaten, and i think the last 21 straight quarters, according to the wall street journal. Lets get to Bertha Coombs with the numbers. Shares look like theyre under pressure. Yeah, not this time. They came in a benny shy on the bottom line at 1. 55 exitems, also light on the top line as well, 1. 31 billion. Nevertheless, the ceo saying it was a successful quarter. No mention about all of the situation with ackman and their defense of the company with regard to that. Their guidance also is for fiscal year 14 is raised but continues to be below consensus here, and hence, the pullback in the stock. Guys, do we have that other story ready to go . Okay, well be right back, kelly. We have another story coming back to you in just a second. Okay, bertha, thanks very much. While we do that, lets get more reaction to herbalife right now with herb greenberg. Just looking, herb, as i mentioned, this is a company that actually consistently has beaten. Now the first miss in quite some time. I dont have the press release. I just came over the numbers and the headlines. I can tell you, to be fair to them, they would tell you that this hit on the earnings the top end of their earningspershare guidance, but of course, that is not what the street expected. They expected something higher. But i think more interesting here, if you were to look at the numbers, is that their fiscal year 2014 guidance for revenue is actually below what they originally had expected. Thats more important, because i suspect on earnings, they could say, well, were spending all this money to defend ourselves. I also want to point out, though, remember, this is but a quarter, and in the scheme of the whole thing, whether they made the quarter, didnt make the quarter, i still believe in the end, what really matters here is the overall question about the business model. So, look, in this case its a mixed quarter, not a good quarter for them optically. Well see how they spin it. And herb, while were going to come back to this in just a moment, if we can. Thank you. We want to get back out to Bertha Coombs. As she mentioned, there is another story moving back at headquarters. Whats going on . Kelly, a shakeup in the c suite at darden. Clarence otis is stepping down as chairman Effective Immediately and replaced by charlie letdzinger. He will remain on as ceo until his replacement is found or until the end of the year, whichever comes first. According to the Companys Press release, mr. Otis will remain a director of the company but will not stand for reelection at the 2014 annual meeting of shareholders. The companys initiating a search for a successor, internal and external candidates will be considered and it will be led by mr. Ledsinger. Clarence otis joined darden back in 1995. The company has been struggling with a number of its divisions, a number of restaurant chains have been struggling of late, dealing with higher food prices. A lot of folks having more trouble getting out to eat at casual dining, trying to sort of cut back, kelly. Once again, we have a shakeup here at darden at the top. Clarence otis out as chairman, and he will stay on until a successor is named. Back to you. Bertha, thank you. Evan newmark, not the kind of reaction you like to see if youre ceo in this case. No, but im kind of surprised they didnt already have a replacement there. Darden has had issues for a number of years. It shouldnt be a surprise to anybody. Certainly not some of their larger investors. So, the fact that they kicked him out and didnt have somebody there, a bit of a question mark over the board, i think. Kayla . Well, its also been the target of activist discussion, too. You have starboard in there, marketa capital in there as well, and there was some question over the fate of red lobster and olive garden and the activists wanted the company to do something and it did something else. And so, the activist board nominees just got approved. A handful of them just got approved. So, this looks to be something that is driven by investors. They wanted him out so badly that they were willing to not name a replacement. Ostensively, they would like to search for that person. And heres darden also saying this on the day its completed the sale of red lobster to golden gate capital. Every time we move left to right, all my thunder is stolen. So, yeah, murcotto capital and starboard, theyre in there. I think one of the themes of this summer segment of ours is activism. We saw it in Dollar General, were seeing it here, were seeing it in corporate inversions with, you know, valiant and aller again and activism strikes again. Herb, to the point he just made, this is a ceo i believe on one of your worst ceos list. Shouldnt they have been thinking through possible succession . You would have thought so. He was runnerup on the list i put together at the end of 2013. Many people thought he should have gone a long time before that. They thought it would have helped the stock. What took them this long . The fact that they dont have a Succession Plan lined up. What was this board thinking . Makes you wonder about the board and it gives the activists actually another leg up in this situation, i believe. Thats a point. So, darden trading up almost 4 after hours on the news while herbalife continues to be under pressure. Now, is the era of the handshake agreement about to be replaced by the fist bump deal . It may be, says a new study that you can seriously cut down on germs by doing the fist bump instead of the traditional handshake. Give us your thoughts on twitter or vote. Unnext, to the Orient Express. Its name invokes romance, mystery and intrigue, but the hotel brand bearing the trains name headed for an identity change. The ceo will explain why when we come back. In new york state, were changing the way we do business, with startup ny. Weve created tax free zones throughout the state. And startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. Thanks to startup ny, businesses can operate tax free for 10 years. No property tax. No business tax. And no sales tax. Which means more growth for your business, and more jobs. Its not just business as usual. See how new york can help your business grow, at startup. Ny. Gov if energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Welcome back. The worldfamous Orient Express changing tracks. The name which has adorned hotels as well as cruise lines is going for a new brand identity off the rails, and its official today. With the new name bellmond, which is supposed to sound like beautiful world in french. Joining me now for more is ceo bill scott. You think of the Belmont Stakes almost, but you were going after the idea of what here . Well, look, when we went public actually in 2000, we did go public under the name Orient Express, but as weve evolved, the number of Properties Around the world, we have roughly 45 hotels, trains, river cruises, so were much more than about our legendary train, the Orient Express. Today were about luxury hotel experiences, river cruises and all that. So, the word belmond is a name that enables us to connect our hotels and our trains and our rivers some famous hotels. Very famous. Copacabana palace in rio. We just hosted the world cup. And the chip rannie in venice. So, these iconic Properties Around the world really stood on their own, but we wanted a way to communicate all that we had to offer so our guests would go to more than just one. What is the vision now for this company and how strong are trends internationally when it comes to people staying at these hotels, traveling on these trains, having the income and the means and the willingness to do what in some ways are kind of oldschool trips . Yeah. I think, well, first of all, the Luxury Travel business on the leisure side is very strong. Despite, you know, the economy, the recovery, all those sorts of things have been very positive for our industry on the Luxury Travel. I think theres also a nostalgia for some experiences. So, these train experiences that we have or Iconic Hotels like the ritz in madrid, copacabana, the ritz or hope chiprianni, those are iconic, Legendary Hotels that i think younger generations, myself included, are starting to go back to perhaps where our parents might have gone. But its not old and new. Our properties arent actually all that skew all the way to older demographic, but we are expanding that in the terms of a feel and a look, and belmond helps us with that. How much, when we see events happening around the world when it comes to air travel, flights rerouted, concerns about instability, about terrorism in many parts of the world today, how do you plan for that . How does your business adjust . How much of a hit is it, if at all, for your travelers . Yeah, well, i would tell you this. You know, where our properties are, i just got back from asia, so we did a trip to asia with my family. We went through thailand. Thailands very secure, very, you know, people were worried about the coup that occurred and curfews and those sorts of things. There was no travel disruption. Airline flights are flying on time. The experience was good. You felt safe. It was a good experience. So, we are seeing a little bit of a slowdown in certain regions, but having said that, its business as usual. People are traveling. I think summers been a good summer, and i think were experiencing a very good time in italy. Italy, our Italian Properties are doing very well. John scott, thank you for that perspective, amid all the headlines that were seeing today. John scott is the ceo of belmond. Thank you. Its good to have you. All eyes on the twitterverse tomorrow. Tuesdays earnings day for the social Media Company and Ceo Dick Costolo will join us and take your twitter questions. Its askcostolo. Get started now. And the handshakes president obama makes on various visits about to become a thing of the past . A concern over germs could see fist bumps replace them. Is that a good idea . Tweet us or send your vote to cnbc. Com vote, whichever you prefer. Well be right back. You do a lot of things great. But parallel parking isnt one of them. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. Welcome back. We begin with a couple news items this hour. First up darden, the ceo is leaving, the shares are responding positively. Tie can use a shakeup on the board and activist investors spin off red lobster. Secondly, lets look at herbalife. That company seeing some pressure this afternoon after missing about a penny to street estimates, down to the two minus 10 , this hour and haherbalife been twend trending down. We took too twoths ask if youd rather handshake or fist bump. The rules are on the bottom of your screen here throughout this segment. The first of the tweets, i propose we return to the bump dance moves from the 70s, for the hand contact required at all. He says long fist pumps, short term and our final tweets suggest that perhaps frequent hand watching still should be considered a lesson taught by most fiveyearolds. Yeah, the fist bump can replace the hand bump any time soon. You dont want me to answer. That i think its an interesting point. Which is, as the world or as society has developed, people are much more hesitant to touch other people. I grew you, i was a toucher. Kayla is moving. There are people that are touchers, there are those that create the proper distance. I think the handshake is a good thing. It shows we are animals after all. There are new studies that say the longest, furthest handshakes were the germiest. Its interesting, i think something is said to be about our society in this very question. Nowadays, if i gave you too firm a hand shaky, you might take do you still do business by handshake . Many medeival times you shook hands to make sure your friend didnt have a weapon. We should keep that in place. Eb else should shake hands, i mean its silly. Water silly . The handshake is silly . In there no, the handshake is silly. The fist bump is. Thats like such a bad fist pump. Its very uncomfortable. I dont know what that is. Its a horrible state of affairs. Look, its summer, i hope this thing kind of fades off into the sun set and we keep shaking hands. We should go euro, maybe do the threesided. Threesided kits . Its good to be on the bottom of the screen. 62 to 38 . I knew the handshake. What about the hug . What about the hug . A big bear shaky. You should do that. Show a hug. A look ahead to tomorrow. To peak the cans of the ultimate tweets. Dick costolo will take your questions via twitter. Hashtag costolo. Well be right back. The equity summary score consolidates the ratings. Welcome back. So a quick final thought here from the panel before we let everybody grow go. Evan, newmar, we begin with you. I would say in social media if which social means touching people. I continue to believe in the handshake and the hug. Not a believer in twitter. What about the double kiss, having spent time in europe, yourself . I dont know the we go to the double or the triple. A kiss is better. Im very old fashioned, a triple kiss. She doesnt want, she wants to get off the stage as quickly as possible. I like a good firm handshake. I always dos have my hand sanitizer. Tomorrow im watching person express earnings im interested to see what that says about corporate and Consumer Spending the rest of the year. Even mastercard has traded better. It makes you wonder about operational. Andrew, what about you . My last thought is on the anniversary of world war i, a factoid is world war i gave us reconstructive plastic surgery. Really. So, does that mean that, well, what does that mean . Well, it means that a lot of people if fork would look a lot different had we not had a world war. That would perhaps be a better outcome for everybody . Perhaps. I think so. Well leave it there. Fast money is coming up. We are fist pumping. The presew ritual on fast money is to fist pump. The only question is whether or not you explode it or you just call it. You got to explode it. We explode i. Thats how we roll. We were just doing that, in fact, before you came to us. In all seriousness, we talking about el poyo loco indicator. Over to you guys. Thanks. Fast. Starts right now. Out to fork citys times square, the traders are tim seymour, guy adami, tonights top story the china breakout. The u. S. Markets today are somewhat calm, there is lots of action if asia, the fx closing up more than 2 , the shanghai getting a sevenmonth high overnight. Lets appreciate the cone growth him we came if before doing anything else, a big breakout last night on big buy. One fight, a