good morning. summer sizzle, the markets in rally mode. the dow on track for its best july since 1939. i would not daresay that. the number of the woke, breaking income news, a first read on second quarter gdp and cash for clunkers, a program aimed at jump starting auto sales hits a road block, sort of. as "squawk box" begins right now. >> ha! ♪ >> i like this song. it's a good one. anyway, good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe

kernen. carl is out today. we'll be back with us on monday. i want to talk really show so we can hear a little bit more of this, right? oh, you're a groeuch this early in the morning. >> too close to monday. where is carl? >> he's staying home for the day. i think he's -- he's probably don't nightly again. >> he's at home with the girls.. >> lots of girls. it's him and lucky against the rest of them. >> right. >> there's the two twins, the mommy, his -- it could be his momny, could be mother-in-law. mother-in-law might be there slapping him around, telling him to take the trash out. she beats him like a bad stepchild. she does. >> no, no, he loves his mother-in-law and is thrilled that she's there to help out with the kids. >> she does run him ragged. she runs a tight ship.

>> the dow and the s&p 500 logging their highest close since november. the nasdaq turning in its best performance since october.r. take a look at the month's performance. the dow, up by 3.8 the 3%. the s&p up by better than 7%. the nasdaq up by 8% and the small cap heavy russell, up over 9%. for the dow, this will be the best month on month performance since 1982. >> that is amazing, though. and no one was expecting it, really, until i was right after -- we were sitting here after that bad employment report. >> the s&p is at its biggest five-month streak. >> since '39. >> since '38 it says here. there's a lot of different records. >> it took a lot of people by price and it came after the

initial bounce from the allows, that huge 35%, 45% bounce after people waited for that pullback to get in and it never came. it traded sideways. no one really believes it. we said this a week and a half, two weeks ago. most people are saying, we could probably go back to 8,000. >> i don't know. >> i don't, either. >> disney last night when it was talking, talked about how it sinks. it doesn't know how strong or quick returns were going to be. >> there is a lady that went in and her clunker wasn't a big enough gas guzzler. didn't get the 4,500 rebate. went in and bought the rebate,

anyway. this was supposed to last until november. >> it lasted four days. >> and they're not -- it's probably the most -- it immediately stops selling cars. they're saying of all the programs, this is the one that works the best. >> and did you see what ford said? ford says they were starting to see the programs. >> mike will be in here smiling about cash for clunkers. he's wanted some type of -- you know, the industry has needed some type of government help. they're going to have to keep the program going. you can't just let it run for four days when it runs through november. people want to do this. >> where do you come up with th8 money? if there is so much demand, why

do you need it? >> but they promised. they prom. >> i haven't had time to go through all the different things i've been sent from dealers. it's been the coldest july in history everywhere. sun spots. >> i haven't been exhaling for a -- >> carl is not here. you're going to try and paint me into this corner? >> i am. you're darn right. the main report to watch this morning, 8:30 eastern release of second quarter gdp, we know it's probably going to be negative. the president can see it's going to be negative. polled forecasters expect the data to show it contracted the economy by about 1.5%. that will be a considerable improvement in the first quarter and here is the president commenting yesterday on gdp.

>> we have stepped away from the precipice, you know, as ben bernanke and others across the idealogical spectrum have indicated, we were in a position where we could have gone into a great depression. i think those fears have abated. and if expect ages hold true, this will be the first time that gdp contracted for four quarters in a row since at least -- let me think. think back. since at least 1947. >> do you remember that?? >> no, i don't, when the commerce department began measuring. yes called him ber-knack-ky. herb fr everybody from chicago.o. >> bernanke, there's two ns. >> anyway, banks borrowing more from the bank's emergency

lending program. they've cut back on other programs to try and ease the financial crisis. the president saying yesterday that it looks like we have pulled back from that precipice. in the past week, the net holdings of commercial paper average ed net on net $92.4 billion. help like this from the fed has decreased so we'll see if that's a trend that continues. meantime, let's take a check on the markets this morning and watching what happens in the markets. it's been a phenomenal few weeks. right now, you're talking about the dow futures up by another 11 points. earnings season has continued to show a lot of beats, better than expectations. again, you're talking about numbers that are often lower than they were a year ago, but better than the street has been expecting. it's been fueling this rally at least for the last couple of weeks. let's take a look at oil prices after a major pullback this

week. you're talking about 66.66. yikes, that's like the number of the beast. ten-year note is yielding 3.618%. we had those auctions this week that have been disappointing. gdp is coming out at 8:30 and that will be a real key number to watch for the markets today. the dollar, as it's been trading at these low levels, you can see it's down overall. the euro is trading higher and so is the yen. you're talking about 79.09 when you look at the u.s. dollar index. gold prices, up about $2 to $936.90 an ounce. let's get to the overseas markets right now. christine tan is standing by in singapore and she has the latest in asia. christine. >> hey, becky. asian markets pushing higher today. upbeat earnings have to support the view that, you know what? maybe asia could lead the global economy out of a recession. in japan, the nikkei 225 surged 1.9%.

shares of sony jumped after posting a smaller than expected loss on reports that it will post a smaller full year loss. investors in japan large ly fel in june pushing the company deeper into a deflation scenario. the big winner today, china continuing its rally one day after the central bank reassured investors it would continue its policy and the shanghai composite climbs 2.7%. in hong kong, the hang seng sought 1.7%.. property shares got a boost after morgan stanley forecast a 20% increase in home prices. overall, seeing solid gains across the region. here in asia, handing it back to you, joe. >> christine, we're talking about the dollar board because the index was down and usually our -- anyway, don't worry about it, christine.@ this is not your problem. this is our problem but we were still talking when -- >> that's two days in a row when

she's thrown it back and we've been arguing about the dollar. >> yeah, which board. we typically hang on every word from christine.. we want to know what's going on with asia because it's important. in that case -- >> but the dollar board is important, too. >> this time, it looks like -- >> the dollar index shows you the dollar. the other two are showing you the direction of the euro. >> right. because it's 1.41. okay. geez. david, how are you? >> fine. >> david is here. great to see him. let me read this. dow component disney, the stock to watch today, beating the street by 2 cents. revenues did fall short of consensus. david is a media industry analyst.t. like so many companies, david, the de-kline this quarter was much like a theme park.

it had been 50% year over year in previous quarters. so this is a much better look, but still down. >> right. yeah. all the businesses are down, but they're not down as much as they were in the last quarter. so that's generally why we're seeing some signs of improvement. not that we've seen the worst, but the media companies were able to take a lot of costs ought of their infrastructure and that's helping the margins stabilize and come back sooner. >> this is one of the best in breed usa? we hear that about time warner. some people say it about disney. >> well, there is some concern with the disney dvd sales. it seems like they were getting hurt worse than the other media conglom rats earlier in the year. but looking into 2010, they're going to have a strong recent release that's helping that and new film releases coming up later this year will help them, as well. >> yeah.1 they didn't have anything there quarter like last year's enchanted. >> right. >> and also some nicholas cage,

like, sequel or something. >> national treasure. >> yeah, yeah. but when is "up"? when do those dvd sales -- >> that will be november. that will be -- the proposal will probably have strong dvd sales starting in november.. so that will help. i thought igar quoted maybe the toys and the ancillary markets for "up" might not be as good? >> the cranky old man doll? >> although the balloons are cool. >> they are. >> you see the picture in the journal today. >> but igar says, you just wait until toy story 3. >> toy story has a lot of great characters. a lot of toys you can tell. their car franchise did great a few years ago. but there wasn't much to sell out of the ratatouille. who wants to buy a rat or a

cranky old man? >> right. >> and on the tv broadcasting side, their local stations were down 26% against slight improvement from the prior quarter that was down 30%. so there's a little bit of a base for them there. but the network was only down a couple percentage points. the espn side was a bit of a disappointment. but some of that was accounting for the timing issues. >> does it matter about abc prime time? is that good that it does well? does it matter at this point with these companies? >> yeah.. it's still helpful. it's still a couple billion dollars of revenue. if it's only down a couple percentage points, i think it reflects positively on where the stock could go. >> cable more important? it is from a margin perspective. right now, espn is still over indexes in the automotive advertising, which is still down

40%, 50%. >> you know, they made some comments about the overall economy. things are potentially starting to bottom? >> yes. i think the worst is behind us and all the media conglomerates saying they're being cautious and they're being held back or held close to the vest.. but i think the up front advertising market is getting negotiated now, so things are start to go happen. but the visibility is still -- you know, it is still getting kaush yuls comments. >> so when we hear from these media companies that they think that the bottom is nearing, should we take from that that they are starting to get better signals from the advertiseders or they are at the negotiating table right now trying to prevent the advertisers from getting better?? >> it's a combination. the tuzers had been very nervous, very tentative. within a couple quarters, maybe, it will be coming out of the e

recession. advertisers are coming to the table now. they're going to be fearful of buying into bargain prices now versus what they might have to pay in the scatter market later. same thing with all the stock markets have been anticipating the economics coming back to these companies. >> i think the stock traded higher yesterday during the day 0.after hours, yeah, a little bit, is there anything to that? >> imparted selling on the news in part, these stocks have had a good bounce off their bottom since march. so i've been expecting generally a pullback. while the stocks did fall worse than the earnings, leading to the march bottom, they've come back quicker than the fundamentals have come back.. >> you're not getting much of a dividend here. any reason to buy disney with the hopes it goes 30 do 35? >> well, within the next year, i

think it could easily be 28. if you look well past the recession, it could be in the 30s again. there might be a better buying opportunity, but that's more of a macro trend. >> david, thank you. >> all right. let's get a check on the markets as we prepare to get another week of earnings. joining us today is bruce mccain, anthony chan, and gentlemen, thanks for joining us today. bruce, why don't we start by talking about this rally that we've seen. the last dey day of july, it's going to be a very, very strong month, some of the best on record, it looks like. do you think this can hang on? >> certainly we've come a long way.

and the tendency, too, is for people to be skeptical about recovery and skeptical that the rally can continue. we still think there's quite a bit of cash on the sidelines from people who may be in bonds or in other sorts of investments it ultimately will come back to equities and drive this rally further. >> so you think the best way right now would she the equity market? >> we do. and that's where we're focused heavily. >> how much of your portfolio is based in equities at the moment? >> we've pretty much maximum allocated to equities and minimally allocated to bonds at this point. >> and do you like what you've been hearing from these companies in terms of the guidance that they're offering, in terms of what they're saying about the broader economy? >> we think it has been a good pregnanton. you've gotten cost savings that have allowed companies by and large to beat expectations..

now a lot more will drop through to the bottom line and we think that will help fuel the rally in through the fall and maybe into the winter. anthony, we get the gdp numbers today. it's still going to be a decline. of course, you're going to see some of that decline being precipitated by weakness in inventories. but with the weakness we saw in the first quarter and second quarter, those inventories are going to be replenished. secondly, we're going to get a bit of a boston from that export, certainly improving in this situation as global economic recovery picks up, ex ports starts to do better and the weakness in the united states is holding down those imports. >> anthony, cash for clunkers,

they ran out of money for this program in four days. any potential pent-up demand? >> what it certainly always tell me is that you can never sell short the consumer. consumers in the united states prove to be resilient. and given the fact that $1 billion of stimulus went by so quickly in less than a week, equivalent to about 250,000 cars, tells you something about pent up demand if you make conditions right. >> you said don't short change the consumer, but do you think that would disappeared as soon as that money is gone or do you think they will continue to buy these cars? >> i think consumer spending is going to continue to show improvement. whether they buy cars will be a function of a lot of things. what are their expectation bes jobs? the unemployment rate? what are their expectations about employment rates and certainly what are their expectations about when the recession is over when no one is aushing that the consumer is going to start buying cars like they did a few years ago.

but i think it's reasonable to expect that the buying climate for cars is going, in fact, improve in the second half of the year and maybe enhanced if this cash for clunkers program expands in this environment. >> what about the unemployment rate?? i know the sdwrobs machine is still a week away, but this is a number that people are trying to get their arms around. it's expected to continue to decline, the unemployment rate. how much could that put a damper on things? >> well, it's never good news, per se, when the consumer opens up the newspaper and listens to cnbc and hears that the unemployment rate is rising. the perception is negative. but as recessions end, the unemployment rate tends to rise and we have, in fact, going to see the unemployment rate rising until we start to see job creation. when we get the next employment rate next friday, maybe we won't see 357,000 or 400,000 jobs

lost. but the point is, in order to o see that number stabilize or start declining, we need to start creating jobs, just to keep the unemployment rate below that and possibly push it lower. >> bruce, how do you look back an approaching negative, all these people out of work, all these great news that you hear from the company about how they're beating expectations, but a lot of tooit times it's from cost cutting and people are losing their jobs. >> certainly i think the issue of pent up spending that is there that tends to be released, that merely requires that the 90% or so who still have their jobs recover their confidence and begin to feel much more able to spend the money that's there. i think the other thing to keep in mind about the jobs picture

this time, a lot of companies have adopted by cutting back hours and not simply laying people off. that suggests that it may be more difficult to get to the point where you start seeing job ads back. but the good news with that is you can start adding back hours and adding back incomes that would flow through to spending money if, in fact, the business picks up to buy a few more hours for the employees you already have. >> we appreciate your time and insights into this matter. coming up, as earnings season are coming to a close, analysts are getting busy catching up on their calls. i think we're taking a trip, joe. >> earnings central is coming. t.

let's take a look at some upgrades and downgrades. danny montgomery is downgrading kellogg at this point, citing costs and recent trends from customers. cadbury and peppily co remain rated buy, but there are some negative comments here based on relative valuation. wow, that was after a big move yesterday. and motorola was downgraded and upgraded to outperform to market perform. we have some different view points on ent.

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen arock wi roclong quick.k. carl is off today. the nasdaq turning in its best performance since october and this is just -- i mean, july is coming to a close today. really, i mean, i guess because all it did was rain in june, but this is too soon. >> you've got one month left to enjoy. >> we have to live for the moment in august. let's look at the month's performance, though. the dow is up more than %. the s&p adding 7%. the heavy russell adding almost 10%, all in one month.

that's what we're supposed to get in a year. so i don't know what that says for the rest of the year, but -- >> eats a rewound, 6,000. >> there's a big report out this morning coming at 8:30 eastern time. this is the release of the second quarter gdp. the forecasters out there expect this data to show that the economy contracted by about 1.5%.. that would be considerable improvement from the 5.5% decline that we saw in the first quarter. in fact, president obama making comments on gdp yesterday. >> we have stepped away from the precipice. you know, as ben bernanke and others across the spectrum have indicated, we were in a position where we could have gone into a great depression. i think those fears have abated. >> now, if expectations do hold true, again, it's going to be a better performance than we saw in the first quarter, but this

would be the first time the gdp contracted for four kwarlters in a row. so this is something that goes back before records were even kept. the obama administration is working to protect the cash for clunkers program. the transportation secretary notifying key members of congress today that the program would run out of money at midnight.. cnbc has learned the administration and officials are trying to keep the operating operating. cash for clunkers gives up to 4,500 tore carbiers for purchasing these vehicles. we've been talking about this positively. >> i haven't looked at the mail today. are people mad about it? >> people are mad about -- remember about helping their neighbors with the mortgages,

how that got people mad? it's kind of the same thing. why am i subsa diesing my neighbor toes buy -- stheer call the another -- >> if there's demand, anyway.. people said if you get the spending now, it does take from future sales or maybe it's got people on the sidelines waiting for this. >> but in the middle of a recession where you think, consumer spending is down because it will make some sense. the cars that you sell, you have to mistake more of them. >> but what would happen if you let this expire? there were people coming in sxwieg before the program even kicked off. >> it's no way to run the auto industry. the government subsa diesing people to -- >> zero percent financing got us in trouble, too. >> exactly.

so it's going to go back and like so many things we talk about every day, we're going to go back and forth. >> and change our minds every 12 seconds. >> i am able to look at both sides. >> you like painting me into corners, though. >> off camera, i know how you really feel so i want to let our viewers get -- >> oh, would you start. >> empathy, yes, i feel for people. but on this one, i'm saying forget it, don't spend any more. maybe if this actually works, maybe it's not too rich of a program. may be you could do $2500. >> anyway, standing by is steve,

8% in a month, that's what we're supposed to get, bob. that's our average for a year now. what does that mean?? does that mean there will be a regression between now and the end of the year or does the market have a lot of ground to make up because we overshot on the downside?? >> it's blths a little bit of both. i think it means that there's down side coming by nilgd of august, but you might only see a 4 1/2, 5-month down in august. you're going to see one of those dips. we talked about it before when the market has moves like this, you see profit taking. you saw a little bit of it yesterday. and today has the makings with the news of being an eight handle up or nine handle down day in the s&p and i would predict a down day being a recent move, but it wouldn't worry me going into the weekend.

>> there's a lot about what t happened. there was a d in there on the -- i don't know, what was it, the five-year. overall, reraised all that money and we're raising the it at historically low interest rates. >> we're raising it, the auction is getting absorbed. there's more supply coming around the time of the nonnumbers this week. so i don't want to say they took it well, but they took it better than they probably should have. combine that with the nonfarm number next week and it has me shaky towards how much downside we can have. but by the middle of august, this shorpt term rally is going to continue. i rode my motorcycle in this morning and i hit a lot of pothol potholes. >> i wish you wouldn't say rocky road.

>> rocky road into your coffee in the morning.g. >> that's a good idea. >> doesn't cash for clunker add some debt to the consumer at the same time? yeah. that's okay, toe, too, right? we don't want a nation of savers. >> it's okay because it definitely spurs short-term demand. >> it does add more debt on the back of the consumers that maybe you shouldn't add it. maybe some of those clunkers are paid for. they should just send it. >> there's another e-mail that just came in, becky. please let this program die. there's obvious demand that indicates underlying strength in the economy, so they don't need it. yeah, we're doing almost $10 million a year. only two of the big three went bankrupt. things have been going pretty well. why do we need any help? you know, only gm and chrysler have been pushed into the hands of the government. >> some people would say you've done enough. you're in the process of fixing -- >> wait, wait, we've got four

days of demand? okay. there is some underlying demand. >> but there wasn't until they did the program. >> i'm just worried about people taking on -- >> why do you hate washington so much some of you've got a guy in the presidency. what's where you guys? >> it's not about hating washington. it's about doing things that work.. the rocky ride on the upside -- >> that's close to rocky road. >> that's right. i'm looking at them saving $130 on gas but adding a car payment. i like the money going to the consumer, but i'd like to see them have the option of, i don't know, maybe buying a flat screen. spend the money, absolutely, because it's working in china, it would work here. but i don't think that this whole -- you know, once again, it's the green movement coming into spurring the economy. these are one at a time things and they're trying to mix them all together and that's the problem. >> that's true, too. we're sort of a societal transformation involved here, too. but we want to -- that's

probably not a bad idea, either, deep down not because of the green movement, but because of the people that hate us to political concerns, bob. >> i like that. thanks, joe. changed my mind on a friday. i love it. >> yeah. we don't want to -- you know, we don't like those people, they don't like us. >> we don't hate washington. we just don't want to be told what to do. >> i'm playing devil's advocate. you know, nobody here is arguing that we want a government-run economy, which is what we have. >> bob, how do you pronounce the federal reserve chairman's name? >> ber-knack-ky. >> bernanke. >> b-e-r-n-a-n-k-e. >> i'm a trader.

it's s&p. i can do that. >> the only reason we're giving you grief is because the president called her ber-knack-ky. >> buy versus sell, i'm not going to give you any orders. >> buy is b-y-e, right?t? >> b-i. >> bob, thank you. >> thank you, guys. >> see you later. >> coming up, all aboard. the train is leaving the station. the destination this time around, earnings central. you can't afford to be left behind. stay right here. at 155 miles per hour, andy roddick has the fastest serve 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. all on the go. i'm bill kurtis and i'm faster than andy roddick.

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♪ memories like the corner of my mind ♪ >> we welcome you this morning to earnings central.l. >> watch me put my hand through him. you're a -- you're not a hologr hologram. >> it's what comes after that i think that we're all worried about. >> he's the leader, this guy right here i think is a -- there's the backup singer. the beluga whale. >> is there any way you can color that out completely? ♪ for the way we were >> we're going to have some clouds coming in later this evening, potentially a little

bit of precipitation. you shouldn't be me over here. wow. ♪ hallelujah it's rain iing men paragraph paragraph amen ♪ ♪ the way we were ♪ the way we were >> yeah. fond memories. earnings central, we hardly knew you. we are saying so long and farewell to earnings central this morning as we've gotting through the bulk of the earnings season. it's bringing a tear to joe's eye. >> you know, i looked at that. when did we do this? >> three weeks of earnings central. >> you know, people write in that i screw around too much. when you put it altogether like

that and it's only three weeks, i think i need to -- it's been 20 years. how many earnings -- 80 earnings period. maybe earnings just doesn't do it for me unless i -- >> well, i need to add a little bit. obviously, if you just reported them straight, it wouldn't be -- >> profit dropped by x percent. the stock was up 3% after hours. >> there were a lot of them. none them them probably even desired. you're talking about coming to a close. don't worry, earnings season will be back in just a few months. but in honor of this, let's recap numbers from last night. metlife is reporting better than expected second quarter earnings. revenue did fall short, though. $8.2 billion versus the $11.7 that analysts had been expecting. but that stock is up by 5.3%. semi conductor at this case

falling on providing than expected earnings. and from winners to losers, las vegas sands bottom line dropped and the ceo says there's no doubt that the operating environment in both las vegas and macau remain challenging. >> it's been a big issue for those casinos, especially in mccow. we did talk about disney earnings earlier.. that stock, after being sharply higher after the course of the day was down after hours. >> general financial, the shares were under pressure. assets under management also decreasing. brian door did that? >> brian door did that. >> it almost looks like he pays attention to -- unless he sits back and looks for all those moments. >> no.

i think he actually watches the show. don't worry, we have the retailers coming up and -- >> that's a campy song. >> it was a choice between that and cast memories. >> what was that, it was a robert redford movie, wasn't it? it was the way we were with barbra streisand and -- >> earnings central, don't worry, it's going to be back in just about two months. >> and you know what i sing. >> what do you sing? ♪ memories >> boo, boo, anyway, if you have any comments or questions about anything you see here on squawk, e-mail us at squawk@cnbc.com. we're going to take a quick break right now.

time now for a check on the news outside of business. and monica novotny joins us. good morning. >> good morning. good to see you. i'm wiping the tears away after that whole montage.e. i'm going to take that and spend time with it this weekend. >> you know, you say things like that now and i just think facetious, cynical, sarcastic. with our history together, i

don't -- you know, thank you, monica, but i think we're going to take it for what it's worth. >> monica loves you. you know that. >> exactly. >> you love me more than anybody else named joe? >> i'm going to get to the news now, where there was a lot of love yesterday. president obama and vice president biden sitting down with the black professor and white police officer at the center of a controversial arrest that has fired up the debate on the issue of race. president obama says he hopes everyone can draw a positive lesson from the incident. search warrants in the case of michael jackson's death labeled the late pop star an addict. they also show several state codes may have been broken, including excessive prescribing. law enforcement sources say jackson's doctor murray gave jackson a powerful sedative the day he died. and, boy, if you've seen this video once, it happens every year, one festival in india back again. indulging in the same ritual that's been going on for more than a thousand centuries where

parent bring their babies to be tossed on a sheet below. they say this ensures the child's good health. they say no baby has-e been injured doing this. frankly, i just don't get it, but that's just me. >> things go on around the world that we don't understand a lot of times. >> i know. i don't understand it. but, up, i try to be open-minded but i worry about those babies. >> yeah. who are we to say -- anyway -- >> who am i? >> exactly.y. you're monday kashgs i'm joe. another guy's name is charles so i don't know you couldn't say i was your favorite joe. >> enjoy the weekend. >> you, too. thanks. >> bizarre love triangle. >> it is. it is. then the meeting at the white house -- i was just wondering, i wonder if the president thought to invite the vice president? you know, just -- you know, i want to but i'm -- you know, things are going so well, do we want to bring -- you know, who knows what -- >> although it looked like --

>> hey, did you hear the one about the rabbi and -- who knows what joe -- >> it looked like joe was enjoying lighter moments. >> i guarantee you the president said, joe, don't say anything. just let me handle this. >> he did drink a nonalcoholic beer. the vice president did drink a nonalcoholic beer. >> thank goodness. i should tweet and i say i don't want to tweet because i don't want to share with anyone. >> you keep it bottled up. >> but i think there was divine intervention with mccarthy. it added up. the other two guys, i can think of that add up to lennon and mccarthy is walter beckon, steely dan, they're getting together to do a tour where they'll play complete albums. i don't like going to concerts. i don't like crowds. i don't like what people do there. i'm totally against that stuff. and i would go.

i would go. i would go to this -- >> is it on a school night? >> i would go on a school night, whatever, to see asia. they're going to have larry carlton, the great jazz guitarist who is known for some of the greatest solos.s. he's going to be there. but this would tempt me to dp out and see these guys. >> now we know what to get for your birthday. >> geniuses. really, i think they're crazy geniuses. i would do this. >> the perfect anti-musical heroes for the '70s. >> they were. and they were able to meld jazz and rock like no one else has ever done it, really. >> and they're still doing it. >> except larry carlton, right there. coming up, we'll have more of the stop top stories. one of our favorite guest hosts, mario will be walking on set and be our guest for the next two hours. having the right tools is crucial to being able to manage your diabetes properly. it's very important for me to uh check my blood sugar before i go on stage.

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hot times on wall street. the dow logging its highest close since december. how the market is looking for more signs of green shoots and big economic reports as traders await gdp data. guest host and legendary investor, mario gabelli will tell you how to play this summer rally and where you should be parking some cash. >> the government working overtime under the hood, as it sees its cash for clunkers run out of money. will the deals continue? we have auto nation's mike jackson, he will be our guest. we'll get his thoughts on the program. plus, reaction to the company's quarterly results. only in new york. ♪ cowboy coming to a town near you ♪ >> jcpenney opening it's first store ever in the big apple as retailers fight through the recession. why ask, why now?

we'll go shopping with the company ceo, as the second hour of "squawk box" begins right now. ♪ it can always be all right when we go shopping ♪ ♪ you know it will be all right when we go shopping ♪ >> good morning, everybody. welcome back to "squawk box" right here on cnbc. i'm becky quick along with joe kernen. carl's out today but he will be back on monday. we've been watching the futures. after an incredibly strong month of july you are talking about the future on this last trading day of july indicating a higher open once again. not by a whole heck of a lot but the dow futures are up 12 points above fair value.e. there are plenty of stories we're following this morning. the dow, the s&p 500, logging their highest close since november. in fact, the nasdaq turning in its best performance since october. this is all happening on this last day of july, as we come to a close here. if you look at the month's performance it is an impressive one, indeed. in fact, the dow up by 8.38% over the course of this month.

the s&p's up by better than 7%. the nasdaq up by 8%. and the russell adding almost 10% over the course of this past month. the main report to watch this month, the markets will be turning on this one, second quarter gdp. polled forecasters are expecting the data will show the economy contracted by 1.5%, a much better improvement -- or much better scenario than we were looking at last quarter when we saw a decline of 5.5%. there are new efforts under way by the way to protect the cash for clunkers program. it ran out of money at midnight yesterday. the program exhausting its authorized funding of about $1 billion in less than a week. officials say the program at this point is not suspended. they are looking at ways to extend it. let's get a quick check on the markets before we kick things off with our guest host, mario gabelli, who will be with be with us for the next two hours. al is standing by at the cme group. we'll be with mario in a minute but we want to get a quick view from the futures pit right now.

what's the most important thing you're watching, the gdp or round up of earnings? >> i think the gdp is the biggest focus.s. we're moving past the earnings and moving into a pretty heavy next seven days of economic data. >> and -- i'm sorry, go ahead? >> i was going to say, i think people have been pretty optimistic and have kind of moved into the future of what's going to happen third, fourth quarter and today we'll step back and say, what's happening now, over the next two, three months and i don't think it's going to be as good as people think? >> because of the gdp? >> i think we'll see a number closer to 2%, not closer to 1%. i think one of the biggest numbers, personal consumption. in the second quarter i don't think people were spending as much and holding back. if you look at the cash for clunkers that points to the fact that people are waiting for the deals. they're not going out and spending the money until there's a real incentive. >> and the cash for clunkers shows there's some pent-up demand out there. >> i think that is the flipside.

i think, you know, once we come to that point where people say, this is time to spend the money, i don't think i'm going to get a better deal and i have the savings here. i think people will move forward. also, as people begin to think, all right, well, i put a stock load of money to the side and we've kind of moved past this dooms day scenario of companies are going to fail, you know, the banking markets are frozen. we've moved past that and looking at a rebound coming to the third and fourth quarter. putting that together is definitely a positive momentum to the upside. >> thank you very much. we'll talk to you soon. >> thanks for having me. autonation -- turn my mike , on. thank you. autonation with about a nickel ahead of expectations, managing inventory the company says. it's a $3 stock, now $20. obviously benefiting from the cash for clunkers. we'll talk to mike jackson later. look at that, almost a leading indicator of -- i mean, how did the stock know way back then -- >> it was not very complicated. the strong get stronger, joe.

and that is that if you had one store selling shoes, they would make a lot of money. two, make money. three, break even all of them. the fourth one loses money. now you're shrinking the number of dealers the strong will do well. more fundamental than that, management. management! >> i want to intro you and then i'll let you go again. can i do that? >> no. >> our guest host this morning is legendary investor, mario gabelli, chief financial officer at gamco. i'm going to look at the things we were going to talk to you. i don't want to talk tops down. you never talk about tops down.. you have the greatest single issue/ideas. you can always talk about them, you have done all your homework. there's a reason you've done so well over the years and that's what baron's does with you. you talk about unique situations. and i'm looking at these and i'm interested in every one. back to what you were saying.

>> i was just helping -- >> how was that? >> i was, a cheerleader like john because mike jackson is coming on the show -- >> like who? john? >> j.b. john the bab tis. . >> you know who i thought you meant? >> john harwood. >> there we go. >> i thought you were talking about john from the dnc. do you want to talk about autonation or what happened yesterday with cablevision? >> i can do everything. cable vision -- >> finish your thought on autonation. >> whether it's jpmorgan, goldman sachs or companies in the flow serve and industrial products area, the strong will get stronger. do you have enough money? will you gain share? when linens in things goes bankrupt, who benefits? in the virtual stores, electronic stores or real world. >> does that mean you like bed, bath & bee beyoyond?

>> i could. we have certain things we like and that's it. >> all right. how about cablevision? >> go back to cablevision. >> two years ago the dolans were trying to take it private, one of their many series of financial engineering. we said, no, unless you shop the deal, which they weren't willing to do or give us a look back, we weren't going to vote for it. the deal didn't go through. they got lucky. otherwise they would have financial challenges. yesterday they announced fundamental, rutledge is doing a great job, tom rutledge, of running the cable business. and then they announced they got formal approval for what i thought would happen a long, long time ago and that is to spin off the knicks, rangers, madison square garden, rockettes, various venues to shareholders. you and i are shareholders, we'll receive one share of madison square garden, msg, and that's a very attractive asset.

that's a process that leads to the next step. the next step, we think and i think, is to sell off their rainbow, which is american movie classic, women's entertainment, ifc, the sundance channel, and then they have a cable asset, which is a terrific asset.t. what they do with that, joe? they propose. >> here you go, dr. love. propose to somebody else? >> time warner spun off time warner cable. now you have manhattan, the bronx, brooklyn, queens, it's all part of what they call new york city. they want to merge them. it doesn't make sense for one to have two boroughs and the other have three. they'll put them together in one fashion. that's my vision of how this all comes together. >> would that cause any problems with washington or not? >> they don't like brooklyn? the bronx to get together? >> they don't -- now they don't like monopolies anymore. >> that's not a monopoly. that's just basically one market.. it's efficiency for the @

consumer. the next step would put msg and have a baseball team on there.. >> favre talked about this yesterday. he brought up shareholders -- what did share holders turn down? >> $36 and change. >> hold on. were you one of these shareholders -- >> yes. >> -- that said no to $36?6? >> yes. >> that's a good move. >> that's one way -- >> it's $20, that's the other way to look at it. you like losing money? >> was it a fair deal? was it a right deal? i don't think this was a case of jerry yang and yahoo!. i don't think this was a case of electronic arts -- >> why did you say no to $36? >> because they did not shop the deal. >> do you feel stupid and silly now? >> always. >> really? >> always. i have a funny story. i was on -- >> you have to make yourself laugh after saying no to $36 and it's at $20. >> what's right, morality -- >> what has that entered into o your calculation? >> always, always. >> really?? >> yeah. we'll talk about that in a second. someone came up, i can't tell

you who it is, a mayor of a major city, and he said i really dislike the fact that you voted against me. because if you voted in favor, they would be in really deep trouble today. >> really? >> well, they would be. they would have been leveraged up. >> you're right. you saved them. you saved the dolans? >> that's the only way you can get lebron back to new york. >> you are such an atroistic guy. you had all the fans of new york when you turned down $36? >> i have a big base in cleveland so they're not going to like that. it is what it is. >> you are something. can we go? we have another minute. >> cablevision, to me, at $20, $6 billion, $10 billion in debt, you'll have madison square garden, put it in your pocket and the stock will stay where it is. >> has it taken longer for cable to come back than you thought? you had some pretty rich

valuations. >> the business has done quite well. it's a subscription model as opposed to selling a car. the subscription model stays valid in this environment.. don't forget, since they turned the deal down, they did buy a newspaper for $650 million. they did buy sundance channel for $650 million. they put $1 billion and you could have done a lot with that. >> a lot in terms of competing -- >> buy back stock, buy back stock, it got down to $10. harbingers had bought 0% of the company and they sold it all out. in fact, the friday before march 9th, they were down to 4 million shares and i think they sold it at 960. >> you look at the media companies now and the bright spot for all of them is cable. disney reports, they say look at cable. nbc reports, they say look at cable. so cable is -- but the distributors -- >> the content versus -- >> yeah, the content versus distributors. directv hasn't taken over and the internet hasn't taken over

yet. it's still -- is it the worry that eventually something displaces cable? >> technology. that's wireless mobility. so that why should i stay tethered to a location when i can have mobility everywhere? that's the killer app. >> this is eventually going to be -- >> yeah. if you're rutledge you go into your market and you say, okay, i'll offer you and i'll offer becky a very simple thing. total needs, whether it's fixed, wireless, communications, anywhere you want to go, we'll give it to you so that wi-fi will be made available in the long island and new york market. you need to have scale to do that. it helps to have economic performance. so merge -- time warner new york -- >> stocks are low. >> and cablevision should buy it. not sell but buy. >> you come on and you always -- >> mergers. >> it's not dirty but you talk about a lot of mating and merging -- >> i'm going to talk about

kisses later so i'm giving that as a prelude. >> more from mario to look forward to on that and other -- >> kissing? >> we'll talk cadbury -- >> that's where the kiss comes in on cadbury. >> don't start yet. >> later. >> we'll come back. >> we have much more time this morning. if you have any comments or questions about anything we're going to be weighing in with mario, go ahead and e-mail us at squawk@cnbc.com. we'd love to hear from you. the futures this morning have been a little higher. right now you're talking about the dow futures up by 26 points above fair value.e. don't forget, we have numbers coming up at 8:30. gdp. that could be a huge market indicator today. up next, though, we have mike jackson, the ceo of autonation, joining us first on cnbc to talk about the company's results, the cash for clunkers program and whether or not this economy is on the road to recovery. time now for today's aflac trivia question.

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now the answer to today's aflac trivia question. which four state capitals are named for united states presidents? the answer, jackson,

mississippi, madison, wisconsin, linco lincoln, nebraska, and jefferson city, missouri. there's the autonation bid slaib ask. looks like the ask is a little low. reported just 15 minutes ago. joining us first on cnbc is mike jackson, chairman and ceo of autonation. every time you've been on, no matter how bleak things were, mike, you were a guy that said, you need to -- you know, you're a ceo.%% you manage through situations like this. and did you that. you managed through this. and you're five cents above expectations in this environment. the stocks gone from 4 to 20. the stocks gone from 4 to 20. >> yes, joe, good morning. mario and becky, how are you? >> good to see you, mike. >> good to see you, mike. >> you know, the decline was precipitous and dramatic that we accelerated all of our productivity and cost saving plans of the next several years. and normally where you would have had all kind of cultural accelerated all of our

friction trying to implement some of our ideas in a downward spiral, nobody argued. and i think that bodes well for the future. if i look at our $400 million cost savings, fully $200 million revolve around productivity, which we will have going forward. the other $200 million is volume related. so you take a dire, dramatic situation and from it try to come out the other side stronger than you went into it. and i think for our company, we clearly have done that. >> yeah. gabelli was just crowing about how you -- when the weak start falling by the wayside in a period like this, that you're going to pick up market share, is that -- >> well, it's good management plus the notion that you're shrinking the distribution base. so the strong get stronger. and some would argue it's the toyota model. i like to argue it's the mike

jackson autonation model. >> thank you, mario. >> thank you. we have a love affair. we won't tell joe. >> he's gotten dirty already a couple times. cash for clunkers, we've gone back and forth. we get mail from both sides of this. but it looks like the demand was already there. we started it now, we started the ball rolling.g. do you think we need to get another $1 billion and keep another $1 billion and keep throwing billions at this? >> joe, first, it's a brilliantly conceived stimulus brilliantly conceived stimulus program. this is how stimulus programs are supposed to work. my compliments to the auto committee. i will be sending ron bloom and ryan dees flowers today and officially declaring them car guys. since july 24th we've had a 36% this is how stimulus programs committee. guys. surge in traffic. the important component, the credit scores of the clunker traffic is higher than our traffic is higher than our normal traffic.

these are frugal, conservative customers who have bought customers who have bought vehicles years ago, drive them forever, think, becky, keeping the bedroom furniture forever -- the bedroom furniture forever -- >> yes, i have a couple clunkers, too. >> yeah, you got a couple clunkers, too, who now say this is the time to come in and buy. so it's brilliantly timed. you know, the billion was always thought about as a first run to see what would happen. if the surge in traffic was all subprime, we would have said, is this really want we to want do, but since the traffic is very high quality of people who high quality of people who genuinely need new vehicles, and these clunkers, which spew out pollution, have poor fuel economy and are borderline safe, get them off the road, get them scrapped, it's a win everywhere. pollution, have poor fuel the other interesting thing that's happened is it's given people permission to come back 0 people permission to come back 0 into the showroom. the surge in traffic is not all clunker traffic. it's sort of a pivot point where

the surge in traffic is not all everybody is saying, the worst is behind us, it's safe to come is behind us, it's safe to come back in. so this is working on all levels. and i know they don't have the immediate source of funding and i know they don't have the figured out but i fully expect there to be additional funding for cash for clunkers. >> mike, what's the fico score and are the lenders starting to lower the threshold in terms of where they're willing to -- >> the cash for clunkers score >> the cash for clunkers score is over 700, mario, believe it or not. >> wow. >> and we're seeing a gradual improvement in credit availability. the approval rates are up or not. availability. significantly, but with it is a higher requirement of equity or higher requirement of equity or down payment. and customers are struggling to meet that higher threshold of and customers are struggling to downpayment, but maybe in the long term having more equity in

long term having more equity in the vehicle is prudent. we're also seeing leasing gradually coming back into the marketplace and that will be a big help also. >> go ahead. >> mike, real quickly, how much does your recovery hinge on the cash for clunkers program, cash for clunkers program, extended? >> there's going to be a recovery regardless. we saw stabilization in volume in the second quarter, the precipitous decline was broken. and we're scrapping already over >> there's going to be a in the second quarter, the 13 million vehicles a year, forming over a million new households a year.ma so there's going to be a gradual so there's going to be a gradual recovery back up to 13, 14, 15 million units. the industry doesn't need 16, 17 million units anymore to be highly profitable. but there's no question that the stimulus program is a kickstart that is extremely beneficial to the industry and to the overall highly profitable. stimulus program is a kickstart economy, because i believe this

economy is not really going to economy is not really going to find it's legs until you have a recovery in housing and a recovery in automotive, and certainly cash for clunkers is certainly cash for clunkers is an ignitor to get the automobile industry moving again. >> mike, last time around the car companies had an embedded cost structure with labor. that's changed. now -- and they used to produce a discount. that model is over. isn't -- isn't -- >> that model -- that's dead. the dragon has been slain. that is the biggest news in the second quarter, the death of production push and the that is the biggest news in the braeb-even point for the industry for the domestic manufacturers has been moved 41 manufacturers has been moved 41 from 16 million to 10 million. and that means they have control of their fate. and the business is about sustainability, viability and profitability. >> mike, i think it's great for the distributors, it's terrific for the oe suppliers, terrific for the remaining car companies. and i think the train left the

station with regards to demand independent of the clunkers. clearly, you can see the power of advertising and you can see the power of value product.t. the power of value product.t. how are used car prices doing? are they holding up reasonably well? >> mario, to the point, that's another amazing thing with the cab cash for clunkers, it has 1/ had no negative impact on used had no negative impact on used car valuation. used car values have strengthened and recovered. most importantly, sport utility and pickup trucks are worth 35% and pickup trucks are worth 35% more than a year ago. we're now able to trade those customers once again. and another important fact that's unbelievable for our industry is even with the collapse of sales, we were able to -- the industry reduced inventories from over 4 million inventories from over 4 million down to 2 million. we haven't been at 2 million, mario, i think, in 1975, perhaps. so the industry is really well so the industry is really well positioned going forward. and whether the recovery happens immediately with cash for

clunkers, which i'm all for, or somewhat gradual recovery later, the outlook is quite positive. >> are you seeing anything to people buying -- maybe buying fords instead because they're favoring the company that didn't favoring the company that didn't have government assistance? >> there's no question that the conversation on, say, a chrysler showroom floor and a ford showroom floor was different. on the chrysler showroom floor, what we live with in the second >> there's no question that the showroom floor was different. quarter, customer would come in and say, hey, you're here and say, hey, you're here because of my tax dollar bailout. you owe me. where's my 75% discount on this vehicle that you have to bailout. where's my 75% discount on this liquidate. >> that must be fun to listen to. >> yeah, that's a heck of a >> yeah, that's a heck of a starting point. on the ford showroom they come in and literally say, hey, i admire the way you didn't take admire the way you didn't take any bailout money from the government. what do have you to show me? that's a completely different conversation. and ford's product pipeline development has not been government. and ford's product pipeline

disrupted. their cadence is excellent and their cadence is excellent and they have very good products to show the customers. so that is an opportunity for ford, that's accruing to the ford motor company and ford brand. >> what are the clunkers, traded in for, mike? >> well, clunkers are -- the majority of the trades -- >> which maker? >> are domestic. >> are domestic. they are primarily going to imports, i would say, 5 5%, 60% imports because the customer perception is still the best fuel economy is with the imports. it's still, though, a significant percentage for the domestic but the majority is with the imports at the moment. it's had no impact on the luxury business. >> mike, i'm delighted -- >> as you would imagine. >> i'm delighted you're running out of cars. that means there's a terrific rarp ramp up for global rarp ramp up for global production tied to the u.s. economy. >> exactly. economy. >> as autonation, so goes the country. >> thank you, mario. >> you're welcome. >> how many of your sales right now are cash for clunkers versus

others? i'm just trying to figure out how necessary cash for clunkers how necessary cash for clunkers program is for sales right now? >> so there will be an incremental lift in business with just the partial month of cash for clunkers of 10% to 15%, cash for clunkers of 10% to 15%, perhaps more. in the month of july, for us it's probably 15%. 15% of our business in the month of july. something like that. it could be more going forward as it's fully ramped up. it could be more going forward it's hard to judge. >> mike -- >> mike -- >> but it's all inkre mental. it's lifting off this 10 million sales unit base. >> right, right.t. >> i wanted to extend your time, which we did. i wish we had more time.. this is the story of the day, one of them anyway, mike. but i'm going to talk to mario more about all this stuff. we are to let you go now. great having you -- >> great seeing you. >> right from the horse's mouth. >> i want to visit again because our client are big shareholders and big fans of yours. >> mario, i always enjoy our

conversations. particularly, since your roots in the car business go back, mario, what, 30 years, 35 years? >> no, about 45, 45 years. we're having our 32nd automotive conference in about two months out in las vegas.s. we're trying to help that economy. >> look forward to, there. >> thank you. look forward to seeing you again. >> see you, mike. coming up, we will have more from mario on what he thinks about the summer rally, what he's buying right now. and then jcpenney takes the big apple. the company opening its first store ever in manhattan. we'll check out the new digs and hear from the company ceos.

welcome back to "squawk box," everyone. disney is a stock to watch today. the dow component, entertainment giant, quarterly earnings beating the street by two cents. revenue fell a little short of consensus and stock was under pressure. we talked about the new efforts to protect the cash for clunkers program. it ran out of money yesterday at midnight. they exhausted their funding of $1 billion in less than a week. officials say the program at this point is not suspended.

if you have any comments or questions, e-mail us at squawk@cnbc.com. when we return, we'll take a look at this morning's top stories. plus, mario gabelli is here. he'll be giving us the picks that can put a little summer sizzle into your portfolio and give you tips for what you should be listening for on these conference calls if you want to be a serious investor. ♪ memories >> we welcome you to earns central. >> watch me put my hand through you. you are a hologram. you're not a hologram. >> it's what comes after that that i think we're all -- >> he's the leader, this guy right here.. there's the backup singer. the beluga whales. this is -- there he is again.

awesome. >> is there any way you can just color that out completely? yeah. ♪ we gaze to one another ♪ for the way we were >> we're going to have some clouds coming in later this evening, potentially, a little bit of precipitation. >> are you going to blow the -- >> you shouldn't put me over here. >> wow. ♪ hallelujah it's raining men ♪ raining men ♪ it's raining men ♪ the way we were ♪ the way we were

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welcome back, everybody pip know we just said good-bye to earnings central but we have important tips for what to look for in the earnings calls that remain and what you should look for next season. we have the perfect expert here to talk about this. mario gabelli, who is here and

who has been listening to conference calls for way longer than i'm even going to try to wager a guess. >> you the ability to interface with management and now you have to ask strategic questions on a conference call, or the annual meeting. >> that's the only place you can get the information because of reg sd. on conference calls, what's going on? >> 80% of the questions are analysts filling in model, gross margin, capital expenditures, top line exports, so on. then you have strategic questions, how are you using cash flow? is this an opportunity to make acquisitio acquisitions? are you spinning off the company? what else is occurring? the conference calls also take their own flavor where you can connect dots. starting -- after lehman went bust, october, november, december, which was the fourth quarter, third quarter

conference calls you could tell ceos had no clue what was going on. liquidity was important. first quarter, second quarter, third quarter, calls take on different flavors. the ones we're finishing now, second quarter earnings, you can sense what is going on in the economy, has liquidity improved, companies took advantage to downsize, to restructure, resize. basically create efficiency. now you're starting to see hope. kimberly clark, for example, where was their earnings? it wasn't in the united states. it was to selling tissue to places i never thought of. they listed four or five countries. amatech, frank did a terrific job. he said, look, a new administration, whatever they would normally going to spend, has been taking time to get out of the train station, so to speak. before the end of the fiscal year you'll see spending. you're getting a sense of where ceos are going and their frustration with issues, clarity

over taxes, clarity over the whole carbon, cap and trade and so on. >> one of the things i've heard over the last few days is a lot of ceos talking about how they think we're nearing a bottom. they're very hopeful about the turn in the economy but also not incredibly hopeful about how quickly things are going to turn. >> that's because you probably have lit gathers on the call to find out if they misled investors. unfortunately, we have to take the legal part out and deal with the economic dynamics. if you can do that, but you can't, unfortunately, because the amount of lawyers that are, what i call ambulance -- glo ambulance chasers? >> whatever, on these calls is interesting. >> you said it's harder and harder for the public to get into these calls, though. >> not necessarily. you can get transcripts afterwards, you can read them. to the degree you focus on a lot of industries, but i would recommend you concentrate on areas of interest and core

competency. if you're a car dealer you want to listen to all of what mike jackson does and penske and so on. if you're selling replacement parts you want to listen to o'reilly or replacement parts, so on. yesterday sheldon was marvelous? >> what happened yesterday on that call? >> i'd rather have someone tell you. >> not you? >> no. >> why? now you've gotten us all -- >> well, there were some fundamentals, but some side bars -- i'm not going to do it. >> i'll find out and report later.r. i'll find out -- >> it was strange even for sheldon to say. it was like he acted stupidly. >> oh, okay. words that can get people in trouble. let's talk about leg mason, a bargain you see out there? >> the annual report came out and you were able to look into their balance sheet. you said, my goodness, this company is not as leveraged. they're getting a $600 million tax refund, the debt is mortgage

linked security, and the kkr and all of a sudden the balance sheet looked trick. in addition to that you saw the brands they had. they laid them all out, how bad some were, how good they were. but if you are playing soccer, the europeans call it football, but soccer, if you go where the ball is, you'll never score.e. you have to look ahead where leg mason will be in terms of assets under management and the analysts on their conference calls were always asking, you know, how much assets did you go in flows, by channel distribution as opposed to what's happening in the next couple of years. the stock is at $28, balance sheet is in reasonably good shape and it will accelerate in the next few years.s. this stock is a bargain. >> it's safe to say gamco owns that. kimberly clark, too? >> not to an extensive degree like that. >> we'll have much more with mario. we have more throughout the show. joe, we'll send it over to you.

coming up, we go live to the new jcpenney store in manhattan, the first in history in manhattan. all these years and no store in new york. we find out why now from the ceo next. next week "squawk box" is in session. congress racing against the clock to pass health care reform. we take the temperature of our very own caucus, congressional leaders, members of administration and party strategist. live from a senate hearing room tuesday only on cnbc.gr algae for 35 years. most people try to get rid of algae, and we're trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels... that we could someday run our cars on. in using algae to form biofuels, we're not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we're making a big commitment to finding out...

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it has taken over 100 years but today jcpenney is opening its first ever store in manhattan. first on cnbc to talk about this debut and more, we're joined by jcpenney's chairman and ceo mike ullman. thank you for joining us. >> it's great to be here. >> i guess the question is, why now and why manhattan? >> well, manhattan is obviously the biggest marketplace in the country. our research showed our customers gave us great credit for quality and for

affordability. but they really hadn't recognized we stepped up our style. stepping up our style, part is getting in the style capital of the united states right here in the middle of manhattan in the busiest intersection. >> this is a tough market. this is a market other retailers have looked at and said, no, thank you. it's not worth it. do you expect this to be a loss leader for the company or do you think you can effectively compete in manhattan? >> we are going to effectively compete. we do business with half americans have year. many of the stores we have in the marketplace are among our best stores. so in the bronx and queens, so we know our customers here. we had a pop-up stores several years ago in times square the whole market increased in terms of awareness and our sales. we're confident manhattan is where we should be. >> how big is the store? >> it's about 150,000 square feet, about the size of our average store. >> and the things you're laying out, this the same fare you would put out in any store in

the midwest or is there a special way and special brand of things you're doing in new york? >> no, we have a proper mix of our private label brands which customers have recognized for decades. we have the best in national brands, the levi, dockers, carters. we have our designer brands, by nicole miller, by heart ron son, by alan schwartz and so forth. we're very excited about the offer. we know the customer is looking for affordability and we think we happen to be in the right spot between the better department stores and the discount channel. >> mike, you know, jcpenney has been around a long time, so has new york, been around a long time. should we read more into this than we are? i mean, is this type of commentary on the new normal, on the reset the economy has gone through? what are you smirking about, gabelli? you've never come to new york before. is luxury finished or at least been downgraded a little bit? even the snooty new yorkers are

going to go into jcpenney now? >> we think the economy is very smart and practicing nettic. they want style and, customers recognize that and we've fared very well. >> what do you see in terms of the consumer strength right now? how nervous are consumers? how willing are they to spend? how many discount does it get them to come into the store and spend? >> we're a promotional department store. we've always been that. the customer recognizes that and gives us credit for the value. the customers are responding very well to what we call appointment shopping, whether it's mother's day, father's day or easter. we know we're going back to school and that's one of the biggest appointment periods all year. during the other weeks, frankly, the traffic level falls back to kind of the new normal, which is quite slow. for all retail. and we think that's likely to be the same until employment improves. >> myron, are rents coming down

to a point where you can find locations like sixth avenue or 33rd street, where you're opening, becoming attractive? how do you look at that? >> we've been opening stores, not closing them so we've been quite successful in suburban america, opening new stores, about 100,000 square feet, where we have an opportunity. the rent has not been a problem in the past. it's canceled out for us in terms of return for investment. manhattan is more expensive than the average suburban store but our capital authority proves out to be a profitable store. so we're very optimistic about this location. >> do you have a santa claus in the store today? >> not today. no, back to school time. >> no, not exactly. "the wall street journal" it's 147 days until christmas, rocked by the slump, retailers are getting a jump on santa. >> well, we think the customer's not ready for santa. i think the customer is ready to

get ready for back to school. most of the moms have their list together. it's the biggest part of the year for children's, juniors and young men. we're very well prepared. it's one of our strongest offers and we're prepared for back to sdool school. >> in terms of ordering goods for spring season, what's your current thinking as to how you're approaching spring of 2010? >> retailers, as you must know, s&p and different sectors, retailers reacted quickest to get inventory in line with demand. like the rest of our industry we've been very cautious about prediblcting any turn around. we have our inventory in line with projected sales. we probably will look at spring very much the same way we looked at fall. whether there's a turn around in the back half of '10, i think it's too early to call. >> we want to thank you for joining us. good luck with the new store. >> come see us. thank you very much.. >> what are you laughing about? >> mike ullman. >> that would be a step up. where do you find preowned

clothes? that's weird you're able to find the preowned from -- >> if you consider jcpenney value, to me, that's retail plus.. >> but not manhattan. never been there before, mario. >> on 32nd street. >> that's where you -- you're answering me on the preowned? >> a little further lower. >> you're so cheap.p. i've known him for -- >> value buyer. >> does that have to control your whole life? >> nothing wrong with walking the walk and talking the talk. >> but you squeak. >> you know, you want to have a big hat and a lot of cows, the story of texas. >> you're right. a lot of cattle, not cows. >> other, other. coming up on "squawk box," we're counting down to the gdp report. chevron has the latest quarterly result. we'll bring you the numbers as they hit the wires, break down the company and what it says about the state of the oil business.

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this is all in your honor. >> one e-mail eer wrote in, why not play animal orchestra before every earnings report? >> on the days when there's 78 companies reporting? >> yes. that's what -- i mean, our viewers -- you like it, right? you're not -- >> no comment. >> i did this for you. it ushers in a stocks to watch segment. come on. i thought -- you're not -- are you watching at all?l? what are you doing in the mornings? are you watching something else? >> i'm doing everything. multitasking. >> all right. counting your money. walt disney downgraded from underweight to neutral at jpmorgan. they are concerned about the impact from espn and theme parks. dominion resources, four cents ahead of expectations. revenue slightly below for dough

minimum yan. autonation, 29 cents, a nickel ahead. company reported -- we'll talk about this, you like penske. >> yeah, he's done a good job as well. >> that's gron 4 to 20 as well. this has gone from 3 to 20 and penske has gone from 4 to 20. >> we bought a little, sold a little. imagine if you waited for the economy to turn. if you waited for clarity in gdp, you wouldn't have owned them. >> right. metlife, 88 cents, above expectations on revenue, which is below. i don't know if it's really 20 cents above or not. when we return, we'll have more from our guest host mario, chevron earnings and awaiting the very important gdp number.. we have the chief economic strategist from morgan stanley. , traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how

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good morning. can you handle the heat? if you can't, stay out of the investing kitchen. the markets sizingle this summer. the dow on track for its best july since 1939. breaking economic news.

the first read on second quarter gdp. one number capable of turning the markets on a time. cash for clunkers. want to turn in a gas-guzzler sitting in your driveway? uncle sam is handing out over $1 billion to help americans do just that. "squawk box" begins right now. ♪ ♪ hey sorry, geez. doing a show here. welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernen along with becky quick. carl quintanilla will be back here on monday. futures at this hour, let's take a look.. do you believe this? i can't -- >> gdp day, man, come on! >> they're excited.

>> call my agent.t. i can't work like this. let me give you a quick -- is that crying? a quick rundown of the morning's headlines. the obama administration working to protect the cash for clunkers program, the transportation secretary notifying key members of congress yesterday that the program would run out of money at midnight but cnbc has learned that the administration and congressional officials are congressional officials are trying to keep it up and running. autonation ceo mike jackson joined us in the last hour. >> this is working on all levels and i know they don't have the immediate source of funding autonation ceo mike jackson and i know they don't have the figured out, but i fully expect there to be additional funding for cash for clunkers. >> cash for clunkers gave up to $4500 cash rebates. we've had a lot of back and forth on this. once you acknowledge you're going to do a stimulus, then you might think this is a good way to do it because it actually

worked. it actually worked. >> you're talking about -- >> you're not digging holes to figure them back up again. not your normal government program. this will result in cars going out the door, more cars, made, dealerships making money, people -- >> the other side is people say there was pent-up demand anyway. we don't need government incentives -- >> we're doing 10 million a year instead of 18 million. we have two of the big three are bankrupt. >> by the way, steve liesman, i know we're not supposed to introduce him, but he has numbers. >> simple math. $1 billion dwoided by 4500 is 2200 extra cars. annualize that, 9.7 million likp joe just said, add that back, that's back to 12 million which, as i recall, a lot of guys -- auto guys said that's a rate they could break even and not have to shut down. that's about a 27% increase. huge assumptions in there, got to acknowledge, before the e-mail comes in, that assumes every car bought in cash for  clunkers would not have been

bought anyway. in any event, it will result in significant month's sales.s. nobody thinks 9.7 million is the right level for car sales in this country. >> mike jackson said it was the gravy on top. we were getting 10 million without this. >> i'm not going to wade into this joe kernen debate. >> she's just taking the other side of this. but you many times have said, in a recession, in a really deep recession when the consumer isn't there to provide what you need, that's when the government becomes a source of demand. so if you acknowledge you're going to do something, this might not be a bad way to do it. >> with the concept, joe, you don't take productive assets and idle them. that's the source of recession. when you take six cylinder car, four cylinder is working -- >> jackson said it's helped to get people back into the showroom, period, even those not looking for cash for clunkers. >> i talked to a couple the

other day. they're lowering the cost of the cars because they want to get them in. a sale today means a sale if they like the car two, three years from now at a higher price. it's about the future and the profit margins are way down. this was a high-end car dealer, they're still doing the same volume at a much lower price. >> bringing confidence back into the system is helpful. bringing parts of the economy back, it will change the numbers in the first week of august that you see for retail sales, change the numbers with regard to consumer expenditures but no more cars in the system. production was going up anyway. it will be 2.3 this quarter, 2.4 the next quarter and you'll have significant ramp rate. the train pulled out of the station before advertising, before cash for clunkers, and if they start leasing, that's going to be an important element. in addition to that, the car

rental companies are coming back. in addition to that, you may start lending money to people with fico scores of 650 and they can buy cars. >> i was just going to say, 650 would be a huge improvement, right, because even the 700 guys are having problems. >> except for cash for clukers they say tend to be most with over 700. >> you're a real skeptic. >> no, that's good news. they say they were the tiedght wads -- >> one lady he had the say she went in, her clunker was a mile per gallon over and she still bought. didn't get the $4500. >> when you're selling 10 million cars you'll find a story in the big apple you want to highlight. >> chrysler and other folks were doubling it. doubling cash for clunkers. >> without the $4500 no way you would have done it. >> they're running out of cars.

the turn down at the dealerships, when you see the seasonally adjusted rates at 11 million, 12 million, that's not sustainable. >> can i pick up on that? >> you know who really doesn't like this are the same people that got really mad about people who paid other people's mortgages. >> why should i help this guy? but there's the other side of this, the cash for clunkers means you're taking less fuel efficient cars off the road. don't forget, the point is, i met the guy who did this. when he was -- when he first proposed this idea back early this year and he said it was such a longshot and he didn't know if he could convince congress to do it and it's been a huge success, so i think it's win/win. >> the reason steve is on set with us today because we have a big report coming up this morning. in less than half an hour. about 24 minutes from now we'll be getting the release of the second quarter gdp. forecasters are expecting this data will show the economy contracted by 1.5%. if that's the case, that would be considerably better than what we saw in the first quarter. that was a decline of 5.5%.

president obama commenting on gdp yesterday. >> we have stepped away from the precip krechlt, as ben bernanke and those across the spectrum indicated, we were in a position where we could have gone into a great depression. i think those fears have abated. >> if those expect takings hold true, this would be the first time gdp contracted for four quarters in a row. since at least 1947. that's when the commerce department actually began measuring. it goes all the way back to that. much more on this right now with a preview, we have steve liesman and veteran morgan stanley economist, peter greenlaw, peter, and guest host money manager mario gabelli. steve, i know you want to jump in and talk about how you take cash for clunkers and how it affects gdp. >> you you could have a ramp up

in protection, inventory building, all that would feed into gdp. the estimates i see are all over the map. i have a couple guys saying this number would turn out to be positive this morning. other guys are much lower than the consensus. personally, i'd like to see the lowest possible number if the reason -- >> lowest possible decline or -- >> the biggest possible decline is what i want to see this morning. the reason is, the trade gap is not sufficiently positive or inventories are very negative. i want to see all the bad news shoved into the second quarter so that the inventory rebound, the production rebound mario was talking about, all happens in the third quarter and we get a big pop to gdp that could start putting americans back to work.. i think right off, 2q, could be bad, not as bad as 1q and i think the market will accept that if the reasons are that we had a bigger than expected inventory draw down. one other thing, we get benchmark revisions today. they'll go back and look at the past five years, look especially

at the revisions to last year. it could be the trajectory of the economy was lower than we thought which might cause some economists to think that the expansion could be stronger than they expected. >> david, you don't necessarily think that's what we're going to get. you're looking for a drop of of 1.2%. that's more optimistic than the street consensus. >> it's in the ballpark. i think steve highlighted the two appropriate components to highlight in this report. net exports and inventories. those are, indeed, the two big swing factors. we're looking for, for example, a 1.8 percentage point positive contribution from net exports in the second quarter.r. but offset by nearly as large a negative impact from inventory. so that inventory component in particular will potentially have impact on how we see q3 shaping up. with cash for clunkers and other things moving in the right direction, i think we're headed towards, perhaps, a reasonably good gain in third quarter gdp.

>> give us a number. >> our official forecast we made at the beginning of july was plus one percent. that was up a point from where we were the prior month. at this point i could see us getting into 2, 3, higher zone for third quarter gdp based on the big increase in auto production that was slated to occur even before cash for clunkers was announced. and the additional assemblies you may layer on top of that now if congress extends the program, as i think is likely at some point during the day today. there is some time pressure mr. because the house is scheduled to adjourn at the close of business today. they need to get something done on cash for clunkers quickly, i think. >> mario, sitting next to you is a fun game because i saw you going like this for a while when they were talking and then you're going like this -- >> i love it, i love, it i love it. as long as i'm not on camera. >> which part do you agree with and disagree with? >> 250 million cars on the road. if you knock off 250,000 on $1 billion, the whole notion was to

stimulate traffic. in 2001 they did it with zero financing. there's no cars in dealer inventories. production, even if demand stays at 10 million -- if demand d stayed flat production will rise dramatically going from 8 million to 10 million in 2010, over the next three or four quarters. that is locked in place. you can't work with no cars in showrooms. >> let me give you one number. we're looking at a 60% annualized -- i'm sorry, sequential, simple percent change in motor vehicle assemblies for the month of july after you seasonally adjust the numbers. that's the largest monthly increase in history. >> that's because chrysler was down and they restarted. >> exactly. >> and general motors -- >> but you don't project that onto the economy. let's say the auto business is not the only one that fell basically flat on its face. let's say -- and i keep talking about this and i think i'm the only guy. let's say, david, we get other industry starts to ramp up in

that kind of way. is it possible we get one -- the average four quarter expansion, after a recession, is 6.6%. everybody on the street is in this 1% to 2% tepid recovery. i'm just wondering out loud as to whether or not there's perhaps one or two quarters of strong recovery out there. >> david? >> i think that's a reasonable question. i think there are a number of head winds that will prevent us from achieving the normal kind of vigorous v-shaped recovery that would occur after a deep recession but i think we'll see strong numbers on -- reasonably strong numbers on gdp growth in the third quarter. it may not just be borrowing from future quarters. if we see sales pick up that appears on track at this point, we might just have a neutral contribution from autos in the fourth quarter or perhaps another small positive.. so i don't think the upside in q3 gdp is going to borrow from q4. >> let's talk about the market's reaction to this.

the market will look to see if it's above or below that 1.5% decline that's expected, but will the traders take enough time to look bu these numbers that both david and steve have said are most important when you talk about net exports and inventories. is there going to be a reflective moment on the floor where you dig a little deeper?? >> well, i think the bears right now are running for cover left and right. the data keeps surprising them, keeps coming in stronger than expected. and if this gdp number comes comes in stronger than expected, it's going to be another arrow in the bears' side and there will be an immediate reaction, i'm sure n equities. the bond market is still suffering from all the supply. we got through last week of two, next week more supply on the heels. it's like chinese water torture, you'll see more and more supply coming. >> david, i'm struck in this recession by the panic nature of the firing and the shutting down

of plants. i want to get back to this idea of a stronger than expected rebound. could it be possible employers hire quickly again and bring back workers that cut too close to the bone? >> it's possible. i don't think we see any clear indication. the jobless claim numbers have certainly peaked and started to come down. they haven't come down as fast as you've seen in past recessions. but as you said, steve, there was a very quick trigger on the layoff side in the early stages of the downturn. perhaps there will be some pick up in the pace of hiring relative to the jobless recoveries we've seen in the last couple of cycles. but i don't really see a clear indication of that just yet. >> peter, let's -- >> the consumer sector still is tough. i mean, i -- >> one of the problems -- pardon me, joe. one of the problems with this recovery, and i think why people are having -- the skeptics are so convinced they're right is we really can't see a spot in the economy that's a silver lining.. the u.s. economy's going to

recover on the cash for clunkers program, i think, is a little too optimistic. in the past recoveries we've always seen either an internet boom, personal computer boom. would he had some technological breakout that helps lift us out. i think we should remember that thinking is allowed here. if you don't see strong technological innovation, you're probably not going to see strong u.s. recovery. >> i think people forget in the absence of a shock to the economy, population growth plus productivity growth equals gdp growth, okay? that law has not been repealed, okay?? and i think what's happening is a failure of imagination. we have to get rid of the credit shock to economy and thak sure government doesn't provide e another shock to the economy. if those can be held at bay, it's going to equal gdp growth. >> which is 2.5%. therefore, why do you want more than that? a slow, steady recovery of putting things back into balance -- >> you need a quick pop, mario,

to get -- >> not for the stock market. >> to get things going. >> not for the stock market. >> peter, we never know what the next innovation would be. if you knew, you wouldn't be a trader, you'd be an inventor. last time you were on -- >> i know, but i'm betting on something, you don't know what the. we're just assuming it's going to come. i'm having trouble doing that. >> how about -- >> it always has and i think it will again, but, you know, i would rather -- >> oh, come on. you have passed the baton to the chinese civilization about six months ago. western civilization -- >> no, it was a year ago. a year ago. >> a year ago? here we are at 9200. quit worrying so much. >> just one thing. >> thank you. >> you're welcome. >> david?d? >> the problem with the 2.5% recovery is that you'd be stuck with 10% unemployment rate for a long, long time. at 2.5% is not going to make a dent in the unemployment problem

we have at this point. >> well, we were also on a level of economic activity through '05, '06, '07 that was stimulated by, you know, basically the steroids of the credit market. now that the credit markets have gotten a little more normalized or smarter or more prudent, i don't think you can get back to that stupid level of economic activity because you're not going to get the stupid funding for it. >> but a slow, steady growth is terrific for the stock market, which means the fed doesn't have to put the brakes on. >> all right, gentlemen -- >> it will take a while to get there and healthier when we arrive. >> we have the number coming up. david, thank you very much for joining us. steve will be back. peter, appreciate it. mario will be with us for the rest of the show. coming up, we're counting down to the 8:30 number. cash for clunkers is a big story today. is it too successful for its own good? we'll check in with our auto expert, phil lebeau. at 155 miles per hour, andy roddick

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welcome back. the obama administration is working to protect the cash for clunkers program. phil lebeau calling the news

line.. we've been interested in the last 20, 30 minute, if you've watched at all. >> well, first off, i'm on vacation so i haven't been watching. second of all, i don't think anybody should be surprised that this program was going to be running out of money this quickly. keep in mind, dealers across the country have been taking preorders for cash for clunkers. this is not a program that has only been going on for a week. yes, officially the government has only been giving out money for a week but you have a lot of dealers around the country who are been taking preorders for three or four weeks. once the government said, okay, money is ready to be handed out, boom, then the dealers went through with those sales. what you have here is a case that i'm not surprised we're seeing them burn through the cash this quickly. let's be honest, you get people a little taste of honey, $4500, they want it. they've taken advantage of that. although it's gone a little

quicker than expected, this bodes to that underlying situation when it comes to auto sales. there's pent-up demand out there. a lot of people who normally would have gone and sold their vehicle over the last year, year and a half, they didn't do it because of the economy. they got a taste of getting $poo 350 0 $3500 or $4500 and they did that. >> do you have any knowledge or insight on what happens from here? >> i bet they come up with more money. i don't think you can turn off the spigot that quickly. they've talked about coming up with another $4 billion. i'm not sure they'll be able to come with all of that. my sense is they'll come up with another $1 billion and they'll say to everybody, okay, now you've got until this program runs out, it may be another week, two weeks. we're pulling forward sales here, joe, so it's a little hard to read about whether or not this is an indication that people are ready to get back

into the auto market or if there are a lot of people who knew this was going on, who were, told by the local dealer, hey, wait. >> phil, thank you very much. we appreciate it. >> you bet. coming up, we have that breaking economic news. gdp is just minutes away. and then later this morning, john harwood sits down with the blue dogs to talk health care on the hill on "squawk on the street," 10:30 eastern time. oof! 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? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac! it doesn't cover everything. and what it doesn't cover can cost you some money.

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here we are on the final trading day of july. markets have been up significantly. we were talking about a gain of better than 8% for the dow. right now as we head into the very important number the markets are watching today, the gdp, you can see those futures are higher. you're talking about a gain of 38 points right now for the dow futures above fair value. when we return, we have that breaking economic news. this is the first read on second quarter gdp. we'll have the numbers and instant analysis from the trading pits. today there's a way to save more for retirement,

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welcome back to "squawk box" here on cnbc. first in business worldwide. we're one hour now away from the opening bell. breaking economic news, a first read on second quarter gdp. rick santelli is here -- or you're gone. we miss you. you're back where you should be, though, i guess, rick. jack at the cme group in chicago. steve liesman is in the studio, along with guest host mario gabelli. and i guess most people have

this number negative. we heard the president talking about it as negative. but it should be interesting to see just how negative it is. i guess people are looking down 1.5. rick, what is it? >> three, two, one, it's only down 1%. i'll tell you what, that's not bad news. now, how you interpret what gdp really means, the effect of head winds, ib veternventory, on thee it's better than expected. however, there was a pretty big down revision to the last one so there might be a little emerald cheffing going on, stir up the soup on these numbers. down 6.4% from 5.5%. in the old days, this is going to be politically correct, when i first started trading they said two quarters were recession, minus four quarters was depression. that's not the case. as the journal pointed out we haven't had four minus since record keeping after world war

ii. consumption down 4.2, that's way more than they were looking for. last time it was positive 1.6. revisions are nasty here. the pricing index up 0.2, that's actually pretty darn good news. the quarter over quarter personal consumption expenditure was 2.0. that's a little light. i guess we could look at that. but the headline number definitely was better than most thought. the cost index is up 0.4, we were looking for 0.3. what's the aftermath? looks to me like you're seeing the treasury market rally a bit. so they're giving you an interpretation that this isn't super rosy, but it's still going to get good press. the equities are just losing a little bit. hey, they're still up on the day. we want to see the digestion of the day for the auctions, chicago purchasing manager about 15 minutes before top of the 10:00. dollar was in give back mode but it held where it was supposed to

this week, on a yearly chart the key will be how it looks a month from now. >> rick, chevron hitting below expectation.n. i like this revenue number down to $40 billion. last year, $81 billion. $40 billion down from $81 billion. that's above expectations of $33 billion. the 8 cent number is below expectation of 85. the upstream earnings were international upstream earnings of $1.2 billion and downstream they lost money on their downstream results in the united states. >> we've got an analyst that we'll talk a little more about this in a moment. but, of course, the headline number missing. it was well above. >> much my higher. let's get reaction to gdp. steve liesman, your computer is working today. that's two in a row. >> no, it's not working. >> all right, one in a row. >> the ability of our tech people here is -- never mind.

>> i don't know what to ask you here, jack.. you know, i thought we were going to test the low, the economy was bad. have you got a way to dig yourself out of the hole you've dug over the last three months? >> joe, you know what, you are looking for instant gratification. this is a long process, my friend. you are -- >> 50%, jack. 50% from the low. >> yeah but where did we come from and -- let me take a step back here. what we are doing is what i've been telling my clients is filling -- >> you is it i will have clients? >> markets have gaps. we have a political gap, joe. the market was at 1004 on election day. we'll test 1004. if the market's any good it will go through there. if not, that's where it's going to stop. how about that? i'm telling you another thing, remember, you can not sustain growth with cutting jobs, with divestitures, with all of the other things addressing earnings right now. the market is smart.t. the market knows that. there's a lot of head winds out there. even though this number came out a little better than expected,

that was the whisper incidentally, it's the reason the market was rallying the last couple of days, buying the rumor to see if they sell the news today but the bottom line is you're starting to get what art cashin calls hold your nose and buying. the other night was a perfect example on "fast money" everybody said, they said buy or sell, they all said sell. the market rallied 200 points the next day. all smart money is trying to be short because they're questioning valuation at this level. and i think that it would be prudent for all of us as investors. as traders you have to love this. you play the momentum game and you watch these people come in reluctantly buying the market and you sell it to them. as a trader or investor, you have to be very leery of the head wind. all the supply in rurry, what's going on in washington, higher taxes. where is job growth going to come from? >> hey -- >> how long can we borrow money? how long can we borrow money and create cash for clunkers programs? what's next, cash for hoold hom?

where does it epd and how do we create real growth as opposed to artificial growth, which is what's driving this. >> revision is not good, is it? >> haven't gotten to the revisions yet. >> 6.4 or something? >> again, you could say that's not good but we may be in one of those bad is good zones -- >> if you go from 6, you're only down one. >> and a better rebound and suggests we were further down before. that means, again, it's going to give some support to those who are looking for a "v" which is still out there. some guys say it's possible to get a "v." i had a chance to look at numbers. consumption, a little worse than expected. domestic and nonresidential investment, a little better than some expected. let me just see here.. the government came in a little better than expected. for example, john looking for 4% increase, got 5.5% increase with federal spending up 11%.

we didn't get that. we had minus 4.3 in the prior quarter. at least in the first print of it. now we're back huge rebound with federal spending up 11%. that's upheld the numbers here. >> i don't want you to fall asleep. >> but the comment on federal spending is you had a new administration, like a new ceo at a company, come in in january, trying to sort through where they're going to spend their money. they hold up on the expense programs. now the money's coming out. conference calls we're hearing requests for flotation, activity rising dramatically. not on a stimulation bill but on the existing spending that is going to likely be completed by the end. current government fiscal year. that's not in confusion -- >> do you pay attention to -- that's what i was saying. do you pay attention to gdp and -- >> no. >> you don't? this isn't -- >> we look at it tops down in some ways and say, look, the u.s. is 25% of the 60 trillion global economy. china is bigger now than japan.

china, russia and brazil are bigger than the u.s. consumer. bigger, unlike ten years ago. and that provides a real balance. >> turn negative, rick?? >> yeah. the dow is half a spit a way. it's up one. this is more than a knee-jerk reaction. after a wild week look at the market setup. treasuries are rallying, rates coming down, supply is over. the equities are unchanged on the dow. down almost 2. the s&p is probably giving you a good clue for the action. >> rick, remember when you made that comment about everyone around on the floor paying for their neighbor's mortgages? what about paying for your neighbor's clunkers, what do they think? >> i don't like any of those plans. i think, you know, once again, i will stress, help first-time buyers, help young people get their first car. you know, help the people whose behavior down the road, and they didn't commit sins, maybe we could condition them to actually be free market entrepreneurs,

get it going again. >> there you go. now you're talking. unleash innovation, the intrapractice neural spirit, create jobs. that's how you save the economy. >> young people will pay for it. let's give them some of the darn benefits. >> absolutely! >> see if we got enough yet to show up on the huffington post or something. i don't believe we have enough. >> who cares. that's the pinnacle of journalism? they're going to do investigative reporting, now a joke. >> now we might. i knew one more. thanks, buddy. thanks, gentlemen. >> the main thing, joe -- >> we have to go. >> we're going to play the final countdown for you. they're already talking about christmas. >> 147 days to christmas? >> right. it's not too early to talk about -- >> now you're doing the ordering for christmas and the question is the optimism of the retailers, whether or not they're going to put stuff on the shelves. >> next week. >> we started talking about it

yesterday. we started to pump it up and everybody's looking for 9.6, growth in the unemployment rate. i mean, let's not forget. let's see if this ends up, the last negative quarter we've been through four negative quarters. we had a chart up earlier. this is the worst on a four-quarter basis, at least on the old numbers we calculated yesterday, it tock out the '73-'75 downdurn. after that you have a quick rebound. if you have the tepid recovery, the market will debate that. mario point out, when did the market start to rally? when it got the worst than expected jobs number. i don't know why, but you pointed out that's what happened. >> october, november, december, you had liquidations on hedge funds, liquidation on prop, an unusual period. you are going back to equal ee quill lib yum. >> so just project forward.

i know we have to go -- >> how far? >> here's my question.. we were at 12,000 or so before lehman. just to get back, working out the panic in the economy, what's a level for the dow that is appropriate for a tepid recovery that takes out the panic? >> i don't know the specific number, whether it's 9,222 -- >> 26. >> exactly. but you're getting there and here. so now the question is, where do we go from 9,000 over the next ten years? if-f you bought an index fund like vanguard you made no money. over the next ten years that index fund will provide you %, nonmalgrowth, but 40% of the earnings, 40% are nonu.s. that going to now have, instead of a head wind of currency, you'll have a tail wind starting about the middle of october, november.

you'll have revenue growth, margin expansions because of what companies did. i think over the next ten years you'll do quite well in the markets. >> mario, we'll have more in a moment. steve, thank you very much.. stay with us. >> go, do it! what happened? we only played a second of it. ♪ it's the final countdown >> steve's favorite song. we play this for him in honor of the jobs report coming next week. we thought it was only one day of fun.. no, no, no, no. we're going to milk this. we're going to milk this for an entire week. >> 147 days for christmas, five days for jobs. chevron is out with second quarter earnings. we told you about the numbers a moment. joining us on the "squawk" news line with instant analyses is jason gamel, senior oil analyst at mccleary skurtsz. we talked about how the numbers were 87 cents versus 95 cents the street was expecting. revenue is better than expected. what happened here? >> i think we're comparing it to

expectations, it's the upstream causing the problems. the downstream number is going to be the headline number. it was a loss in the u.s. we were expecting we thought it was going to be pretty good. on the upstream side we're seeing actually some cost issues flowing through. we had a big loss on foreign exchange rates because of the fall in the dollar over the quarter. they had right writeoffs on wells. the good news is the production in upstream was better than expected and beet my expectation. >> also the average selling price the company point out for crude oil and natural gas was $50 in the latest quarter. that matches up with $109 a year ago. what else is the expected to do when the product is collapsing? >> that's exactly right. you cut the upstream price in half and you look at the price for refined products those are down significantly as well. the revenue number is very much explained by those drop in prices across the board. >> the other thing the company points out is that it did maintain pretty aggressive cost

cutting. they said it was 15% drop in the recurring sgna expenses which mario gabelli is with us today and he's been pointing out when companies cut like that, they are going to be very well prepared for very strong earnings in the future. >> that's a great pint. we didn't see did in this quarter but if we look at what's happening not only from chevron but bf and some others in the space, they are doing a pretty good job of taking some of these fixed elements out of their cost structure. they should be rewarded for that long term. >> we heard yesterday exxonmobil with lower than expected numbers. when you compare chevron or exxonmobil, what do you like better? >> i like chevron better. even though they both missed the chevron operational results from a production stand point were very strong and look to be sustaining a pretty strong growth pattern in the case of exxon the miss was in large part due because their production volumes were disappointing and they look to be flat to perhaps even declining a little bit on a

production standpoint. >> thank you for joining us. we appreciate it. >> coming up, earning season coming to a close. yeah. and that means earnings central, we'll say good-bye to that. we're getting bittersweet mail. we are getting ready for a flood of -- work with me, will you? we're getting ready for a flood of economic data next week. we'll ask gabelli how he's playing his portfolio. one four star hotel.

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time for the trader's edge. joining us is art cashin director of floor operations at ubs financial services. certainly a big improvement over down 6. maybe the market already has a lot of this into it already. >> i think it's looking at the subsets of the numbers. you know, how much of it had to do with fewer imports and things like that. it's being discounted.

the market has to be very careful today. you know, you can pull back a little, but if you give up yesterday's gains and get back into that rectangle that we were in over the preceding couple of days, that's not a good technical sign. that could indicate an intermediate top. same thing if we gave up all of the gains last night and that fadeout in the final 30 minutes. i'm hoping month end will change all that and we'll hold it together. >> what else should we be watching? what's going to give us -- equities sort of do whatever they want. i wish we had some underpinnings or technical indicators, the dollar, bond, the options are okay, right? >> yeah. the auctions, it looked like the chinese came back to the seven-year. i thought the whole thing, they might have sat out the earlier auction just as a lesson, hey, you guys paying attention, this is what we could do if we wanted to. that way they didn't hurt their

own treasury holdings but at least sent a message.. i think next week is going to be important. we've got a couple of cycles coming together. i think i told you a couple days ago i'm going to look at wednesday and thursday. actually, wednesday, thursday and into friday. it will also equal the length of the 1929-1930 bounce which also took back 48%. we'll see if there are further parallels here or if this rally goes up on its own. >> wouldn't it be smart to just buy the market before congress recesses because there's a big sigh and sort of a celebration? or is the market up in anticipation of that? >> well, i think there might be some anticipation.. i agree with you, historically when congress is not in session the market feels most comfortable. that's why they always love deadlo deadlock. if you got one party couldn't push anything through, the markets seem to do the best in those years. but i'm, again, wait for next

week. i want to see what happens by the weekend. >> all right. arthur, we know what's going to happen this weekend. >> yes, the ice cubes don't have a shot. >> no, they don't. marinading. mario is laughing. finally laughing at something. >> he's been trying all morning to get mario to laugh. >> man, he's all business, which is why he's worth a billion dollars, i guess, right? >> right. >> is that overstating it? >> i have no idea. >> you have no idea whether you are worth a billion dollars? >> we have a public company. we work for our shareholders. we do we're best every day to maintain costs, drive returns for the clients by picking good stocks. and along that line, we give 8÷ kisses. we think about that. >> we've been teasing this since par you came on. >> i've got to get that in because when you think about stock selection, i'm doing british today, the sun, the moon and the stars. where are you talking? revenue growth. where is the company having

revenue growth margin expansion, multiple expansion and takeout? we go back to the concept of this equilly write up. this is a candy bar. $150 billion industry around the world. when mars and wrigley teamed up, no, it's not a candy. >> no. >> and it's not a kesiss, and i is a hershey's. and you gave it to me. basically, it's very simple. okay? when mars and wrigley's merged, it had this in the business and, therefore, will cadbury merge with someone in we think they will. cadbury has very good fundamentals on their own. we think this is a terrific stock to own in portfolios because it covers the world. then another one, along that same line, would be a company in

the beer business in. imbev buys budweiser.r. how do you hand this world? how should you consolidate with someone else and so on? >> i want to bring you a headline. the parties have reached an agreement on major issues in the ubs tax case. this is according to u.s. government attorney, but again, that's been the issue that's been out there about whether they would hand over their clients' information or not. it's been driving a lot of wealthy individuals into the irs. change what they've been talking about for the reported income. >> you look really nervous. >> no, not really. i think it's not inappropriate. >> right. hand over the info. >> i agree. if the guy is basically stealing from all of us, why should we protect them. >> okay. we're going to have more from mario in a moment. stay right here. we'll be back right after this.f has impurities like co2 in it. controlled freeze zone is a new technology... being developed by exxonmobil...

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