Transcripts For CNBC Squawk On The Street 20130820

Will talk more about that in a moment. Another tough overnight session for global losses in tokyo and india. The road map begins with the retailers rallying best buy, home depot, urban, and they all beat handily expectations, but slightly different than penny. Missing expectations, but trading up as the investors conclude that it could have been worse and appears to be better for eli musk and tesla. After the retailer posts better than stronger earnings and mobile phones and appliances were the strong components of the quarter while gaming is weak. This stock is at a 2 1 2year high today, jim. It is up 2x for the year and a lot of discussion about huber joe l jolie, and if they have found the answer to amazon. Well, that is very good and the gaming is the going to be good in the Fourth Quarter and we have new iterations, and i like gme. This is a remarkable turn, and sometimes you have to say remarkable. Some people have gotten it right. Joey has gotten it right, and shows you how poorly might have been run beforehand and the companies can turn around like a Football Team. You have a new coach from the niners and bad to good. This is a company like the nfl. He puts in a new coach, and they are suddenly from being a sec d secondtier division to being in the division playoffs. And so you are almost down to the flat comps, and they say they will make a bigger investment in price competitiveness and saying amazon, bring it on. Well, li can go to best buy online as e wewell as amazon. And now you have to pay taxes on best buy. It is room for two. It is not one of the zero sum gains between best buy and amazon and that is what we are discovering. Also, the consumer is addicted to hard goods. Yes. We thought that every dollar that used to go into the jimmy chew sh choo shoes with the toe cleavage and now it is best buy. And there is some rationalization. Well, i love the guys who come out to say, listen this is what we did wrong and we will do better. The best buy release is about selfflajlation and i love it. And not to mention cost cuts. They have cut 390 million and halfway to the target. Yes. There is some room to go on sg a. Yes, i want to congratulate the jpmorgan analysts who said long and strong and the focal points on earnings, and i was doubtful and too critical, because when you see the stocks move, carl, you think that, well, it starred the year at 11 and at 30, what is going on . Well, the sans that the first 15 points, a la Hewlett Packard were not going out of business, but the next, we are going to fix our problems and no longer system issic risks and the Strategic Plan is over and now it is about tactics and the tactics are working, best buy. And what about the next ten or 15 points . Well, the new products in the Fourth Quarter and you will want to shop there. New gaming products. And gaming is a gigantic industry and it is one of the generati generational things, and we saw monster beverage a topten stock. Im a uban guy, and some people will be shopping at best buy, and back to school will be strong for them. Interesting story. And another key story to watch today, depodepot, they di beat the revenue better than forecasts and raising the earnings and estimates for the year and reflecting the improvement in the housing market. And some well, get to the metrics. Customer transactions up almost five. Average ticket up better than four, and the u. S. Comps 11 and the first doubledigit in 14 years. Frank blake, and again, joly, and frank blake, the ceo of home depot is executing better than i have ever seen. And remember, he was always another guy who was saying, l listen the consumer dollar has not come back, but on the call, you will hear that the consumer is spend morgue money in the house, because the dollar in the house is giving you a buck and a quarter. He is a huge believer that the consumer will stop spending until the house is going up and the spending and the home depot hard goods and dont forget this is the Holiday Season the spring, because people who shop at home depot are the gardeners and people who spend time making the house look better out soosi and remarkable quarter, and again, great execution. This is amazing. Raising the fullyear comp view to six which is the biggest since ten in 99 when they had half as many stores. My halt is off to frank blake who is happens to be one of the most humble men in the business and when you tell him he is doing well, he immediately says no, it is the team, the team. And it is credit where credit is due, and it is the team and the powerhouse and firing on all sill l cylinders. Skeptics argue that none of it is reflecting what has happened to the 10year since the beginning of may up. 120 basis points or part of that or what . Well, i am seeing the good commentary since july, and one thing, look, the 10year trumps everything. I dont want to say that we are in a situation to take the eye off of the 10year, because it is just to be all and end all, and if the 10year settles down, then people will go back to what works, and this is a different week from last week. Last week was hang dog and macys doesnt have everything, and walmart, and not a shopping pleasure. And kohls and macys, and it is more nontraditional skewed and if you look at the best one of all, the best one is Urban Outfitters. One more question on home depot. Does it mean that lowes got trounced or is going to benefit . Well, lowes is in a halo mode, and they have not done as well as home depot, but people are going to say they are spending on homes and people want to do the zero sum on lowes, but if people are spending at home depot, lowes is okay, but home depot is the best of the breed. And jim urban reported that the profit jumps 25 thanks to hi higher sales at all threef of the store formats as well as expanding margins due to fewer markdowns and the story is repeating better margins and something we didnt see last week. Yes, and home depot is about a cultural thing. You go there, and urban is a cultural phenomena and three people who had numbers plus30, and extraordinary, and a line by meg hane who is the president of free people, and the brand is more than the product. You know what the strength of the urban is Customer Relations management. They are reaching out, and they have created with free people which is just on fire a remarkable kind of lululemon culture and people are spending at free people above what they are spending at almost every other retailer, because they like the karma of it, if you want to call it karma. Anthropology is the analog to ho home depot, and urban is not that strong, and the company admitted it. Not that strong for them is better than most. And we have to get through two of the three landmines of the space this week, and namely american and abercrombie, right . Well, teenage apparel and we just dont know. It is a hate them, love them, chinatown kind of situation, and urban is one of the guys that congratulations to gentlemen and ladies on the good quarter. When you go through it, they could open up a huge number of stores and i will tell you that growth is what we search for. This is not cost cut, this is Revenue Growth and then margin expansion, and it is a remarkable quarter, and the directive consumer, the conline business is going to increase the dividend and they are going to grow. And they are on all cylinders and like home depot, fantastic. And maybe not on all sill c r cylinders c penny reporting a lower than expected loss, and penny hit by the unusually large markdowns and if failed promotional strategies and mike ullman saying on the Conference Call that we know where the problems are and how the address them and have the plans in place. It is said this morning, jim, they ran the bus over ron johnson and then backed up to run over him again. There are things in the rele release that are egg intive about that, but first as someone who has met big ackman, this is personally, apologize to mike goldman, because i like the fact that the private label is doing well, and the real whole was the thing that johnson wanted, but the most important here is the 1. 5 billion in overall liquidity they plan to end with, and this is no longer on life support. Mike ullman is turning it around and in the end, it is jcpenney and it is not like jcpenney is Urban Outfitters, but it is one of the quarters that says we are not dead yet and at best buy 11 it was you are not dead yet. It was a very good quarter and back to School Season and he is positive. And macys was positive on the back to school, but is it possible, possible that the company could make a comeback, jcpenney and the answer is yes. Interesting. People are worried about the cash of course given that we are entering back to school and holidays and the inventory is relatively high, and is that the concern . They said that the back to school was encouraging especially for the tax free holidays, and something that mike goldman specialized in and the arizona jeans and the nike and the levis and vans and if you check the price it is below everybody else other than kohls with that sonoma brand. And they also argue that customers unlike what johnson wanted to do is to shop by category and not brand. You want to go in and find x and not what so and so makes in x. It is true. And ullman always had the mind that he knew what was in the mind of the shopper. And people will say, jim, ullman failed the last time, but failure is not the right word, because he was not offering as attractive merchandise as target for instance, but this is a quarter where ullman calmed the banks and the credit markets, and we have found that carl bass is selling, because he does not like the stock, but they will make it through the Holiday Season and you have a new story. Is preferred as much of a tell as earlier in the year . Is. Yes, that is a tell. It went from 25 down to 17. But this is one of the quarters where ullman got it, and the idea of a brouhaha by ackman of whether he should go, and i think that ullman is deserves thanks. He deserves a thank you. And i think that he deserves to keep the job. Well, mike ullman didnt need this headache. He was just having a good time, and then suddenly, he comes to save it, why . Because 100,000 employees and he feels bad for them to come in to save it and he is the goat of the game . Look, it is true to run over the bus and it is a Jackie Gleason situation, and it is like, in other words, no honeymoon. And when we come back, what a morning already. We will talk to model s. Making headlines for tesla. And we will tell you why apple needs to learn from tebow when it comes to tell, i have and couple of interesting points of apple. We will talk to the ceo about the companys new top box and h how to keep the company relevant. We will have a lot more squawk on the street from the nyse coming up in a moment. At fidelu 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. Fake a look at the global markets. We have seen pain in jakarta, and nikkei down again yesterday. Nobody learns, jim. Right. The markets go dourngts and ywnd a chance when the Interest Rates went down, and you had a chance. It is 1997, guys. If you were in the markets, you get a little focused i almost said other things. You see the pattern recognition here, and anything alarming in the losses . These are, if europe comes back and japan comes back, i dont care about these losses, but both of those things have to happen, and otherwise, i will stay front and center. And more good news for tesla and elon musk, because they say that the model s has received the highest crash testing over any other car tested. They say that in the individual categories conducted by the Highway Safety administration released last week gives them the combined record of 5. 4 stars and only one percent of the cars tested earn 5. 0 stars in each category and that comes out after Consumer Reports gave it a perfect score. It is a safety share, and i was using the earnings per share, and that has nothing to do with the stock prices, but this is a moment that i like netflix, and all that orange with black is way too hard to watch. But i like netflix, and i shop at amazon and i buy amazon and i have been in the tes l. A. Andla buy tesla, and the dashboard is so compelling, i would think that the people are more prone to crashes, because the actual pc in the car is so dynamite and i feel like, hey, one eye on the road, and but apparently that is not the case. Obviously, we have fatalities going up in the last few years because of the texting while driving and a terrible thing that people should be ticketed for that of course, but i think that the tesla will have another leg up, because young people, and Rick Santelli said some interesting things that young people love it. I never judge a cult stock and who am i to say unlike tim greenberg, that tesla belongs to x. When you speak to the young people, they say it is well and good, but what about tesla . And the hedge funds, tesla, greatest of a lifetime. And why . You have some edge . Do you believe that it deserves, i dont know what it is, onethird of the market cap of gm . Well, i remember when merck passed their market cap in 1984, and people freaked out. I do see that people will say it is wildly overdone, and then people who say, i dont care as long as they execute, i will keep on this. And the execution from musk is remarkable. The Conference Calls are like, it is like king, and it is like king henry iv and olivier, and on broadway. It is like, wow prince al and kiss me kate, and see you later, and this is a great broadway play. Musk is into shakespeare, and into the histories. Have you seen what mark vintioff has tweeted . No, he has not texted me. And i agree with e lon musk, tesla is the best car ever, and i want an x. That is from benny this morning. Well, i wont retweet you and what is the crm stuff i have been asking you tollp me with, and that is neither here nor the there. And remember, this is a car that has not hit europe yet. I looked at the mw electric car, but this thing, i have to tell you that is going to be a that is a popular item and i might have to have two of them. Well, speaking of netflix, moving higher in the premarket, a and they have struck a deal with the Weinstein Company and that is what is different about the deal is that it gives netflix window into the content of the pay window which means you can get it sooner. And so the details of the deal continues to change. Well, netflix has the momentum and the way that the younger people watch tv and netflix and original programming we often admit that you at least want to try it. One more thing, why didnt apple buy it at 100 . They could have had social and mobile ugh cloud. And now, apple in a moment. Looking for a safe haven in the market . Cramer will e help you find one in the mad dash and looking at the futures. Maybe some relief here in the open as we look to reverse some of the losses of the last four days. Squawk on the street from the nyse is straight ahead. And the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. 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They downgrade panera, and by the whole, and it is a hot stock, but by the last quarter not so strong and they go chipotle, sell to hold, and they are starting to make a comeback and people got negative on theb i eat the burrito bowl, because i dont need the tortilla, because it is about being svelte. Yes. And it is red robin with the better sales drivers and margins. This is a hot stock, and people dont for kcus on the re robin and i come back and say, have you seen wendys, and that bacon pretzel cheeseburger comes with lipitor now that lipitor is generic, but it should. It should, right . It is called the best Product Introduction for wendys in the past ten years. And Product Introduction that moves the stock is almost impossible. Hats off to wendys for getting it right. Mcdonalds would agree with you. I had the wrap last week and very good. Very good mcdonalds, and i like what is happening, but it is not happening fast enough. Look at this thing. Geez, who says that people cant make money in this market. And what about al llergealle . Well, wells fargo say they are trying to figure out what they are going to do with res stas stasis, because it is the eye product that is comparable to the bobotox, and i think that ts is a for real move and the stock could put on five or six points. And so we have restaurants and some downgrades of anne taylor, and walmart. What about that . And all of that is after the bell. Can the markets bounce back after the first fourday losing streak of the year . The opening bell is just after this break. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. [ male announcer ] at his current pace, bob will retire when hes 153, which would be fine if bob were a vampire. But hes not. Hes an architect with two kids and a mortgage. Luckily, he found someone who gave him a fresh perspective on his portfolio. And with some planning and effort, hopefully bob can retire at a more appropriate age. Its not rocket science. Its just common sense. From td ameritrade. You are watching cnbcs squawk on the street from the Financial Capital in the world. The opening bell is to ring in a minute and a half. After four days down in a row on the dow, something we have not done since last christmas and we are not 5 off of the highs and the 5 correction on the s p 500 would be 1624 and so a little cushion there. And sbx is hanging on the thread and we know that there is a difficult level, and if the Interest Rates go, and the 10year to 3 , and you breakdown and if they stabilize, you will hold in here. A lot of tells i am looking at, but one of them is that what people say that home depot means, we should go back to look at housing there. Is an interesting article in the New York Times about houston that there is a shortage, and anything that shows that housing will stabilize takes us higher. Would you take it to say to rethink masco and Sherwin Williams and Owens Cornings and whirlpool . Well, stanleys black and decker had a strong showing and Sherwin Williams was not that good, and masco is three quarters behind us. Interesting. We have not mentioned dks, and yeah, bummed out by that. That was a big miss. I have to tell you that those who are going to sell under armour on that, you are mistaken, because under armour is not the ish ssue there. I think that nike is probably okay, but i think that people will jam those stocks down. It is a mistake. Well, there is a look at the opening bell and the s p 500 at the top of the screen, and at the bigboard adoptionshare, organization helping to make the child adoption process easier and more transparent. Over at the nasdaq, the United Nations marking world humanitarian day, and with that, we will get started here. We have not yet mentioned apple which has a couple of tidbits in the news. The journal asking the big supplier to start moving the phone in early september, and what we believe they will say on september 10, and all things d, and they have hired a fitness consultant and a man who worked on the nike fuel band which would lend to some support of a watch device if he did the same thing there. Well, it is a big hit, and run book is a big hit, and this is apple. I frankly just catching up. When, remember, that september 10th was not supposed to matter and the analysts decided before tim cook had anything, it was below the expectations, and icahn has taken it up, but the stock can go higher. I know that you have to be careful that it is a level where it could hang out, but i think that the idea that apple was dead is wrong. I think that apple is an interesting products and ip expensive and do a big buyback, maybe underneath it here. Dont wry it off ite it off so and some say that the apple will be offer ed ed in the gold color which is the first color since 2007 and you know where gold is popular in the goldcolored things . China. And Morgan Stanley saying that the iphone 5 krshgts could 5c is that it could be increasing in china. And also coming on the talk about it with china mobile, and the firstst thing i told people to buy apple is because my daughter had a pink ipod and for the holidays she wanted a blue one. She said, dad, these are Fashion Accessories and maybe tim cook has decided in china they are fashions tas. And the big gains are jcpenney, and tjx. Yes, and tjx doing a remarkable job and once again shows you if you have the right mix, and home goods and europe is turning, and she is a remarkable operator and asks for no publicity whatsoever and she would be praise if she came public, but she is not. Nice quarter. And finally on the s p 500, pulte, and horton and lanasco well, people thought that the home sector was something to forget about it, but Restoration Hardware should be have the best quarter of all, and if the 10year goes awry, they will say, what were we thinking when we bought those stocks on that tuesday morning. But remember, there is a pulse, and this is a pulse and execution, and frank lake, and ullman, i apologize to you, mike, on behalf of the various hedge funds who have hated you and bs buy. I mean, we hane at Urban Outfitters is remarkable, and this is all about execution today. We mentioned anne taylor, and nice pop, and janny up, and interesting price buy. Interesting, because apparel is not that great. They say that wear to work is the best offer in the mall. We will see how they do later on. And one thing to keep checking home depot, they did not have the leverages i expected so it is not popping the way people thought, and it is that people thought more sales leverage, but i want to point out that they did a great job, but people are looking down and saying, why didnt they make more money, and i say give them a break. Interesting call on the social today. Out of janny as well. The initiate facebook with a buy talking about the pricing leverage and the potential for the payment platform and the target to 50 and facebook is up, and initiate zynga with a sale with 2. 50. And i have it on the charitable trust, and you know that they have to take out the 38 level which is the level that has been impossible to breach. It is where sandberg sold the stock, and see if he gets through that. That is important. I dont know. Zynga, and give the new Management Team a little shot and a lot of cash on the books. Remember, everybody wrote off groupon and management came in and turned the thing around. I dont want zynga to sell here. Where were you . That is initiation. I should say that. Initiation. Yes. And selling that is selling sirius satellite at 2. 50 is not so great. We mentioned the phones earlier, around bernstein with a note. I am quoting from bernstein, it appears they are headed for a disastrous September Quarter and argue that the windows phones are not getting traction and nokia continues to place the big bets on the highend phones which are very good products burk on products that nobody wants. Well, i can see it coming off, but it is not blackberry and better than blackberry, and the microsoft software, nobody is crazy about that, and so i saw a guy who had the phone, and really . He had the phone at any college reunion, and steve ballm ballmer, and he brought it out and i said, what is that . I said the nokia with the microsoft, and i said, why didnt you use the apple. He did not respond. Puzzling. And all of this, jim, directionally close to the flatline. And the bonds and the home depot, and now people are spooked, because where is the leverage. Again, apple is not Immediate Reaction because it has been straight up. Look, europe is soft and we will see what happens when europe closes today. People will say, we have gotten over the most oversold in 2013 and once you clear europe out, people will circle back. Okay. With all of that, we will go the bob pisani and see what else is moving on the floor. Hello. Happy tuesday. Knows they the u. S. Bonds are to the upside for a change. The markets are are on the flat side, but most of the major sectors started at the upside and the carnage is out there with the emerging markets and indonesia is down another 3. 5 , and thailand down 2 , and the currency of the weak dollar is not helping here. The emergency markets are down, and the rupp is down, and take a look at some of the emerging stock markets here, from the beg beginning of may when we started to talk about the tapering problem, of course, is that the money is coming out of the merging markets and flowed in in qe, and now flowing out, and most of the countries with problem problems. Here in the u. S. , most of the sectors were opening flat slightly to left side, but the commodities even though we have a a weak dollar today, most of the big base Metal Commodities are to the downside. So copper and aluminum are all to the downside, and the stocks in the commodities area like materials names are opening flat to slightly down today. That is an issue today. And there is some of the big commodities that you will see, and material names that you will see here in the United States that are trading are slightly to the downside. The biggest problem is that this is august frankly, and we have painfully low, and opened with 30 million shares here at the New York Stock Exchange and that has to be close to the lowest levels of the year, and while there is phantoms to think about, there is very little hard news to trade off of right now. That is the biggest problem we have got right now. In terms of the retail, boy, home depot knocked the cover off of the park. And i was concerned if the big ticket items would be there because that is what they needed to see, strength in appliances and kitchens, and they did it. Traffic up 4. 9 , but most importantly, the average ticket price of 4. 3 is better than anybody thought. They basically silenced the people who were worried about out there, and we are seeing the strength in the Home Improvement names and the liquid lick wi qu, and important numbers and also on the upside is masco. We will see how lowes does tomorrow. Back to you. Thank you, bob. This volume thing is even spooking the bond market, and think that everything is thinner than i have ever seen that i can recall in my career. Im not kidding. It is like everybody went to the beach already. Shift to the bonds and the dollars and go the Rick Santelli in the cme. Good morning, jim. Check out what is going on in the 24hour chart showing you that we are kicking down kind of rejected at least on first pass at 290 level, but that has been the modus operandi of the treasuries hot and come back to back fill. You look at the twoday chart and you can see the yesterdays extension. The most important chart to Pay Attention to and i will continue to use is the midjune chart, and why . Because it will show you the still momentum holding on that chart, but more important, if you look at fridays settlement 282, 283, and the low 280s is the pivot. That is important breakout high when we took out the july 5th, 2. 75, and that corresponded to the 5s and we talked about them. That 5year is giving you a canary in the coal mine for the rest of the curve, so Pay Attention to it, because it is backed up six basis points from the settlement yesterday. Switch gears, dollar index. I will tell you that down here, you cover up the name of the chart and you show it to your favorite technician, and see what his opinion is. If you cover up the dollar index and look at the chart, it is hard to get bullish on this chart. It cant get out of the 80 to 81 area, and be careful. What is the protagonist of this raid . Look at the euro today and going back to february, because it is the highest level since the second week in february versus the dollar. Ca ca carl, back to you. All right. Rick, we will see you soon. Rick santelli in chicago. Kelly evans in post 9. Good morning. Talking emerging markets. Or submerging markets as the case may be. If you look at what has been happening overnight and bob touched on it and what rick has to talk about as well, people are looking at the developing markets like u. S. And europe and saying, eh, maybe not so bad after all. As we start to see the Economic Conditions normalize, and the fed talks about a taper, people are pulling money back home or putting it to work in these markets and importantly or unfortunately, they are taking it out of the merging markets. And now there is a note out this morning by jeremy zervos where he does not talk about the markets specifically, but in great misallocation he says that people are chasing returns better than they would have gotten at home for the last couple of years is part of the misallocation. It is one thing to bet on the longterm prospects for the economies to grow faster than the u. S. Which has demographic, and other troubles bu troubles,d parcel, you need structural reform, and other things that brazil, and indonesia and thailand and others are not able to come through with. They say, okay, we have foreign money coming in, and the trouble is that when the tide goes out, they are there to borrow the buffett line, standing naked. And the emperor is not wearing clothes and it is trouble ahead for the markets. Can you give me coer lo on the weakness, because that money is coming back, and shouldnt it be stronger . Yes. Yes. And so many people are writing why can the dollar stronger case, and we can point to 12 reasons why it should be intact, and why isnt it happening and it should be to the point of the thin trading volumes but the currency. Well, it is more about europe and japan being strong. And europe could have one or two percent plus growth next year. Yes sh, and japan does not w japan to be strong, and the strength of the euro is bad news for everybody except for germany, and so it is not that encouraging of a move itself, and if it is starting to unwind the dollar strengthens and maybe we will get weakness there. And how much are you interested in say the trust to getting expose sure to europe and taking some money off well, huge. You have to be in euro. And this morning on squawk the 40year low versus the United States and a lot of the good momentum in europe. I was out with a very big investor and we were talking about how the strength in the euro is about the union being well. That is okay. And we had a lot of people saying that the union is fall ing apart. Italy and i was with someone who said that italy is remarkably good. Even people who are nervous, jim, about the details of the situation in europe will election in a few weeks. German elections and a number of things and the spanish but they say it is better than any of the other emerging markets. It is risky, but fundamentally cheap, and you dont want to be in the frontier markets. And not to say that the bans dont need to continue to sell any assets. 3 trillion worth of the del deleveraging to go, and it is a tough slog. Yes, but at the same time, some of the industrials are strong and not getting the cred dishgts and credit and the central bank did a great job. And mario draghi with a good point. And jim, this effort, and he was times man of the year. Good point. In is going to support u. S. Equities which is what we are seeing in the market today, and the reason we are not not catching a cold overnight is because people will look at the u. S. And say, i see safety there. Good analysis, really good analysis. And coming back, it is one of the best performing airlines that you have not heard of, but not for long. Alee gent is going to expand more than southwest, and that has ramifications. We will be joined with an exclusive interview later on. And plus, ryan lochte will be swimming across the hudson. I have eaten out of the hudson and it is not as bad as you think, but that is why i have two heads. The dows early movers. Take a look. We will be right back. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. 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Question, how big is too big . Samsung is unveiling the next tablet called the galaxy mega. The 16 inch device is cross between the phone and the tablet and it is going to be available aus gust 23rd. Samsungs first fablet, and what is a bet ter name . We will get to the tweets later on. It is a big screen to hold up to your head and talk. It is the lebron. Yes, the lebron. I need a lebron and let me get one of those. We will see how it sells. It could be a shaq, but it is too close the radio shack and that would be a bad connotation. And in general, it appears like not so much the high end, but the war is going to intensify as we get into the fall. Yes, and then you go back to apple, if they were just on the news and not icahn, it would be going up, but icahn did move the stock. By the way, i happen to be a fan of carl icahn and people say, too active . You put a tweet out and the stock can go up 50 points, and so when you get to the sell of the new situation, but home depot selling and home depot should not be going down, but i have to go the listen to the call. There is still a pervasive gloom, carl. People dont want the believe, because they look at the 10year or listen to what kelly is saying that you cannot buy United States because of thailand. I have always felt that was not what she is saying, but people are she was tfabulously reporting on the area, and when i Say Something is good, i say it is good and i think that home depot is good. With that in mind, we are getting interesting news on herbalife. Over to you . Well, lets set it up, because scott walker is reporting that Perry Capital has taken a long position in herbalife according to sources that the herbalife position was taken over the course of the past six week, and the position is also underneath 5 , so nothing massive, but still another firm getting involved in herbalife, and the sources say that the firm believes that the stock is cheap, and that the company is not the quote, unquote pyramid scheme that bill ackman has said it is. So again another player getting involved in herbalife on the long side. So again, ackman on one side with the shorts, and then you have more and more hedge funds and other Hedge Fund Managers getting involved by buying the herbalife shares and we will keep you abreast of any of the details, but for now, herbalife, and Perry Capital long with shares. So perry is against jcpenny, and i was against him, and now he is long on herbalife. He was my professor, and if he likes herbalife, everybody should look at it. Are the positions that you take about the company, are they outweighing what people think about the company . You mean, do they make widgets . Yes. They make supplements and a suicide over the weekend that involved a herbalife distributor that people were talking about, but all i know is that it is a battle of the titans and you are right. Maybe it should be about the product, but the product is irrelevant right now. They could be talking about anything. Yes, yes. When we come back, there is a lot more squawk on the street straight ahead. Coming up, take a look at h this. Those dolphins know what is happening next, and they are rushing to make sure they dont miss it. Six stocks in 60 seconds when squawk on the street returns. 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. Lets get six for 60 tuesday. And we have spirit who is the cheapest carrier to make you pay to get on the plane and off of the plane and you have pay if you mention the name, but the company is too cheap on valuation. And Morgan Stanley . Well, how much can you dump on them, because it is a Steel Company that everybody hates. Indiarelated, i dont mind the steel. And bgb cutting cliffs . Well, i dont like that talk, when that are good, they are good. And what about this one . Well, i like sherry mccoy, and this should be an interesting call. And what about this one . Well, nay maris reporting a very good number and play on europe and not just china. And we mentioned zillow. The secondary stock is 82. 50, and if you see the stock going to 83, it is a good day. What is coming up tonight . The beer battle and the cookout, and we are trying to get to the bottom of what people are eating and drink inning this country. I dont drink beer except for six days a week, so we will make a real decision on this thing. You are a tequila man . Mez cal man. You have forgotten more about mexico than i will ever know. Yes. And a good time always. Simon hobbs, what is coming up at 10 00 . Well, a dive into the retail. And the Retail Federation president will join us exclusively. And we will look at the new tivo boxes that search the web for programs for you, but stream them to the apple device, and what would ryan lochte do if he was in the second hour of squawk on the street today . Well, hed swim the hudson in support of a candy bar. Hour two is on the way. 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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. And choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Welcome back to squawk on the street. Our roadmap begins with retail and best buy, and urban and jcpenney and also from the street we will talk to the head of the federation. And how much more of the submerging markets could be in store. And tivo is here to explain how the take back your tv set. And how ryan lochte is crossing the hudson river to deliver pizza. We will talk to him as he merges from a very dirty hudson. And first though are the emerging markets and feeling the pain around the world as troubling news trickles out. Indonesian shares have tumbled in the last trading sessions, and there is the pain we are e seei seeing. Jpmorgan is more bearish on india after the slide. They are downgrading from neutral to wait. And joining us is jpmorgans chief asian and equity strategist, adrian mowat. Good morning. Good morning. It seems that the pain here has caught people off guard and how much further weakness do you expect to see . Well, i think that we will see further weakness, and this really started with the event back in may when the fed started to talk about the t word, t e tapering, and you heard the interesting of the e. M. Fixed income bubble and many could argue the global bond bubble. And it appears that has unwound. Such as brazil, india, turkey, indonesia, and that is where you are seeing the biggest declines here. But as often happens with the situations, it will broaden as portfolios see the outflows and the other emerging markets get settled down even if they dont have current account deficit. Adrian, this is reminding a lot of people of what happened in the 90s and especially the late 90s when a stronger u. S. Economy prompted people to put money into the u. S. And take it out of the emerging markets and we saw a asian crisis as a result. What is different and keeps us from repeating that experience now . Well, there are a number of important differences. Back then we had fixed Exchange Rates so banks were loaning shortterm money to longterm projects and so you had mismatches at different levels. This time around, what we are seeing is a reversal of the tail wind. The tail wind was qe quantitative easing from 2009 onward to help a lot of the emerging markets who had current account deficit to remove that, and we are removing that, but we are not causing the type of dramatic event that you saw in the tequila crisis in 1994 or 1997 with thailand and malaysia and then into 1998 with russia and korea and indonesia. So there are differences, but there are also similarities. It does look like a very high stress environment. And lets not forget that the best case is the fed will start tapering next month which probably means that the bond market volatility as a characterist characteristic, we need to deal with over the next month or so. I think that is going to keep the pressure on the e. M. Currencies and keep the pressure on these markets. So for adrian, for people who are watching at home, and solely invest in this countrys markets and maybe sitting and looking at you now thinking that it does not look good, but at least it means that more money would flow into the market in which im invested so i dont need to worry about it, what would you say to them . I would say with respect to that they are complacent, and much of the story of u. S. Profitabilities has been international earnings. There are many u. S. Companies with large expose sure to emerging markets, and even if profits hold up in emerging markets when you translate those at these lower Exchange Rates, it will mean that the dollar earnings are down. So you have to be a little bit careful to say that the u. S. Is isolated from the problem. It is also important for the u. S. To have headwind to deal with at the moment, and Mortgage Rates have moved higher, and the headline inflation rate has moved higher and that inflation will cause the u. S. Consumer to see some contraction in the pace of growth and discretionary income. So i think that the outlook for eq equity markets both developed and emerging is challenging as we move through september. And something to keep in mind, adrian mowat laying it all out for us. Thank you very much this morning. Thank you. Meantime, Retail Stocks are leading the s p right now with strong numbers from best buy and Urban Outfitters leading the y way. And dominos, and also some other big movers. Carl . Well, talking about the big movers, because from the retail side of things, at least starting off with what is going on enwith best buy, because those are huge in terms of the moves. Best buy reporting numbers in terms of the earnings and the sales that come in better than the analyst estimates, but what is important about the best buy story is the turn around and not just because of the earnings and sales, but the Profit Margins as well. This is a company, the biggest Electronics Retailer in the world that has had a pricematching policy, if you will. So maybe they are sacrificing some of the Profit Margins, but it does not like like they r because the Profit Margins are improving over the same time last year, and so that is why those shares are a little bit to the upside. Looking at home depot, the nations largest Home Improvement retailer, we talk at the slow and e steady grind higher for the u. S. Housing market and you are seeing the benefits or the the home depot as well. They come in with earnings and sales that beat the analyst estimates also with regard to the forecast, and raised the forecast and profit sales as well. Watch those home depot shares. And jcpenney, the embattled ret retailer and we knee bill ackman is not going to be as big of a part of jcpenney Going Forward and they report a loss wider than expected, but some inves r investors are having a surprise on some of the sales trends improving which is big. The Retail Stocks have been on a tear outperforming the s p 500 over the course of the past few weeks, so retail is a sector to focus on today, simon. Thank you, dominic. Busy day of surprisingly positive results from the retailers and not the mention the back to School Shopping season looming and if not in full swing. Here for cnbc exclusive is matthew shay, president and ceo of the national Retail Federation. Good morning, sir. Thank you for joining us. Good morning, simon. Nice to be with you again. The batch of results today is very good, but last week we were concerned about what walmart and American Eagle and aeroaeropost and can you nail it down for us what we are seeing . Well, the consumers are cautious and thoughtful about the purchases and going through the fairly familiar story for five years and despite that Consumer Spending and retail activity has driven the economy for 30 months with the exception of a couple of months this year, you are seeing people make decision and shoiss. Choices. They can spend on what they are seeing today in autos and homes or discretionary, and sort of choosing either or. That is what we are seeing a cautious consumer making thoughtful decisions. So from your vantage point, where would you guide the investors. You are obviously not a stock guy, but what are the senior members of the industry saying to you about what is working now . Well, i think that what we are seeing is a lot of great news today based on the strength of the housing market, and we will see the consumers responding to things that best buy is doing on the electronics which is positive. The turnaround in jcpenney or apparently, and those are great things and observations of walmart and macys and others is that these are terrific executives with great teams and great products. It is really about the consumers and the way they feel about the ke economy, and the job creation, and this either or, and right now, it looks like we have an economy to where we can walk or chew gum and you cant do both at the same time, and we need an economy that can. But to be clear, you are warning off a soft back to School Season . Well, it is not a warning, but a statement of fact. Last year was almost an aberration. Last years back to school was up 15 , bigger than ever historical class going to school and pentup demand in a lot of areas, and last year was exceptional and unusual, and this is down from last year, but it is consistent with the norm which is families are buying the things that they need for their children. But they are being deliberate and not going to go outside of the budgets. At this time of the year ago, 40 of the backtoschool shoppers had been in the market. This year, more than 50 are already in the market. That is positive we think. Well, matthew, it is interesting though that the trend can reverse on a dime like that, and we can go from the year up 15 to this year where i think that it was down 8 that you were forecasting, and how are we tracking with the forecast after these early weeks . It is its 7 down from where we were a year ago, and again, this year would be the highest year back to school sales in history except for last year. So last year was way outside of the norm. And i think that what we have seen is that consumers really pulled back in a kind of across the board in all segments about fathers day, and middle of june through july, but the word from some of the folks that reported last week is that late july and early august back to school is looking positive. It is looking much better, and as we go into the second half of the year, we generally feel much more positive about the way that back to school goes, and then leading into the back half of the year as we head into the Holiday Season and inventories pick up and confidence is high. Before we let you go, sir. Can i ask you about the lead article in the Washington Post business section today which talking abs at the looming National Strike on august 29th, for those working in fast food and some working in retail, and macys, and dollar tree and sears is mentioned as they push for the right to have a labor union and to push the wages high higher. I mean they are talking about 15 hour here, and that is what some would like. How do you feel about that . Are you in support of obamas request to congress to move the National Minimum wage or the federal minimum wage from 7. 25 to 9 . Well, the most important thing we can do right now is to create all jobs and that helphe everybody. We want to create jobs and we have been in that since the recession starting to recover and we are partnering with wa walmart, and dozens of ceos and governors and so creating jobs is critical, but the question is what is the right way to do it . Is the right way to do it by choosing between hiring fewer people at higher wages or greater number of peoples at competitive wages that the marketplace will support, and that is really the conversation that we need to have. Whats in the best interest of the local communities and workers and we take the view that it is better to be encouraging Business Growth and development by reducing and eliminating the regulations, and not layering the regulation on the employers and create jobs in all sectors the get the economy move f moving forward again. So do you support the minimum wage going up 9 . Well, we cant support something that is discriminatory and picks winners and losers saying that Certain Companies mut pay the higher rate and others with the lower rate and just as with health care and all of the other reg you laegss we have seen mandated, the businesses can only support what is going to allow them to continue to be profitable. If you encourage regulation or legislation that makes the companies unprofitable, they will make tough decisions of going to fewer fulltime workers and more parttime workers and reduce hours generally or lay people off . It is going toic mate very, very difficult. We are not in favor of unilaterally increasing the minimum wages and other wages, because it is not come ppetitiv and certainly not in a way that is discriminatory or arbitrary and pick Certain Companies and winners and losers. Matthew shay, thank you. President of the national Retail Federation. And now airlines have a low cost carrier that will possibly expand to more cities. The ceo of alee gent will join us. And we will also be joined by tom rogers the president and ceo of tivo and find out how the new box will compare to apple. 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. Allegiant air announcing 18 new routes. The stock is up 34 in the last year, and the phil lebeau joins us live with exclusive interview with the companys president. Hello, phil. And big expansion for allegiant, and we will bring in the president from las vegas where it is based. Andrew, what stands out about the expansion is that you are making a big concerted push to increase service on the east coast, correct . We are. Good morning, phil. Yeah, we are. The east coast, and the florida destinations in particular have been really strong over the last 12 months, and we continue to see a lot of strength there surrounding a lot of new cities that serve florida and a lot of the new routes into florida from some of the existing smaller cities that we have been in other points around the country. Andrew, you are adding service from long island and mcarthur, and stewart international, and portsmouth, about an hour out of boston, and are you finding that people will say, hey, i will make the drive in order the save some money on this flight . Well, phil, i guess we will find out. You know, i dont expect those flights to be primarily filled with people lets say driving north from manhattan, but i think that we offer a very low price point, and far less expensive than the other alternatives and people who are cost conscious will drive a good distance to get on our airplanes, but there is a lot of people in the new York Metro Area as you know, and we think that the service, and we are going in with little frequency and we believe it will do well, and we will expand it from there if it does more than we expect. Andrew, so much of the attention of your airline is focused on the service, and the routes you are flying, but it is allegiant travel, because a big part of it is selling the travel packages. Im curious, what percentage of the passengers that you are carrying on a particular flight are bundling in travel options in terms of hotel destination, et cetera . Well, phil, most of the Hotel Business is focused in las vegas. So a much smaller percentage of customers going to florida are buying a hotel from us, but a very large percentage of them are buying a rental car from us, so it depends upon the destination market, but we are successful to get people to buy these other products and serv e services, they will want when they go on vacation from us, and the reason is that we will offer them savings as opposed to if they were were to buy them independent of a package. Simon, a question . Yes, i do. Welcome to program, mr. Levy. I am concerned about where you stand on the consolidation of the airline industry, and last week the d. O. J. Moved to break the merger of American Airways and American Airlines and so im assuming as a disruptor, you would like the mergers to go through, because if the deal goes through, they will raise prices, and they may cut back on the xcapacity, and that is a green light for you to take market share, isnt it . Well, simon, we do like the consolidation, and it makes sense for the industry, and keep in mind as you well know this industry has struggled over the years to earn an acceptable return on the capitol for the investors, and in general the industry is making strides to get to a point the earn on returns, and the consolidation is a part of it. Keep in mind, too, that consolidation started as a result of the elevated fuel prices we have been living with for many years now, and just by the nature of much higher fuel input cost, we have tike tswrwe revenues up to cover it. We like consolidation, and find exactly what you said is true. The routes will be eliminated or less service into the particularly smaller cities which opens up opportunities for us, and we have taken advantage of that over the last several years, and we hope that there is a negotiated settlement to allow it to go through. We think it is good for the industry, and the traveling public and for us as well. Phil le behere, andrew. Fees are going up in the carriers of las vegas, and as these fees go up, how is it going to make it tougher and tougher for you to say we are the lowest cost operator out here . Well, the fees in las vegas they have gone up a little bit, but they are steady at this point. So i dont see las vegas as a continuing issue for us, and we continue to add service into las vegas market. The cost structure is exceptional and far and away the best cost structure among the airlines in the u. S. There is always pressure here and there, but the job as management is to find the ways to offset the costs in certain areas with the increases in efficiency in others, and we have been successful to do that and we are feeling that we can do it on a ongoing basis Going Forward. Andrew levy from allegiant airlines. Thank you, phil lebeau. Tivo is unveiling a brand new line of dvrs as it wants to compete with the big Company Companies and even apple. We will show you what they can do straight from the source. The ceo of tivo will join us live next on cnbc. I hav e 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. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. 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And the important point here is how do you revolutionize it at a time when tivo set the pace for the dvrs space if you call it that and now it is catching up again and the lot of the moedles and the copycats came out and a lot of people are using them through the Cable Companies and what are you doing to fight back and reclaim your territory. Well, that very question is at the heart of the challenge is that people dont understand what tivo is today. It is really a combination of apple tv, google tv, roku, slang, the cable box, and the dvr all in one. That is unique out there. Yes, you can get roku tv and apple tv and take pieces of the streaming world to get it to your tv, but what tivo does that is so unique is to take the regular channels and the recording capability which is important the people, and allows you to get netflix, and hulu and amazon and youtube and music and spottify and pandora and allow you the search across everything, because it is impossible to know where to go and which remote to go for and where to search for what, and of course, we call itd roamio, because you can get it anywhere. Not just around the house streaming as you can, but soon, we will be launching the ability to roam anywhere and in a hotel halfway around the world, and connect to the recordings on the tivo roamio and get them in your hotel room, and it is to get what you want wherever you are and the one comprehensive solution out there. And it is, tom, the cord cutting is the wave of the future . No, the cord cutting is not the wave of the future. We have another key thrust at tivo, and that is that we are the leaders in providing software to the cable industry, and to bring up to speed their solutions which have really lagged the marketplace. There are 70 Million People out there who cant go open to the cable box today and find out what the oscar winning movie was from last year or the Award Winning shows from two years ago, and nobody would settle for that on a smartphone or laptop. Tivo, you can do that, and we are upgrading the Cables Industry ability to do that and cable is a player, but what tivo allows you to do is to get rid of the cable box and save money, and have a much better experience, but hold on to the cable service. Wow. Can i get rid of the time warner, because it is a disgraceful piece of hardware. You wont get an argument out of me. You will not get an argument out of me, and get rid of it and put in tee voeshgs and you will have a better experience and get netflix, and hulu, and et cet a cetera, and your cable bill will go down. Amen to that. Who do you think controls the future of internet tv distribution . We have seen everybody collecting around the hulu, but presumably for you, you hope it is going to be a complex mishmash of everything that the box can search rather than one or two big cloud providers in the sky. Well, it is a great question, simon, but a you look at the music world, and look at what has happened. Music was crushed by the digital revoluti revolution, but look at what happened for consumers, you can get any song on any device wherever you are, and perm i personalized with your own settings. We are bringing the music experience to what people have come the love to tv. Well, you are not really, because you are not the ecosystem, and apple is and amazon is, but you are not. You are search and conquer, and you are like a droid. Well, what apple is, it is a device for getting streaming of television to the of the. It is not a comprehensive solution nor is roku or nishgs because who is going to own the television . The cable op erator, because th key to this, and i dont care what device you use or the content that you are talking about, but streaming via broadband to the home is key. Who has the most robust pipe to the key to the video future is the cable operator and they have made the investment, and we is made a bet on the cable to be the winners and now cable subscribers can have the best possible experience out there, and that combination is the winner. So they look to you as a s symbiotic partner as well. Yes, 10 of the top 20 smos have partnered to upgrade and not the mention virgin and the uk and the biggest cable operator over there is rolling out the tivo and changing the competitive balance between virgin and big sky. And thank you is much, tom r rogers, the ceo of tivo. Always great to be back in the old alma mater. Almost 25 years later, and you are cook. Way to go. Thank you, tom. As the saying go, in for a penny and out for a pound. Jcpenney diving head long into a bold strategy, and we will see if this one will actually start to pay dividends when we come back. Air optix® contacts so breathable theyre approved for up to 30 nights of continuous wear. Serious eye problems may occur. Ask your doctor and visit airoptix. Com for Safety Information and a free onemonth trial. Ive been doing a few things for playing this and trading. Ove tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. Tdd 18003452550 and schwab really helps me step up my trading. Tdd 18003452550 theyve now put their most powerful platform, tdd 18003452550 streetsmart edge, in the cloud. 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Tdd 18003452550 to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Hour into trading and some of the stories we are talking about at 10 30 on the east coast, and 7 30 on the west coast. According the aaa, more people will travel than in 2008 due to the optimism in the housing market. And more people are preferring apple to samsung. Apple has taken three times as many customers from samsung as samsung has taken from apple over the past year. Samsung may be looking at new products to turn it around. Today it announced a 6. 3 inch phablet phone. And bernstein says that nokia is relying on the highend phones to maintain the momentum which they say is a risky bet. And jcpenney lost more than expected in q2. Rick, what is the most encouraging thing that you saw . The better comps or the cash struggles . Well, the most encouraging thing that i saw is that the comps got better each month. It is particularly interesting that they were better in july, because a lot of people seemed to have trouble in july. So it is very encouraging. They are having to do undo, a lot of what ron johnson put in place, and we talked about the home problems the last time you were on and they are reversing basically going back to category versus brand and going back to different pricing models. They are going back to what worked and kicking out what has not worked. They lost 25 of the sales under mr. Johnson, and they are still seeing and taking some pain. I expect that home category to b be remerchandised by the Fourth Quarter. And a small quibble, because a lot of people are saying that jcpenney here is going back to what worked, but we have to remember that there were a lot of things that didnt work when they were doing it the old way, so how do you tow the line of getting rid of the stuff that didnt work, but figuring out how the stay relevant and fixing the brand to do what it takes to be a leading Department Store . Well, it is a what was wor g working. Jcpenney was underperforming, but they werent losing 25 of the sales. So they were pretty much status quo. Compared with what has been going on, i think that we can say that it was working okay. Can you clear up the aberration that it became on the one hand johnsons super low pricing and then the reemergence of the coupons in the quarter as well, and how is that distorting what we have seen, because a lot of the stuff that they were giving away at cost. Yeah. When we had the low prices, they mike ullman came in and started couponing again. And yes. Reticketed some of the merchandise, and that went on throughout the quarter. So much of the merchandise has been reticketed by now. And higher margins. Yes. And can i ask you one more question, we had a denial from them recently that one of the commercial lenders c. I. T. Was no longer funding manufacturers and you are to see that they use c. I. T. To pay for the cost of what they are doing, but what is your understanding, because i hear that people in the industry are finding it difficult to get funding through c. I. T. Despite the denial . Well, a couple of shikoum issues. The big suppliers that have extended for jcpenney for payables that we can see in the numbers and the benders back through c. I. T. Who are paid later. So i believe what happened is that the, that pushed jcpenney up against the credit limit, and they had to have overnight negotiations, but my understanding is that they are funding jcpenney again. And going into the back half of the years, and obviously, the holidays, and cash burn i assume will accelerate. Is that problem, issue or are the inventory levels of a concern . Well, the inventory is good. The inventory quality is good. I have been in the stores and they need inventory and merchandise to sell, an monetize it, but in the Third Quarter, we would like to see some cash inflow in the Third Quarter as they sell the inventory. That is how it is supposed to work. Well, we can hope. Rick, thank you. Thank you for coming. Thank you very much. It is a great morning if you are holding the best buy stock. The stock is moving substantially higher on the Second Quarter earnings beat helped by cost cutting. Lets get to Courtney Reagan back at hq, because she has been speaking with the ceo . Well, i just got off of the phone, and you could tell that he was happy about how the quarter had turned out. We know they beat the street estimates by 20 Cents Per Share and encourageded by the flat comps. I asked him about the new shop concept. We know it did not work at jcpenney, but so far he is encouraged with what is happening with the samsung shops and the beginnings of the window shops. I said are more of the venner ddo vendor interested in building them out, and he said more conversation with players burk when it makes sense for the vendors and the customers and best buy, we could do it. Then we talked about the consumer. We have heard a lot of concern earlier in the earning season how that consumer is feeling economically and financially. I said is that what you feel . Have you seen the sales and the traffic pick up in the quarter and impact from the payroll taxes, and he said that we worry less about measuring the temperature of the consumer, and we know they are looking for value and positive experience, and look at what we can do to provide compelling offers and service. I said, what keeps you up at night, and it seems that you are so far happy with what you have been doing, and he says a journey. What keeps me up at night is continuing to deliver on the progress, and the saydo ratio, and defining what we do is not that hard, but doing it is actually the hard part. So far we know that investors are happy with what they have done so far, and there are certainly challenges before they move forward and we will see what happens with the Holiday Season and flat comp is not anything to be overly exciting, but the progress is. And so a little reprieve from jcpenney and best buy this morning for their shareholders. Over to india, the rupe is declining . Well, kelly, the country is growing with the slow growth, and weakening consumer, and now they are concerned if the fed taylors back, consumers will take money out of the hi highyielding bonds in india. And concern that the high flow of bonds in end ya will lower the cash deficit, and that is going to be a concern for the government because the indian rupe continues to decline. And they write overnight that if the rupp continues to decline, there is a certain level of hesitancy from the Prime Minister in prescribing any tough policies. Although, the analysts say that is what is needed for this once hot merging market to make a comeback. The bombay sensex has been experiencing high volatility and india is down most month to date, and down 10 over the last three months. Back to you. And a rough week this, too, in bombay. Thank you, seema mody from the nasdaq. Over to the market two for a flash on books this time. Well, book, and Barnes Nobles and those shares are hit hard down 16 in the market so far. The reason why they came out with the earnings and the sales that all tended to be in line or slighter better than the anal t analysts estimates and in the case, a loss, but it was leonard reggio, the chairman and the founder of the company who shay s he is now suspending the efforts to take the Retail Business of barnes noble private. He wanted to buy, remember, those retail operations. He says that it is time for the company to focus more on the nook customers and bring in more execution to them so that barnes noble shares and remember that nook business has been declining, but it is declining less than some had thought. So again, those shares are down 16 , carl, right now in early trading. Thank you, don. New regulatory troubles for jpmorgan, and we will break down the biggest drama for the big bank, and in a few minutes we will talk to one of the biggest names in sports, 11time olympic medalist ryan lochte. And ladies, long deep breaths. We will be back right back. You. You. 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That is a live picture of the 11time olympic medalist ryan lochte who has just swam across the hudson river and we will tell you why when he joins us on squawk on the street. By the way, just turned 29 on august 3rd. Wow. He is not coming to the set, is he . What . Coming into the stock exchange, is he . Well, he better hurry if he is. Interesting pro motion from a talented young man. We will talk to him in a moment. Over to the cme another talented young man Rick Santelli. From the cme. Well, everybody is talking about the emerging markets but on a simplified level. They are in the news big time for sample reason. Now, the stimulus by Central Banks is not necessarily the only reason or the lack of future stimulus, but it has certainly made the condition a little bit more critical, so when we splash water everywhere, the merging markets have to deal with it, and investors, you know, they are trying to put the capital to workings and relatively inexpensive capital and goes to the ideas that would not normally find capital, but what happens when the taper talk begins is that it is the catalyst for some reversals of that and some large ones. While im speaking, you can look at the oneyear charts of the mexican stock market which is a giant elliott wave pattern that is going to continue to deteriorate, and look at what is going on in indonesia or india, and the stock markets dont look pretty. Take it a step farther. The main issue currently is funding. But it is funding everywhere, but think about it specifically from the emerging Market Countries with the large current deficits and the capital once plentiful is not as nearly plentiful, and now what happens eventually is that we have to decide are the central bankers specifically ben bernanke, are they responsible for the u. S. Or the world . In other words, how much thought is going to go into the notion that the catalyst of some of the emerging market reversals are on the shoulders of some of the Central Banks. Now, remember, we have all heard this analogy, and think about it, that the u. S. And to some extent europe, and the cleanest shirts in a closet filled with not so clean shirts. What does that imply for these guys . The dirty shirts . Okay. We dont think about it. Lets reverse it a little bit, and the dirty shirts could indeed create an environment where if we dont see the developed economys fixed income markets like 10s and the yields, and we dont see see what is coming in because of the merging issues and the mouse traps are snapping then in my opinion the key issue that it might be time to play a little defense. You heard it on the santelli exchange. Ba back to you guys. Wow. A helmet, shirts, and thank you very much, Rick Santelli, always an original this morning. And the Justice Department taking a look at jpmorgan and trying to find out if the company improperly manipulated Energy Markets across the u. S. Kate kelly has more. Kelly, another regulatory inquiry for jpmorgan which is becoming positively embattled by lawsuits and litigation as of late. The wall street journal is reporting in the wake of a 410 million settlement off offaccusations that it manipulated the power markets, jpmorgan is under criminal investigation under the same issues. The new probe undertaken by Preet Bharara is said to be the 10th investigation by the bank in the disclosures and it includes a 10page list of lawsuits in criminal and civil from securities to libor to the securities and exchange chief Investment Office which led to the socalled london whale scandal. Jpmorgan says that because of the legal reserves it has amassed it may be inquired to pay up to 6. 8 billion in additional legal costs which does not likely include the costs of the latest probe that is coming to light. The energy probe centers on the transactions made by jpmorgan units through which the bank used a dozen tactics to manipulate the prices to its own purposes. That is according to the mirc papers. Masters future, now appears in question as the physical part of the commodities portion of jpmorgan has been put on the block. So is there a sense to be picking on jpmorgan, kate . Well, simon, there is that sense. It has a sense of a pileon to jpmorgan jpmorgan, but to contend with t. So i dont want to make that judgment, but certainly youre hearing more noise about jpmorgan than you are about other banks. I heard on the radio this morning saying they might now be replacing bank of america as the most legally Embattled Bank on the street. Kate, thank you very much. Kate kelly back at hq. On a lighter note, he just finished swimming across the hudson river and now hes coming to cnbc live. Well talk to one of the biggest names in sports, olympic champion, ryan lochte, when we come back. 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. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Dow is up some 34 points on this tuesday morning. Nice little build here given the fact that weve been down the past four sessions, and unbelievably, one of our market watching producers says these levels are the biggest gains for the averages since the beginning of the month. Since august 1st. Whats remarkable is that has come off the back of what was really carnage overnight in asia and weve sailed on. Were looking at you talked about some of the pain in foreign markets this morning. Still a best house, bad neighborhood . Thats the interesting thing. The extent to which emerging markets look weak i wonder if the great rotation doesnt start to happen with people taking money out of emerging markets and putting it back to work in the u. S. I wonder if people dont start to move from stocks into bonds here. I know thats the other question is why home depot has managed to lose so much steam today. Great quarter. Beat by 3 cents. Incredible comps in the u. S. , 11 , but its now in the red just slightly as people lost some enthusiasm. Jcpenney as well. Why did 11time olympic medalist ryan lochte just swim across the hudson river . Hes delivering combo snacks to some of his fans. Shades are now on along with the combo shirt. He joins us from the west side. Ryan, good morning to you. Good morning, guys. Tell me how this promotion came about. You know, combos is looking for new and creative ways of enjoying their snack. So i thought why not have me since i love being different and i love encouraging other people to be different, to be themselves, so i thought that was a perfect opportunity to hop on board. Ryan, have you ever been in the hudson before swimming through the hudson . I have never swam through the hudson, but you know what . If theres water, its a piece of cake. Ryan, im imagining youre not from these parts, but we actually had a fire at one of the Water Treatment works on the hudson about a month ago, and they had an emergency release of everything and they banned swimmers from the hudson during that period. Im assuming that this was planned before. Did you think about calling it off . What was that . Did you were you sure it was safe enough to swim in, ryan . Oh, yeah. They made sure it was safe to swim in. The water was actually really nice. Aid wet suit on so that helped me. You know, like i said, it was a piece of cake. Its water. Ryan, you said you like to be different, and we all know that about you. Obviously a fantastic reality show. You have done tv. Youve done your share of promotions. How are you balancing the business end with the training end as we get closer and closer to rio . You know, its really easy. I mean, for me because i like doing so many different things, thats what helps me get more focused when i go to the pool because when i go to the pool, its all about me training, but when i get out, i want to have another life outside of the sport of swimming. So i like doing other things like what you just saw. Me delivering a pizzeria pretzel combos to adoring fans. Any thought of moving into investments . You talked a little bit about what happens outside of the pool. A lot of celebrities, a lot of athletes have gone on to looking at startup companies. What about you . Is it Stock Investments . Would you ever do anything like that . You know, im always the one to do different, unique things. Like, for instance, this past year i had my own reality tv show. Other things, i mean, if someone asked me to be in a movie, id be more than happy to be in a movie or doing commercials, stuff like that, outside of the pool. I have a feeling thats not too far away. Probably has already happened. Thank you so much for your time. Ryan lochte having just swum across the hudson river for combos. Im trying to figure out with the meter distance is of the hudson. I think he swam 110 meters. What we should really organize is a swimoff between faber and him. Faber is prolific as well. I will take ryan on that bet, but dont tell david. Tweet time. Today samsung unveiling its latest device called the galaxy mega. Its a cross between a phone and a tablet. Samsungs fablet is unveiled today. What is the better name for the galaxy mega. Tweet us squawkstreet. At a dry cleaner, we replaced people with a machine. What . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Your money needs an ally. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Welcome to squawk on the street. Here is whats happened so far. If and when this tapering takes place and the market sells off a little bit, we would add more to japan. The market is starting to adjust to an environment in which real rates are going to absurdly low levels to something not normal but headed in that direction. The consumer seems to be addicted to hard goods. Every dollar that used to go into jimmy choo shoes with the toe cleavage is going to best buy. Back to School Season, hes being very positive. Macys was positive on back to school. Is it possible, is it possible that this company could make a comeback, jcpenney . The answer is yes. Interesting. Theres a look at the opening bell. This is down from last year, but its really consistent with the norm, which is families are buying the things they need for their children, but theyre being deliberate and theyre not going to go outside their budgets. There are a lot of people in the new York Metro Area, as you know, and we think our service, we think it will do well and we think we have a chance to expand it from there if it does more than we expect. This has got to be one of the most significant product launches for you guys since the original tivo. It is a very significant launch. It takes tivo and i think puts it out there in a way that people can truly understand. Good morning. Were live here at post 9 at the New York Stock Exchange. Lets get a check on markets, first of all. The Dow Jones Industrial average up 38 points. The s p 500 and nasdaq showing small gains despite some weakness overseas overnight. Shares of Dicks Sporting Goods slipping. The retailer lowered its full year earning statements saying it expected consumers to remain relatively cautious. Shares of tjx rallying. Earnings jumped 14 year on year. The operator of tj maxxs had laysed its outlook saying it Sees Opportunities for the second half of the year. The retail rebound. Home depot and best buy rallying. Well tell if you that trend can continue. Plus, if you want to know where the markets are going next, all you have to do is Pay Attention to congress. Thats according to one of our guests this hour. And rock and roll all night and play football every day. Kiss front man gene simmons the proud new owner of an Arena League Football team in los angeles. Hell be here live to tell us what the heck he was thinking. Gene is a great guest. Looking forward to that one. Shares of best buy are surging after the Electronics Retailer easily beat earnings expectations. Home depot also topped expectations. Here with more on the retail sect yosh, peter keith from Piper Jaffray and michael lasser, a retail analyst at ubs. Thank you for joining us. Good morning. Peter, want to start with you. Were seeing, for example, the case of best buy a reprieve. Is this really a turnaround story for that company . Best buys in the verily early innings of what we think is a multiyear turnaround. Q2 was a nice quarter. The comparable sales trend was only down slightly. It probably would have been up if there wasnt some modest disruption in the store. Youre seeing domestic gross margin trend begin to flatten out. Theres a lot to get excited about as we look forward to the back half of the years on best buy. How can it be the case though because people are going to say, wait a minute. You have people buying stuff online, buying their electronics online. That seems to be the overarching trend here. What is best buy doing right and how is it going to stay relevant . Theres some early kaeths that is best buy is starting to take some share back from online players. The great example is their tv category was actually flat year on year for the Second Quarter. Thats the first time in three years tvs have been flat. We think thats reflective of share gains in tvs and people moving to larger screen tvs. Theyre not comfortable having those types of products september through the mail. They have their price match policy and theyre being more aggressive on driving improved Conversion Rate both online at the store level. So we think those factors drive better Sales Results in the coming quarters. Michael, it looked like this morning depot might drive sentiment with such impressive comps. Why do you think the stock has settled back . Two reasons. First, the flow through on a double digit comp was relatively mode modest, but that was due to incremental labor that they had to add to the stores to deal with the very healthy samestore sales increase. And, two, they provided a conservative outlook for the second half of the year, but we think theyre just being prudent. They told us sales in august are very brisk, and we think that continues into the back half. Just to put it in perspective, the last time they comped double digit was in the late 90s. You were probably still in high school. That was back when they had not nearly as many stores. Thats for sure. Does lowes did they eat lowes lunch or is there enough food for everyone to go around . I think theres enough food for everyone to go around if you apply the typical spread of about 300 basis points. It suggests that lowes was doing about an 8 comp. Maybe if you take a little bit of a haircut to account for some merchandising changes, it may be a little less than that. The last time they comped was 2006. Its been a while. Peter, in a word, what does this mean . What does it mean for the rest of retail . Are they being crowded out . Its simply wallet share shift. Youre seeing big comps from retailers that serve and sell items into the home. You look at best buy specifically. We talked about tvs being flat. Their appliance comp was up over 14 and home depot doing the best comp since 1999. Clearly theres a shift right now on where Consumers Want to spend money. And a its on some of the bigger ticket purchases. Its an interesting one, guys. Thanks for the context there. Thank you. Lots of action across the globe this morning. A lot of emerging markets and their currencies selling off due to worries about the fed. Our cheer International Correspondent Michelle Carusocabrera is done watching the ryan lochte interview and joins us now with more. I was jealous, carl. Hes always so erudite. Yes, he was. You talked about the emerging markets selling off because of the Federal Reserve. The Federal Reserve runs Monetary Policy for the United States, not the rest of the world, right . But the fact of the matter is we are still considered the best credit risk in the world despite all the hemming and hawing over the deficit. What does that mean . That means we pay the lowest Interest Rates in the world. That also means when our Interest Rates go up, guess what . Everybody elses does, too. What does that mean . You have to worry about their economies starting to weaken. So lets run through some of the numbers here. Were going to show you the one week of the bomb bay index, one week of thailand and one week of indonesia as well. They have gotten hit very hard over the last two days. Why . Because our Interest Rates are rising, theirs are going to have to rise as well. Here is the Ripple Effect that happens as a result of that. If you think those economies are weakening and you have investments in those economies, maybe you want to get out. Youre a hedge fund, you want to sell your securities, maybe you want to sell your bonds, you go sell them. Youre in india. You sell your indian bond, you sell your indian stocks and they give you a big pile of rupees. You go to the local bank in india and say here are my rupees, i want your dollars. A wall of their local currency is coming at their bank. The supply is huge. They have to figure out how to pay the dollars. The currency has started to fall. What are with he showing you here . This is actually a chart of the dollar over the last i dont have my glasses on over the last week. As you can see, it started to sharpen dramatically. Its much, much more costly to buy a dollar in india right now. That has started to raise a lot of questions. When we started to see big currency moves in the late 90s, t they called it the butterfly that flapped its wings, that it caused a Ripple Effect all over the world. A hedge fund back then huge, 5 billion, now very quaint, started to have a big meltdown. It can have Ripple Effects. Why isnt this the late 90s . First of all, back then a lot of currencies were fixed. So when devaluations occurred, they occurred overnight. You didnt see the stair step process we saw, for example, in that oneweek chart in india. Additionally, carl, super important, a lot of these countries now have huge war chests of Foreign Exchange to meet those demands for dollars. Why . Because when they happened in the late 90s, they all had to fall under an imf program, and ladies and gentlemen, just like greece hated it today, they hated it back then, and they vowed that would never happen again. So they have a lot more breathing room this time around. However, the moves are going to be big. Back to you. Thats really insightful analysis. Some of the lessons learned. Yeah. Hard won, but they were learned. Michelle carusocabrera. Bad management, lousy marketing, major debt have pushed one Green Company to the verge of bankruptcy. Not too late though to turn it around. The profit Marcus Lemonis, will tell us how. But first Rick Santelli talking earnings in the economy. Well talk about earnings but more in the context of a car metaphor. I think good car metaphors are the answer to everything that might be a little complicated to. To hear the metaphor and hear what kyle has to say, you will have to tune in in about ten minutes. [ male announcer] surprise youre having triplets. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. An allnew episode of the profit airs tonight with Marcus Lemonis trying to clean up a manufacturer of allnatural home cleaning products. Take a look. Hi, how are you . Im jen. Nice to meet you. Nice to meet you. So thank you for meeting with us. We really appreciate it. Youre very welcome. Were known for our cleanliness. This is a big meeting and im hoping jen can rise to the occasion. Which of the products would you use as a disinfectant. Our allpurpose cleaner is a disinfectant. Its made with vinegar. Are you getting that in terms of an aroma . No. At all . A tiny bit, but ammonia in bleach is okay. Its just funny to me. Sounds like a great product. We have one or two other vendors were entertaining. Great. I have a question. What do we need to do to earn your business today. Thats obviously why were here. When jen and i talked about coming here, we came to ask for the sale. You know, the only question that really will make sense is testing this product out. Do you have a room we can go clean right now . Yes, of course. We should do that. Housekeeping. Marcus, man, the look on your face is classic as youre standing there against the wall. I mean, put into perspective this turnaround versus the others you tackled this season. This is run by two women who are very opinionated and very strong and they make a great product. We talked about people, process, and product. I love the people. Their process is totally broken, but their product is fantastic. You will see me dive pretty deep tonight. Anything about this category in particular . We talk green all the time. Weve seen a lot of businesses make a lot of money even with subsidies and then lose a lot of money. Is this a challenged space . Well, its a challenged space because youre dealing with the p gs of the world. In order to get shelf space you have to have a great product, great packaging, and great margins, too. And its a tight space, but its a wide open space. And i think yesterday we reported its a 64 billion industry, this whole home cleaning space, and the environmentallyfriendly stuff continues to grow inside that space. Its wide open but you have to be right on the mark. Marcus, do you think that some of the women that you speak with in this episode are surprised that their product doesnt sell itself . That they have to do as much as to appeal to the consumer and focus on price as simply to say, you know, look, its ecofriendly, and therefore you should be lining up . Kelly, one of the things that i found is that this pride of authorship really plagues small businesses. They fall in love with their story. They fall in love with their product, and theyre so kind of buried in whats good and whats bad that they really cant see it. We went to a store, we dont show it in the store, but we went to the store and the consumer said id never buy the product. The packaging is terrible. What does the name mean . We had to unwind everything. We redid the packaging, changed the name, changed the way the product is manufactured, changed the way its distributed. Its a highenergy episode but in the end i think people will be pleased with the result. Marcus, we keep hearing anecdotally here and there from people who are obsessed, and i mean obsessed, with your show. Some of them are sitting with me at this desk but some of them arent even in television. Are you beginning to feel that as you watch the nation sort of take on the series . I think the thing, carl, thats been best for me is i have been contacted by a number of universities who actually want me to come out and speak to their Business Schools and my godsons fourth grade class called and asked if i could come to a show and tell. Its not just for entertainment value. Are people learning something . I had a ceo tell me the other day he thought he was smart but he didnt think about some of the things. Im not the smartest guy youll ever meet, but im going to provide you with enough information to be dangerous. Well, i thought you were going to say the universities wanted some turnaround help but thats another story. Marcus, thanks very much for your time this morning. Of course, a new episode of the profit airs tonight on cnbc at 10 00 p. M. Eastern and pacific. News on Electronics Art pushing the stock higher. Julia boorstin has more on that. Ea shares are more than 4 higher. It sounds from ea that both their packaged games and mobile games are working. In the mobile business, plants versus zombies has reached over 6 0 million downloads worldwide. Mobile is obviously an area where ea has been investing in growth. The Company Also Unveils new online mode and new licenses for its fifa popular soccer game and a slew of other new packaged games. The coo 15said to reuters earli today it expects to see growth in the physical boxed games thanks to the launch of new consoles from sony and microsoft this fall. So optimism from ea, a business that had really been struggling. Back over to you. And shares up 4 this morning as a result. Thank you, julia. The safest car in america is the tesla model s. That car just got the highest crash test rating of any car tested in the country. Earning fivestar ratings in every safety and crash category. Phil lebeau joining us now with more from chicago. Phil, good morning. And i think tesla even tried to claim that technically it got 5. 4 stars. There are sub tests done as part of each crash test done. That refers to the overall test score. When you look at these crash tests, the importance here is that not only did the models achieve a fivestar safety rating according to the national highway traffic Safety Administration but according to tesla, these are the best scores ever when you factor in a number of sub categories nhtsa also likes to test. They stay it comes up with the lowest Vehicle Safety score. Meaning it has the lowest likelihood of injuries when you factor in all these things together. Whats the importance of this . Obviously you want to have a good test score when it comes to your safety ratings. But for model for the tesla company, this is all about improving its reputation as it increases sales. They sold more than 10,000 in the first half. Expect to sell 21,000 this year. So as you take a look at shares of tesla, keep this in mind. When you combine this crash test rating along with con Consumer Reports giving a huge thumbs up for the model s. This goes into the mix of making people say this is a legitimate car. Its not just gee, whiz, cool, its legitimate. It has great safety ratings, a great reliability track record. All of those things go into adding to the legitimacy of the model s. Unbelievable story this year. Just incredible. Thanks so much, phil. Phil lebeau. If you want to know whats next for the markets all you have to do is Pay Attention to congress. Well explain why one Portfolio Manager is saying that in a few moments. Plus, from the stage to the owners box, kiss front man gene simmons has bought an arena Football Team in the city of long as. Hes going to tell us why later on in the hour. Ncer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. If then schwab is the placeing your trato trade. 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Tdd 18003452550 and learn how you can earn up to 300 commissionfree tdd 18003452550 online trades for six months with qualifying net deposits. Tdd 18003452550 our trading specialists are waiting to help you get started. Tdd 18003452550 so call now. Tdd 18003452550 [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk on the street. I have a guest, kyle harrington. Kyle, welcome. Thanks for taking the time to be our guest today. Thank you, rick. You do a lot of work about stocks, who is beating their top line, who is beating their bottom line. I want you to go through that but under the metaphor that i look at all the economies around the globe and i think about cars. The u. S. And to some extent europe is the price of gasoline which in this analogy is the cost of capital with Central Banks about ready to make some changes. The price of gas or capital is going up. We have a very good car engine. Its getting a lot of miles per gallon, but a lot of emerging markets are driving gas guzzlers. How is all of this going to figure in for future shareholders and anybody looking for a job. Tie it up for me . Theres 465 companies in the s p 500 that have reported their earnings. 65 of those companies have beat earnings estimates, but here is the thing that i want people to focus on. Only 54 have beat top line estimates, meaning revenues. So, rick, we all know revenues minus expenses equals profits, and wall street focuses on profits. I think were at the point here where weve cut away the workforce, weve cut down expenses as much as we possibly can to show good earnings. Now its time to focus on top line revenue estimates. Later in the week this week, rick, we have gap, we have ross stores reporting, and i think that thats going to give us a further indication of if the consumer is spending money. Because that, as we know, drives our gdp growth in this country. The consumer. So i want to take a look at the top line of ross stores, of the gap Going Forward here, and, of course, on wednesday, rick, we have a very big fomc meeting. Were going to get an idea here of what ben bernanke is thinking through and the markets from that point i think are going to have a direction. You know, everything you said i agree with. The one thing i might debate you on is the wednesday minutes, and theyre definitely important, but i think in this instance no takebacks i dont think the fed could put the genie in the bottle. I think forces are at work for a normalization and even if theres a taperingtype taper, i think that the markets are in motion and its going to be hard to stop it. In the last 30 seconds, can you comment on that notion . I dont disagree with you, rick. All im suggesting is that i think that ben bernanke and the fed have no choice but to keep rates exactly where they are. You take the bunch bowl from this party at this point in time going into a fall time period where theres going to be budget talks and debt ceiling talks, youre going to have some problems with the equity markets. Kyle, thanks for taking the time once again. Were going to talk before we get the german elections because i think the merkel situation in the elections might all reach a crescendo right as the emerging markets continue to melt down. Should make for some fascinating political landscape. Thanks again. Kelly, carl, back to you. And youre right, rick, hard to put the genie back in the bottle. Thank you vep for that this morning. Now many market watchers are focusing on the fed. We have a Portfolio Manager who says you actually need to be paying attention to congress and hell explain next. First though, the bell is about to sound across europe. Just a couple minutes to go in the trading day. Well get you details on whats happening across the pond after this. What you wear to bed is your business. So, if youre sleeping in your contact lenses, ask about the air optix® contacts so breathable theyre approved for up to 30 nights of continuous wear. Serious eye problems may occur. Ask your doctor and visit airoptix. Com for Safety Information and a free onemonth trial. Make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you start using active trader pro today. The european markets are closing now. Welcome back. It was an ugly session for europe. Simon, we saw some big losses, especially in the periphery. Yeah, absolutely. What we used to call the pigs down substantially, greece in particular has been hit hard. We finally got an admission despite the fact theres an election in germany from the finance minister there that there will have to be another bailout of greece. You see athens stocks have taken it on the chin. Europe was down anyway. During the course of the session, we have recovered slightly as a result of whats happened here in the u. S. With the dow not doing so badly. Let me take you to the sectors that are moving. A lot of the banks are down. But its profit taking. Some of these banks have done extremely well. These are the spanish banks. This one is up 67 . People booking profits. You see it across eurozone financials, some of the insurers are also in negative territory. There are profit warnings, notably in Building Materials today. Crh warned and thats brought down this sector. This is some of the largest cementmakers in the world and the mining stocks are lower. You may have seen bhp on squawk box this morning with their results and you got this big 7 billion, 8 billion write down. One more thing to add to the fact that the germans are admitting there may have to be another greek bailout, one of the two senior germans at the helm of the ecb is actually going to go to athens tomorrow to meet the Prime Minister and the finance minister. The question becomes is he going to try to play hardball into the german election with the greeks and what might that do to the markets . Back to you. Thank you very much for that. Lets get to bob pisani and see what else is moving down at the big board. A little bit of flight to safety in the u. S. For a change. Our markets are up, bond market in the United States is up, and whats weak is emerging markets, although its not quite as bad, put up some of the etfs for emerging markets, not as bad as its been in the last several days. Philippines, thailand, china is to the downside. Emerging market etfs, put them up for a second and you will see. Not as bad. The last few days its been a lot worse than anticipated. Let me talk about what i think is going on with the market gro emerging market group right now. The fundamentals have been deteriorating but the growth through 2009 has been helped by credit and fiscal stimulus. Whats lacking is restructuring work. Outside of china theres not been a lot of infrastructure spending. Here is the problem right now that were facing. Number one, the stimulus has been expiring, not just in the u. S. But stimulus overseas. Weve seen low commodity prices. Thats another issue. And finally, higher bond yields have been making it a lot harder to borrow money for these individual countries. Thats been the issue and thats been whats going on with these countries right now. Most of the major etfs are still to the downside. Interest rate sensitive stocks here in the United States generally doing a lot better today. So utilities, reits are moving to the upside. Reits, utilities, and Home Builders all moving to the upside. Reversing several days of downside today. Finally, you could take a look at those Home Improvement stocks today. Home depot was just a terrific report overall. I was very impressed with the fact they had 4 growth in traffic as well as some of the ticket items, the big ticket items like cabinetry, kitchen purchases were notably strong. Stock is pretty flat here. A lot of people have felt that the margins were a bit lower than expected. I think thats nitpicking. This stock has had an enormous run up. Its been up 80 essentially in the last year and a half. Its been one of the big performers among big cap stocks. Not surprised to take a little bit of a pause here today. Back to you. Bob pisani, thank you very much. Our next guest says investors need to pay more attention to congress and the debt ceiling fight if they want to toe where markets are heading next. Hes scott black president of Delphi Management with 970 million of assets under management. Good morning. Thank you, kelly. And good morning to carl as well. Thanks for joining us. Lets start off talking about congress and the debt ceiling. Youre basically saying the weakness were seeing in the market may reflect and may continue to reflect this negotiation all over again . Well, the weakness now has to do with the tapering situation, but im worried because if you go back two years and it was actually july 7th of 2011 through october 3rd, peak to trough on that cycle of the s p, it dropped 18. 7 while we were fooling around and getting downgraded to a aa plus and we didnt lift the debt ceiling. Theres such acrimony between the democrats and the republicans in the congress we may have a reenactment of what happened. The economy is just above stall speed. If you look at real gdp, its only up 1. 7 . Weve already had the sequester, weve had the recision of the payroll tax and there are a lot of negative drag on gdp, and if they fool around, they may kill the market as well as the economy. Scott, you think small caps are basically expensive. You think earnings estimates on the s p are too aggressive. Youve highlighted sort of the political risks well see this fall. Where do you go . Do you rotate back into fixed income . No. You look individually because were a deep value player. The s p as a whole is fairly valued. Its about 16 times but im using 103 to 104 which has earnings up 6. 5 , 7 . The current bottom up estimates are 108. 5 still implies 12 growth and thats not in the cards. It started out at 113 and things are gravitating downwards. There are individual companies that are still cheap. My advice is to buy companies that have sustainable earning power, high returns on equity with great Balance Sheets and low multiples. The one sector that gets no respect are some of the large and medium cap tech stocks that are flush with cash. You could name things like oracle and qualcomm and then medium sized stocks like sandisk and lamb. Those types of companies are selling between 8. 5 and 10. 5 times this years expected earnings net the cash. And those are cheap. But i certainly wouldnt be reaching for cyclicals and i wouldnt be chasing 20 and 25 multiple stocks in this kind of an environment. I was going to ask, scott, yeah, if we start to see the market correct another 5 or 10 as some of the negotiations and other concerns play out, do you start to be a buyer of stocks more broadly or are you going to stay specific . Were always specific because were a bottom up stock picker like warren buffett. Were trying to find deep discounted value. We pretty much stay fully invested at all time but its getting increasingly difficult to find very good values in this market. Carl alluded earlier, small cap and medium cap defined by the russell 2000 are 21 and 20 times this years expected earnings respectively so theyve been really picked over as an asset class but i would definitely avoid fixed income. Rates will continue to back up even if bernanke doesnt decide to taper in the next session. Because you could make an argument, scott, for going long fixed income given some of the weak dynamics you have laid out with regard to the economy. If you think 2. 8 is a reasonable proxy for growth expectations, why do you think the tenyear continues to move higher and why do you get out of the way of fixed income here . Well, firstly, the fed Balance Sheet is already expanding hugely. 3. 65 trillion as of the close of business on friday. It was up 26 yearoveryear and, truthfully, although bernanke has been well intentioned and i admire his work, people who have done Academic Studies show that the injection of the monetary stimulus really hasnt had all that much impact on real gdp. But its been trying to keep us afloat because weve lacked real fiscal policy for the last four or five years. But i think theres the expectation that we will taper, whether its this month or next, and rates will continue to back up. And i wouldnt be surprised if the tenyear crosses 3 here. Of course, anybody that goes way out on the curve given the huge accumulated deficit of the United States, ought to have his head examined because we have roughly 17 trillion in accumulated debt. Debt to gdp is roughly 1 1. Its the highest level its been since 1949. Scott, i want to congratulate you. Both kelly and i do on julia simone, your new daughter. Congratulations. The baby is terrific. Thank you very much. Thats nice of you. Scott black joining us from Delphi Management. Football is finally coming back to los angeles, and its all thanks to kiss. Kiss front man gene simmons buying an Arena Football League team appropriately named the l. A. Kiss. What the heck is gene simmons doing buying a Football Team . We will ask him when we come back. I want to rock and roll all night right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Coming up next on the half, rising rates. Women they ki will they kill the rally in stocks. And what would jack vogel do . The legendary is here with his latest advice for investors. Plus big blue. Ibm sinking to a 52week low. Should you still be betting on this old tech name . And dont miss this interview coming up right now. I guarantee it will be the most entertaining interview all day on cnbc. Carlito. Not to set the bar too high but i know gene will deliver. He always does. Thanks. The band kiss finding a new way to rock an arena bringing football back to l. A. After a fiveierhiatus. Gene simmons is the cofounder and lead singer of kiss. He joins us this morning from los angeles. Gene, its got to have you back. Congratulations. Thank you very much, but, you know, its slightly misunderstood. I have wonderful partners. Im just one of the knuckle heads in the bunch. We have the powerful and track tiff doc mcgue who handles the band. Bret bushy who has been part of the entire arena Football Organization for a long time and is so passionate about it, and my powerful and very young friend paul stanley. Yes. So we are the four sort of horsemen here to do good. And i know for a lot of guys, you know, we hear this a lot from people who have been in music, gene, that this is a dream come true. That this is a real this is one of those hills that everybody wants to climb. What got you interested . Well, the most important thing to note for los angeles and the surrounding area is los angeles didnt have a Football Team. How insane was that . Look at that. Thats thats, by the way, part and parcel of what were going to be doing, bringing bombast and bang for the buck to football, okay . Nfl is great. Theres nothing wrong with it, but go to l. A. Kiss football. Com. For those of you that still use pencils lakissfootball. Com. You will find out that you can bring your entire family and treat them to an entire season for 99 bucks. When you take your friends out for lunch, it costs more than that. Take 99 bucks, you will get a full season of l. A. Kiss here in the Los Angeles Area and guess what . If youre a season ticket holder, kiss will do a special concert just for you. So, again, if you tuned in late, how dare you, write it down lakissfootball. Com. The great thing about football is that it shows, especially for young people, it really is a chance to get sort of your responsible hairs in the back of your back standing up. Kind of understand its not just all about you, its about teamwork, and were going to take this to heights its never been before. L. A. Kiss doesnt just sound cool, it is cool. L. A. Already has a football them. They have the l. A. Galaxy. Ignore everything that was just said, just go to lakissfootball. Com. Keep your eye on the ball, kids. Listen to gene. Did you get any advice from bon jovi who has also been active in arena football for years . Jon did a terrific job when he first got involved. Hes no longer involved. Hes a powerful and attractive man, but were always about the here and the now and the future. Right here, right now were going to be taking arena football to the next level. Again, family entertainment, bombast, more firepower than most third world countries. Look at that. Its right in your face. Its in your face football. You could be sitting right there in the front line. Look at that. And, boom, if they hold onto the ball and they wind up in your lap, ball is in play. I love that. Yes . Can i just ask what the Investment Case is here . How well does this team have to do for you to get your money back . Well, were not looking at the short foil. We always take a look at it in the long way. In the same way that the Investment Community does. You cant take a look at like where is my pay date . You have to love something, put your nose to the ground, smell it, feel it, touch it, know the business model, know the structure of how it works. We understand that part, and the rest of it is with missionary zeal going out to the masses and using your fine broadcast entity for nothing to make sure that people understand that l. A. Kissfootball. Com is the way to go to get your season tickets for 99 bucks. Youre killing me. And a free kiss concert. Im not through. Thats not all. We have talked to you for years about how good kiss is at licensing. This is the icing on the cake. We cant wait to see how it turns out. Please come back. The great gene simmons joining us from los angeles talking l. A. Kiss, the new arena Football Team. The man, he knows how this kind of thing works. He knows how the model works. Yeah, yeah, yeah, he does. I dont think anyone is going to forget that website. Have you ever wanted to get your grad degree but you didnt have the time. A graduate degree at big name schools without leaving the house. Well tell you how that works next. Are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. announcer at scottrade, our cexactly how they want. T 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. It is crunch time for obama care as the brand new federal Health Exchanges go live in only six weeks. Now for the new Health Care Law to be successful, young people are going to have to sign up early and often. Bertha coombs explains back at hq. You know a lot about how this is going to work. Its really make or break. One of the reasons Employer Group plans are often more affordable is they have younger, Healthy People helping to offset the cost of older people who use services more. This Obama Administration is aiming to sign up more than 2. 5 million young people in their 20s and early 30s this fall to help balance the expected demand for insurance from older americans. In california the director of the States Health Insurance Exchange says the socalled young invincibles are a key target for the state Ace Marketing efforts. We have been doing hundreds of focus groups with what are often called young invisibles, folks in their 20s that might not have a family that are thinking do they really need insurance . When we have talked to them, they may be young invincibles, they arent young and stupid. They want to have insurance. Now, the hale and Human Services department is engaging young people themselves to get the word out with a contest on youtube offering 30,000 in prizes for the best videos about the laws benefits, but theyve got competition. The heritage foundation, which will also be targeting 500,000 in traditional advertising to overturn obama care, has launched a User Generated Campaign with the hash tag stop obama care across its social media platforms specifically to reach young people. Sometimes thats through a tweet, sometimes that might be through a graphic that we share on pinterest, sometimes that might be through a blog post. But everyone is at a different place, and we just want to meet those people where they are. The biggest key to winning the hearts and minds when it comes to obama care is going to be the readiness of those online exchanges themselves. If they are not ready on time, carl, thats going to be a boon to opponents. You can check out more and read about that now on cnbc. Com. Those potential glitches are something that loom large. All right, bertha. Thanks very much for that, following again whats happening as obama carrolls out across the country. Our next startup is hoping to revolutionize the Education System by taking graduate degrees digital. Theyre currently partner was universities like georgetown, berkeley, and usc. We have the ceo of the company and the former ceo of hooked on phonics. Chip, thanks for joining us. I dont know if my plan was to follow gene simmons but im excited to talk about the worlds best Online Education. Maybe theres some parallels you can draw for us. In the meantime, i think the idea of getting a graduate degree online is starting to gain traction. What does your company do exactly to make that happen . Quai quite simply, we partner with top universities to build the best online programs. Unlike the massively open online courses, these are real students with real professors getting real degrees. Theres no e or i on it and most importantly delivering a real outcome. Explain, for example, the difference between what you facilitate as opposed to this Georgia Tech Program which we understand is going to be a key test of whether you can use massive online courses to get a graduate degree. Well, if you look at our platform, there are average class size across our platform is 12. 3. Youre talking about small, intimate, live classes with fak sult. It looks a little bit like the beginning of the brady bunch. Its 12 people looking at 12. I think the key is this system provides an intellectual intimacy with the faculty member that ultimately creates the rigor you would normally find associated with an oncampus program. These students get the real thing, and, you know, ultimately while to you might power the experience, this is not a to you degree or a to you course. This is a chapel hill course a chapel hill degree, a berkeley degree, a georgetown degree. Students dont just become sorry. I have just going to say what that means is they will pay that chapel hill price tag. Of course. Now, if you think about it, for the first time really ever a student can enroll in a georgetown Quality Program and not pick up their life and move from wherever they are in the country. Thats no immaterial thing for their cost. If you think about it. They dont have to quit their job and they ultimately dont have to pay for room and board. I would say it all comes back to the student outcome. We really measure our progress as a company entirely on the results a student would see in a program. If you think about it, retention across our programs is 84 . So really Online Education has never seen anything quite that high. Were really focused on driving the right student outcome. Chip, most people know you from your days at hooked on phonics. Youre talking the polar extremes of education, early education, now a masters. Any synergies at least for your experience between the two . You know, this is my third venture backed startup. I have learned a lot over the years. I have always been in education. Im really a product of the American Educational system, so im the first person in my family to go to college. I went to George Washington and it utterly changed my life. I hadnt seen snow until i got to d. C. The reason i bring that up is the power of a high quality educational experience. I personally have seen it to be life changing. For me education has been a thread throughout my career. Are you going to go to the arena Football Games once they start . Yeah. Im actually a passionate Miami Dolphins fan. Im not here to talk about ryan tannehill. Im here to talk about real Online Education. If you think about how that applies to our programs, its quite interesting. When students enroll, they become tar heels, projans and hoyas. I have a little student i. D. From one of our students, and you become a real tar heel. The most important thing is its real. Like you are becoming a full student. Theres no e on your degree or i on your degree. And to some people that will be worth the price tag. To others you cant replicate the campus experience. Thanks very much for joining us. Thank you very much for having you. The ceo of 2u. Today sam lusung unveiled tr fablet. The question, samsungs first fablet unveiled. Whats a better name for the galaxy mega. Tweet us squawkstreet and well get your answers after this break. I hav e 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. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. Serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. Tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. In a clinical study, over 80 of treated men had their t levels restored to normal. Talk to your doctor about all your symptoms. Get the blood tests. Change your number. Turn it up. Androgel 1. 62 . Tweet time. How big is too big . Samsungs latest device is called the galaxy mega. Its a cross between a phone and a tablet. It looks like a tablet that you can make a phone call on. It will be available starting this friday, august 23rd, and weve been asking you, okay, whats a better name for the galaxy mega. A lot of responses today. Oracle writes, the black hole. Caroline writes, carpal tunnel. Schuman rights the applesauce smasher. And tyler writes, should be called the dwight howard. Cramer this morning did call it the lebron is i think what cramer said. Did you see the larry david movie, whats it called . Refresh history or something jon hamm. The electronic car is called the howard. I thought maybe it was a play on that. Michelle carusocabrera and the halftime. Thank you very much, carl. Welcome to the halftime report. Four hours to go until the closclos close. Dow is higher by 58. Thats what were following. Common sense investing. Legendary investor jack vogel, the founder of vanguard, joins us with his take on the fed and the markets at this pivot time for Monetary Policy. Big blue. Ibm at another oneyear low as old tech takes a beating. Shouou