than what apple has done in the past and might be the reason why we're seeing shares take off in after-hours market. the conference call is scheduled to begin in just a second. >> how on the margin side? third quarter is better than second. is this a place where people are really excited about these numbers? boil that down. >> it's a great question for you. we did expect some kind of margin drop-off from the company's second quarter to this quarter and last quarter, you'll remember they recorded 36.3%. 33%, 34% is where wall street thought these numbers would go down to. 36.3%. so, in other words, apple is able to maintain hefty margins from the second quarter to the third quarter. that's a big-time surprise and three quick questions for you. how, how and how because this is raising a lot of questions on wall street as to how apple has been able to maintain this level of profitability, those margins and so far so good. conference call i hear in my ear is just beginning. >> so what are they saying in your other ear?

>> they're saying go to the conference call. go to the conference call so we'll get going. >> we'll check back in with you, jim. thanks so much. it is exactly what apple was expected to do. it was going guide conservatively and the stock is still higher even though we had the analyst come on saying he would expect some sort of tumble in the stock because it was so widely anticipated. >> it's the margin number and it's clearly that they pound on their suppliers and they get their deals done ahead of time and they lock in those prices. you look at 36%, 36.3, absolutely incredible and you beat on every one of the lines over 10 million ipods and 10 million iphones and 2.6 million macs with the macbook pro and you've got to like everything that apple is saying right now. if this is how they can execute in this kind of economy in the crisis that we have been facing, absolutely incredible going forward. >> imagine what the recovery looks like. >> i don't even know why they bother to give guidance, though. the only thing we know about their guidance is that's not going tobt number.

we don't know what it is. >> they're going to beat that. >> they're going to beat it and we know that's not going to be the number. >> under promise, but they do it so often now that the one time where they actually don't, it's going to be a disaster. >> that's why they continue to do it and at the end of day they make a great product. if you know someone who has an apple computer, they're never switching. they have an apple for life and that's it, end of story. >> and once you get the iphone or the ipod, that brings them to the ma ac. 2.6 million. this is a product that everybody's been saying no way can apple sell this premium product and yet they still did it. >> and the market wanted to sell this number. morgan stanley had a call telling people buy 145 puts and you think the market's first reaction was the realization that the numbers didn't knock you on your socks, but the reality is these guys are chugging along. they're giving you the margin side of the deal, which is where i think you want to be buying this thing. up to 160, you have a nice ride. >> it will be interesting to see

what the reaction is, the r.i.m.s of the world, the no kias on the back of this that they're selling more iphones than ipods. >> it's incredible for us because i'm a texting guy. i need the blackberry and i can't see how they're doing it with the iphone. maybe i have to check it out. >> maybe. >> i don't know if the pie is bigger or the second share. >> we should note that jim goldman is twittering the apple conference call throughout the show and we'll be giving you updates as the story develops and continue checking on it in the after-hours action. moving on to the big after-hours story. yahoo, jon najarian from monster.com has been listening to that call in one year as he's listening to us on the other. another very talented man. dr. j, what are you hearing? >> it's just started, melissa, and that's the white one hanging out of my ear. this one's you. by the way, my hat's off to jim goldman, i don't know how the heck he does this, but here's what we're hearing so far. in their prepared statements they already addressed economic

recovery and ad line sales picking up. that's the online sales. so if they're putting that out already and there is some positive going forward. very conservative with what they've offered thus far, and what the projections are next quarter versus this quarter. this next quarter will be extremely good for him in the second half i like a lot for yahoo!, but they're just getting into it now. like i said i'll be publishing some more. i like what i'm hearing and we do not have positive readings going into this one and slightly to the negative side and that's about where the stock is, slightly negative. this isn't a slam to the down side, and i think it gives you an opportunity to play it for the upside going forward. >> john, a new conservative guidance coming out probably because of the new conservative cfo wouldn't you guess? he's new on the board and he does not want to shake anything up and he probably wants to present himself so he can maybe beat over the next couple of quarters, wouldn't you think? >> i think you're exactly right,

pete. it's tim morris, and i circled some of the things he was saying. he said economic recovery, ongoing shift to online advertising. that's the same sort of thing pete said google said and if they're seeing a big recovery and they're the biggest dog in the race right now then i think these guys should do pretty well as well. >> and tactically, it almost looks like the number, they were much better. profit ability was better and they're cutting non-operational projects and it seems like they're sprucing up the store for something in the second half. >> you think? >> well, i mean, i think it's a great strategy. if you show it is a much more profitable company and you can stretch the core business line then it makes sense for the obvious deal that we think it is going to happen. >> they've been sprucing up for the last year and a half. >> it wasn't good. >> they spruced it up to a $48 billion bid. >> a better spruce. >> it annoyed a lot of people. >> dr. j, we'll check in with

you later on in the show. pete, we'll give you a call back in yahoo!, as a weighing opportunity. >> absolutely. i think margins will only get better and what john was just reporting there is something anything close to what google was talking about, from a bullish standpoint, i like google. >> karen, do you think what he said about ad spending in the second half of the year can that help the tech markets? yahoo! is a smaller player. >> it is a smart play, but is that a proxy for the economy at large? if it is, that should help everybody. >> is it? >> i don't know if they're in a unique position versus any other company. maybe they are more real time every day. i hope so. i'd like to see a recovery. >> we should remind you all out there that dr. j is also twittering the yahoo call. everybody's twittering all the conference calls, but we will also keep you updated live here on "fast money." i've done that before and it's not fun and i'm not very good at it. >> if you can read the twitters, boy, we would be fined by the

fcc, i think. let's talk about the general market today as a whole. the stocks keep the streak alive. the dow up for a seventh straight day and the nasdaq posting its tenth straight gains from materials helped fight back weakness in the financials. caterpillar a huge mover today. we had our surge right at the open and it pared its gains mid-session on the cautious commentary out from the ceo, but it did manage to finish higher. is this a name that you sit with even with this big gain today? >> well, i think you do. again, if you listen to the commentary today, it really wasn't bad. china was across the board everywhere, everyone was talking about the one place that they found it and that's the place where you get comfort, but the thing that i liked was that they started to talk about a bit of a recovery in the u.s. side of their business and this is what we pointed to yesterday. you got some of that and it blew in the top line and what caterpillar told you, like everybody else as a company, they set some objectives at the start of a difficult year and said we'll be more profitable. they're much more profitable. they ket profitability the top line.

>> why are we so excited about caterpillar? they themselves admit that this is a cost-cutting story so it has now transition into an organic growth story. we bid it higher yesterday. we bid it higher again today. >> the two things i like that he said, the elephant can dance live on the commentary after and it's because, in pack, the biggest companies in the world have been forced to change stripes and become more profitable. you come out of this in a period of growth it will be a good company. you have stabilized the credit markets which is starting to see that. some of the biggest customers in the world need to get that financing and they said that stabilization is a pre-condition for recovery and it's there. that's what i like. >> the story out of the whole thing is it's mining and infrastructure and when you are talking about mining and infrastructure and you're looking at china and india. they're both trading in single digit p-es right now and they'll explode to the upside of caterpillar and 20 times at best right now, trading at a 20 times

p/e and 115 to 225. extremely wide. let's say they're at the upper end at two bucks. joy global, bucyrus pushing caterpillar right now. those names look far more attractive. >> i don't disagree with any of the two gentlemen. the problem is anyone i spoke to today said it was a short squeeze. so if they're looking at it maybe you'll want to lock in profits not to say that longer term you don't see the stock move higher. but maybe you want to take a little bit off. term -- >> he's the gentleman. i am not a gentleman. >> this is a huge move in just a couple of days. if you add yesterday up with today's move, any time toward the 40, i think it is a great opportunity. maybe it's an arbitrage. >> for the last two weeks we learned one thing. trade the market. you can't invest in it and don't get over short because i've seen the bears get aggravated when they were at 870 and they were looking for 850. it turned around on a dime. >> what's holding at 950 is clearly the commodities play. you look at caterpillar today. that was the driver and you look

at what else in the dow was moving, chevron and exxon. sprinkle in something not on the dow, but freeport-mcmoran. they didn't knock the cover off the ball. that ceo came on today and he made you a bull even with the stock at 68 because he talked about the fact that they'll have to pick up the production levels because the demands are just immense right now. >> every use of copper is something we should be excited about for the next five to ten years. copper is your long-term play. it's free fort, southern copper it's tck, which reports tomorrow. >> let's talk about the financials today. that was the part that really held back the markets overall. morgan stanley showing a weakness more so than its peers and in fact, analysts said more writedowns were at the heart of investors' worries today. >> commercial real estate is at an inflexion point. the losses are going higher so that's why you will see some writedown at morgan stanley, we think you're seeing that in spades at a lot of the regional banks.

>> commercial real estate at an inflection point. the losses are only going get worse. karen finerman, we talked about this for a long time. ia is it rearing its ugly head today of all days? >> commercial real estate it takes a while for those loans to go bad. it's not like the consumer does makes it happen so quickly. i think morgan stanley was talking about exposure there and the other thing about morgan stanley was i don't think they went out on the risk spectrum that goldman sachs did during the second quarter which was a fantastic time to be -- >> a proprietary trader. >> with the government's money. >> wherever you can get the money. >> government money, whatever it is. >> that will hurt them, but commercial real estate story will take a longer time to play out. i just think a lot of the commercial real estate equities have already played that story out. >> we have seen an underperformance of morgan stanley, if you go back to the bank run we saw, bank run meaning bank rally. we don't want anyone to panic. it certainly sunk the whole sector higher. morgan stanley, if you take a look at morgan stanley versus the dealer index. you didn't see the same

jut performance as its peers. is it that overhang of commercial real estate, do you think? or was it simply that morgan stanley is neither here nor there? it's got the real estate risk and it's also not a trading desk. >> i think morgan stanley has an incredible markets division, and i think we'll be right there for backs for the next 20 years unless we see some other unforeseen, but what i love about morgan stanley is the asset management business and they're scooping up the jewels of citibank. this is an annuity and i think it will be a profitable company, i think the numbers tomorrow may not be impressive and they'll point to the fact that the credit spreads are tighter. >> it's going to be a profitable company and at what point do you get in on basically the bet that it will be. >> at 29 the stock keeps running into resistance, and they need to show you something on the normalized earnings front. that's not there right now. i agree. >> you have 30,000 brokers and you look at what t.d. ameritrade

put out as far as volatility in the marketplace. april, may, june, incredible. their trading volume, 392,000 transactions per day. unbelievable numbers and you have to figure with 30,000 brokers now going forward, someone like morgan stanley, i agree with what timmy was talking about, all of the other parts of the morgan stanley business, add this to it now the crown jewel you just mentioned and suddenly it is cheap. i don't think you have to pile into any one name anywhere, i don't care if it's goldman sachs or anybody else, but to piecemeal every time it pulls back and you take another look at it. i think long term, long-term for me is a week, but in the long term it could really be something. >> didn't they price it at 27.44? >> right. >> it spent most of the day below that number today and we're looking at negativity going into earnings, so maybe you want to stay clear for a couple of days. >> karen, are you a buyer of morgan stanley? if so at what price? >> i want to second what pete is saying. you don't have to jump in with both feet now. you can do some. >> by the way, that's what i'm

hearing from the mutual fund guys. nobody is placing that flag in the sand. they used to say stand there and bid for them, do not let them trade lower. i haven't heard that conversation in two years. >> is it because the machines are taking over, steve? >> oh! >> no! >> all right! >> i'm going to blow a whistle on this fight. we want to go out to jim goldman who has comments from the apple conference call. >> yeah, as you might expect, apple is accentuating the positive and doing a heck of a job doing so. let's go to the tweet there because this is an interesting factoid, half of the macs sold during the company's quarter especially through its retail stores, better than 470,000 of these were sold to first-time apple buyers. this is a very important fact because what it does is it speaks to apple's ability to expand the marketplace, to expand its market share and this is a trend that we have seen developing over the past several quarters, but these apple stores have become a magic bullet now. its own sort of halo effect to

generate more of the mac faithful, if you will, once they go in and they buy a mac and then the question is do they buy an ipod, do they buy an ipod or an iphone and now they're buying a new computer and switching to apple? this is very good news and it's developing nicely. >> jimmy, i think this goes back to what we were talking about. it's about the i touch and the iphone, feeding into those macs. it will be interesting to see what the status is of the new buyers. how many of those buyers owned an apple product? that's the feeder system that's pushing them. if they can get to 8% and they were four a couple years ago. they're somewhere near six now. 8%, that is unableable what that could do to the bottom line. >> apple is now creating its own sort of halo effect with all of these products and who buys what and when which apple product they buy first? apple doesn't care. they just want to drive people into those stores and traffic into the apple retail stores up

30% year over year. i have to tell you what other company wouldn't kill for numbers like this. retailing or consumer electro c electronics. >> the company is currently unable to make enough iphone 3gs. what exactly will they do to address that problem? they can't build another plant at this point. >> good point. we knew demand would be significant as far as the 3gs was concerned. for apple coconcede that the company is unable to meet depanned and it is trying to address that issue right now, it is doing so in part by announcing moments ago a $500 million payment to toshiba, that's not part of the company's release, but they did make that payment during the first week of its september quarter, a half billion dollars to secure additional man flash memory from toshiba to populate those new apple devices. >> jim, we'll check back with you later on. apple shares moving in the

after-hours session. up more than 2%. that was the word on the street. we have the live play-by-play from apple and yahoo!, from jim and john as the after-hours action continues. here's what else is coming up on the show. all hands are on deck. apple and yahoo!, moving aggressively after-hours. we'll track the top traders and reports. don't expect a new toaster any time soon. while goldman breaks out your local bank is getting burned. don't let your money get charred, too. big ben is trying to get out, but is america back to doing something it just can't quit? a top strategist tells us how to trade the great american bubble machine when the post-market show continues. , upset stomach, diarrhea. yeah, my buddy's got all that. ouch. we've done corn dogs, pizza, and nachos. put it down. [ moans ] dude! pepto guy: sorry to hear that. everything ok? no, we are a little strapped for cash. do we need to buy a bunch of different medicines? pepto guy: oh, no, pepto alone relieves all five symptoms.

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welcome back to "fast money." we're live at the nasdaq market site in times square. we've been checking with jim goldman the whole after-hours session. apple shares right now higher by more than 3% at this hour. we do have apple beating estimates. the guidance, as expected, was a bit conservative, but some of the commentary on the conference call, this was the best non-holiday quarter surpassing

last quarter's record. also iphone revenues have eclipsed ipod revenues for the first time. we'll want to check in on shares of yahoo!, that was moving lower in the after-hours session at last check. john najarian is both tweeting following the conference call and now he's going to fill us in. dr. j? >> tim morris, the cfo and carol barts, very upbeat. carol barts, despite the fact that everybody including gene munster says how conservative she is and clearly the guidance is conservative, everything else she's saying is far from conservative. she says they're the number one online media company in the world. she says sport, finance and business, of course, they are the number one driver. she cited 9 million page you haves from a story on why hoo that went back to the new york times. she called yahoo!, a kingmaker and that they're going to be driving traffic to people that

basically do business with them. so this is very upbeat of carol barts. this is not conservative at all, and i think this is exactly what investors want to hear. investors waiting for this stock to get back into the 20s. doesn't sound like they'll be waiting that much longer to see something like that. because like i say, she has a number of initiatives. sync with your mobile phone, for instance. the home page will sync with your mobile phone starting next week if you want it to. a lot of good thing, melissa. a lot of things that they want to bring you back into yahoo!, over and over and that will increase from the site. >> anything you want to hear from you brother? >> the most critical thing i heard was the page. we've heard about the various things and you heard about microsoft launching this and this was a big catalyst for them

and i believe this page could be something that propelled them to the next level where they need to get to. >> dr. j, we'll check with you later in the show. john najarian tweeting for us, you can follow the tweets on the twitter page. fast money twitter page. that stock is jumping up by 10%, the forecasts beating the street's expectations up by 7.5%. it will be interesting to hear if they have any sort of the commentary on the new strategy they have of making some of the coffee shops seem like local coffee shops. they're taking down the starbucks marquee. they'll be serving beer and wine along with live entertainment like poetry readings. >> what does that do to mccafe?? if that was all a threat. >> i was going to say, ask stevie. >> mcdonald's makes better coffee than starbucks. i'll say it right here. >> it depends on the roast. >> do you drink it like a man? black or not? >> oh, yeah. there's an expression. i can't use it here. >> that's the only way you can rate coffee. they make a better product.

>> i drink it like a man. >> they open it small. so far starbucks moving higher in the after-hours session. next trade is your local bank in trouble? last week saw strong earnings out of goldman sachs and j.p. morgan and the regional banks flopped. it reported a larger than expected loss. specifically real estate and commercial loans. more regionals including wells fargo and u.s. bancorp all released earnings this week. here with a trade ahead of the report is the managing director chris nicholas. chris, always great to have you with us. >> it's good to be here, melissa. we've gotten a lot of data points. i want to figure out how bad this problem is and how far we are into it. the u.s. banking sector could see an increased commercial real estate loan losses of $250 billion. how much have banks grappled with that $250 billion figure, if that is accurate? >> we haven't tallied the number

yet because we're going through second-quarter earnings right now. clearly, we're in the early stages of the commercial real estate debacle and we're starting to see signs of issues on the retail strip mall, if you will and income producing property which is have to date actually shown some loan losses. prior to that the losses that we're seeing on the construction real estate portfolio for residential housing. so we're still in the early stages. i'd say we're looking at $250 billion in total losses, and we're not through a quarter of that yet. >> which banks have the most exposure when we take a look at the portfolios and is it as easy as going by regions in areas of the countries that are seeing the softest economies? >> i don't know if it's that easy because you have different underwriting standards for different banks and the southeast and particularly florida and georgia and atlanta, of course, are having issues right now. if you look at regent's financials report today, you had non-performing assets up about dollar 1. billion and almost 50% sequentially and that was the biggest increase from first

quarter levels from the banks that we've seen this quarter so far. that's in the southeast. so that could have some issues on other commercial banks like suntrust, bbnt has reported an increase. suntrust, key bank that has commercial exposure here in the second quarter and they're still up to report. suntrust is tomorrow and keycorp is on thursday. >> chris, it's karen. what do you think about another problem area, specifically california, wells fargo? what are you looking for for them and what will be the problem area for them? >> wells fargo is knee-deep into the consumer issues as everyone knows. i don't think that's new news. they'll have the revenue growth to offset the higher losses. we think wells will clearly have a good quarter from the mortgage side of the business and that might not be sustainable into the third quarter and we think it can beat on the margin and the income.

they do have investment banking and trading opposition. so we think there are more levers on the revenue side for wells fargo to offset the higher cost of credit. >> from the other regional banks that don't have the capital markets or don't have the mortgage pipelines, they don't have the revenue to offset it. we think it is positioned fairly decently. of course, when you look at the credit cycle, the consumer was the first. so we look at wells fargo and look at bank of america who have been building up reserve levels quite significantly, they may be out of it and the reserve efforts may be ending by the end of this year. >> chris, last question. what are the buys in the sector? is it the wells fargos of the world? >> our buys in the sector? >> yeah. >> wells fargo and b of a. large fran shiez -- franchises with strong deposit basis and have provisions earnings to offset the credit losses going forward. it doesn't mean it will be risky here. i'm listening to you guys talk about yahoo!, and apple and i

think i'm the red-headed stepchild here. >> we're not seeing the economic turnaround and the bank reporting earnings so far. you don't extrapolate goldman's reports and their numbers to the economy. you look to the banks right now and we're not seeing it so far. >> one last question, chris, this is actually the last question that i will ask you. can you take it off the table at this point? that's a publicly-traded bank out there will need to be seized by the fdic because of its exposure to commercial real estate? is it that big of a problem? >> it's a significant problem. i think if we don't see stability in the unemployment rate you could see that happen. i'm not going to bank on that, but the unemployment rate continues to go higher your vacancy levels will go higher and you'll have bigger issues and losses on the commercial real estate portfolios. i don't think i'm projecting that right now, but i think it's not out of the question and clearly it will be on the smaller side. >> great to have you with us. always a pleasure. >> my pleasure. >> chris mustacio. next trade here is dismal. we head to our prop desk. shares of amazon.com approaching

a 52-week high ahead of thursday's earnings and one of the catalysts for the stock this year was the success of the kindle e-book reader and now barnes & noble is entering the space. karen what do you make of this? >> this was a fascinating story and just as we saw the ipod revolutionize music and the way music is distributed so there are no music stores anymore. i thought the e-reader would do the same thing. i got a kindle and i love it and i shorted barnes & noble. as i read into this, barnes & noble has an e-reader that -- this is software. they don't yet have a device like the kindle, but i think it's coming. interestingly, the more and more i looked into it the worse i thought this is for a bricks and mortar-type model, but then it occurred to me, barnes & noble would be a huge beneficiary if borders group were to go under which i think is a reasonable likelihood. borders has more depth than barnes & noble. it's smaller. their sales are declining more quickly. they would see, barnes & noble would see a bed bath and beyond

boost that they got when linens 'n thing s went under. so that makes me not want to be short. i covered barnes & noble and now i'm waiting for boarders to go under. >> does that make sense? >> exactly. it's all in one. >> it's all full circle. >> the whole economy. >> what i thought was going to happen i don't think will happen. >> all right. >> coming up next, why pete was listening to this classic on repeats at his trading desk today. to find out, stick around for the stock of the day. >> on tonight's trader radar we look at the stocks lighting up screens today. founded as a small discount airline in texas, this company revolutionized the industry with its low fares on emphasis and customer satisfaction, but has recently seen turbulence. >> the ceo's out there talking about the difficulty and they're facing some of the worst in their history. >> today shares of the company face further headwinds after it

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welcome back to "fast money." let's get the after-hours story on apple and yahoo!. jim, what is the latest on that conference call? >> if there was any question that apple was having difficulty or struggling to crack the enterprise market as far as the iphone is concerned as it tries to go up against research in motion and the blackberry, rest assured that apple is doing exceptionally well. tim cook and peter oppenheimer talking about cracking the fortune 500 companies out there better than something like 20% of fortune 500 companies have bought 10,000 or more iphones. so apple says they are extremely gratified with the way the iphone is penetrating the enterprise thus far and it is a trend that this company expects to continue saying that this is only the tip of the iceberg as far as iphone's penetration of the enterprise is concerned and again, they do see this trend continuing in a very big way. guys? >> i'm hearing some rumors about the i touch adding a camera and microphone to basically bring

this to a point where people don't need a home phone. they're taking it to the next step. there's talk about that. people are looking for the next exciting thing in apple. what do you think? >> i think there's a very real possibility. wired magazine had that report earlier that the ipod touch would be featuring that camera and this speaks to the whole issue of the fact that at&t and apple are at some laggerheads as far as allowing videoconferencing on the iphone. so apple may have figured out a way around that by including the camera connected to a wi-fi connection that turns your ipod touch into essentially a mobile videoconferencing device and indeed, that would be a significant seller and apple essentially doesn't end run around at&t. it would be a really interesting situation if that develops. >> jim, great to have have you with us. we'll check in later on. let's go to dr. j listening to the yahoo!, conference call. what is the latest there? >> the big thing here is they finally talked about the elephant in the room that is most, melissa.

they just mentioned the very first question, in fact, was about bing. so joe teranova will feel good about that. and carol barts said -- the e caller asked and what do you think she said? it might have been joe in disguise, but the caller asked what do you think? she said i like it, i think they deserve kudos for it. my interpretation of that is that's an olive branch to microsoft. no other competitor that doesn't want to do a deal is going to be out there giving microsoft, hey, nice job, a thumbs up on that so the deal talk will start picking up again. you've seen it pare losses. it's back about 50 cents from the lows of the session. keep an eye on yahoo!, as the call progresses. >> thanks so much. do you think that's yet stock is paring losses in the after-hours? the notion that the merger talk is still alive? >> i don't think anybody here thought it died. i think we all know it exists.

there's some interest there and what level it is? that's the only question. >> it seems like the deal that will never happen. >> that deal will happen. it's a matter of time. >> why were you listening to mr. roboto? >> they've got the da vinci device, that's less invasive surgery and it's a robotic surgery. it's a magnificent device, but not so magnificent when it costs well over $1 million for the device and folks are having to cut back. if we are improving right now which clearly we were showing signs of stabilization and maybe some improvement, this stock has moved up from 100 and now it's trading near 170. they have earnings later in the week and plenty of opportunities activity out there as well. trades around 34 times right now. probably relatively cheap and maybe, just maybe they've got some incredible upside. when you talk about a stock that was $300 less than a year ago. >> there's a significant amount of short interest in it. earnings are coming up and there's a huge upside and part of what pete's seen. the short covering will happen. this stock could double on you in the next six months.

>> time now for a special earnings edition of pop and drops. all of the companies making news after posting their quarterly numbers. we'll pick it up with lockheed martin. a drop of 8%. jim? >> there will be no f-22s being built. it is down 6%. it's a time to buy this thing and trading with india. >> moody's was down 6% on the session. careen? >> moody's, was there legislation out there that might not be so good for moody's trying to really sort of decrease the prominence and how necessary these rating agencies are. that's a bad thing for moody's. >> more regulation from the obama administration. >> imagine that. >> a pop here for deere, up 2%. tim? >> it's the ag play at work. we're driven up by the caterpillar numbers.s. and deere is playing in the same space. run with the deere. >> go ahead. >> i don't like -- unless you're grasso. >> i am when i want to be. >> i'm not sure. i'm not sure. >> all right. grass o over here.

i don't like airlines and even if the ceo told us that it could be tough going forward so who better than to take the ceo's word? i'm not going to be buying. >> we have a pop here for neil armstrong, the cheese version. yesterday marked the 40th anniversary of the first moon landing and residents in ohio decided to commemorating the event by creating a 6 foot tall replica made entirely of wisconsin cheddar cheese. 1,800 pounds on display at the local neil armstrong air and space museum. >> for how long? >> hopefully want very long and maybe they'll end up eating him afterwards. >> it is a tough economy. >> he's a hero, though. >> that's true. coming up next, america's blowing bubbles once again. first it was a dot com bubble and then the oil bubble and then the credit bubble. after the break, we've got a guest who spotted the next one to burst and it's deja vu all over again. stick around. you're the colon lady!

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stocks are on the comeback trail. caterpillar is selling more earth movers than china and ben bernanke said today that he will keep interest rates low for a long time.

>> happy days are here again. not so fast as the former wall street strategist who stood up against his bullish peers before the crisis. we haven't cleaned up the mess from the last party yet, he says. you see, in 2000, the tech bubble burst and capitalism took its course. hundreds of tech bombs rightfully went out of business and just like after the 1800 gold rush when mining outpost turned into ghost town. but after the biggest credit bubble this world has ever known, we kept this ghost town open for business and just like japan in the 1990s, we didn't let capitalism take its course and we'll pay a price for it over the long run said this top strategist who saw it coming. richard bernstein makes his case for the "fast money" now. >> richard bernstein, ceo of richard bernstein capital management. richard, we are here. we may already be on a course where there are bubbles out there. we have a policy of institutions that are not too big to fail. we have the t.a.r.p. out there.

what happens next for the economy? what do you see because of this bubble? >> well, the fear is that we turn into something like japan in that we keep the excess capacity alive ask what is not needed and we have a slow-growing deflationary economy and that's one of the big risks that's out there now. not necessarily in the next six weeks or six months, but as we look out to 2010 and 2011 that's what we missed. say tim geithner is out and he buys your premise and where we become a japan-like economy. what would you tell him to do at this point in time, now that we are all already here in this situation. >> i think one of the things they could have done was take the cit situation right now and first let me say that jeff was my boss at merrill lynch when i was at merrill lynch. so everything is close here. i think there was a whole question about -- as cit goes away who will lend the small and mid-sized companies and have the

companies and my argument in the article was why should the guys make trading profits and let's put the t.a.r.p. money to good economic use. >> they did do that. they did say we're not going to bail out cit and let the market bail them out if they choose or not. >> absolutely. i think that's right. the government did get money to cit originally and that was my point. the private sector is doing the right thing. i'm not arguing anything else, but i think the big thing that has not gone on in washington has said that everybody is too big to fail. they're scared of systemic risk and that's what we hear. that's a political answer and i don't think that's an economic answer. >> real supply and real capacity out of the auto business, for example. >> the auto business, they have. it will be interesting to see what happens with the feeder companies that go into the auto industry as they start declaring bankruptcy and what happens to that unemployment and that's a big story and that was a big step in terms of that restruck other.

will they take enough capacity. you're talking about the bigger issue is reflation and the approach. ar you anti, you know, the free lunch we seem to be getting right now. because that's really what the government has done. >> i'm not sure i would use the word free lurch. i'm not antifiscal stimulus. i don't think that's really necessary, but what we're not doing is we're not saying is let's take the stimulus mono and get the highest return on investment, the biggest multipliers in the economy that we possibly can. >> we're wasting a lot of money right now. richard, i hope you'll come back. richard bernstein of richard bernstein capital management. you want to take a quick check of amd shares. they did report a bigger loss than wall street expected and we're seeing a big 14% decline in the after-hours session. coming up next, what is happening in commodities tonight. tomorrow's first move, we'll get an update coming up next. at 155 miles per hour, andy roddick

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time for a new segment we are calling "pitfalls." the action and the commodities, currency pits. the institutional services, managing director. jim, always great to see you. >> actually in the absence pit, mosaic which are not really the commodity ones that are on the fringes of commodity and the drillers and the fertilizer. the interesting thing about the commodity play is for the last four months it's never been about intrinsic value and it's been about the dollar weakness and today we shot again. every time the dollar has threatened to get weak again. we buy it again. for the meyers particularly, one of the things i saw today was they made higher highs and lower lows. if i got a weak close, they're they always throw the curveball. we saw fairly strong close. i still like freeport-mcmoran, barrett gold and magnum gold. the dollar starts to get real strong you'll want to get out of that trade. the dollar weakness is funny and at a precarious level. it is like wine.

two glasses of wine are good, ten are bad. it could be bad for everything else. >> i think, jim, aka, the pit bull makes a good point on the miners. i would say they're some of the wildest stocks to play, but if you look end to freeport today. they tell you about the demand in the case of copper and you've actually got supply issues out six to nine months. i love the call and i'm worried about the levels here. in pack, we're a seller of freeport. >> always great to see you and we'll have the final trade right after this. you could buy 300 bottles of water. or just one brita filter. ( drop plinks ) brita-- better for the environment and your wallet. right now, 1.5 million people are on a conference call. 750,000 wish they weren't. - ( phones chirping ) - construction workers are making 244,000

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a quick update in the two after hours stories we are tracking. apple is higher in the after hours session by 3%. yahoo!, is trading lower. we'll see which one prevails when it comes to the tech rally. time now for the final trade. tim? >> my final trade is ung, nat gas is coming back eventually. >> grasso? >> unh. as along as obama show continues i think he's desperate. >> dwa, warner. >> pete. >> liking joy global. >> tune in tomorrow at 5:00 eastern time for more "fast money." have a great night.

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california has it all. sunshine, amazing beaches, rolling mountains, national parks, and now a budget deal. after months of bitter fighting, democrats and republicans in the golden state agree on how to close the $26 billion budget shortfall with cuts, cuts, and more cuts. >> california, obviously like other places in america, goes through some terrible times this last year. >> no other state in the nation personifies beauty and glamour like california. beauty is only skin deep. deal or no deal, california is still in crisis. >> california has been hit very hard. >> unemployment is at record levels in this, the eighth largest economy in the world. home foreclosures skyrocketed.

>> of course, there's no time to waste. >> tonight, turning the corner in california. the budget deal is a big step, but it's only the first step. this is a cnbc special report. "california in crisis." ♪ california, california good evening, everyone. i'm sue herera, live at the state capitol building in sacramento, california. a lot has happened here in the last 24 hours. after months of bitter budget fighting, democrats and republicans reached an agreement on closing this state's historic $26 billion shortfall. don't get too excited quite yet. the state legislature and state senate must now approve it before an official deal is in the books. lawmakers were set to start sifting through that plan today or tomorrow. in an interview with nbc news, governor schwarzenegger stressed the importance of bringing jobs back to california and lowering that 11% unemployment rate. >> we, you know, are en