Transcripts For CNBC Squawk On The Street 20130708

Crude oil hitting 104. 12, the highest intraday level in more than a year. Road map begins with markets. Bond yields rising, oil back off 15month high. Well break down what it means for all of your investments. Other questions over the crash landing of course in San Francisco airport that left two people dead and dozens more injured. Live on the scene. Crisis in egypt continues. Politicians fight over who should govern the country. Live to cairo. The latest details on the dell buyout. Michael dell key endorsement could bolster his plan to take the company he founded private. Futures climbing with the s p on track for its third day higher ahead of alcoa earns this afternoon which marks unofficial start of earning season. The tenyear slipping back to 2. 69. Dollar at threeyear high against the euro. Interesting session after the jobs number, which in itself was a wild ride on friday. Right. Lost ground in the morning. Made it up in the afternoon. First the tenyear had the big move. By the end of the day the stocks with story with triple increase in the close. Earnings. Now its on to earnings. Based on friday. Of course wall street journal story putting a negative slant on what we can expect for the earnings season in terms of. 7 , i guess. The questions about revenue increases, how significant theyll be, whether they can continue, that is, u. S. Corporations to deliver profferability weve come to expect. You dont have to try too hard to put a negative spin. Conditions themselves have accomplished that. Look at negatives, i cant believe it, the negative depositive preratio, depending whether you look at s p, somewhere in the range of 61. So this is usually in the range of 2. 5. If were if three times as Many Companies as usual are saying things are going to be bad, is that because the fundamentals really deteriorating . Is this the expectations game again . If you cant Say Something nice, dont say anything at all. Their mothers never told them that. Kick off a discussion about the markets. Christopher zook, chairman and cia with kaz investments and a cnbc contributor. Happy monday. Good morning. Dan, quoted in a couple of the pieces about earnings season. Im the course of the negativity. Your point, its not going to be great. I was quoted but im not making im not setting the bar here. Companies listen, what matters. Coming to air we know First Quarter was bad. We knew the First Quarter is bad, the Second Quarter is going to be bad. Does optimism presented about the back hooflt year and beyond warrant higher stock prices because you are going to lose what has been a big beneficiary for stock price, fed activity. I wonder, chris, what am i going to go, to the bond market . Where am i going to look . Im talking about a multiple thats what, 14 times expected year ahead next four quarters . Which is more or less historically not bad. Stock prices are not bad. Not expensive. Also not cheap. When you have the fed pulling out and you have earnings slowing and you have Revenue Growth tepid, its hard to get excited about stocks at this level especially after the pa parabolic moves. Do you put it in cash . Or emerging markets or commodities or keep going, nowhere to hide. I have a slide in my presentation right now that shows the flows coming out of bond funds, the flows out of Commodity Funds and the lack of any flows into equity funds and title of the slide, somewhat, where the heck is the money . That is the big question now. If everybodys pulling out of the investments, are they going into stocks . If they are the answer, money market, cashes. Right now. Absolutely. What changes that balance or moves it back into stocks . Our investment viewpoint, lets wait and see. Right now we have uncertainty on the feds standpoint in the september meeting, earnings season, were in a wait and see mode. To the extent thats happening investors are pulling back and waiting and say week dont disagree with that. Do you have the luxury . People at home might have that luxury, take money out of a bond fund and put it in your bank account for a couple of months. But your cio, you have to tell clients what to do with funds. Are you moving them to cash. Absolutely. Return of my money is more important than the return on my money now. We want to be prudent, we want to park it look for extra opportunities. We see some now as an example in the minors, 15year valuation lows youre going to be wrong short term but youll double or triple money. Youre not afraid of repeating the first half of the year, stocks on a doubledigit tear . Absolutely. Thats possible. Were not completely out of stocks. You pare back, look for evaluations that are compelling. If you dont find a name comfortable owning for three to five years from here, step aside, let somebody else get the last little bit, and wait for prices to come down to you and make real money over time. Got to mention, dan, fomc minutes wednesday followed by a Bernanke Speech after that who clearly wants to continue to control a message that some argue has gotten out of hand last couple of weeks. In related news, to shift the conversation, good story about Larry Summers potentially being the fed chair. Clients, wall street in general, centered on janet yellen. This advances something people arent talk enough of, thats how close relatively speaking Larry Summers is to being near the top or at the top of being nominated. What . Lets assume we get summer as next fed chief. Our view is that inevitably janet yellen, Larry Summers, interchangeable, they have to continue the bernanke policy. We had lunch with a senior republican lawmaker who when i said what are the odds that Larry Summers can be confirmed, let out one of the loudest laughs that i have heard in quite some time. Whether hes nominated or not, whether hes confirmed is really a separate issue. We did a snap survey, at cnbc, following i guess fridays jobs number. The consensus, september taper, average asset purchase reduction of 22 billion. Does that seem in the ballpark . I think it is. When you see that tapering begin to happen, that in itself is probably good news. Its anticipation of the taper. Thats what people are afraid. You probably drift. Drift for here another three, six months and we may have an opportunity to go higher. If earnings come out of left field weak this market has a lot of room on the downside. Can i make two quick points . First weve always been in september, glad to see the market coming around to btigs view. The conversation is can stocks handle higher Interest Rates . Since the tenyear bottom to today, the s p 500 is higher by 3 . Since the tenyear bottomed to today the russell, the russell is higher by almost 9 . It is a fallacy proven by today that somehow or other stocks cant go higher if Interest Rates go higher. Always has been. Correct. A great deal of pain in certain areas, particularly dividend related. Absolutely. The key is why the Interest Rates are going up. If theyre going up because the economys doing well and earnings are doing well, stocks go up if the economys not doing well and rates are going up, thats a problem. Christopher, dan, thanks to kicking us off. A team of investigators continue to look for clues regarding cause of the tragic crash of the asiana flight on sunday. Of course it left two passengers dead. Many more injured. Cnbcs aviation reporter phil lebeau, here from San Francisco airport. With the head of the National Transportation safety bore. Take it away. Thank you, david. Joined by Deborah Hersman chairman woman of the board. The fuselage is over our shoulder here. Give us a sense of what youve been able to perhaps eliminate as some possible causes here. Youre not close to determining anything, but is mechanics a possibility here in terms of this crash . Well, theres still a lot on the table and i say theres probably only two things at this point that weve ruled out. We probably are going to start ruling things out in the coming days as we begin to gather factual information. We know there was no evidence of criminal activity at this point. So we dont have any indication of that. And the other piece of it is weather. We know the weather was very good on the day of the crash, that they had a visual approach into San Francisco airport and visibility was about ten miles. Good day. At least initial indications from the data recorders there doesnt appear to be anything mechanical or engine related, at least initial impression . Thats right. We dont have any reports on air Traffic Control tape or cockpit voice recorder that the crew was saying there was anything wrong and we dont have early indications theres any problem from the trace transcripts and recorders. Tel take me back to what weve been able to take so far, the pilots handling the final 10, 15 seconds before the crash. Were they coming in too low, too slow and tried to turn around . Whats your understanding . Sure. Weve got really good information, really help focus our investigation from the cockpit voice recorder and flight data recorder seven seconds out. The crew is talking. They acknowledge theyre moving too slow. They are not at their target approach speed of 137 knots, 4 seconds out they get a stick shaker activation. Basically its telling them that the airplane is about to stall. Their yolk is vibrating, making a noise, telling them theyre about to stall. 1 1 2 seconds before they have a conversation, talking about going around, that means aborting this landing and going ash and trying to come in and land again. Thats corroborated by information on the flight data recorder they were below their target air speed and did attempt to push the throttles up in the last seconds. The Korean Transport Ministry saying this pilot had 43 hours in a 777, actually handling it, and this his first time trying a landing at sfo. Is it possible the pilot should not have been flying the plane and trying to land it . Remember theres two people in the cockpit and thats theres a reason why we have that. We want to have safety redundancy, crew coordination and for them to work together. So we do need to understand who was the pilot in command. 0 who was the pilot flying at the time, what kind of conversations were they having. A lot of people who hear reports today and obviously you havent determined anything, but one of the questions is going to be, how do i know especially with some of the foreign carriers because of the Pilot Shortage thats been going on worldwide, how do i have confidence that these pilots are truly certified and should be doing the takeoffs and landings . Well, we expect that all of the pilots that operate aircraft that transport the American Public are qualified to do their job, domestic carriers have to meet certain requirements and International Carriers that come into the u. S. Have to meet the same requirements. About currency, about their ratings and their testing, about their medical qualifications. Were going to be looking at all of those things to make sure it was done correctly in this case. Do you understand the flyer, the Business Traveler here in his market, as much as they go over to asia, who might be looking at this saying, wait a second, the guys first time landing at sfo . Im concerned about the flights that im getting on in the future. Its really important that everyone does their job. Youve got the pilots that have got to do their job, airlines have got to do their job with respect to training and then the regulators and theyve got do the oversight. The American People and travelers around the world, their trusting those things happen. Our investigations are determine what happened and why so we can prevent Something Like this from occurring in the future. Last question, look at the future language that has burned, are you surprised that so many people were able to get oust that aircraft within a couple of minutes . I think its a really good news story that so many people were able to get out of the aircraft. Its a testament to the aviation industry, for the changes that have been made over the years to improve survivability. And also, it goes to the cabin crew and the passengers, getting out, evacuating the aircraft. When they do tests they want to people to evacuate in 90 second. The risk of fire is there, you want to get out. We saw pictures of People Holding their carryon baggage. The luggage compartments were collapsing on some of them. I think it scratches people have to scratch their head and say why is somebody grabbing their bag running out of a plane that might be catching on fire . Well want to take a look where people were seated, what instructions they were given by the flight crew, whether people complied. But i will tell you that we do see in a lot of situations that people may be focused on bringing belongings. Some crews tell them dont do this. Again, you know, it is a challenge. And evacuating in an emergency situation, its hard not to get on a plane when youre just orderly filing in and getting on and getting your seat or getting out. Chairwoman of the National Transportation safety board, an update on the investigation. Still a lot of work to be done, guys. They were saying that this fuselage is likely here for days, if not weeks, as they go through everything involve here. Phil lebeau, thank you so much for that. When we come back, mike dell, more support for his buy outoffer. Does that mean carl icahn will back down . Why investors need to wake up and smell the taper. The fed will start tapering as early as september, growing consensus view, take one more look at futures. Monday morning, getting kicked off in the right pattern. Green arrows. Draghi doing jawboning in europe. In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Unh hey lets go [ male announcer ] you can choose to blend in. Yeah yeah yeah or you can choose to blend out. Oh, yeaheah the allnew 2014 lexus is. Its your move. Welcome back. Some welcome news prerhaps from michael dell. Taking dell private in a buyout that will be voted on by shareholders july 18th. This morning, iss, institutional shareholder services, the proxy Advisory Service by which a number of shareholders in dell will headache their decision, decided that in fact it favors the dell deal, so to speak, and advises them to vote yes for that deal. Of course last week i was reporting that many people many of the people aware of and involved in the meetings with iss on behalf of both michael dell and silver lake and the committee of dells board came out of the meetings with iss with a decided opinion it did not go well and in fact they were preparing to not have the support of iss, which given the closeness of the expected july 18th vote, which mike dell will not vote his shares, made them believe the deal would not occur. And so you had the special committee reaching out to mr. Dell, inquiring whether he had interest in raising his bid prior to hearing from iss. Much of that now thrown out. In fact, of course the chances for this deal had been bolstered significantly. The leverage that carl icahn, who has the separate recapitalization plan will not be voted on per se but it is the alternative, if you will, leverage that he has to potentially get a higher price out of mr. Dell and silver lake has eroded significantly. Well see what mr. Icahn chooses to do. Its a close vote. Youve got southeastern and t. Rowe and yacktman and a number of other funds, june 3rd, by the way the record date, will vote against the deal or expected to. Nonetheless, guys, unexpectedly, this has certainly bolstered the hopes of michael dell, not even having to raise. The stock price fall dramatically for a leveraged buyout for a deal on friday because of fears that it would get voted down and then youre left in this no mans land. Iss ignored in the past when it comes to j. Crew buyout. A separate conversation whether this forprofit service which a handful of analyst whose dont necessarily have expertise in material areas have influence. And yet thats the way the system works. Thats why we focus on it but it is worthy. Plenty on all sides, bankers and others, who feel like this should not be the way these things go. Management should not have to spend so much time in a proxy contest dealing with iss and worrying about it. Right. But thats the way the system is currently working. Well, if spitzer becomes controller, theyll be able to deal with him and Pension Funds as well. Oh man. Another story well talk about. Back to future. Absolutely. Reminder, by the way, carl icahn will be a keynote at our delivering conference july 17th. One day before that vote. Hell get a last chance. Well see. We may hear from carl before then. Probably. Kick off the trading week with art cashin. Hell join us after the break. One more look at futures. Well get the opening bell in under ten minutes. For the small and the tall. For the strong and the elegant. For the authentic. For at home and on the go. For pessimists and optimists. For those who love you a little and those who love you a lot. For ultimate flavor and great refreshment with or without calories. For carefree enjoyment. For those who have a lot to say and those who have nothing to add. For those who want to choose and choose. For every generation. For us. For everyone. Forever. announcer scottrade knows our and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary Cloud Infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Just a couple of minutes ago before the opening bell, lets bring in art cashin, also director of floor operations for ubs financial services. Good morning. Weve had the weekend now to digest what we learned on friday about the jobs report. Are you surprised the stocks held up as well as they did and are doing this morning with regard to futures . Not only surprised but a benefit. Draghi out on the circuit again and hes got nothing but sugar plums in the bag. Its helped our tenyear yield move down a bit. Its helping yields generally. And i think things have picked up. To let people know what hes saying, a couple of comments higher rates and advanced economies would be damaging. Fyi. Well, you know, i would like to add to something that dan greenhouse talked. He mentioned since the bottom in the tenyear in the yields in the tenyear, that the russell is up 9 and the s p is up 3 . I think the point there is that russell is made up of smaller Capitalization Companies that deal in the United States mostly and that the multinationals are in the s p. So they may have a tougher time out there. And if the u. S. Economy is picking up, thats kind of the right rotation youd like to see. Are we done having the conversation about alcoa and whether its a bellwether for the i mean i see today the percentage of buys on the stocks a 20year low, 1 in 4. Unfortunately, the only good news about alcoa is that thankfully many people survived a plane made of aluminum. Great point. That was a key. Great point. Oversupply of aluminum, oversupply of sugar. Look at commodities generally, the exception of oil, weve got a lot of this stuff. What a different story from a couple of years ago. From a couple of hundred years ago when napoleon was around, aluminum was worth more than gold. It was important to have aluminum silverware set, if you would to mix a phrase and that showed how wealthy you were. I had no idea. A lot of things that he knows that we dont. From personal experience, but, no, ill leave that aside. Quick question, with regard to the rest of the earnings season, the fact about the number of companies who are coming out with negative preannouncements, what do you make of it . Concerned about earnings season. Alltime record high Profit Margins. Were going to take a real good look at the top line and see how things are. And take a real hard look at what management says about whats coming down the line. Okay. Art cashin, thank you very much. The first opening bell of the week, that would mean its monday, yes. Its about to ring. More squawk on the street straight ahead. Im a careful investor. When you do what i do, you think about risk. I dont like the ups and downs of the market, but i cant just sit on my cash. I want to be prepared for the long haul. Ishares minimum volatility etfs. Investments designed for a smoother ride. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. Watching cnbc squawk on the street. Live from the Financial Capital of the world, the opening bell here in just a few seconds. At the big board this morning, kcg holdings. Over at the nasdaq, Power Solutions international. Manufacture emissions certified alternative fuel power systems. With that, we kick off the week and really earnings season. As we mentioned, tonight with alcoa after the bell. Few things going right in europe. Look like greece is going to get the next tranche. Portugals government is not disintegrating before our eyes. And the draghi headlines we mentioned before the break. Things there seem so unsteady back in the headlines after months in which people were able to largely ignore it, hope that draghis pledge was keeping things intact. The question, after last week, European Central bank, bank of england, that were out there introducing Forward Guidance and kind of shaking things up in rates and currency mark, carl, whether than involved anything here here, for portugal, greece, will these remain i had been on the ladder, the remaining areas of concern for quite some time. Yeah. I think its going to go away in the near term. Keep an eye dow components, intel one to watch. A downgrade to underweight. Price target goes to 20. 12month price target to 20. Talking about earnings not eclipsing 2 for the next several years based on trends we know in the pc world and dell, by the way, getting a pop here on that news. Yeah. What we know so well, trends, of course, dell one reason why we saw iss in favor because of the continued risk to the business that many see as a result of severe erosion in pc sales. And in that market, that hitting intel. Microsoft, for its part, has not been hurt at all by those concerns. In fact, just the opposite of what you might have expected in this period with those shares up so sharply. Today not doing much of anything. But having been up sharply over the last few months. Intel the secondworst s p for the morning behind applied micro. So well keep an eye on the chip space, certainly, and the pc space. Deere down grade, piper cutting deere to neutral, saying fears of a slowdown in Farm Equipment replacement cycle, finally going to happen they think in 2014. Its the one wind of the trade in 2010 and 2011 when caterpillar and deere and all of the companies and commodities running up because anything that had exposure to china, anything that had expose sure to commodities something investors wanted to get their hands on. Whats interesting now, while that is a concern, look how strong agriculture relatively speaking has been in the u. S. You get a bit of a pick up from increase in maybe construction activity. Not enough, though, for them to like deere here. Gold is up today. Of course after that fairly significant fall friday. Watching that closely. Yeah. Its rebounding a bit today. The Top Performing dow component, alcoa. I was just going to say, tell me you know what you said . What was the ratio of negative . I think number of buys is about 1 in 4 on sell side. Its okay to hate this stock. Yeah. Maybe. Does that not signal theres some support of opportunity . I know its dangerous territory but come on. Well, yeah, i guess at this point. Downgraded to junk. Their debt is right. They do generate free cash flow. Theyve done a lot of things. Jims not here, i can say Klaus Kleinfeld. Well positioned for a difficult period. It doesnt mean its not going to be difficult. We know it is given whats going on in china. Trade agent 7. 81. Estimate for the Current Quarter is 6 cents, for the year ending december is 36 cents. Anyway for this earnings per share of 6 cents match a year ago. Sales are expected to be done a little more than 2 here. Can we mention the mother ship . Lets mention comcast. I was going g. E. I know. Sorry. Despicable me 2 the best fiveday open for animated film ever, 146 142 million. Dm disneys lone ranger ii, 48 million. Jerry bruckheimers record spot spotty here, johnny depps record and disneys absent the marvel pixar axis. Going back to the point about the hollywood model. Failure like that, as one person quoted in one of the pieces i read, said will be talked about for years. Yeah. It is amazing. I think you have to spend 250 million on a movie, you talked about it. Spielberg and they were talking how that model has changed dramatically from the likes of spielberg and lucas who can talk about so with that the dows up 76. Look whos back from a nice european vacation. Bob pisani. Welcome home, sir. Thank you very much. Two weeks in europe, tock my mother back to see her relatives. Two weeks in germany and switzerland gives you an appreciation, new money class and its not europeans. Go into expensive swiss watch shops, i heard hindi spoken, chinese, arab, little swiss, heard little german, little italian, little english. Its quite impressive. Women Walking Around with sarrys on in the middle of europe. Something to see how things have changed over in europe. Stocks versus bonds, great to see the stock market going up while i was there. Yet we saw bond yields going up dramatically. Dan greenhau, bond yields 1. 6. Now 2. 7. S p up 3 . Thats what you need to know when the bond market is killing the stock market. Im looking at quarterly reports, i see numbers down. I see 4 decline in the total bond fund for vanguard but i dont see huge outflows. Biggest bond etf in the world 3 of assets lost this year. That is an outflow. Its notable. But its not titanic. Not titanic outflows yet. Im waiting but i still dont see them. How about the earnings situation . Usual commentary on the start of earnings season meager bottom line growth and zero top line growth. Let me tell everybody, were expecting about 2 , 3 Earnings Growth thats what the estimates are. Beat them by 3 every quarter, quarter after quarter. Were going to see roughly 6 Earnings Growth for the Second Quarter. Is that good enough . Its not great. But the year average, the 15year average in Earnings Growth is 8 . 6 Earnings Growth is good enough to keep the stock market going. Its not good enough for double digit gains in the stock market. But its certainly good enough. Dont believe all of the disaster stories that this cant go on. Meager top line flat top line growth with meager bottom line growth, folks this has been going on for over a year. It has been going on. And will likely continue. Nice to be back. Nice to have you back. Boy, he does get to travel, that bob pisani. Lets go over to the nasdaq. Check on things over there. Dave, over the past few weeks weve seen samsung and htc reports dismal earnings investor a negative impact on Semiconductor Players that specialize in mobile chips today citi removed qualcomm from top picks list citing slower highend smartphone sales. Travel stocks on the radar today a pocket of strength for the nasdaq 100. Morgan stanley upgraded priceline to overweight. Earnings of course officially kicking off today, Thomson Reuters projects telecom and Financial Sectors to deliver the highest growth in earnings while technology is not expected to have a Strong Quarter with analysts on average expecting 3. 7 earnings decline for the tech sector which would the worst quarter in over five quarters. Risk reversal pointing to strengthening dollar as a headwind for many of the global i. T. Firms which have significant exposure to emerging markets. Strengthening dollar makes products less competitive overseas. That could be a challenge this quarter. Back to you. Thanks very much. That is going to be the man point of debate all summer, whether higher bond yields and higher value of the u. S. Dollar, threeyear high i think for that currency will dereal pottive movement weve season equities. Good morning, nine charts, control room keep up. Twoday chart of 5. In the wee hours, this was up around 1. 63. Its 1. 64. Two day at tens now at 2. 66. Not that these yields now are low. Because theyre not. But they definitely come off some of the speed they hooked up with after fridays data. Lets open the charts up and make the fiveyear the benchmark. Its lowest yield friday on a highest yields on closing basis back to july 2011. Make that the start date. Our fiveyear. You see it. Look at european fiveyear. Look at difference in the right side. Lets look at our tenyear, same period. Now lets look at european tenyear, tenyear bund. Underdeveloped on right, as an aside down 1 from a industrial production. Weakness in the charts. Look at portugal, year to date on continueyear, under 8 . Maybe their government isnt falling apart but the cost of poker has gone up. Friday, threeyear high on the last chart. David, back to you. Thanks very much. Mr. Santelli. Talk about a subject that ricks talked about a great deal, freddie and fannie. New developments there that are worth discussing this morning. A lawsuit filed in the United States District Court District Of Columbia Perry Capital against treasury, the treasury secretary himself, jacob lew, ed war demarco recipient of the lawsuit. Why am i mentioning it . Well for those who havent been focusing, fannie and freddie have become extraordinarily profitable entities over the last year. Also been in a position of writing up deferred tax assets and there was a change not that long ago called the third amendment in the way that the treasury deals with fannie and freddie. Not just taking a dividend from them as holders of preferred, but in fact taking all of their profits. And it is that socalled third amendment that Perry Capital is one of the big holder of the preferred as well, is focusing on. Theres a lot of debate about this. Youve got legislation that is beginning to be cobbled together, senator corker, for example, introducing legislation how to fiwind down fannie and freddie, waiting to hear from treasury on a potential plan. The lawsuit is added into the mix. And more importantly, perhaps, whos behind the lawsuit. Ted olson. Cant find a more successful lawyer than elson, solicitor general in the bush administration, victorious in the Supreme Court on gay marriage as well. But the lawsuit itself does focus on this third aechmendmen. The third amendment essentially said we are going to take all of the profits of the companies and take them for deficit redux into the treasury. What has that meant in june 30th, fannie and freddie paid treasury 66. 3 billion, what it would have been otherwise in terms of dividends 4. 7 billion. The continued profitability accelerated in the lawsuit, payments to treasury under the socalled third amendment, they will fully reimburse treasury with interest by next year. Under the third amendment, say the plaintiffs, regardless of how much fannie and freddie sent to treasury, preferred stock will remain outstanding. They want a different road to be taken here as do holders of the preferred. Berk cowits, a large holder, this debate is starting to take shape. Hedge funds on one side, not a lot of sympathy, perhaps, from the investing public but simply a question of the rule of law, whether treasury overreached in the third amendment. Its worth watching. Fannie and freddie delivering enormous profits that are helping to reduce the deficit. Right. A hard time cutting that off. Or they dont want it cut off. Perry, by the way, isnt asking for monetary damages they want the thing ruled illegal. Right. Then of course you can see them benefit because they would reinstate preferreds, go back to par, enormous windfall. Richard perry will be amongst our so many different guests that were going to have delivering alpha on the 17th of july. But certainly something to discuss with him is the future of fannie and freddie. Great story. When we come back, oils on the rise. Off of the highs of the day. And gold, well talk about that. Are relooking at triple digit oil for long term . Will gold hit 1,000 an ounce . Well dive into both commodities and find out what as ahead. Don mat trick beginning is his newzynga. Issues he has to tackle day one. Take a look at early movers. Priceline at the top. At farmers we make you smarter about insurance, because what you dont know can hurt you. What if you didnt know that its smart to replace washingmachine hoses every five years . What if you didnt know that you might need extra coverage for more expensive items . And what if you didnt know that teen drivers are four times more likely to get into an accident . sup the more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum hooking up the country whelping business run build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Welcome back to squawk on the street. Im Bertha Coombs at nymex, watching gold. This morning, expecting to see another gold selloff, poised with dollar at 3 1 2 year high. As the dollars eased off the highs a bit, goal has remained steady. George saying expect to see more bargain hunters come out here, if it can sustain that 1230 level into the close today. As nar as energy, a pullback. We are seeing wti nymex crude above 100 at spread between wti and brent, so narrow, less than 5. Nat gas the outlier as we continue to see the heat wave grip so much of the country. Runaway train carrying crude oil derailed and exploded in a. Quebec this evening, five are dead, dozens missing. Ta katy tur. Investigators are trying to get to the heart of the blast zone, if they can. They havent been the able to get down there its too dangerous. Behind me, two fires burning as of yesterday morning have been put out. But the pressure within those two dangers still so high it hasnt been safe to approach it. As you said five are dead as of now. But that number could be deceptively low as it at least 40 people missing by friends and family. Now this happened 1 00 a. M. Saturday when 70 cars on a Railway Train detached themselves from the locomotive. Somehow, its not sure how that happened, rolled down the hill, derailed in the center of the town and five exploded and caught fire sending a massive fireball into the air. Decimated 40 buildings in the area, that numbers up from 30, forced 2,000 people to evacuate. 1500 of the people will not be allowed back in their homes either just arent there any longer or its not safe to go back. A spokesperson for the rail company says, theyre not sure how this happened about the train was unmanned overnight for an overnight driver shift change. Theyre not sure how the brakes failed and how the locomotive and the trains themselves got to detached from each other. Theyre worried about the death toll going higher theres a popular nightclub in the heart of the blast zone. They believe it was busy. It was 1 00 a. M. , saturday morning. Investigators arent sure what theyre going to find if theyre able to fine any remains. Its been described as a river of fire. And theyre not sure if theres any bodies there to even find. Carl. Just unbelievable story. Truly tragic. Thank you so much for reporting today. A want to get moves on the commodities. Keeping in mind all of the loss of life in the story. John kilduff, a cnbc contributor. Good morning. Good morning. Its a tough story to report. The kneejerk policy response is that moving oil by rail is dangerous which weve known for a while. Does this change that . The industrys going to have to system up. The Railroad Industry has to step up, tighten up their operations and procedures and they invite the scrutiny when this happens. How do rail cars get unhooked magically almost . Ill tell you its a bigger and bigger problem. By the owned of the year theres a Million Barrels of crude oil a day riding the rails from the midwest out west to california down south to the gulf and out to the east coast. It only going to happen. I have to say, the pipelines of accidents, they burst, cause environmental issues. So oils a dirty business. It can be done. It can be done safely. But it takes a lot of regulation and money to keep on top of it. John, at the same time, dangers with pipeline the trouble with rail this was not built necessarily with carrying oil in mind. The fact that the proximity of the accident to the heart of this community and many others that are traditionally built along railways suggest extra precaution needs to be taken if were going to acknowledge, a, this is how were transporting fuel and, b, that means accidents really severe accidents are going to happen. I think thats right. I mean ive always advocated you know dont not ship it by rail, dont not drill in sensitive spots but you have to stay on top of and have a cop on the beat. I talk about how outside Englewood Cliff theres police along the highway. It doesnt make us bad people but theyre out there to make sure you follow along. Trust me, they do it. This is very much the same thing. And its serious stuff. But the value of these barrels to lowering the oil price and value to our economy makes it a risk reward that you have to take on and accept. We take those chances every day. Its nerveracking driving down hig 70 miles an hour and theres a gasoline tanker next to you. You hope the tires have been checked out and everythings going on there. Gold, deutsche says metals off 30 from the peak in september of 11 and the correction may be over. Are you sharing the view . More downside for gold. I think theres too much ahead of us here. When we get into septaper, gold another leg lower. Its lost its currency with retail investors, the moneys piling out. Later into the year, into early next, inflation scare, i think, year on year comparisons will be tough. Youll see some flash numbers that are going to get folks attention and golds going to look good as a safe haven if we see trouble in china and other places that will reestablish the safe haven state us. More downside, maybe test 1,000 but fair value in the 1200 to 1500 range. John kilduff, thanks a lot. When we come back, why some investors will no longer be getting early looks at pivotal data we get. Yb y has different investment objectives, ideas, goals, appetite for risk. You cant say one size fits all. It doesnt. Thats crazy. Were all totally different. Ishares core. Etf Building Blocks for your personalized portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. [ male announcer ] some things are designed to draw crowds. Others are designed to leave them behind. The allnew 2014 lexus is. Its your move. University of michigan releases its Consumer Sentiment data. Investors paying to receive data two seconds early which is ages in market time. All over the story for weeks and hes highlighted the data last month. Obviously people, its polarized views as we watch the tick here with a few seconds left. Here we go. Eamon, hard to say whether your prediction is correct. There we go. It went down. It went down. In light of that, Thomson Reuters has now changed its plan eamon joins us now. Good morning. Thomson reuters says that it has voluntarily suspended the Early Release of data at the request of the new York Attorney general eric schneiderman. Thomson reuters says they defend that this general action, but theyre going to suspend it effective july 12th. The statement from Thomson Reuters saying, Thomson Reuters strongly believes that news and Information Companies can legally distribute nongovernmental data and exclusive news through Services Provided to feepaying subscribers. Review what they were doing here. This is university of michigan Consumer Sentiment data, often market moving data that comes out from the university of michigan, coming out from them for decades. Thomson reuters pays the university of michigan about 1 million a year for access to that data. They sell it early to paying subscribers at 9 54 58 a. M. And at 9 55, two seconds later release the data to a Broader Group and public at 10 00. That tiered wrelease system is whats at issue. Thomson reuters will suspend it for now as they wait for the review here from the new York Attorney general. Carl . Eamon, thank you for a story youve been all over from the beginning. Straight ahead, the man who is telling investors to wake up and smell the taper. Jpmorgans chief economist Michael Feroli. Business when possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. For the strong and the elegant. For the authentic. For at home and on the go. For pessimists and optimists. For those who love you a little and those who love you a lot. For ultimate flavor and great refreshment with or without calories. For carefree enjoyment. For those who have a lot to say and those who have nothing to add. For those who want to choose and choose. For every generation. For us. For everyone. Forever. Welcome back to squawk on the street. Dows up 108 points. Road map with a call to investors to wake up and smell the taper. Jpmorgans chief u. S. Economy Michael Feroli will explain why its going to be here before you know it. The countdown is on. Earnings season set to kick off after the bale with alcoas report. If the taper is coming, does that mean growth as well . Earnings season bull bear debate. John mayer be trying to call home. Ahead of technology for new york city trying to help mayor use it to surf the web. Well explain. We know your maroon 5. I read what the words say. Taper talk buzzing here on wall street. Stocks are up, jpmorgans chief u. S. Economy saying june hiring strength makes it more likely the fed will slow its Bond Buying Program in september than december. Michael feroli joins us. Good morning. Good morning. First of all, stocks have been resilient today, resilient friday. Youre not a strategist but i wonder what you see is potentially a positive reinforcement cycle panning out where growth expectations look better. Seeing that flowing into stocks and fed able to exit in september. That seems reasonable. The fact that the fed may be tapering, some see that as less support for growth but also reflective of the fed viewing the underlying economy as being more resilient here. I think the fact that the fed is tapering is because were doing better than most people including the fed thought in terms of growth this year. Its interesting you say growth because it seems like if anything were doing better on the jobs side 195,000 again, but the growth itself has actually been disappointingly weak in the first half. Do you have in view that the fed does that well pick up 3 growth rate in the second half of the year . Thats a good point. Gdp growth itself has been not great. Of course in the face of fiscal headwinds in the first half of the year. We think gdp growth picks up in the second half as the fed. The feds mandate relates to employment and job growth has been solid and steady. And i think that continues, we should feel better about the economy in the second half of the year because, as i said, fiscal headwinds probably are more intense in the first half rather than the second half of the year. Interesting the way people are discounting fiscal headwinds, too, mike. Almost as if that sense that the economys growth is in the range of something over 3 without that sequester effect is what the focus here is and what some extent the tenyear is keeg off of. Yeah. Thats appropriate. When you look at you know, private final spending outside of the government, its held in quite bet than the overall gdp number. So you know, if the drag from the government sector does abate, as i side the economy can do better than weve been seeing. The labor market has held in and theres no indication its about to change. Yeah. In fact, mike, with the ism still above 50, obviously auto sales good last week, that 195k, are you in that school that argues that were going to see some reignition of jobs in the third or fourth quarter, that if 300 print is in our future in the next 6 to 12 months . One can always hope. I think we have to remember, though, that productivity growth has been exceptionally weak over the past four to eight quarters. If productivity growth comes back to something more normal we could see gdp pick up but job growth remain you know around where it has been over the past year or so. It would be amazing, mike, as well if the Housing Market didnt suffer more of a blow from increase in Mortgage Rates and actually if we didnt see conditions more broadly weaken in with regard to whats happened in rates here, with i think about corporate loans, consumer lons, that kind of thing. So, you know, again, that would suggest, though, the period were in is more similar to a period like last cycle make 90s when we were in able get the fed back towards the normalization as opposed to, say, japanstyle post financial crisis prolonged period of deflation. Right. There are some financial conditions that are tightening. The dollar is strengthening. Mortgage rates have gone up. You know one of the things that we take some comfort here that is some of the High Frequency indicators we see in the Housing Market, like Home Builders survey, weekly purchase applications, those havent reacted too negatively to higher Mortgage Rates. Maybe there are other things going on that home buyers are becoming more confident and stomach higher rates. I take your point, financial conditions at least in Interest Rates in the dollar are tightening and thats going to offset better news in the underlying economy. Real quick, to come back to something youve said, given its earnings season and productivity increases seem to be important in Terms Companies ability to be profitable despite lack of Revenue Growth, why is productivity slowed so much over the last four to eight quarters and what will get it going again . Well, i think thats a pretty big mystery wry rite now. Part could be the productivity was exceptionally strong in 2009 and 2010 and this is a payback period. We have seen relatively less capital pending by firms, particularly in hightech Capital Investment and those are the investments that generate longerrun growth in productivity. So that may be another factor contributing to that slowdown weve seen. Mike, do you think Larry Summers should be fed chair . He certainly is competent. I think all of the frontrunners are would make good fed chairs. I guess thats all ill comment on that. Im sure well hear more about it in the months ahead as much as we hear about the taper speculation. Michael feroli, thanks. Investigation into what caused the weekend crash of an asiana flight 214 is still ongoing. Ntsb analyzing air Traffic Control records, weather and the crews action from data recorders aboard the plane. Phil lebeau live in San Francisco and has a lot more. Reporter a lot of questions regarding the experience of the pilot in charge of the controls over asiana flight 214. Here what happe heres what we know according to the south Korean Transport Ministry. The pilot at controls was in training, essential lil Transition Training to be certified in the 777. You need 43 he has 43 hours of flight time with 777. According to asiana, you need 60 hours of flight time as well as ten takeoffs and landings 0 to qualify as a 777 captain he does have almost 10,000 flight hours on other aircraft. Asiana 214s data recorder show no mechanical issues before the crash and in fact, the crews did not issue any kind of distress warning. The ntsb, by the way, needed to interview those asiana pilots which think hope to do today. We have to remember, theres two people in the cockpit and thats theres a reason why we have that, we want to have some safety redundancy, we want to have crew coordination and for them to work together. So we do need to understand who was the pilot in xhond, who was the pilot flying at the time. What kind of conversations were they having . Reporter as you take a look at shares of asiana, hit in trading today, the ntsb investigators will be here in San Francisco at least for the remainder of the week. Remember, crash investigations tend to take at least more than a year. In regards to that carl and david and kelly, over my shoulder is the burned out fuselage of asiana 214. Its going to be here at least for several days, possibly for several weeks, as they go through the charred wreckage of the plane. Its weird watching flights come in and land on the runway next to the asiana 214 fuselage. But theres more questions and we will be hearing more from the ntsb later on today. But for now, thats it from here in San Francisco. Back to you. Weird for anyone who is in a plane on approach, whether youre a passenger or pilot. Phil, incredible. Thanks so much. Phil lebeau in San Francisco. Meantime around the world, violence growing in egypt as Political Parties argue over who should govern that country. Live in cairo for us with the late latest. Good morning. Reporter carl, its been another violent night. Health officials have confirmed to nbc news that the death toll has risen from 42 to 51 with over 400 injured in the clashes that were centered in cairo close to Republican Guard barracks. What happened, promorsi rally close to the barracks and they say, the promorsi demonstrators, that they were praying at dawn and they were shot on, unprovoked. The army released a statement saying the promorsi demonstrators were marching towards the barracks trying to get through there and then in the firefight that broke out, one soldier was killed. Now members of the Muslim Brotherhood held a press conference showing bloody, disturbing images from the scene this morning. The ministry of defense and ministry of interior hosting their press conference, showing images there. A tense situation. New level of violence here that has struck the capital of cairo. Of course this is holding back the political process. Remember, it was seen as imminent that mohammed el bare r elbaradei announced as prime minister. The only islamist representation in the antimorsi competition withdrawn saying it cant sit and watch what they call a Republican Guard massacre. No announcement about the cabinet. No details on the minister of finance. A lot of uncertainty driving this country as we head into the next few hours. Thank you. Watching the political process and the specter of violence over the coming days. A billion dollar battle twe between hedge funds and the government and taxpayers caught in the middle. Attorney suing the treasury in a cnbc exclusish next. Guarante onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac ats for around 299 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. A new report finds that rising home prices are helping mortgage borrowers. Diana olick has details in washington. We know home prices have been riding dramatically lately due to record low supply of home for sale. Price gains are giving borrowers back much needed home equity. The number of underwater borrowers who owe more on mortgages than hopes are worth, fell by 47 from q1 of last year to q1 of this year according to a new report. Underwater borrowers represent just under 15 of the active loans. Real number 7. 2 million mortgages larger than the value of the homes they back. That does not include, though near negative equity when the borrower has less than 20 equity in the home and would not have enough to move to a more expensive home. The drop is dramatic in the stage which had the largest volume because prices fallen dramatically. Ard arizona prices up, negative equity down 53 to 18 . California, its down 51 . And much the same in florida and nevada, again according to lps. Mortgage delinquencies down also over 15 at the end of may, year to date. Thats the largest drop in 11 years. Why in negative equities a primary drive of default. Thats good news. Bad news, these numbers are from q1 when Mortgage Rates were at record lows and buyers coming back in droves to the market. The concern now is the dramatic ride in Mortgage Rates. Im hearing about the possibility of big cancellations of buyer contracts on existing homes and especially for the Home Builders well talk more of that coming up on power lunch. Thats a key concern for everyone in the market. One hedge fund is suing treasury and we have the attorney behind the case. Exclusive interview coming up. Well meet the man who wants to turn pay phones into the newest way to keep a big city connected. Thats coming up. Geoff im the kind of guy who doesnt like being sold to. The last thing i want is to feel like someone is giving me a sales pitch, especially when it comes to my investments. You want a broker you can trust. A lot of guys at the other firms seemed more focused on selling than their clients. Thats why i stopped working at my old brokerage and became a Financial Consultant with charles schwab. Avo what kind of Financial Consultant are you looking for . Talk to us today. 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Helping this big country move ahead as one Norfolk Southern hows that function . Wi drive a ford fusion. Who is healthier, you or your car . I would say my car. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah new york city is becoming a hub for technology as startups plant roots in the city. The city itself expanding, Broadband Connectivity and transforming aban donned phone booths into wifi hubs. The chief information and innovation officer for new york city. He joins us here at post nine. Great to have you. Good morning. Good morning. You were cto for merrill for many years. Correct. Now with the city. Phone booths are still usable products . Absolutely. But we have to reform them over the next couple of years. Looking forward to it. Walk me through the technology. How do they work . Its all copper. You have a power, a copper and it goes to the backbone. So, a, you have power, you have the backbone, we can reform. We had a competition where almost 100 entries came in and gave us quite a bit of feedback in terms of what we can do with the pay phones. It may not look like what you see today. How many are there around the city . Almost 10,400. Wow. 10,400 pay phones. You know, public is looking to see more from a pay phone than just a pay phone. What is the reach . Im curious, if youre near one of these, how far can you expect to have a good signal that you can operate your ipad on . Technology is becoming better and better by the day. Today go 30, 50 yards, and i mean youve seen a lot of hot spots, 18 hot spots over the pay phone, just to goat peopet peop Start Talking about it. Nice 50 yards or so reach that we can get. Routers, as you see there, small routers, 18 x 18 inches. You can get a lot out of the pay phones. Wasnt it at t showing off hot spots . Why not let the private sector take care of this . We are not going to use taxpayers honey to reform this. First phase show off technologies to get public to Start Talking about it. So we did some touch screens, some wifi hot spot done through private sector. Next is now getting feedback from the public. So we held a competition. There are about 25 finalists who shared with us the best technologies that we can expect. Anything from next of a docking station for the bike, use Kinetic Energy to power up the pay phones, solar, all kinds of stuff. The second phase completed. The third phase, put it out to the Tech Companies and have them come back incorporating features we know we can do. Google has a big presence in new york city already. Correct. Over on 14th street. There are google fiber, in huge areas. Ever a conversation about google which offers libraries which we have so many in new york city and Public Institutions free google fiber . In fact, if i may, there has been a program already under way. What we have done is through the Franchise Agreements that we have at time warner, cablevision and verizon and any of the folks and also through the stimulus money that we got a couple years ago about 42 million of that, Broadband Technology Opportunity Program weve rolled out five into almost 100 Public Places where we have installed fiber plus Computer Centers and education. There has been a lot of proliferation of fiber and theyre going to continue to do that through the Public Private partnership, through our Franchise Agreement with cable providers. They are also adding more capacity. Those things are going to continue to happen. As you may know, we cant and shouldnt be using taxpayers money to introduce more fiber to the city. A lot of viewers out west trying to decide whether to base in the valley or new york are listening closely. Thank you for coming in. Thank you. Appreciate it. All right. Want to move on to another big story this morning. Hedge fund Perry Capital suing treasury over fannie mae and freddie mac saying the agent sps third amendment to its preferred stock amendment troys value in the privately held securities. Joining us one of the lawyers, matthew mcgill. Thanks for getting over to the studio. Why the lawsuit particularly in light of the fact that were starting to see proposals whether it be from congress or the senate and expecting to hear one from treasury as well as to what theyre go doing with gses given they cant continue to operate in the way they are. Over the next several months were going to see a lot of proposals. But the issue about in this case is we want treasury and the fhfa to follow the law asset out in 2008 and thats the law that governs today. That law requires fhfa to be the conservator of fannie and freddie, not authorize fhfa or treasury to initiate the wind down of the gses. Do you expect youre going to get your day in court, given that there do appear any number of things that will happen in the not too distant future to begin the wind down that you discuss . Bewe believe well get our day in court. I cant speculate on the legislative processes. But whatever happens with respect to ledgislation in the future, treasury has to follow the law as it exists today. You know its really nice for deficit reduction, all of that money coming in, matthew. Undoubtedly, this is a good deal for the government. This is undoubtedly part of the reason why the president s fy14 budge the projects 248 billion running into treasurys coffers over the next ten years. Bottom line the law requires fhfa to operate fannie and freddie, restore them to sound and solvent condition, not leech all of the profits out of the entities. Right. In this case, nobodys going to cry for hedge funds. Perry benefitted from its position in the preferred securities. Why should we care, frankly, whether some hedge funds are out there trying to make more money from a preferred position that they took some time ago . The United States has the deepest and most liquid security market, the envy of the world and exists because of the rule of law. If the rule of law is trammelled, if the government is allowed to ignore congress instructions, its a danger to all investors and all securities. Matthew, if fannie, freddie werent making money, had nothing to return, would you be unhappy about the trammelling of law . Thats just not i mean its plainly not the facts here. Fannie and freddie now have been profitable for more than a year. Theyve been returning billions and billions of dollars in profits quarter after quarter after quarter. Projected to be profitable long into the future. So the projects are so clear the president himself is projecting 240 billion of profits from the gses over the next ten years. That may be the case now. Was that the case back during the heart of the financial crisis . Certainly it was not the case in 2008. But by 2010 things had turned r around and entities were going to be profitable. So it is just simply unfair to the investors in these entities who treasury and other agencies of the government had encouraged to invest in entities to shore them up at their greatest need. Its unfair to them for the government to come along and say were going to take all of the profits out of the companies and your investments have been destroyed. Ironic hedge funds are protecting Community Banks from the government rather than the government needing them to protect them from the hedge fund. Ted olson, your partner, one of the most successful lawyers from the Supreme Court ever. Why your decision to take on the case . We think its an important issue for the rule of law in this country and we do believe that this is an issue that might have to be settled in the Supreme Court of the United States. Really . You believe this could end up going to Supreme Court . In my experience, the government does not lay down and die particularly when 60 billion or more is at stake. Yeah. As they say, start adding it up, 60 billion is a good amount of change. Well be following this closely. Appreciate you coming on with us this morning. Thank you, david. We should mention, by the way, Richard Perry a future speaker at our delivering alpha conference july 17th, if you have forgotten. Earnings season kick off unofficially with alcoa after the bell. A lakely roundup what to expect. A bull bear debate. You guys do . Having some fiber with new phillips fiber good gummies. Theyre fruity delicious just two gummies have 4 grams of fiber to help support regularity i want some. [ woman ] hop on over [ marge ] fiber the fun way, from phillips. [ woman ] hop on over your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary Cloud Infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. The fed has been in focus for investors, Second Quarter earnings season kicks off with alcoa results after the bell. Senior manager with s p capital i. Q. 6 to 7 ernings growth for the Second Quarter. Also joining us, michael farr. Hes more cautious. Why the optimism relative to what everybody else is expecting. Its low, 2. 9 right now. But we went back over the last ten quarters and you cover earnings season, you know every quarter we see 65, 70 peting the estimate. Last ten the estimate on the alcoa reports is 4. 7 Percentage Points lower than where we enat the end of the season. The trailing four quarters lower 3. 8 . That we think is going to come in to play in the Second Quarter as well. Thats where we get 6 , 7 profit growth. Always a game of lowering expectations and beating them, we might have more with a number of companies that have cautioned negatively. Right. Isnt the real argument whether its this quarter . It seems to be is this the quarter where everyone thinks we have the same number and then it doesnt happen . Thats why were conservative, like i said, over the last ten quarters its close to 5 , theyve been wrong 5 . Were looking at 3 to 4, putting us in the 6 to 7 range. As far as guidance goes, it has been very negative. Weve soon 78 of companies that have given guidance and given negative guidance and thats the highest sense the First Quarter of 2001. It important to keep in mind but after so many quarters where analysts are wrong by a great percentage analysts being wrong . Im shocked. I know. Sorry for saying so. Michael, what might be behind the high ratio the highest since 2001 of companies with negative earnings preannouncements . Facing i guess that look over the cliff and over the precipe at this point. Weve seen productivity gains, weve seen Profit Margins at alltime highs and weve had the tailwind of a accommodative fed. With the Consumer Spending all the way along, the end demand hasnt been there to drive the top line. So maybe were out of the room on the Balance Sheet that we can manage and out of the room in the excess and the economy that we can kind of capture. We cant really capture as much emerging Market Growth as we have been before. Were back to those old time numbers perhaps that 6 annual growth for s p 500 earnings we dont like it a whole lot but it might be the reality of the day until we see a real economic expansion, which we have not seen yet. Christine, is the story going to be every quarter, is top line growth the dominant narrative getting through earnings season . That is it . Is it margins . What will be the biggest story . Top line again. Were going to the season with a negative top line growth expectation, about negative. 2 . Were just about flat. With last quarter its the same story. Yes, we are positive on the bottom line, expecting that 6 growth. But when you look at top line, growth still isnt there and its actually the worst weve seep going into the season going into the season Third Quarter 2009. Im interested in the forwardlooking guidance, too, as you the companys guidance, a lot of companies have been though they had good numbers for the First Quarter yearend didnt look good. How closely are you listening to that in im hearing that talking about more dower. I think the second half numbers have certainly come down a bit. But theyre quite strong. Go into 2013, the expectation was, yes, the first half of the year well see more of the same. But the second half of the year is when things are expected to ramp up. Looking at 6 growth for the Third Quarter and 11. 3 for the fourth quarter. That brings us to overall calendar year number of 6 , which isnt too bad considering how weak the first half was. You manage money for highnet worth clients in washington, you sound nextish about the stock market. So, what are you doing with client funds here . Have you had exposure to equities are . You leaving them in bonds . We manage for High Net Worth and institutional money as well. We look at this as pretty normal. You go through periods where earnings expand and Profit Margins expand and contract. Given the bond market now we remain in equities. Weve been in the multinational high quality very strong Balance Sheet equities. Weve seen the rotation towards those groups and types of stocks. We think thats going to continue not only out of bonds but perhaps out of gold and we think that some of the emerging markets, too, are going to have surprised people on their Second Quarter statements, june statements are going to be lower and we think that flight to safety is guying to continue and probably we hope continue to benefit our clients. Do you not care about earnings . As you say you started off talking about all of the reasons why the picture looks grim for equities but your clients arent in equities. I think youre making a really good point because i think earnings are probably going to come down and i think the market can bump along through yearend. I dont know how to trade in and out based on any sort of shortterm forecast. So if im not going to own bonds if i cant do commodities, if im negative on emerging markets, where is best place to have customers, clients moneys . I think its in multinational blue chips. Good dividends, strong Balance Sheets and seeing earnings begans, theyre just not huge, but theyre that. Does alcoa matter. It always kicks off, the big highlight, metals and mining this quarter, isnt expected to do well, expected it down double digits. Alcoa expected to be down 20 . Every other company in metals and minings expected to be down for the quarter. Well see if alcoa leads them that way. Thank you both. Christine and michael, appreciate it. Tune in to closing bell today. A live interview with alcoas ceo Klaus Kleinfeld after the companys Earnings Report 4 00 p. M. Eastern. A market flash on priceline. We are watching priceline this morning because analysts at Morgan Stanley like what they see. The upgrade to overweight. Talk about pcln maintaining competitive leadship, stableizing margins and attractive valuation. 1010 bucks, up 41 now so far this year. Back to you. When we come back, one major asset class beaten down over the past few months could be making a comeback. Well tell you what it is when we return. Unh hey lets go [ male announcer ] you can choose to blend in. Yeah yeah yeah or you can choose to blend out. Oh, yeaheah the allnew 2014 lexus is. Its your move. 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. Now get 200 free trades when you open an account. Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or Breast Cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. Before Global Opportunities were part of their investment strategy. Before they funded scholarships to the schools that gave them scholarships. Before they planned for their parents future needs and their sons future. They chose a partner to help manage their wealth, one whose insights, solutions and approach have been relied on for over 200 years. Thats the value of trusted connections. Thats u. S. Trust. Munies have had a rough june, going into correction mode, having one of the steepest drops in a decade. Next guest says muni bonds are in the best fundamental shape theyve ever been in. Mark paris, cohead over at invesco. Thank you. Talking during the break about stories today. Making calls on munies has been treacherous for some over time. Its more important not to make Interest Rate call. Rates are probably on the uptrend. Fundamentally we have a sound market. The state of californias doing well. A lot of things happen at the municipal levels that dont happen at federal level. In the high yield market project Revenue Bonds as economy gets better bonds get better. A big disconnect in price but the reality, High Historical absolute rates and with the new taxes kick in for 2014 on your 2013 income, you have great bargains out there now in the muni world. All of the states that were in trouble before the californias and illinoiss, are they no longer troubled. You look at california, theres a budget surplus. State of illinois raised taxes. State of new york lowered taxes. State dozen what they need to do as per. Detroits a big headline. Well have to watch and see what happens there. But that to us is a oneoff at our shop we do research in the municipal research. You can find the right bargains and stay away from the potholes. Are there bargains out there now . Things traded off significantly over the last month. So i wonder, are there particular pieces of paper that you look at and go, whoa, a great opportunity . Absolutely. Look for new york residents, new york city water authority, secure credit. That bonds in the high 4 range. Thats a tax equivalent yield above 7 . For those who want to put money into highyield municipals, over 5. 5 close to 10 on posttax basis. Those are really attractive numbersing both historically and after tax. With a long bond hovering by low 4 you have along bond move significantly on higher rates and be attractive in the muni world. Taking on a lot of Duration Risk, going into a Municipal Fund im taking on risk. Do i want to look at long end of the curve give what happened i expect will happen . The Duration Risk is a major concern, where the most pain is felt. The disconnect in the muni market has overseeded that. At a long bond below 4 , at high grade munis in the 4. 5 rate, high yield munies plus 6 . Have long bond move more higher in rates and munies hanging in there. The problem now is retail selling. Were getting a lot of money out of mutual. Funds. Explain why that happened. I talk about disaster in munies, fine. I understand if it was broadbased sort of concern about i dont know, taxes going lower but i dont understand why munies one of the hardest hit Asset Classes when they should offer protection against some things theyre worried about. Thats the way we feel. I get emails from friends and calls, whats going on. The initial reaction when the fed started to talking about tapering scared the retail investor. Remember, Pension Funds dont own municipal bond, no institutional buyers in bonds. This is a retail product. When it runs to the door en masse we have no mechanism. Dealers cut back inventories and pms come in the morning, navs are down, nav goes down and retail continues to pour money out. Thats a cycle thats difficult to deal with in the muni market. It does leave you with a lot of opportunity when the dust clears. You say detroits a oneoff. I hear that a lot. I hear concern about the trend that that may set. Why do you consider that to be something that is a oneoff as opposed to fundamental problem . Fundamental lemieux this in palts do a lot of things that the federal government doesnt do. Theres isnt that logjam at federal government level. Detroit a large city that had various demographic and geographic concerns going on. Look what happened in alabama with jefferson county, alabama if you did research you know to stay away. We havent bought detroit in years in our Municipal Funds. We stayed away from the small pockets in california. So many names in the municipal patient. Do good credit research. You will get a negative headline time to time. Those making heroic efforts to save detroit, are they fools . Its going to be a coin flip. Dealing with a new air where the bankruptcy judges are going to make decisions on ongoing basis, ns this case someone looking out for detroit. So the bet can pay off. Weve seen that pay off in muni credits or go against you. Bonds are not trading at a low discount you say its a home run to make money on. It a risk. Wed rather take risk in higher yielding, good quality products. Good discussion. Something all viewers Pay Attention to. Thanks for coming in. Google glass addressing some of Congress Privacy concerned about the product. One congressman saying the tech giants response didnt good enough. Joe barton will tell us why hes worried and what he plans to do about it. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. Thats me. I made you something. I made you something, too. See you next summer. [ male announcer ] get exceptional values on the highest quality cars at the summer of audi sales event. Well, it pays to be the former treasury secretary. Tim geithner is joining the ranks of elite earners when it comes to public speaking. He made 400,000 for three speaking engagements since leaving office in january. He made apparently 200,000 alone after giving one speech and taking part in a q a session. Geithner wasnt the only big name at the conference. He spoke alongside the former french president and i am sure they do well on the speaking circuit across europe. Geithner cannot speak to any Financial Institutions that receive money from the u. S. Government in the bailout. Not formally. He cant, but he cannot. If citi wanted him, he couldnt do it. Any of the t. A. R. P. It is interesting. Jeffries, where he did something recently, remember, ron baron referred to geithner saying something about yes, why he. That was at a dirch and they didnt take money, either. He has to make money, the poor guy. Wiping our eyes. He worked hard. How many times and by the way it is not just guys that served in official confident. If you look at the martin feld signs of the world, anyone with access or perceived access, if you want to talk about money makers, guys that have the ear of the fed and history of the fed makes ones as you know. For get 2 milly seconds on wall street. If you think you are getting some kind of insight, it is usually valuable. The policy rather than out right banking and maybe afterwards you kberve a chants to recoup what you made. When you talk to the people at the fed or in washington they will say these guys dont know anything. I think he will mess up, yeah. Old war stories. A couple good stories for you. To the cme group this morning. Rick. I am still trying to wrap with my arms around how much theyre getting pads. I guess it is entertainment, right . If we look at the best trades, theyre always in change. It can be any number of denominations. Take all of the trades and multiby by five, six, seven, eight nine times leverage and you get hardy returning. The newest trade is flip the chart up, look at the spread difference between u. S. Tenyear currently around 265 and a tenyear jgb in the high 80 basis points range. Difference is about 180 basis points. Why is this important . The new trade out there is if you didnt like owning treasuries about 25 futures points lower, you might enjoy loaning them here for the Interest Rate differential. You would i a japanese security and play the spread in between. There is a lot of ways to make money on this and one of the risks is how the spread moves and in the context of Interest Rate differential and the Forward Exchange rate. Of course your risk here is to Pay Attention to the dollar yen we know the treat has a love affair but we want to watch this. Many banks, commercial banks, are being talked about as, kre, the steepness in the field curve, the Interest Rate differentials will be a panacea of money making opportunity. There is one fly in the ointment. Every week the fed puts out a wunch bunch of information on commercial banks, securities available for sale, and in december of 12 it was roughly a balance close to 45 billion. Last week it was around 15 billion. The most current read is 6 billion. Now, granted, these around huge numbers when you are talking trillions ins positive but in the end gives us one glimpse how the Interest Rates are taking on a crowd that holds a lot of them. Back to you. Thanks. Well talk in a few minutes. He is back. Elliott spitzer trying to return to the public sector. Were going to tell you what job he has his eye on back in a minute. I turn ed 65 last week. I turn the math of retirement is different today. Money has to last longer. I dont want to pour over pie charts all day. I want to travel, and i want the income to do it. Ishares incomes etfs. Low cost and diversified. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Fso youre worried about housef fires . Stop smoking. Manage your wires. Watch out for space heaters. Clean the chimney. Get one of these. Cool the romance. And of course, talk to farmers. Hi. We are farmers bum pa dum, bum bum bum bum Norfolk Southern whats your function . Hooking up the country helping business run trains they haul everything, safely and on time. Tracks they connect the factories built along the lines. And that means jobs, lots of people, making lots and lots of things. Lets get your business rolling now, everybody sing. Norfolk southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Elm lot spitzer is back and he is running for political office. He resigned five years ago. Now he is running for the office of comptroller in new york city. He says he will ask voters for forgiveness and believes he has the right skill set for the job and he wants to get back into office baurz he misses the policy fights and wants a chance to help shape the citys budget. They report out of times that his first appearance is at noon today in union square near one of the bub way interests. I guess maybe the two of them together . Notaorietnotoriety. Isnt the quickest way . It is not even the personal issues. There are also serious concerns about the way he was using police force and what he was doing with regard to his opponents. Again, people know the name. And of course thats a job handling all of new yorks pension accounts. It is a big job. Your interaction with banks and boards and American Companies at large is huge. Very significant. You can even set policy there in terms of corporate gov governance and things of that night and i also think about allen hennessy. There is a long line. He took the office of attorney general and made it what it is now so no doud he would do the same thing. Whatever that really is today you know it he will do as much as he possibly can. And campaigned largely on his familys fortune and wont have to do a whole lot of fundraising. On some of the morning shows this morning, he is out there. Off to a running start. 3600 signatures by thursday. I think so. A few more of those. Going to the papers today spitzer, weiner, and corzine all had headlines relatively good. Corzine reported theyre going to drop the criminal charges. Maybe he will join the race. Unbelievable. If you are just joining us, here is what you missed early on. Welcome to squawk on the street. Here is whats happened so far. Incompetent manufacturing in the United States is interesting, a good thing, and we put capital where we get the best returning. The u. S. Is a good place to manufacturer. We are still looking to get back to full employment somewhere around 2020, so the fed has to put its foot on the brake right now, it is hard to see what the motivation is . If three times as Many Companies are saying things are going to be bad, is it because the fundamentals are he deteriorating, just the game . If you cant Say Something nice, dont say anything at all. Clearly their mother never told them that. If you dont find what youre comfortable owning three to five years from here, step side and wait for priss to come down and make real money over time. Product growth comes back to something a little more normal. We could see gdp pick up and job growth remain where it has been. The bottom line, the law requires the fhfa to operate fan and freddy and not to leech the profits out of these entities. Good monday morning. Hope the fourth of july was fantastic. Were live in the new york stock exchange. Dow up triple digits, 99. 75. Es closing high, really only about 160 points away from the record close on the dow. S p up 10 points to 16. 41. Shares of dell rallying and reaffirm iss and recommending of Shareholders Approve the puzzle and silver lake partnering. Iss says the offer provides certainty of value and intel getting hit this morning, a city analyst cutting his estimate on the chip maker saying it is dim toebl shares will break the upside. Stocking are rallying, up 100 points, better than 100 points this morning. Well take a couple of strategists to break down all of todays news flow for you and experts looking for answers after a plane crash landed in San Francisco. Two people dead and many more injured. Were live on the scene. Bad news for qualcomm. City group saying theyre a top pick no longer. What it means for the smartphone industry. Google refusing to budget, the Privacy Policy. The dow up 101, the now, nasdaq, s, as Second Quarter earnings season kicks off. What can we expect looking ahead . The chief Investment Officer with palisades Capital Management and fixed income markets with Raymond James. Good morning to you both. Market going through a period of adjustment. Some may argue with the markets higher and the ten year at 2. 7 maybe were getting used to the yields here. I think thats right. I think he made a great point earlier, all of this out of bond funds is not coming into equity funds yet. It is sitting on the sidelines. I am curious whats going to happen when the individual investor opening up his statement at the end of the quarter and looking at how their bond fund returns are while equity funds have done so much better this year. Nobody likes to miss a party. Certainly they produced double digit returns this year. I think at some point it is under pinning into the market. Those that think we will see a big pull back in equity prices will wait for and that may not happen. Kevin, does that dynamic sound reasonable to you, people getting fed up with fixed income and take a gander on stocks . There certainly has been a lot of concern over when the fed is going to taper and stop easing altogether. That advanced selling in the bond market is not unknown. It is a matter of are we where we need to be . We have seen the ten year go up 50 basis points in a month and about 115 over the beginning of the year. A little bit over done. A little with the volume and volatility and i think now were seeing more settled market and people are picking up bargains. The steepness of the curve is helping. Dan, you seem to like a lot of things cramer likes in this environment, industrials and banks. Can you be more specific. Within the Financial Sector this is a group that has done nothing. Many of the stocks are nowhere close to their previous market high. We like jpmorgan as a large cap pick but we favor smaller names, Raymond James up one of our favorites right now. Much on the industrial side we like the rails in particular, of the short line railroad, genesee and wyoming railroad. You want to stay proceed particular lickal in this environment. Around the world there isnt a lot of growth. The one place in the u. S. Will favor small caps more than the s p stock which is are more global type of players. You want to buy companies in the city that is growing. Does gnw carry oil . I dont believe so. Is that part of the Investment Case for them that you want to look at the rails more pure play . Well, no. They have operations predominantly in the United States but also in australia. They are part of the little bit of the Global Growth story but rails is a great story. It is a 5 billion Market Cap Company and acquiring other operators and thats a key compone component. I think m a is very under appreciated and most of the merger and acquisition tifrt favored Smaller Companies this year. Thats whats been dominating and why candidly it is under reported right now. There is at lo of m a thats happening thats quieter. Thats indicative of a slow top line growth environment that the s p constituents are likely faced with. Those companies cant grow organically. They will buy the growth. A similar question to you to put a period on it. In an environment where athe love things have gone on sale, what would you buy first . First i have to say i love dans pick of Raymond James financial. I love Raymond James financial as well. In the equity market they call them fallen angels. In the bond market is continues to be the union market which is severely beaten up provides the most value. When you talk about 115 to 130 of taxable rates and you add onto that a taxable equivalent with a tax rate depending on where your tax rate is, it provides great value up and down that curve. Thank you, have a great day. Thank you. Investigators are looking intoet deadly crash of air asia dlsh an Airlines Flight and questions are growing about the pilot who only had 43 hours of experience on this particular plane. Phil lebeau joins us and we understand a number of those hours may have been in the similarity anyhow thats what theyre trying to determine, how many hours in the simulator, and how many were flying an aircraft. We do know that he had 10,000 hours of experience in a number of special airplanes, just 43 however in the 777 and that thereabout the focus of a number of questions had they hold the briefing later today. The 777 that crashed here at sf 06789, the pilot as he was coming in did not issue a distress call. There were no indication there was mall function with the mechanics or the engine of the airport. They hope to interview the pilot as well as the rest of the crew later. A lot of question about training and the broader question, training of pilots for for the purpose airlines. When you take a look at the new pilots that will be needed by region, the gettest demand through 20u 13 is asia. We talked about that certainty of training for foreign pilots earlier today. Here is what she had to say. We expect all of the pilots that operate aircraft that transport the American Public are qualified to do their job. Domestic carriers have to certain requirements and International Carrier that is come into the u. S. Have to meet the same requirements about currency, about ratings and testing and medical qualifications. Well look at all of those things to make sure it was done correctly in this case. Earlier today the ceo of asiana was asked in south korea about possibility of lack of experience being a factor and he says such speculation is intoll krabl and contrary to the facts. You should not speculate. Were not going to speculate. Well take a look at shares off 6 in traiting. Back to you. Incredibly important point, the growth were seeing out of asia and the pilots they need. A hedge fund is suing the u. S. Treasury over freddie and fannie. Thanks, karl. Fascinating development in what has already been a battle on going into the holders of the preferred shares of fred i and fanny, that being freddie mac and fannie mae and the gses that have returned to robust profitability over the last couple of year. Not that long ago a socalled preferred oblt of the firms would be diverted to the u. S. Government which of course has had them in conservatorship since hank paul some put them in that state back in august of 2008 it is led by gibson dunn and head olson and we also have matthew mcgill, another lawyer on the case who also oorg used in front of the up Supreme Court. The United States has the deepest and most liquid securities market, the envy of the world, and only were exists because of the rule 6 law. If the rule of law is tram he willed and the cob is lal loutd to all investors it and all securities. We think it is important for the rule of law and we believe it is an issue that may have to be settled in the United States. The issue here is whether or not the treasury had the right to change that agreement. Some say as a result of the Emergency Powers that it still operating under when it comes to fannie and freddie and in fact it did have the opportunity and the right to change that agreement any way it saw fit. Of course, we are now seeing as much assist 66 billion delivered to the u. S. Treasury by fannie and freddie. The continued profitability of gs pes expected to return more than they took from the u. S. Treasury in terms of bailout, and then going on well on on. There is expected to be a plan put forward by treasury in the not too business stant future. Dealing with the dissolution of these gses and figuring out the structure they should have in the newt but this is raging on. They were arguing they were not within this rights to change the provisions which previously clifred significant dividends but not all the profits. I cant imagine reading the briefs well be reading over the coming weeks and months, steven. Thank you. Richard perry will be a featured speaker on july 17th. Last month google sent a letter to congress trying to ease privacy fears and the letter was not enough to be one congressman. Le tell us why he is still concern but first santelli watching the markets and a busy week for the fed. Especially considering this big taf year ya. I would call it a free brunch. Well have a guest. It isnt about the main entry of zero Interest Rate policy. Touch one plastic fork and the markets throw a his i hit. We will constitutes it in 10 minute. Ble price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. For over 60,000 california foster children, having Necessary School supplies can mean the difference between success and failure. The day i start, im already behind. I never know what im gonna need. New school, new classes, new kids. Its hard starting over. To help, sleep train is collecting School Supplies for local foster children. Bring your gift to any sleep train, and help a foster child start the school year right. Not everyone can be a foster parent, but anyone can help a foster child. Welcome back. Were tracking United Health this morning hitting a 52week high. Barrons saying the stock could surge 40 over the next two years. They say unh looks better positioned than rivals like aetna and cigna because of high growth businesses and increasing Profit Margins. The stock up today about 23 so far this year. Kelly, back to you. Thanks very much for that, josh. Google glass may be a revolutional device with the potential to change the world. One thing it will not change is googles Privacy Policy according to a letter sent by congress. It came in reply to an open lett letter. Joe barton chairs the privacy Carl Quintanilla and joins us from dallas as we take a look at the response there. Thank you for joining us. Glad to be with with you you. What are your main concerns . Were you satisfied with the way google responded. I use google maps to get to this studio to do the interview, so i am pro google in terms of technology. I do think an individual still has a priet to privacy in the 21st century and google glass will give people the ability to look around and tap the glass and say record that and people wearing the glass wont have control and we need to correct it if it is possible to do so. Many people that say what is is going is focusing our attention perhaps too late on how much privacy is already being infringed because if someone has mobile phone, the camera the devices arent obvious, there is not always a flash. Are you often already being recorded. Shouldnt your concern be broader in fact than google glass in particular . I agree with that point. I think it is a valid point. Because of the way it is developed which is amazing, is going to bring a whole new generation of users into the marketplace and your basic point about losing the privacy war, i dont think we have, but i think it is time to have a serious debate about it in the congress with the developers. It stedoesnt have to be antidevelopment. We do need to be get to agree the individuals privacy is paramount as opposed to the developers ability to collect, disseminate and market. Google has responded in their own way. Susan says the use will be governed by the terms of the google Privacy Policy, no changes to the policy. I wonder, if it is not glass, it is going to be something else. These products are going to continue to rain upon us. Are you prepared to have this fight every time a developer comes up with a New Invention . Sadly, we have never really had a fight. We kind of let the developers and marketers have the field. Some Companies Like microsoft have been very cooperative and microsoft has changed their default policy to protect privacy and you have facebook and yahoo and foog he will and all of the big banks and now with all of this Health Care Data being collected and now even the nsa, our security agency, is clengting every phone call. It is a big problem. Congressman, how far are you prepared to go if you feel private sigh isnt sufficiently addressed by these companies. . I would like to introduce a model privacy protections bill 6 rights. The congressman just elected, we have a privacy bill we would like to move immediately. Obviously are you have to have the leadership and the president s help to get this done. Important issue. We thank you for joining us this morning. Thank you. Interesting. Straight ahead why one Market Strategist says the term the new normal should have been applied to emerge being markets and not the u. S. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. Vietnam in 1972. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection and because usaas commitment to serve military members, veterans, and their families is without equal. Begin your legacy, get an Auto Insurance quote. Usaa. We know what it means to serve. Its been that way since the day you met. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, seek immediate medical help for an erection lasting more than 4 hours. If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Lets get to rick santelli. Thanks, karl. Like to welcome our special guest. It has been awhile since we have had peter on. Thanks for joining us today. Great being here. I guess this is easy. I like 20 read your pieces and mostly i agree with much of what you write. When traders in my opinion worldwide talk about how the exit strategy for the fed will be messy, i think that most dont consider the messiness weve had the last couple months really since may 18th, but this is the m in mesy were talking about. If it was like horse and back, just swish the m. Can you tell me your observations of how it may get more messy and the involuntary nature of higher rates to some extent. To your point we have to say the 65 increase in the tenyear bond yield over the past month and a half is not in any model, and we have seen the first tien of the bond market beginning to take control and stay to ben bernanke enough is enough and the rules will be set by us and not you. If the fed tapers in september at this point with the move we have seen in the bond market all the fed is doing is catching up to the market. It is the first sign the fed is on the road to losing credibility and control of the bond chrkt which i believe is their worst nice more. Do you think the fed in any way didnt communicate kpakexac what it is doing or how little it wants to do . Do you think the minutes will reflect any lack of communication or the last statement . Do you think there is any miss talks there . I think Communication Works when you are confident in what you are talking about. I think the fed is winging it. Thats why bernanke literally talked out of all sides of his mouth when it came to policy. When your data dependent or forecast dependent you stant talk with Firm Conviction about what you do next. The ned is winging it. This is branld new stuff for them. This is a grand experiment. It is a monetary fantasy land the fed put us in and i think this he have no idea how this is going to play out because no model will match what is going to happen. A few seconds left. Very quickly, emerging markets, basically the bane of every conversation. Is it really their fault. When splashed with huge amounts of liquidity and then the plug was pulled and went to the sahara almost over night. Arent they Collateral Damage to programs with big central banks. The global search for yield created by artificially suppressing the Interest Rates. We saw it in housing andy americaing markets and seeing it now in emerging markets. The grab for yield created by artificially suppressed and rates. We have seen this before. The fed thinks it is somewhat new. It is just a replay. Thanks, peter. Thanks for taking the time to be our guest today. It is great having you. Karl, back to you. Ten years still coming in a little bit this morning. Well keep an eye on that as well. The bells are about to sound across europe. Well bring you the impact it is having here whether we come back. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah european markets have closed. Mostly green with the exception of italy. Seeing shares extending games and here in the u. S. And better news from greece and portugal. Draghi speaking at length and reiterating his commitment to low Interest Rates. Following its july meeting, the council stressed the Monetary Policy stance is geared towards maintaining the degree of monetary accommodation warrantied by the outlook for price stability and promoting stable money market conditions. It reiterated its Monetary Policy stance would remain accommodating for as long as needed. So not surprisingly that bolster shares across europe but in Green European Commission Officials Say they have reached an agreement with authorities on the economic and financial policies the country needs to instigate to receive the next tranche of international loans. Over in portugal making moves to end its political tur poil. Portuguese stocks gains more than 2 on that news, carl. Problem solved, right . Not exactly. Bob is back of course at work after a couple weeks off. You were missed, sir. It was wonderful to sit in europe and watch yields rise. I left at the lows two weeks ago. Stocks went almost nothing but up even though bond yields continued to rise. It was fun to watch from europe where theyre more anxious. Tourist trade still getting hit there. Bonds, finally up after hitting what twoyear lows yesterday. Here are some of the big bond yields. There is the biggest one in the world, en d. It has been awhile since we have seen these in positive territory. Crude hit a 14month high so some of the big energy means are up 1, 1. 5 as well. A tough day for the semiconductor names. City cut the estimates, so some of these names are for the downside. You see 3. 1 decline in intel. Marvel, micron, also downside. The thing i think most interesting, and what i care about, jpmorgan and wells fargo talking on friday. Given whats going on with the bonds they have tons of bonds. What are they going to say . Notice theyre up today. Wells fargo is at a new high. The regionals, u. S. Bank, theyre at multiyear highs as well. Doesnt seem to be that much of a concern. Here is the story here. Mpl, you are getting a steepening yield curve. In theory it is good news. The loan book should be better assuming the demand is there. Thats a good piece of news. The bottom piece is tricky. If theyre holding a lot of bonds in trading accounts and the bonds are down, they have to mark it and it will show up in a p p l. Essential in the trading accounts they have to account for that and give us indications whats going on. That i think will be the most interesting comment well be getting from the banks. Let me move and talk about earningsment everybody and their mother is screaming about how bad it is going to be. This has been going on for six quarters now. Weve had meager growth on the bottom line and almost no growth on the top line. Not a new story. The expectations as we go into the first day, 2. 9 increase in earnings. Not great, but 3 Percentage Points is how we beat that aaverage. 3 plus 2. 9 and you get 5. 9 , about 6 and the average the last 15 years has been 8 , so it is not going to be a great quarter and it will keep the stock market chugging along. I am not arguing doubledigit growth in the s p but 6 is what well get in the Second Quarter and thats good enough for right now. Thats i think a very important point. Everybody seems to think this cant keep going on. Yes, it can. It has been going on. It is not something that happened this quarter. It has been going on five or six quarters. Minimal top line growth has been the story. Back from europe and riled up. We have to send you on vacations for often. 6 is not great but it is not going to crash the stock market. I am afraid to say this but i am going to anyway. We have seen a lot of buybacks. If they cant generate 6 on a smaller share count, what can we do. Thats what well do. That could be a potential issue. We have too go here. I am saying 6 , my estimate where were going to be. The pasonic haul or sgik that. Yes. Oil briefly hitting its highest in a year. The fact this has come off the highs, does that mean the worst is over in the near term . Certainly a large percentage, i say a good 5 to 7 now is uncertainty type premium that we have here. After about 95 dlrsz it is going on its own accord and due to the middle east situation to say we bounced off a high over 04, hard to say right now. The har you cant be sure it is all clear. I think it will ease back because i dont see any disruption in supplies in the near term. I think the market has gone about as much as it can physically do. You never know. To speculate say we got a couple headlines out of reuters or someone that said the activity or violence had spread to the suez. What would that mean . Thats ai quick 5, thats for sure, if you really have something tied to a real disruption whatsoever. That i dont foresee. 245e9s why this market is so susceptible to the outside. I have seen a lot of buying because people are trying to buy that lottery ticket. Some suggested that could go to zero. Are you in that camp . From a technical standpoint it probably can i dont know. I think hope will be dashed a bit. May hold support in 3 to 4 level. Keep in mind back several years ago wti used to train over on a regular basis. It is not a crazy idea for it to go the other way for a while here. It is not anything to get too concerned about. Remember where were coming from. It was trading over 20. Not that long ago. Seems just like the other day. Unbelievable. Thank you so much. It is a heck of a trade to watch. Well talk soon. Our next guest says the problems in the emerging markets are not new, are he will remarks and will last longer than investors think. I was trying to remember how long ago you were saying Pay Attention to the russell. Pay attention to domestically centered companies. Where are you on that trade . Were still there. We think that the problems around the world, particularly in the emerging markets are nothing new. I think people have to realize u. S. Stocks out performed emerging markets i think coming up on six years, point to point, and the market has chosen to ignore those problems. People are finally realizing the emerging markets have problems, but theyre not over, and i think a little too quickly you have people saying the emerging markets are cheap and missing the point there is a sea change under way in the Global Economy and nobody wants to admit it is actually happening. Whats the sea change, rich . I think, kelly, that the emerging markets were the biggest beneficiaries of the global credit bubble. It is why they out performed so dramatically as the credit bubble was expanding. I think everybody out there will agree it is now deflating. Yet theyre waiting for credit related investmented like commodities, emerging markets, gold, to out perform. We think it is very unlikely to have credit related assets out perform in an environment where it continues to deflate. I know are you watching the regional banks. Friday. What a day for the day, the zions of the world and how long can that trade exist if rates normalize around here. I think bob just a few minutes ago referred to something close to what i am going to say here and that is as the yield curve steepens and particularly around two to five in terms of two years to five years, as that steepens, thats kind of the heart of profitability for traditional lending. We think of commodity swans and all of these things and traditional banking is lending and as the yield curve steepens, that can be advantageous to traditional lenders. We certainly saw that. I want to take that victory lap and well check back with you in a little bit. Never take a victory lap, never. Bad news for qualcomm. Citi removing the company from the top picks list that could spell trouble for the industry. I have low testosterone. There, i said it. See, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. 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Surprising new details on how the every day investor is trading through the volatility. Qualcomm no longer a city top pick and thats want stopping one of our trader from buying more shares and were going to have a big debate about it as well. Kelly, are you miking up right there with qualcomm. Thats right. Well kick things off and look forward to that in 15 minutes time. This he have removed qualcomm from the list setting slowdown in high end smartphone sales. Samsung expected weaker profit and revenue attributing to slower smartphone sales. Ray is a Research Analyst in idc and joins us this morning. Good morning. Whats interesting about this to me, seems to point not so much at the saturation of the high end mobile phone market which is obvious but really at the lack of innovation from companies because you could have said the same thing about pcs ten years ago. Thats right. Also take a look at the oval trajectory of the market. The Smartphone Market in even high end Smartphone Market only slowing down. This is not an out right collapse. If you take a look at the innovations some of the Companies Like samsung, like apple, you know, take a look at the latest models and latest experiences, a lot of them say, you know what, this is more like future creep. It is not the new splashy features we saw a couple years ago with face time and siri. You get great camera features but camera on the sport smartphone is around a long time. Is it fair to say whats happened to mobile now is what it took a couple decades to happen to pcs, the market saturated and now there has to be another channel entirely for the companies to create or move into if they want to find renewed growth . I think you are right on the money. Were right at the precipice of it. If you take a look at the press about iwatch and google glasses which you covered quite generously earlier today, were going to the phrase of wearable computing. These same companies, apple, samsung, and qualcomm, they have a stake in those. Take a look at the whole sum of this, these companies arent going away. They are doing it like you said, going into new channels and new systems of distribution and new devices and experiences. I wonder who would you say is best leveraged to the migration of the chipset into things other than phones and tablets. It is a qualcom or somebody else . You can never, ever count out qualcomm. If you think a look categorically across the board, theyre number one in so many areas. They were taken off last year and put back earlier this year. Chances are well see them again. You take a look at what samsung is doing and media tech and how much of a presence in emerging markets with low end smartphones. There is a long list of other vendors to be aware of. Qualcomm is still the 800 pound gorilla. Given the at the clien if you can take the longer view, may be an opportunity. Thank you very much, sir. Thank you. New questions are being raised by pilot of asiani nr a airlines and well talk to a former pilot and captain about what coup been going on inside that cockpit when we come back with more squawk on the street. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . On the phone is jim tilmon, a former pilot and aviation expert. Thanks so much for joining us today. Thank you. Thank you very much. A lot of discussion about this approach and what we know. The ntsb has a lot of work to do. On a day with good weather,this visual approach is described somewhere on a scale of 1 to 10 in terms of difficulty around a 2 or 3. Do you have a sense why they would have delayed to add power . I do not. It is a puzzle to me why they would be flying the aircraft that low and that slow and take corrective actions that late. All of those are factors that contributed to this accident. Why that happened, we dont know yet. Premature to say that we do. Lots of variables here and we need to wait until the ntsb comes up with answers. The chairman did point out there are two pilots in the cockpit. It is why they have that set up. How easy would it have been to if he was not the one already flying. Very simple. Are you sitting right there in the cockpit and you just reach out and grab the controls and go with that. It is fairly routine and happens from time to time. I am concerned about the lack of conversation between the pilots about what was happening prior to the time they get to this critical stage of seven seconds before impact that the airplane is about stall, just about stall, and thats your warning, so you need to take corrective action. The corrective action they took was frankly in my view too late and it was just didnt work out. I was going to ask about that. Sounds like everything was fine, looked fine until seven seconds before landing. How much time did they really have to react and how surprising is it that the descent could by all accounts go fine until the last second. Thank you. I just dont really subscribe to the fact that everything was just fine. I dont think so. Accidents dont happen like that. If these accidents start somewhere before, long before they get to that point. In my view a landing is not made on the runway. A landing is made several miles before the arn gets to the runway, and that you set up your airplane and put it in a slot. You get everything stable, everything is set. Youre looking at a sight picture. You maintain that with minor adjustments in power and attitude until you touchdown. They should not be made in the last few seconds in flight. You should make decisions like that long before so you have room with altitude and air speed and Everything Else to make the safe adjustments for flying. Jim, a lot of questions. It is really all we have at this point is just questions. And of course empathy for the victims and their families. Appreciate your time so much. My pleasure. I am praying this will be resolved very soon. Jim, thanks. It could be john carter revisited for bis any and the lone ranger. Find out how much money the house of mouse could lose. Mine was earned in djibouti, africa. 2004. Vietnam in 1972. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection and because usaas commitment to serve military members, veterans, and their families is without equal. Begin your legacy, get an Auto Insurance quote. Usaa. We know what it means to serve. Hooking up the country whelping business run build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary Cloud Infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. It was another rough weekend for disney. Lone ranger tanking at the box office and grossing only 73 Million Worldwide since the release wednesday. This was despite a massive 225 million budget. Julia boorstin joins with us more. A surprise to see them up almost 1 today. Thats right. Disney shares are shaking this off. Despite johnny depp, and a familiar brand, it fell flat largely because it failed to appeal to younger audiences. Although disney reported the budget at 225 million, hollywood insiders put it at 250 million, so what will it cost disney . They put the number at 190 million. Two years ago disney took a 200 million writedown on john carter, a bigger bomb out of the gate than the lone ranger has been. A spokesperson acknowledged that, quote, initial opening performance in the u. S. And overseas of the lone ranger was softer than expected. The key question is when it opens in the remaining 70 of the International Market will it be able to overcome the fact that westerns not o tend not to perform well overseas . The weak performance is not hurting disney shares today. The stock is up about 1 trading near an alltime high still. Who is on the hook for this disappointment . The studio chief agreed that the chief is already fired and disany and the current chief started when it was halfway through shooting. One factor that could work is though the reviews have been pretty terrible, the Audience Response has been fairly positive. It earned a b plus grade for moviegoers to get positive world of mouth. Interesting. In fairness to disney, they appear to be doing just about Everything Else right, the theme park business is on fire, espn, basically mins cash, one of the best performing component. And the tennis match yesterday. Julia, thanks. As we continue to watch the dow lose its gain. We were up triple digits and now up 66. Exactly 66. Well see if we can hang o the ten year has come in. To headquarters and wapner and the halftime. Thanks. Welcome to the halftime show. Four hours to go until the close. Right to the wall and find out where we stand today. There is the dow losing a little luster now, only 68 points and the s p is positive. Here is what were following on the half. New information on why individual investors are pouring into stocks and what theyre buying. Qualcomm gets the boot from citys top picks list and the traders are split on this under performers