here's what to watch for tomorrow. >> make sure you tune in tomorrow, 99 billion of supply, day two for a week that's going to encompass $235 billion. what do we have on tap tomorrow? one month bills, one year bills,

and two-year notes. tune in. i'm diana olick in washington, home sales appear to be gaining momentum, can we say the same about prices? a new report tomorrow at 9:00 a.m. viacom reported second quarter earnings before the bell. video game sales hurt the media giants profits and the pressure's on redstone, will the sales generate enough cash to cover his debt? and don't forget about amgen better than expected earnings and revenue and guides higher for the rest of the year. stock is up in the extended hours. i'll see you tomorrow on "closing bell," "fast money's" up next. good night. amgen's second quarter profits rise 40% on lower costs and the biotech company raises the full year profit outlook. after the bell, amgen says it will cooperate on a pending osteoporosis drug. rates may be rising in the not

too distant future, he's not a voting member of the fed panel. cnbc.com news now, "fast money" with michelle cabrera starts right now. the "fast money" in just ten minutes, folks. melissa lee is on assignment, and fresh off the trading floor, these are your expert "fast money" traders. stocks at 350 today, pushing the dow above 9,100 and foiling the bears once again. what's driving the gains in this market which doesn't seem to want to go down? let's get you on the right side of the trade. here with the word on the street, do we have new volume in today's move? >> hold on, pete, you've got business to attend to. >> ladies and gentlemen, i've got to introduce la princessa. >> all right. that's what you call me behind my back anyways, right? >> here's what happened today.

you had new home sales come out, we got excited in the morning and disappointment set into the marketplace on a low, low volume day. i think a lot of people were disappointed that you did not see follow through up side after what was a particularly decent home sales report. everyone got caught short later in the day, low volume, 352, scramble for cover. >> here's what i didn't understand. hardly any volatility until the end, but middle of the day the vix is up 7%. are those people worried we're going to see some kind of big move? >> i don't know whether or not they're worried, but they're seeing the volatility at the lowest levels in multiple months and they want to start positioning themselves. we talked about some of this last week when we had a surge in the volatility when we pushed a little bit to the downside, we saw it get back up towards 26%. today near the 24% to 24.5% area, and the reason they're doing that is they are rolling up buying protection, give you a great example. on friday, part of the trade was wells fargo rolling up and trying to get protection, closer

to the strikes. when you get a market that goes up 100 in just a couple of weeks. they no longer have protection until it gets down to that 100 level. they've been rolling up in multiple different stocks. >> you look at it bullish or bearish? >> bullishly, because you've got the prekts in place, you don't have that fear factor of everybody at the door to sell the stocks they decided to buy. they buy the stocks, uh now they've got the put protection. they don't have to panic. >> like joe, i was a little concerned we didn't trade better. and the dollar was really your culprit. we came in today with that housing number, i would have expected commodities to fly. we saw the dollar -- >> we had a huge run, we had a huge run, and the fact that -- >> michelle, i think we're finally getting ammunition for the people seeing the global trade is back. i think the g-3 recovery is going to be better than people think. and this housing data whether it's this number, which we're going to talk about, and you can probably blow holes in this number, but it should have been more ammunition. copper at nine-month highs,

aluminum at eight-month highs. and i think the dollar strength, we'll talk about the treasury auctions may have something to do with that. there's a lot of concern out there with the dollar and i thought it should have been selling off and it did not. >> i agree with -- >> a wall of worry, which sh what we want. >> exactly, we've seen already this data. stock price moves already looking forward positive data coming out so that it actually came out it didn't react the way we thought. look at the run, look at the run in these emerging markets. >> i think these emerging markets were running, i think they've got more room to run and i think commodities are rallying on an asset class rally and a strategic hoarding. >> but not fundamental? >> no, and that's why i'm bullish on that. >> the fundamentals have moved, they reflect a higher price, a higher multiple. >> it is not going to end with just a wimper. an explosive high-volume

thrust -- >> i love it when you talk that way. >> goes lower on the day. that's how this ends. should we be alone? >> are you turning red? >> all right. you started talking about this, next trade, housing bond, let's talk about the numbers everybody keeps referring to, home sales jumping 11% in june compared to the previous month, that's the third straight monthly increase. the news sent the stock sharply higher, up 9%, lennar up, as well. >> it points at this number, and going back four or five years, we've had a tremendous fall. >> single-family homes is what we're looking at. even though we've got a big raise, comparatively. wow, that doesn't look so good on a long-term basis. >> no, an 11% bounce off the bottom after the run we've had, it's easy to have a statistical outlier. i'm not convinced the housing market is going to soar 11% next month, but i do think everybody's looking for stabilization and i think we got

it. but i'm the one who's on the side of, i do think this number was, you know, the reason to get out in the streets and do cart wheels, and if i think it's going to rally, i'm not buying housing stocks, i'm buying cement, and some of the biggest bricks and mortars and copper. >> copper's at 10-month highs. then it comes to joy global, all of those different mining makers. you've got to look down a little bit deeper. these housing stocks, i tell you what, i would not want to be jumping in there. just like the casino stocks, great trade, but you don't want to be in there long. >> karen and i have been looking at this thing. look at american express, what's that housing number? >> whoa, we're going at it. >> what does that housing number show you today? there is stability in residential construction. you are witnessing the residential side, we've passed residential to commercial. >> way too early to go there. >> i think it's the inventory

numbers, pete. 12.4 months in january, today it's down -- >> i'll tell you what those are going to hit like a hammer. >> let's say you're long some of these home builders, case-shiller out tomorrow, what do you do ahead of that? >> sell them, take them off. >> you agree with me. >> you absolutely don't want to hold those home builders, but i think it comes down to the commodity trade as you pointed out whether cemex to a global, caterpillar because of the exposures they've got there, but i'll tell you what, the home builders, no way. >> the point we keep talking about. if we wait for these numbers to absolutely show improouflt, you're too late. >> i actually don't own it, but i do think cemex was interesting. that was actually a seminal event in the recovery of the home builders stocks. and they're going to be positioned to take over from others that are in a weakened --

>> who knows exactly where the bottom is. you only know after. but this is good data. >> well, we do know the housing is strong is in brazil. gone from $7 to $26 and because, actually, interest rates are low in brazil, the consumer doesn't have any debt. these banks are all issuing mortgages. >> and my favorite story in the entire world is the emerging middle class where the poverty-stricken finally emerge and are able to buy homes in places they never could before. >> that is the story with gafisa. they are building low to medium-level condominiums where interest rates are at record lows and there's a rationale for these guys to get in there and spend money. >> this plays into the whole global story of goldman sachs laid out back in may and june when they picked the various sectors and said time to buy. these are all starting to get rated up, and i'll tell you where it goes, lowes today, conviction buy list was on there, they took it off, why?

because it hit the numbers. this thing pulls back enough, that's going to be a great stock to participate. >> like i said, go after and own the names that have the exposure, the actual exposure to the residential home sector. >> got it. >> american express, that's where you want to go -- >> next trade. time for after hours action. amgen is trading higher now after reporting second quarter profits 40% on lower costs and restructuring. the company also raising its guidance for the rest of 2009, yes, we talked about it ahead of time. joe told everyone to buy it. mike? >> yeah, michelle, i'm sitting in on the amgen conference call right now, and the ceo just finished up his scripted opening remarks. basically saying regarding health care reform before we move on to earnings what's boilerplate this earnings season out of the industry, that the company supports it and pleased to have the seat at the health care reform table. but let's get to the earnings. so it beat by 13 cents on the

bottom line, it beat on the top line, it raised its full-year revenue guidance to the upper end of the lowered range that it put out at the end of the first quarter. so 14.4 to 14.8 billion, the street was very pessimistic sitting at $14.3 billion, and most importantly, it raised its full-year earnings guidance to a range of 4.80 to $4.95 a share. the street was sitting at $4.57 a share. but the company set out a separate release whose shares are also moving higher in the after hours saying they're going to partner on the drug that's known as dmab and this is a twice a year injectable osteoporosis drug that many analysts as we've talked about before believe could be $1 billion plus block buster product. >> here's the interesting thing to me. you're talking about biotech and you've talked about earnings, earnings, earnings. remember the old day all they

would do is burn up money along the way. how about the pop line. they've got ten different drugs right now sitting in final stages of the pipeline. have they addressed any of that? >> no, not yet, but pete, the focus here is definitely on dmabb. this is the drug that many analysts say is going to determine the fate of this company. there's an advisory committee meeting, so this is an outside panel of experts for the fda that is going to take up the safety and efficacy of dmabb on august 13th, and the fda is expected to make a decision on whether to approve this drug about two months later, october 19th, i think the day is. >> explain then why this partnership if it's so important, i don't understand the reason that they'd be making this deal. >> yeah, it is as i said, it did come as a bit of a surprise, and basically saying that in europe and emerging markets, they're going to partner on this drug. i think glaxo's going to give

amgen $120 million in an initial payment and near term milestone and give them some royalties down the road. so this totally appeared out of the blue, but on the conference call the chairman and ceo did say that this is the result of months of intense conversations with glaxosmithkline. >> thank you, mike. you're going to be twitter the amgen conference call for us. you can follow all of mike's comments at twitter.com/cnbc. he's getting right there back on the call. kudos to you, joe, who told everybody buy amgen ahead of the numbers. >> and long before that, karen finerman, timmy, you may, as well -- giving you love, as well. they told you to buy amgen, as well. here's the trade, you've got to understand august 13th is the next important date. you're going to have a lot of hot money, come in, chase this stock, i'll tell you what, you've got to be out, i believe ahead of august 13th. >> out or use the puts, the fact that all of this news that's

already come out, that volatility will come in as you were talking about today. why did we see that rise? because of the catalyst. >> let's stay with health care right now. time for a sector trade on the insurers. aetna got hit throughout the session, lower by 3% after slashing the full-year earnings forecast citing higher medical costs. lagging the market for month on obama reform fears. karen, what do you do here with the insurers? is aetna the problem in and of itself? >> well, it's an interesting space to think about. the numbers weren't good, meaning they had more medical expenses than they thought they would per dollar of premium that gets paid in. however, you have to step back and think if you are an hmo company right now, you really shouldn't be out there talking about how great your earnings could be. i mean, this is a political environment where they're coming out here -- >> oliver stone conspiracy -- >> they can't -- >> you're absolutely right. you don't want to be bragging about how much money you're making right now. you want to look at oh, woe, poor insurer am i.

>> don't take away the monopoly on insuring people. but i think this number wasn't great, they're not the premiere name in the industry, all that being said, i would stay away because i'm afraid of this administration, i don't know what could happen for these hmo stocks. >> what if, indeed, health care reform does die the slow death we've been watching here. >> then they're all huge buys, no doubt. even with unemployment, they're trading at 8 and 9 times earnings, which for premiere names like these is an attractive price, but i'm not ready to call -- >> this administration's out on a limb. i don't think they're going to have this as they have mapped out, but i think the trade people have been staying away from is for the right reasons because we don't know the answers. >> here's what we do know. from every sector in the world in order to pay for what they're trying to achieve here. if you believe you can't get a deal done, you can play through

options, you'll have it protected in case somehow they do and move on. >> a tremendous amount of uncertainty, which goes back to the trade, it's all about biotech. because biotech's got the answer for all of these problems that we're facing right now in the health care sector. >> and we're going to talk more about that, the health care analyst to handicap whether or not this is going to happen in this reform. next up, let's talk about the wire -- where commodity stocks are trading. alcoa led the way up 3%, oil putting up the third straight day of gains. joe, you're a commodity expert, what do you make of alcoa? >> some say i'm not that good of an expert. i'm not. i really believe it is about oil and the important thing to look at in the commodity space is this. it looks as though technology has taken us this far, it has been the leadership. now the second half of the year, what is going to be the leader? and i think that most people truly believe fundamentally technically that it is going to be energy as we move forward. right now in energy, the important thing to look at is you are having the cftc having

some hearings on speculation, that may throw some cold water on what's been a rally over the last four or five days, but the dollar is going to remain weak, commodities stay strong, that's your theme for the second half of the year. >> we're actually getting rotation, and this is not commodity trades go up and down, a lot of things are working very well right now, sugar's working, czz, down in brazil, michelle, where i know you're hanging. i think there's a lot to do in sugar around the world. also look at steels, we had that number posted up there with u.s. steel trades in new york, there's a lot of opportunity in coal and steel, and big in the bolts, we're starting to see rotation because i think there's recovery. >> what have we seen so far with the coal names? they all run into the earnings, give you that pullback and then extend that run further. so i think you've got to keep your eye on the stocks, walter industries is one of the names you have to keep your eye on. across the board, whether it's all those names, but then back to these engineering stocks.

did you see -- all these various names, foster wheeler just keep moving to the up side, they're still too cheap and i think there's more up side to come. >> well, you know, a.c. did an offering tonight 17 million shares, i don't know how that got priced but good for them to take a chance of being run up in their stocks. next trade, the market's swinging higher in a late afternoon surge, chalking up one more gain for the rally that's been picking up steam since the start of earnings season. can it keep going? for that we turn to greg for your five-day market forecast. greg, good to talk to you. first, what do you make of the reversal in the last ten minutes? was it significant? >> first of all, michelle, i think your tag name at the begin of the segment with pete was -- >> -- >> yeah, we love that. the charts itself, i think we are making too much of it. we've had a great run-up here in the last two weeks, people that were waiting for this market to

dip didn't get it, so people are now chasing the market. however at this point, the breakout above the only thing i say about it without trying to micromanage this market at this point is the moving average line is down around 9.20, we're up around 9.80 somewhere around that region. it's a little bit overextended, but today was a hangover market. we had a great two-week run-up. >> it's joe, tell me exactly what it looks like on a chart when this ends. what is the blow-up basically look like? >> and your point earlier, joe, as far as you need some sort of dynamic ending here, i think it's going to be somewhere around the test point of around 1,000 in this market. i think we can creep up towards that region, but again, the people that missed the first move from the lows in march before we came into the consolidation are chasing this market right now. however, we are going into an august vacation month, i think the market settles in a little

bit. but if i have to guess, it would be somewhere around 1,000 level where you'll see a final blowoff if, in fact, this market is overextended. >> let's get some specifics. general electric, you say it's a buy, what do you see in the charts? >> what i like about general electric, it's lagged here the last momentum move up. >> tell me about it. >> we certainly have -- we certainly had the lows that we posted in march and moved up, but what i do like about this, michelle, the moving average line's near term and moving up at this point. i think there's decent support and i will take any trade where i can define my risk. right now my target is 16, i'm only going to take -- >> wow. >> i'll only take $1.50 to $2 stop loss around $10.40. because it's lagged, the near term average line is going up right now, get in on it and you have -- >> at this point -- >> i'm looking at the chart on ge, though, and we've gone from $10 to $12.30, i think ge's the

story where fundamentally people are on board with the technology group, going on in the infrastructure group and the finance side hasn't been that bad. i don't think ge has gotten behind in the market relative to itself. i think there's a trade there that's probably underperformed. >> greg, you're short walmart why? >> lower highs for the last year. the stock is really turning over still, a lot of resistance here, and again, i can define my risk. i'll short it here and i'll put a stop just above $50, i think this stock goes to $35, fundamentally, they haven't had their house in order for a while. >> i think it's crazy, actually. sorry, i know -- this has never traded that will get you there and it's not like the business is so cyclical that earnings moved so wildly, you know what -- >> they expanded way too much in recent years. >> we're going to leave it here. skepticism here. greg, good to see you. >> you too. that was the word on the street. right now, a dot com darling in

the dumps, amazon cheap after the earnings report. and why is pete looking at a behind the scenes technology play in emc? plus, do you buy or sell mastercard ahead of earnings? the answer plus all this coming up after the break. the bill akman starter kit. and is the top trade in market still intact? the number one internet analyst takes the pulse with more earnings coming up after getting hit hard by big blows. plus the big fish leaves the water. normally only at home rubbing elbows with the rest of the boys in the pit, rick santelli makes a special trip to the "fast money" floor with his chi-town trades that are anything but shy. npeople are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles )

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income, there are people complaining about his demands given that citigroup still has billions in taxpayer loans yet to be repaid. does he have the right to have the money or not? you know what's frustrating when you read the reports, what they fail to mention that his contract doesn't call for him to make $100 million, what does that mean? he's made 200% of $100 million for this company. >> and he's made a lot of money for the company, and people fail to realize that the american taxpayers have gotten a nice little boost from this guy. >> they need him. >> i don't understand where the question lies, and in fact, it's easy to jump on what's going on with the bailouts, but in fact, here's a case where the guy added extraordinary value but there's an ironclad, you know, document that says he should get paid. >> let's understand a little about what andy hall does, he's a legend in the energy trading world. he works fibro energy and everybody's going to look at this and say he did it speculating on oil. that's not what he does. what he does is measures inventories and understands when

the relationship is going to move. and he nailed it, nailed it over the last couple of years e. he's been on target, spot on, understands the fundamentals of oil. and to your point, your point, we are all investors right now basically in citi because taxpayer money's there. so i want andy there, i want him there, i want guys like that there, and if someone like andy can't be at citi, it highlights exactly where this top program fails. >> when oil is cheaper in the future, contango when it's more expensive. >> here's the thing we don't know that i can't understand. i would see how he would make the $100 million on some formula, the question is, how much risk is he allowed to take? >> take a lot of risk. >> okay, that's the thing. >> the problem is it's not defined for us. >> we don't know the answer to that is. so if you gave somebody $10 billion book of business they could do what they would want, they'd hit a couple of times --

>> we don't know that, we don't have the numbers. >> i'm not saying he is or isn't, i just don't know that information. >> he's obviously taken a big enough bet to generate these huge profits which suggests that a company that is backstopped by a taxpayer could ultimately lose a ton of money, as well. >> this is a trading show and he does exactly what a good trader does that everyone on this desk does, when he knows he's right, he puts the pedal to the floor -- >> he could have been wrong. >> taking more risks. >> but the difference also is the fact that we all trade our own money. we aren't trading the government's money, we aren't trading the taxpayer's money, and we don't know the defined risk. >> i can tell you i also don't know what his contract says, and when citi bank has a terrible year no matter how much somebody makes, any firm i work out it's speculative and tied to a specific hard dollar credit. so it doesn't always mean dollar for dollar or in other words if most investment banks, this is why we have to see this guy's contract. the world's largest online

retailer surged over 60% this year. but then after reporting worse than expected revenue on thursday, the stock has sunk over 10%. so is this trade and dot com darling finally over? joining us is mark mahaney. >> hey, michelle. >> what do you think? >> i'm not going to touch that. >> i didn't think so. amazon, what happened? what do you do with amazon right here? >> amazon you're a buyer, small buyer of amazon here. get the stock below $80, you want to be a big buyer. you had an expectations correction, this stock ran up hard into the second quarter results, they beat on the bottom line, but didn't beat on the top line, so you can't see how that trade would've sustained itself. >> like everybody. what are they doing internationally, mark? because this is the place where their model has been reaffirmed and people should get excited about what's happened there. >> you've seen no slow down in amazon's business over the last three quarters, as if there's no recession that amazon's facing

internationally. why is that? because they roll out that free shipping program internationally, why is that? because they've rolled out new categories. executing extremely well there, the weakness in u.s. business and video game sales and video consul sales. they'll cycle through that, growth will reaccelerate. >> why are you the amazon analyst? isn't amazon just a retailer, why is the internet analyst still covering amazon? >> that's a good question, you could say the same about some of the other advertising names, as well. i've covered amazon since 1998, there are some internet developments here, key to focus on the kindle, digital music, digital video developments, look at what they're doing with cloud computing and some of the strategic services they're offering to businesses. it's got a very deep retail element to it, but there's plenty more to the story. >> how about recently, as a matter of fact today, they pulled back, i know they have earnings later on in the week. that stock has made a big run july, up about 15%, a little bit of a pullback, and 26 pe, is it too cheap because of their ability to accelerate the whole

internet? >> akamai for us is a stronghold. >> stronghold -- come on -- >> get out on the limb, mark. i had a girlfriend who said that once -- >> we went out on the limb on akamai from $8 up to $22, you bring it down a bit we'll get back on the limb. we think we'll see continued weakness in this business for a while. i want to see the numbers stabilize a little bit more before we get positive on the stock. >> mark, you are a good sport. we give you a hard time on andy hall's compensation, your stronghold, thanks for playing, we appreciate it. >> thanks, michelle. amazon may get all of the attention, pete najarian's been focusing on a behind the scenes trade. data storage companies, and one of the biggest had big options action ahead of earnings release tomorrow. pete, tell us what you've been seeing -- >> well, this whole area's been absolutely on fire and you talk

about western digital and see stocks up 150% year-to-date, you say, oh, my goodness, is there anything stopping these things? or are they ready to crash and burn? i can tell you this, today the options activity was unbelievable. they are buying the august 31 calls, august 32 calls, august 35 calls. they traded over 40,000 contracts in the calls today by noon, normally trade about 7,500. right now it looks like the market is positioning for western digital to do exactly what seagate did, which is tell everybody how good the margins are and tell everybody that their forecast is going to be strong. but this is an area where things like emc outbid, paid $2 billion for data and domain, we've seen broadcom trying to go for emulex, this area continues to be hot and continues to run. keep your eye on the various names because all of them, network appliance continue to work to the up trade. >> time to take your position on mastercard, the credit card company reporting thursday morning, giving you two days to

place your bets. what's your position on mastercard? >> i don't have one except longing, wishing i had owned it up to this run $193 or wherever it is. but at this price it's starting to get, i think i a little expensive at 23 times earnings. i'd rather own visa, but i don't own either. i feel like the run-up has gotten -- >> the thing i like about earnings, these guys are going to tell you they're seeing revenue growth around the world. they've gone from 40% of revenues internationally to about 60% in the last five years and that's only getting bigger. as we saw the deals around the world, their sister company down in latin america owned by citi, sold this year. this is is is a company that's growing rapidly and that's what we need to see. get excited about the revenue growth. we think they're going to guide and have guided. >> and also year-on-year numbers, last year's fourth quarter looked phenomenal and this year's fourth quarter, payment processing business continues to grow. i think visa, mastercard, take your pick, you can own either one of these names. coming up next, the man who runs his mutual fund using a

hedge fund play book. he beat the market all throughout the credit crisis by a lot. how he did it. plus, why all three companies at the bottom of your screen made our list of the pops and drops of the day. stick around. on tonight's trader radar, we look at these stock lighting up screens across wall street today. founded in 1966 by a group of banks who wanted to make pay transactions easier and faster. this credit card company has been charging up the charts this year. >> it had run up so far so fast, it's the kind of name i love to own. >> today investors continue to find the company priceless. as shares surged on a favorable report from barron. who is it? the answer when "fast money" returns. in the history of professional tennis. so i've come to this court to challenge his speed. ...on the internet. i'll be using the 3g at&t laptopconnect card. he won't so i can book travel plans faster, check my account balances faster.

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where the action was today, the bond market stole the spotlight, sent 10-year yields to a one-month high, why coming up. but first, let's check on our big after hours mover, amgen. the 3% gain after reporting second quarter profits rose 40% on lower costs and restructuring. company also raising its guidance for the rest of 2009. it beat on the top line, beat on the bottom line, joe, you told everybody at noon they should be buying ahead of it. >> yeah, you've got to stay with this trade, august 13th is the next deadline date. ahead of that, you lighten up, i always like pete's strategy, which is go out and play the options market with it. >> try to protect those gains. if you still want to hold the stock trading at a 15-pe right now, still it's ridiculously cheap for a biotech. if you can buy those puts to protect yourself to the downside, you can still hold this thing if there is anymore up side. >> moving on. is your portfolio long only? are you staying with a simple stocks and bonds strategy? if so, pay close attention to our next guest.

he is an m.i.t. finance professor, but we like him anyway. saying individual investors would be better off by investing like hedge funds do. he runs a long-short mutual fund that attempts to do just that. and it's paid off. the asg global alternatives fund held steady even as the s&p 500 dropped 20%. welcome, dr. lowe, it's a pleasure to have you here. >> thanks very much for having me. >> can you explain how it is that a mutual fund can imitate the moves in a hedge fund? >> well, basically the idea is try to figure out what the  broad-based exposures of the entire hedge fund industry. these sort of common factors. and once you find what they are and measure them, you can actually implement them using standard exchange-traded futures and currency forwards. >> so, it's joey, you use them just like a hedge fund. tell me what derivatives basically do you use? >> basically only use exchange-traded futures and

currency forwards to implement these kinds of market factor exposures. so these are very liquid instruments, and pretty plain vanilla, nothing complex about them at all. >> it sounds expensive. how many fees are you generating as a result? >> well, actually because our company is not a broker dealer, we're not allowed to talk about specifics of the fund, focusing on marketing it. but we're certainly able to talk about the general ideas behind it and really using liquid  futures and forwards to try to implement hedge fund datas, you're actually using some of the least expensive instruments the most liquid instruments, so the idea behind this who effort to replicate hedge fund besbay says is to keep it low. >> this is an interesting premise, but a lot of hedge funds, they could be equities, commodities, fixed incomes, and this very -- the biggest ones

are probably the mix of all of those. but do you have a rigid structure how you want to be  allocated across the asset allocation spectrum and around the globe? >> well, i think the idea is to really get the broad based exposure of the entire hedge fund industry. you know, at any one point in time, certain hedge funds are  outperforming and others are  underperforming, but the key is to try to get the exposure for the various different strategie in a reasonably risk-controlled way. and if you can do that, you can actually do reasonably well over the long run. >> but it seems like you're always one step behind. hedge funds from yesterday and trying to figure this out for  tomorrow, how does that work? >> the idea between beta replication is not to front-run the hedge fund. >> tattle be great. >> it would be, but it would be illegal. what you're trying to do is get a sense of where these broad market exposures are, and then to be able to capture them in a relatively expensive,  transparent, and liquid way, an it turns out that from the 

broad-based exposure's  perspective, those kinds of bet don't change very often. obviously any one single hedge fund can change its bet very quickly, but when you take the entire industry as a whole, they don't move nearly as quickly and it is possible to be able to get those kinds of exposures at relatively lower costs. >> back to class, dr. lo. thank you. time for today's edition of "pops and drops." big drop today, radio shack, off 7% after they came in with second quarter sales that missed estimates. karen, what do you think of this? >> yeah, very disappointing those sales, not a fan. i was at one time, but not now. >> you're dropping it and you're still dropping it. all right pop and drop after they said -- we talked about it earlier, new home sales up 11% in june beating expectations. joe? >> first of all toll brothers would be best in breed in this class, i wouldn't touch any of these names, still remains high, 8.8 months and you know what, pete, i still like the play.

go out, jpmorgan, american express, visa -- >> the transaction guys. >> big drop today in alpha natural resources off 6%, coal name down after missing on earnings, profits fell 77%. they warned the full year forecast could be down. >> no big surprise, but the problem on the guidance is that the side of the business does not look very good. i think coal is recovering, but slowly, i don't think you need to rush back into this one. >> a big pop in varian, dari, 29%. scientific instruments, pete, i know you like those. >> love this whole industry, abbott made a big acquisition earlier in the year and now you have this agilent bid. that's what it was, a bid, bought them out, about the fair value, 33% premium. probably going to be a done deal. >> stanford, the chairman of stanford financial charged with funding the ponzi scheme. he's finding out that his texas

jail cell is too hot to handle. he's requesting to be transferred because his northern houston holdings don't have air-conditioning and reports the conditions are oppressive. >> and i bet you think he should get that. >> absolutely not. he can sweat it out. >> yeah. he can rot. >> he can rot. everybody agrees he can rot. >> are you okay with that? >> different colored chrome on the toilet. >> he looked pretty good going into this gig. >> way too good. coming up next, the health care debate rages on in washington and on the street. what obama's final plan might actually look like and how it's going to change your trade coming up.

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welcome back to "fast money," live at the nasdaq market site in time square. the debate over health care rages on in washington and waiting rooms, board rooms around the country. tonight on a cnbc special meeting of the minds, the future of health care, some of the most influential policy makers and business leaders debate the best path to reform. but as you'll see, they don't always see eye to eye. here's a preview. >> that public plan, which pays doctors 20% less than the private sector, which pays hospitals 20% less than the

private sector. ultimately all of the companies out there with a new mandate that you've got to provide health insurance or pay a surcharge are going to dump people on the public plan. but at the end of the day, life-saving cancer therapies, you're not going to get. >> i strongly disagree, we have to have a public plan. look, we haven't covered 50 million americans, they have to have an option. and what a public plan will do is it will force the insurance industry to be more efficient. >> so will washington succeed in the efforts to overhaul health care? what will it mean for wall street if it does? joining us now daniel clifton. good to see you. >> thanks for having me. >> is health care reform dying here? and what does that mean? >> it's slowly dying and a question of whether policy makers are going to compromise and live to fight another day. >> republicans have to compromise, you mean? >> no, i'm not saying republicans, but the democrats have to realize they can't do this without republican votes, they've got to scale back the

size because they're not going to get the tax increases and be able to say do we want an accomplishment to go back to the voters. if they choose accomplishment, they can insure 30 million americans. >> it would be great news for health care stocks, right? >> right. i think we're facing a good scenario in the short-term for health care stocks, either a deal that insures 30 million americans, or no deal, that means no cuts to the providers themselves. >> here's what i don't understand. we buy our own life insurance. >> yep. >> we buy our own car insurance, why can't we buy our own health insurance? why do i need the company doing this and the government? >> no, i totally agree with you. and what i don't understand why do we need the government involved to make this bigger? why can't we go after some of these health care companies that are gouging people. >> you get rid of it from the employer because the problem is you're not the client. your employer is the client, they're -- >> what they'll tell you in washington is that we're paying $1,200 for every uninsured resident that goes into the

hospital. i personally believe that's not the real answer, but that's where you're coming from, that's what you're trying to do, is lower people with insurance premiums. the problem is people with existing insurance isn't buying the argument and that's why it's failing right now. >> it's a problem because you start telling people you're going to tax their benefits, they get up in arms even though that's the right thing to do. >> and am i going to get higher taxes and not lower premiums? and for that, it's a long august watching health care reform. >> there's going to be a flurry of m & a activity. >> people try to preserve profits in the face of washington trying to take it back from them? . all right, one last thing, a little thing from michael fox at the beginning of the health care special. a friend of the show and -- all right, we're going to watch. and do not miss meeting of the minds which prepares tonight here at 9:00 p.m. on cnbc. thank you very much, we're going to be watching this throughout august as you said. first, though, next up on "fast money," all earnings all the time for the last two weeks, but now traders are moving their

focus outside the stocks for a record-breaking debt option this next week. this week, rick santelli has your game plan as the government tries to borrow billions and billions and billions of your money. coming back after this. new chevy equinox. trodul with an epa estimated 32 miles per gallon. and up to 600 miles between fill ups. it's the most fuel efficient crossover on the highway. better than honda cr-v, toyota rav4 and even the ford escape hybrid. the all new chevy equinox. i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called?

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markets this week. rick santelli here to break down the impact. when was the last time the government tried to borrow this much money in one week. >> not only that, you know, here's an interesting -- we talked about this on power lu"p lunch." let's see the fed isn't going to have the nerve to raise interest rates again, short end, we have nothing but supply that is like this big teeter totter and the more it's going to start to tip. of course we have to have a steep yield curve. is that good? i'm not sure, but i will tell you this, there's auctions every other week, and the equity markets get in a lather and it's going to be as far as the eye can see. it isn't if, it's probably when. >> i agree with you, but the other side of that, remember when the yield curve was inverted and everybody made excuses, it's just -- >> signal a recession. it was inverted, very long before we saw the housing

number. >> and every discounted it, said no, it's not telling us anything, and it was telling us everything. >> i think what was telling us everything was the fact that the company left rates too low, washington was asleep at the switch, now you have all of these organizations fighting for regulatory boundary lines. >> the point is the yield curve is telling us something. >> isn't the most important question, are people going to buy these things? and you saw in the option today the bid to cover. >> they'll buy them. they'll buy them, but at what yield concession? >> well, again, the government obviously is getting away with murder here and isn't that a good thing? we're trying to stall and build as much time into this economic recovery. i'm trying to find the downside of this, and i don't see it until people walk away from the table. >> i agree with that. i think that you're going to continue to see pressure to have a little enhancement, they're going to have to pepper some of these, a few that go average, but right now, i don't see, who is going to buy what? spain or italy for an extra 35 or 40 basis points. that's not going to happen. >> no way. >> remember with a steep yield

curve, even a bozo banker can make money. >> i agree with that. a better question, though, how much are goldman's earnings came from a steep yield curve? why did they walk away from easy money? >> rick santelli -- >> tomorrow night. >> rick santelli, why don't you come back and join us tomorrow night in center square and we'll discuss between now and then. we need to come up with a nickname for mr. santelli. everybody give us a little viewpoint and send your options in, but rick santelli tomorrow night. >> all the e-mails directly -- >> we'll see you tomorrow night. rick santelli will be here. we've got your final trade after the break. q

time for the final top trade. >> potash p.o.t. >> karen? >> got to like unh. >> tune in tomorrow for more "fast money" where rick santelli will be your host tomorrow on cnbc.