okay. we're back. it was a see saw morning for a while, and then we turned positive, ask we've been staying positive for most of the morning now. the dow up 32, the nasdaq up 7 1/2, s&p up 1/3. >> i didn't thinkly green energy gets a lot of attention, the solar, doing pig farms now, using solar panels to power pig farms.s. >> there's other stuff on a pig farm you could use for power. >> i was confused. i thought you would use that. but i guess you use one to power the other. >> this is cnbc.com news now. >> congress is moving quickly to add $2 billion in funding for cash for clunkers through september 2010. amid confusion among dealers on whether the program has been suspended, the white house says it hasn't. the board expects a gradual recovery for the u.s. economy,

now that the sharpest declines have ended. there is agreement on the major issues in a tax fight with the u.s. government. that's cnbc.com news now. i'm courtney reagan.. good morning, and welcome to "the call," everyone.. happy friday.. we can see the market is doing pretty well here, up 35 points after that better than expected gdp number. it could be on track to have at least the best july since 1989. potentially, the best july since 1939. and melissa, larry is here to miss it. >> that's right. he is missing it. i'm melissa francis. larry kudlow is off today. jpmorgan chase's chief economist bruise kazman came out with a call, and we're going to have him live. also, the house is planning to pass a $2 billion bill to keep the cash for clunkers program alive. we'll have the very latest from washington and discuss whether it will indeed have a positive economic impact.t. we have a jam-packed show.

this is "the call" on cnbc. all right.. stocks bouncing around after the government reported that the economy shrank by 1% in the second quarter. better than expected. but on the flip side, consumer spending weaker than expected. take a look at the dow right now, back in positive territory after that dip there. you see at the open, we're up 33 points on the day. that's about 4/10 of a percent, the s&p trading to the plus side up 3/10 of a percent and the nasdaq also in had positive territory, up 4/10 of a percent. trish, we end the week and month on a good note, maybe, it looks like? >> looks like it, melissa, definitely. at least the best since 1989 for july, potentially even the best since 1939, as i was saying. a lot of optimism about the gdp number. we're going to talk about that, coming up in just a few moments. but first, i just want to talk about this market here. we've had quite a month.. the dow has gained as you can see at the bottom of your screen, 8% this month alone. so if you've been in this market, it's been a 4ek heck of a ride.

bob pisani joining me on the floor and keeping track of everything. quite a month. nice to see this july -- a lot of people thought it might be e kind of slow, but it was kind of great. >> haven't seen these gains from the dow since 2002 on a monthly basis. what was really important about this month is this is the month when investors began to believe that there was prospects of some kind of economic recovery, but it's debatable. you can look at it very simply. just watch what happened this month, folks. let me put up the cyclical versus consumer index. cyclical is all of the commodity stocks and all of those big industrial stocks you know about. that's the top line. and the bottom line is consumer stock, pepsi cola, procter & gamble. look, outperformance is huge. 20% versus 5%. this started in march, but took off in the month of july. and that's your indication of what we call the coming recovery, and you can find out about whether it's happening or not, but investors believe there is a good reason to buy into the

market here on this cyclical cycle. >> this is talking basically smart money here. what about your average investor out there, what are they doing right now, are they getting in, fleeing, what are the funds looking like? >> the companies track all of the mutual fund flows and money market -- put out a monthly report and just put out a report on money markets as well as mutual funds.. look at these numbers. in the month ending june, which is the most recent date we had, they pulled out $1 16r billion in money market funds. that's probably something like $3 trillion in money markets, so probably 5%. so the question is, what the heck did they do with 160? where did everybody put this money? a lot of people paid bills.s. charles biedermann -- believe it or not, bond funds still getting in flows. it may have been starting to reverse in the last few weeks, but look at the numbers here to date. stock funds year-to-date until the end of june are exceeding outflows.

can you believe it? still for the six months of the year, first six months, those bond closes are getting $113 billion in in-flows still. trish, the question is, when is this going to reverse? >> hang on. what is this telling us here? this is telling us that people are still reluctant about this market. and yet what you tend to see is the masses follow, though. so in other words, all these individual invest tors, unfortunately, are likely going to be late to the party. >> retail investors have been reluctant to put money into the stock market. they are continuing to put money in the bond market. i talked to charles biedermann, and there are people who track these on a regular basis. this week, we're going to see great inflows into the stock market and probably some outflows from the bond market, but it's not going to reverse that big trend here. what i'm looking for, and we're still trying to figure, when can we see some really heavy inflows from the retail investor into the stock market? we've got to get those numbering up. and if that happens, that will be another particular up into the markets in september and october. >> a lot of folks out there

still gun shy feeling they got burnt last time around and still reluctant. a big number to watch. have a wonderful weekend, bob. great to see you. melissa, i'm going to head upstairs. but you kick off the next round. >> okay. see you in a second. with the economy shrinking less than was expected in the second quarter, is the recession almost over? joining us is bruce kazman, with with jp chase, and cnbc's steve liesman. bruce, i want to start with you. we have this hot off the presses. you just changed your call on third quarter saying you're upping your gdp estimate to 3%. what was behind this? this is based on the data you saw this morning, right? >> are that's right. we had been looking for something close to that, 2.5, but the composition of growth in this report was much better than we had thought. final demand was close to flat and much of the decline in growth came from a drawdown in inventory. we look at a second quarter in which businesses have pulled back too far, and we look to see the business sector move closer

to more normal behavior in the third quarter, and i think that's going to give a decent lift to gdp growth. >> steve, to get it on the record, you have been famous, right, steve liesman? >> i thought there was a bit of pessimistic outlook in the objective crunching of numbers on the part of economists and outlook of investors. i think there has been an under estimation. i think the irony is interesting. it's not the better than expected part of the report that makes people vying for the third quarter. it's the worse than expected part. the inventory that people mentioned and trade numbers not being as good. the one other down side is consumer spending, which was down a little more than expected. that remains a wild card. but if you think about what could happen to auto production in this month and next month, it could be a huge contribution to gdp in the third quarter, and the 3% number is also significant, because if i'm not mistaken, bruce would tend to put in line with that, either a flattening or even a decline in unemployment of 53%. >> is that true, bruce? and then we'll get what stu thinks about that. >> not quite.

we still have jobs being shed here, but at a much more modest pace. we're looking by the end of the summer to see jobs shed by 100 to 150% a month, not quite enough to stabilize the unemployment. >> what do you think about this morning's data?? does it change your outlook at all? >> my good friend bruce and i talk a lot and i'm not quite as 3%, i think while we have a small positive, i think we could be at 3% real gdp in the fourth quarter. still worried about consumer spending being on the soft side. but at least we're debating the size of the recovery. i think the second quarter data proves that the rip cord was pulled on the free-falling, skydiving economy, and so whether i think it's fiscal stimulus, people have been saying it's not working, well, government spending up 5.5% in the second quarter with more to come. so i think the feds' policies, fiscal stimulus, some stabilization in housing, are what's causing the economy to

finally slow down and i agree with bruce, we're going to be positive maybe this quarter, and maybe more so in the fourth quarter. that's when i think you also get some job turn-around. maybe not the fourth, but by the first car next year, i think the economy will be creating jobs again. >> hey, that would certainly be nice to see. when you talk about the job turn-armed, it's critical at some point to see that. bruce, at what point do you think we're going to start seeing a shift in the unemployment rate so that americans can start feeling better about everything, and maybe go out there and start spending some money? >> i think it's going to start to happen soon. but i think there's a basic point to get across here. we're going to get more growth than people expect. we're going to get a lot less growth than we need to dig ourselves out of the hole. so we're going to have strong gdp growth here, but the unemployment rate is going to be elevated for years to come, as we have got such a damaging recession. >> can i -- >> hang on, i'm just curious, what does he mean, years to come? >> our forecast would have the

u.s. unemployment still at 8% or higher in 2012, with growth being 3 to 4% over the next two or three years. >> steve, what's that wrench you have? >> i want to throw a wrench in the outlook for soft consumer spending. the government went and reviseded upward savings rates for the past few quarters if not the past few years, and they have been higher than expected. so the possibility exists, and you've got to throw this out to our friendly number-crunchers on the panel that savings have been higher. the average household is a little further along in putting their balance sheet back in order than they estimated. so maybe there is less of an adjustment to consumer spending than might be in the cards. >> bruce, what do you think about that? >> i think steve is right, that there is a bigger adjustment that's already in the pipeline. i can the consumer, though, , still has plenty of things that will keep it relatively soft for the next few months. i do think the consumer is going to start to kick in with auto sales and later in the year, they're going to look stronger. >> dare i ask the question, should we shut off the stimulus? are we on our way? do we need more spending? >> you don't need a second stimulus. you don't need a sequel.

i think the stimulus we have is just now really starting to work. >> well, we haven't spent a lot of it yet, though. we need to unleash the other 80-plus percent that we haven't touched yes yet? >> that's why you don't need another one. give it more time, and we'll see it evident in the data in government spending and in directly in consumer spending, as well as in nonresidential construction, particularly government-related. so i don't think you need any additional fiscal stimulus at all. >> if -- >> hang on. i want to switch gears here. we talked about the stimulus, it's clear, none of it is getting to folks as early as everyone had anticipated. so once that does star to channel through the economy, that will be good news. as for second stimulus, well, a whole other ball game there. but, stu, what do you think in approximate terms of the financial sector? are we seeing enough strength, enough new helpth in the financial sector that means that people will start the -- and individuals will start being able to access credit, which is a lot of what this economy,

let's face it, like it or not, is pinned on? >> i think you're seeing healing there. we certainly have seen spreads come down. bank credit can still be tight, but a lot of it is that we're looking for better borrowers. i thought it was interesting, just this morning when you interviewed the ceo of otter nation who said a lot of the fico scores, the credit scores of consumers coming in on the cash for clunkers, were actually fairly high. so i think those kinds of people with good fico scores or businesses with good credit can still get credit available, and as the economy improves, that will improve the prospects for economic growth, corporate profits. and i think consumer credit and business credit will gradually become more available. but it's a process that's still just now under way. >> bruce, stu, steve, thanks to all three of you for joining us. >> great conversation. okay, coming up next, stocks are changing pretty much with the wind today. never theless, on course for the

best july in 20 years. will risk appetite continue, and how do you play the markets? next. >> plus, from big-bank bonuses to high-frequency trading, rage against its big banks is back. and in today's "call of the wild" debate, breaking up the largest financial institutions only right here on "the call." we'll be right back. if you're taking 8 extra-strength tylenol... a day on the days that you have arthritis pain, you could end up taking 4 times the number... of pills compared to aleve. choose aleve and you could start taking fewer pills. just 2 aleve have the strength...

welcome back. dow has been experiencing a best july in 20 years, so is risk appetite back for investors?

joining us to discuss, we have our bull on hand, dan genter, president and ceo of rnc, and david deets, president and chief investment strategist of point view financial services. wonderful to see you both. david, i've got to ask, gosh, to be a bear in this environment, we're seeing the market go up so much over the last several months, 8% this month alone, what's that feel like? >> well, i tell you, we were certainly taking a lot of positions earlier this year. but the fact of the matter is, we are now trading in an environment that most traders have is never seen before, with the gdp down for four quarters in a row, that hasn't been seen since the great depression, the unemployment rate, 9.5% going higher. sure, we hope for the best, but the fact of the matter is, these stocks have went up 46% since march 9th, 12% in the last ten days. i mean, come on, you cannot continue in the face of this uncertainty. if the economy continues to get better u i think you've already seen a lot of the up side. but look out below.

if things don't work out the way people hope.e. >> but dan, it's interesting, bob pisani was on the floor earlier and showing charles biedermann's numbers, and what it indicated the individual investors, mom and pop investors who are taking their money ow of equity funds, very nervous right now, doing things like paying bills, he said and putting the money into bond funds, more conservative instruments. do you think at some point all these folks that are on the sidelines are going to come back in, and that's going to trigger another rally? >> well, i think you are definitely going to see that, trish, because we're not only seeing it with our clientele from individual investors, and also the professional investors, there is still a lot of cash on the sidelines. and i think that's the real safety net on a near-term basis. any cash anybody had, especially for professional investors, it's been a ball and chain during this entire rally. and they cannot afford to take the risk to be out of this market. and any type of weakness that we see, they're going to buy into it, because they need to get back into the game. and i think we have shown confidence that breaking out of

that 850 to 950 trading range, people have confidence in earning estimates, we're way too low, and they're probably still too low. so i think they will buy into it, that cash is going to have to come in and now give us more support and more up side. >> david, one of the arguments you make is the median is getting close to 16? >> absolutely, melissa. and look at the dividend yield, above the yield you could get on a ten-year treasury as late as early march. now it's down 2 1/2%, and to address what the other guest was saying, the fact of the matter is, stocks follow fundamentals. fundamentals don't follow stocks. what we saw in today's gdp was a surprise decline in personal spending. so if the people aren't spending on main street and the people are 70% of the economy, that does not bode well. >> but -- sorry, melissa.a. >> that's okay. i was going to say, dan, you don't expect that to be the leading indicator, though, people going out and spending.

obviously, unemployment is a lagging indicator, and unemployment has to pick up before people are going to go spend. that's not going to be the thing at the frontal line. >> no, i don't think that basically that's going to be the leading indicator. and i think what wear seeing from this market is this market is going to do what markets always do in tracking earnings and the estimates have too low. i think they're still too low for next year, and probably going to be 67 to 68. so even if multiples stay at 15 to 16, we still have with dividends 10 to 12% worth of up sides in the next 12 to 18 months. and that type of potential is going to draw investors back in. >> okay, dave, what do you think it's going to take to draw investors back in? back to the root of this question for the segment, what will it take for people's risk appetite to increase?? >> absolutely.y. better earnings is the trick. but the way the company has been beating earnings is because they're cutting costs. they're laying people off. we're not seeing that top-line growth. you can't -- you can't ultimately just cut costs into

prosperitiel in we see some top line growth. i'm very concerned that what we just saw in the gdp report was that the key increase was government spending. i don't know how long that's going to continue, but we're just hearing last night that perhaps a key program for the automobile industry, the cash for clunkers, may be discontinued. so it's a very uncertain environment. >> well, that's not exactly -- not saying it may be discontinued. i mean, it blew out so much faster than anyone ever expected. it was such a wild success to give away $4,500 to everybody who wanted to buy a car. you know, 110 -- i think it was, 000 people showed up in order to do deals like this already. it's not that they're discontinuing it. that's not a fair characterization. >> well, i agree with that. but if the economy is getting better, i think it's going to be very tough for congress to deal with pressure from the american people as to why one person's taxes should help fund their neighbor's car purchase. >> that's true. >> we are going to talk about that.. david, maybe you should stay with us in that cnbc studio,

because it's one of our segments coming up. i think we've got to leave it there, guys. thank you so much for joining us today. we appreciate it.t. >> coming up, big bank bonus rage gets reignited. we'll discuss the impact and the possible of breaking up the big banks in today's "call of the wild." >> but first, congress working quickly, like we were saying, to refuel cash for clunkers. breaking details are coming up, straight ahead on "the call."pl we'll be right back. of 10 inch hose clamp pliers. you know what's complicated? shipping. shipping's complicated. not really. with priority mail flat rate boxes from the postal service shipping is easy. if it fits, it ships anywhere in the country for a low flat rate. that's not complicated. come on. how about...a handshake. alright. priority mail flat rate boxes only from the postal service. a simpler way to ship.

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all right. check out autonation, the nation's large yef auto dealership chain reporting second quarter profits fell, no surprise there. but has expressed optimism that the cashing r cash for clunkers program will improve sales of. as for the cash for clunkers program, the house is planning to pass a $2 billion bill to keep it alive, thereby tripling the needed amount the government will need to pay for the cars. diana olick is live from the white house with the details. >> reporter: that's right, it was supposed to last four months, and barely made it four days and now congress and the administration are scrambling to come up with a solution. as of now, the white house says the program is still on. >> we justify got a note from our legislative folks that

absolutely, if people are going out, want to buy a car this weekend, that program is still there, it has not been suspended. i can tell you there's a flurry of activity this morning, working with the agencies, working with congress, to make sure that there is the funds for it. . >> the program, which officially kicked off monday, has spend $150 million and reportedly has another 800 to $850 million in commitments pending. between 35 and $4500 per car, that's a quarter million clunked and sold. vacationers headed or for vacation tomorrow are considering a quick fix, but architects say the plan should require better fuel efficiency require better fuel efficiency on new purchases. industry execs just want to keep it running. >> let me tell you what we have seen since the official kickoff on july 24th. we've had a 36% surge in traffic. now, here's the important component. the credit scores of the clunker >> let me tell you what we have traffic. component. traffic is higher than our normal traffic. >> now, lawmakers are struggling to get that bill to the floor

today. and melissa, as you said, they're looking to take $2 billion from the renewable energy loan guarantees and shift them into into the program. of course, the senate would have to vote on that next week. melissa? >> diana, i have a quick question on the numbers. you said it was 250 cars sold or clunked -- >> sold and clunked. you've got to clunk one to sell one. >> new sold cars were about 110,000. >> it depends on how many are pending and how many are in the system already. remember that three weeks ago, you started to be able to go to your dealer and apply for the program. it was only on monday that it officially kicked off and sales started to go through. so, you know, it's a bunch of number crunching.. >> diana olick, thanks so much. should the government refuel the cash for clunkers program? let's bring in jack kaderi chairman of smarttransportation.org, calls himself the architect of the program. and also james, reuters money and politics columnist. thanks to both of you for joining us. i want to try and crunch some of

these numbers as we're going through them. and since you're credited with being the architect of the program, how many new sales do you think this resulted in, and then how much does that translate to? say it's 110,000, like jd powers said, how many jobs does that mean, because we're touting this program as a big success, and tfbl it is, but what does that really mean? >> well, listen, let's first remember that the sponsors of this bill, the initial bill, dianne feinstein, steve israel, chuck sueman and others asked for $4 billion initially. not $1 billion. they knew this would be a successful program. they asked for four times the amount that was given. so now we're in a bit of of a crunch because the program was successful, as predicted, and now we've got to add $2 billion very quickly to the program to make sure it continues.s. >> but jack, i'm -- we're saying it was successful. i'm trying to quantity my what that really means. what does 110,000 cars mean? what does it equate to in the economy, in gdp, what does this mean?

>> sure. let's look at the numbers. as recently as 2007, the automakers in the united states sold about 16.5 million cars. this year, we're on pace for forecast for clunkers to sell 9.5 million cars. that's a big drop and means a loss of over 1 million jobs 50,000 jobs from dealers and hundreds of thousands of jobs in the assembly workers, and hundreds of thousands of jobs in the part suppliers. now we're on pace, though, to bump up from 9.5 million, probably to well over a million a month, given cash for clunkers. of . >> jack, let me bring in jim here. jim, i know you've never bought this program from the beginning. been very, very critical of it. some folks are saying this would be wildly successful, really contributing to a big spike in auto sales.s. but you say the reality is that this is not going to translate into jobs, it's not going to translate into productivity. so you don't buy it? >> no, i don't. first i want to clear up an

internet rumor, trish, that you finally trade in your beloved 1977 chevy impala. is this true? maybe there is a dodge dart out there. >> how old do you think i am, for goodness sakes? was i driving in 1977? >> that was my first -- that was my first -- i'm not that old. that was my first car, a little joke. listen -- >> so are you going to trade one of yours in? >> i don't know. i may. our van may be breaking down, and i'm not sure about the gas mileage. listen, my concern isn't so much the number of -- the number of cars sold now or jobs created now.w. it's the number of net cars and net jobs over the course of a year or two. and i'm telling you, there has been all kinds of studies of these programs, pull forward economic growth and pull forward cars that might have been purchased anyway, and in the long term, created no net new jobs, sold no net new cars. all this is like buffett would say, another viagra and sugar high, and really doesn't create

any real economic growth. >> but wouldn't you say, it's interesting, because this is the kind of stimulus, whether you agree it's working or not, but it's certainly gotten to the people quickly. it's gotten into the system quickly, which is the problem we're having the overall stimulus package of many. >> no, actually, i don't -- i have to disagree, i don't think it has gotten to them quickly. so far what they have done with these dealers, the dealers have extended to the government a $4,500 loan, because they haven't figured it out yet, which may worry you about the efficiency of the health care system they have that, this cash for clunkers program. so we have the private sector extending the government loans, haven't gotten the money yet. so if all you're doing is saying listen -- it's like california, an iou. exactly. >> jack, what about that? i'm a little concerned about the numbers. if we're talking about 110,000 cars on a billion dollars, in a market where we're selling 9.5 million cars, statistically, that's not very significant, even if you heap another $3 billion on the program.

$300,000 cars, and those aren't ones that would not have been purchased. these are people with really old cars that presumably, they needed to replace. >> that's not what we're trying to do with this program. we had several goals with this program. first, the fact that jobs are being phaseded right now because of this program. it's not 110,000, it's 250 to 300,000 cars -- >> what is a job saved -- i hate that phrase. how do you know it's been saved? >> one example.e. you have dealers. we have to close 1,100 dealers in the past year. had we had cash for clunkers, those dealers would be open today. >> but they would still be waiting on their money.y. >> dealers have the credit to go ahead and extend this, and they get this money in 30 to 60 days. that's how every program works in terms of this. dealers are used to that. they have the facility to extend that loan for 30 years and get it back from the government. the government is getting them that money. so they're not out that money, they're going to get their

money. this billion dollars is producing sales of 250,000 cars in a matter of a week. >> okay. >> you can't find another stimulus program that's working that fast, compared to this. >> all right. i guess we have to leave it there. thanks for joining us, guys. we appreciate it. trish. >> thank you. i'm just going to forget about that 1977 impala comment. coming up, big earnings continue to disappointment. brand-new details off the conference call. and where oil prices are heading. >> but first, shock and awe is back over big banks giving big bonuses. let the rage begin. is it time to break up our largest financial institutions. that's today's "call of the wild" coming up next. thththththh

welcome back. the u.s. government is the biggest shareholder in citigroup, which you the taxpayer happen to be the biggest in citigroup. nine banks paid out bonuses of nearly $33 billion last year. so is it time to break up the big banks? we want to bring in for this discussion, irene aldrich from all alpha trading, and richard bloom enthat you will. irene, i'll kick it off with you. do you think we would have a more productive banking system if these banks were not so so

big? approximate if we didn't have this supermarket style system. >> well, first of all, i have to say that i have i huge respect for the u.s. government, and i know how difficult this job is to actually balance regulation, and market implements and everything else. but, you know, citibank, it's been a really big bank and it's been working. and it has been slowly selling off assets. so, you know, they have been -- divesting of some issues, and it's a big thing, and the government owns it. but the in end of things, it's working. so why fix it if it's not broken. >> but mr. blumenthal, a lot of people would say it's not working, because the government has had to put so much money in, we as taxpayers have had to put so much money in. what's the solution? >> well, there is no question that the system is broken. it has to be figuresed the the only question really is, what to do. and i think the choice, obviously, is between breaking them up. but it's not so much about

bigness itself being the problem. really, the issue is bigger than bigness. it's not on an anti-trust probl or a market monopoly problem. it's really that the risk that citigroup and other banks took, put the whole system in danger.. and that's why we need stronger requirements for increased capitalization, reserve requirements, and maybe constraints on what types of risk -- in other words, what types of investments they can do. so i'm not urging repeal of graham bly ly, but am urging stronger regulations perhaps by some institutions so they are risks do not become systemic risks. >> irene, back to your first point of citi, a look at the latest earnings report, i don't think it shows it's a conglomeration that is working. also, to dick's argument they're taking too much risk, the problem isn't the size, are they

taking that much risk because it is so big in order to make a wave in their profits, you do have to make more extreme measures, because you need to make so much more? >> sure. well, i would like to address the risk component first. according to bassle, regulated by the international -- banking and international committee, essentially, this committee, it needs and it decides, among global heads of banking and regulators what is the appropriate amount of capital cash, essentially. another liquid, marketable securities that the bank has to have on their balance sheet. i think the current bassel two mandate, something like 8% is considered to be standard. citi is now up to 12 -- i think 12.1%, if i'm not mistaken. in this q2 in their report in terms of how much cash they have. so just to put this in perspective, every bank is working as a leveraged institution. where they take deposits and then lending this money out. so the amount of cash that the bank has on hand essentially

shows at any given time if there is a run on the bank how quickly they will be able to distribute the assets to the depositors, and the -- to prevent further banking crises and things like that. so the banking -- international banking commission or banking supervision, they have determined that 8% is actually -- an okay number, right? and multiple studies went into it. and citi is way above that in terms of capitalization, in terms of risk. so their risk is comparatively smaller than the risk of the banks out there. >> dick, do you buy that argument? >> no, i really don't, because it's a bit like arguing saying well, the rating agencies say it's okay. rating agencies are the problem and got us into the fiasco that we encountered so to say citigroup may have a aaa rating means nothing to me. this group or that group says their present leverage rating -- >> richard, what would you actually do then? what's the solution here? break them all up?

>> not necessarily break them up. but simply impose the kind of constraints that i think the president has discussed, maybe not precisely his proposal, maybe it's not the federal reserve. but someone has to impose oversight, scrutiny, and i know that for some, it's a loathe some word, regulation. as to the capitalization requirements, and impose stiffer requirements against the kind of excessive leverage and risk-taking that really brought down the entire system.. >> or let them fail. but that's a whole another discussion, so we'll leave it there. thank you for joining us. we appreciate it. >> thank you. first exxonmobil and now chevron follows suit falling short of expectations. we'll hear the conference call. and the outlook for oil. the long and short-term calls on this one. we'll be right back. i'm bob pisani with this

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welcome back to "the call" i'm mary thompson and listening in on chevron's second quarter conference call. the company is raising its full year production forecast by 5% or 30,000 barrels a day. for 2009, expected to be 2.66 million barrels per day, based on a $50 barrel price for a barrel of oil. new projects basically, the reason for the increase in production forecast, are because a number of new projects are

running ahead of schedule. one -- including one in the gulf of mexico and another in cast i can stan. the company also saying that it's cost cutting program to eliminate $2.5 million in costs is running schedule for the first half. and whether it would reinstitute the buy back program, it said no, it will keep a good balance sheet. production in the u.s., the company says it is focusing on oil rather than natural gas because of the decline in the price of natural gas. all of this, of course, coming in the wake of the company reporting a 71% decline in second quarter profits with oil placing the decline squarely on the shoulders of a decline in the price of products like gasoline, crude oil and natural gas. the company earning 87 cents a share in the second quarter, a far cry from last year's $2.90 a share and below estimates, as well. the revenue fell from 50% to $40 billion, the number ahead of estimates at $33.4 billion.

basically, this is how the company's operations did upstream, exploration and production. you can see a big decline in the profits there to about $1.5 billion, downstream also -- actually, downstream recovered. that's refine and marketing and recovery in this year's second quarter. in a statement, the company's ceo, david rilely saying operationally, chevron had a successful quarter with a number of projects contributing to a 5% increase in production. still, demand for refined products like gasoline remains weak. >> mary thompson, thanks so much.. so down big one day, rebounding the next. take a look at how oil is trieding today, a monster day yesterday. right now, up about a buck, but down 44% on the year. one year ago this month, almost at 150 bucks a barrel.. will oil return to triple-digit pricis when the economy recovers? let's ask addison armstrong at tradition energy, also a cnbc contributor and kevin kerr, president and chief officer of

kerr trading international. gentlemen, this earnings season, i'm listening to comments like out of bp's tony hayward. they don't expect a recovery, or they expect a recovery to be long and drawn out. this is the opposite of what opec is saying. they think as soon as the economy takes off, oil can ignite again. what's going to happen? addison, what do you think?? >> i think the oil majors have it right, they have their boots on the ground, they know what's going on out there. >> opec doesn't have their boots on the ground, add son in they're drilling every day. what are you talking about? >> they have the same profit mode actives, but one is more realistic than the other. i would say these major oil guys absolutely know what they're talking about. they have to be very conscious of their public statements about future earnings and things like that. and i think that they're absolutely right. you know, there is no evidence of any sort of demand pick up now or even down the road. >> what about this year? the rest of the year? you're saying no pick-up this year. >> no pick-up this year. >> wow. kevin, what do you think?? >> i think adson is right but

for a different reason.n. oil majors, these guys coming out with earnings saying, look, it's going to be bad for a long time coming. that way, when the earnings come out and they're better quarter after quarter from now on, they'll look great. they are talking their book. obviously, opec is saying, look, there is going to be a recovery, we're already seeing the early signs of it of. and the only thing that's going to drive this recovery is energy. so we probably have seen the bottom in crude, and you're going to see a slow pickup and by the end of the year, closer to 80, 85, but in 2010 if the recovery is picking up pace -- >> triple digits.. >> addison, a lot of people are worried about the u.s. economy. decisive gdp numbers today, and the concern with all this stimulus money being spent, we will continue seeing weakness in the u.s. dollar. if we, in fact, see that, what will that mean for oil? and is this something you're watching carefully? >> of course it's something we're watching carefully of the dollar depreciation is a key factor in what's going on with the price of oil. and so one thing that those of

us who look closely at the fundamentals obviously can't have a real tight gauge on. because the dollar is really in a -- i would say, and some of the people i talk to say, is in a death spiral.. you know, you've got hidden dollar depreciation with things like china stockpiling oil, stockpiling copper, stockpiling steel. they're diversifying their assets away from the dollar already. >> wouldn't this cause you to become more bullish on your oil price? >> absolutely. but i still -- i'm a fundamentalist. so i have to see -- i have to see a real pickup in demand. i have to see some use of all of the spare capacity that's in this market before i get really bull -- >> kevin, you guys are both crazy. speculators caused this run up at least in part in the first place. what's going to stop the fast money from jumping right back in the market, the very first time we see demand pick up? they're going to bid it right back up to 150 bucks. why is that not the case? >> well, i'll tell you, they're already there. it's already happened. what do you think has driven the

price from 33 up to 70? my question -- >> so why aren't you in? >> my question about the fast money is, where are the new buyers going to come from, all right? if everybody -- >> more money coming into the funds. the minute we see demand pick up, it becomes a good bet and they pile on. >> they've already discounted that. >> we have a bet. we're going to get off line and make a bet. >> it's the easy way to go, is to blame the speculator. the real problem is what we have talked about, the weak dollar. and if the dollar continues to drop -- >> it contributes, you're right. >> you're going to see much higher oil prices and commodities prices. >> where do you think oil is going to be? take me out six months from now, kevin. >> end of the year this year, looking at $85 a barrel, probably into next year, as dollar continues to weaken.. talking back up to triple digits. >> addison, your price six months from now. >> six months from now, $75. >> you heard it here. thanks, guys.. coming up next, what allen sanford, senator dodd and twitter have in had common. jane wells, please explain this one. >> trish, on the same list as

steve jobs, tmc and the fringe. but in a first we report, you decide this week to enter the call of the shame after the break.

what do you know?? it's that time of week again where we bring you the most unbelievable stories in business news. and this week, we wanted you to write in and vote. cnbc's jane wells will tell you how you can do this. she joins us live from l.a. with this week's nominees, some of which are rather amusing, some

of which are not so amusing, jane. >> trish, you know, for once you guys get to choose the winner on the blog, and here are your choices. >> this was not any kind of ponzi scheme whatsoever. >> cruel and unusual punishment, allen stanford canal take the heat. the fraudster says the texas jail is oppressive and he wants to be moved. if he thinks he's in the hot seat now, wait until the trial. nominee number two, so alone. a former countrywide exec reportedly tells congress in secret testimony that senators chris dodd and kent conrad knew they were getting special treatment on their loans. nominee three. >> frere shocka. watch his face as it dawns on him that organizers are playing the national anthem that isn't

spanish, it's danish. he later says something to his french host which probably needs no translation. number four, snappel.l. a snapshot of steve jobs, the first image after returning to work from transplant surgery. in another sign that apple has been weird about this whole story, the photo breaks on tmz.com, which says it was shot on an iphone. and finally -- >> nominee five, a comi con, daunte'sin ferno, as fans are encouraged to, quote, commit acts of lust on women at the expo. the models in the booth -- complaints pour on to twitter and eventually they are tweeted an apology. vote for your choice, funnybusiness.cnbc.com. trish, i know which one you want. >> you know exactly which one i hate, the one with electronic

arts. the idea they would hire models and then encourage people to assault them? it's monthsage nice particular, it's awful. it makes me so angry, jane. >> she is really angry. >> i am! i am really angry. i mean, the video games in general make me angry, because -- well, all right.t. we don't to -- >> it's just an incredibly sexist thing for them to have done. >> >> i'm more simplistic about this. i think allen stanford looks like such a dork walking along in chains going -- with the big thumb's up, he's got my vote every time. how could you possibly be smiling and mugging for the camera as you're being hauled off in chains? he gets my vote. jane, who are you voting for? >> i'm going to vote for the french. the tour de france can't get the right national anthem?? another dis at spain yet again. >> and they'll say it was an accident. i don't know. all right. love it, jane. thank you so much. we'll all go vote.

we'll be right back with last call on the economy ahead of president obama's afternoon remarks. you are watching cnbc, first in business worldwide. g b

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