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and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to "the closing bell." i'm maria bartiromo on the steps of federal hall, the site of our nation's first president's oath of office. across the street from the new york stock exchange. it's hot out here, but it's hot inside as well. we continue our summer on the street series.s. here's what we're following at the close tonight. the red hot month of july coming to a close on a strong note. the dow jones industrial average up almost 9% this month alone. the best monthly performance in seven years. its best july since 1989. the nasdaq and the s&p 500 as well scoring a fifth consecutive monthly gain. the nasdaq is up over 8%. the s&p 500 up better than 7% in

the month of july. hello, august. investors encouraged by an improving gdp figure today. the gdp in the second quarter contracted again, but it contracted at a much smaller rate. annualized rate of 1%. that is a 1% decline, indicating the economy is shrinking at a slowing pace. also ahead, oil prices getting a boost today on that reading on the economy. crude oil tonight up nearly 4% to close at $69.45 a barrel. but oil did post its first monthly decline since august. it closed -- rising inventories. we're getting to all that coming up in the program. in the meanwhile let's look at how we finished the day on wall street with the dow jones industrial average extending the move of the last couple of weeks up another 14 points today at 9,169.9. nasdaq composite gave bup six points, fractional loss there. of course the nasdaq remains the winner in 2009, up double digits. about 23% higher for the year. s&p 500 tonight up half of a point. 987 the latest trade there.

oil stocks were some of the laggards on the street today. we get all the action right now from bob pisani our eye on the floor of the nyse inside the big board. >> good to see you as always. a little action in citigroup here making an addition -- or more shares going into the russell 1,000. i'll talk to you about that in a minute. take a look at how we did for the month. we're still sorting out the final numbers, but the bottom line is the dow is up about 8.5% for the month of july. that's the best month, single month for the dow since october 2002. and again, these numbers are still settling out here. the s&p and the nasdaq also had great months. looks like the best move up for them. but single months for them since april 2009.. summer rally, it was definitely there but there ways very clear theme. traders bought cyclical stocks, stocks that do better when the global economy improves. commodities. techs, consumer discretionary, and industrials. those are the cyclical sectors, folks. and all of them outperformed the rest of the market, helping to move the dow up here. and what underperform? well, everything had a great month. but defensive stocks clearly

lagged here. your telecom, utilities, health care, and consumer staples. big talk going forward, the dollar index. we had the dollar index at the lowest levels since september 2008. this is an intraday chart. and as the dollar weakened around 11:00 eastern time, predictably certain things happened. commodities and some commodity stocks rose throughout the morning. and of course you can see different names, but freeport-mcmoran typical commodity stock rose about 11:00 eastern time. started moving up. and of course came off the highs towards the close. but there you see the nice move to the up side. finally here's citigroup and here's the crowd in front of citigroup. citigroup completed a big exchange of its preferred shares for common stock a short while ago. today there is an add into the russell indexes here because those who are weighted to the russell have to increase the shares that are in there.. so they're going to be buying citi at the close. the volume will be heavier.. it's not clear there's going to be any price move but that's what they're trying to do here.

there will also be an additional change on wednesday when the s&p 500 also increases its share weighting for citigroup as well. maria, back to you. >> all right, bob, thanks very much. we'll check in on that citi story as it continues to develop for you. meanwhile, let's take a look at the other business headlines we're following for you tonight. the commerce department today reporting second quarter gdp fell at a better than expected annualized rate of 1%. a 1% contraction. that's much better than the downwardly revised 6.4% contraction during the first quarter. and it was largely due to a smaller decline in exports and rising government spending. the chicago purchasing managers index rose 3 1/2 points as well to a new reading of 43.4 in the month of july, now, while any reading below 50 still indicates contraction in midwest manufacturing activity, the result was still better than expected because of a big increase in new orders. and the labor department also out with news today, reporting the second quarter employment cost index was up by a better than expected .4%.

but over the past year employment costs have increased by just 1.8%. that is the slowest pace on record. worker benefits also rising by 1.8%, the lowest gain in 12 years.s. economists say as long as wage pressure remains inflation will not be a serious threat. earlier president obama commented on the gdp report today, saying he was guardedly optimistic. >> this morning the gdp revealed that the recession we faced when i took office was even deeper than anyone thought at the time. it told us how close we were to the edge. but the gdp also revealed that in the last few months the economy has done measurably better than we had thought. >> and joining me now to talk about the gdp report, steve liesman, cnbc's strn economics reporter. pretty interesting numbers here, steve. >> yeah, very interesting.g. and i think there's two parts to

think about, maria. the first part is the number was better than expected. but what was interesting was it's the things inside, the components inside the report that were worse than expected that make economists more optimistic about the third quarter. let me give you one example.e. we had a huge drawdown in inventories, 141 billion, and the expectation among economists is that we cannot repeat that kind of drawdown in inventories. so now because it was worse than expected in the second quarter the expectation is there will be restocking of shelves and with restocking of shelves, maria, will come some production. with production, i hate to say this, could come actual employment. >> you hate to say it, huh? >> well, i mean, it's a tough call. but there is some thinking in fact that maybe these numbers suggest if the third quarter numbers come in as many are now expecting, a little bit stronger, perhaps unemployment can be capped at around 10%. >> well, you know what, it's interesting because when you look at the breakdown, where would those jobs come from? do you think they would be related to the stimulus package and the spending coming out of

the government? for example, infrastructure, energy, health care. is that where you would target the job growth, steve? >> well, certainly washington will take credit for it. whether or not it's true is another story, maria. but the debate, for example, of how much of the auto production turnaround in the third quarter is going to come from the cash for clunkers? there's some thinking that maybe they were going it produce some cars anyway. but they're looking at a huge rampup in auto production at least relative to the second quarter. and you might expect there could be some additional employment that comes from that greater production of automobiles, for example. >> let me bring in jan handzus, chief u.s. economist at goldman sachs. jan is with us now. good to have you on the program. jan, let me get your thoughts on the gdp out today. what does it indicate for the quarter that it is representing as well as perhaps what we may see in the future? >> i'd say two things. one, the recession, and that wasn't just true for the first quarter but also for 2008, was even deeper than previously

estimated. and then from a forward-looking perspective i'd echo what steve just said about the inventory drawdown, which was even bigger than we'd expected, and that does mean that production at the moment is very low relative to the level of demand. and that's going to give you a boost over the next couple quarters. >> yeah. that's what actually klaus kleinfeld from alcoa told us earlier this week when he was on the show, that at some point companies are going to have to replenish, inventories are at such low levels at this point. >> yeah. and in fact, at the moment there they are still drawing down inventories at a very rapid pace and that's just not going to go on for much longer.. and i think what's going on in the auto sector is actually a pretty good example of that. production is enormously low, even relative to the very low level of demand. and that accounts for the increase in auto production plans in the third quarter. and i think you see that in a bunch of other sectors as well, but autos is the most obvious.

>> jan, let me get your thoughts on what steve was just saying. and steve, i want to bring you back here and get you to talk a little more about it. but steve made the point that look, eventually it will lead to job creation. jan, when do you expect job creation to come back into this economy? >> so we don't have job creation, actually, until sometime in 2010. but we do think that the pace of job loss that's still in the 400,000 to 500,000 range at the moment, that that's going to abate very substantially over the next few months. but the sort of growth we're e expecting is just not quite strong enough to get us into positive territory. >> maria, i just want to make the point that when good things start to happen good things can happen. part of government stimulus, and maybe jan is going to chuckle at this even if he doesn't agree, part of government stimulus is fooling some of the people some of the time and make them understand that the economy is not falling off the floor here. so if we have people panic earlier this year and fire

workers, somebody sees a number like 3% gdp in the third quarter and maybe that comes from the government but if that causes them either, a, not to fire or, b, god forbid even to hire, then we can get what you call a virtuous cycle going and you can start people -- and get the economy back to what it does for itself which is to grow with population growth and productivity growth. that's the aim here of this whole effort. >> yeah, i think that's probably right. i do think that the government stimulus is having a pretty large positive impact at the moment as well. we're estimating 2% to 3% in the second quarter, probably even a bit more than that in the third quarter. >> look, what's the risk of a downward revision here ahead? a lot of times we have these one-time events that change the number entirely. do you think there is a risk, jan, of the economy slipping back into further declines more

than a 1% contraction as opposed to going the other way into positive territory? in the coming quarter. >> i think in terms of revision i don't think there's a strong sense that downward revisions are more likely than upparred revisions at this point. if anything, when things are getting incrementally better or even incrementally less worse, the typical pattern is that upward revisions are actually more likely. and i do think in the near term that up side surprises on a lot of these indicators are still the most likely. the biggest risk i see is basically in 2010 after the inventory cycle has run its course and after the fiscal stimulus has had its biggest impact on gdp growth that you're going to find final demand is still pretty weak and the economy, you know, continues to basically underperform. so i worry a lot more about 2010 than i do about the near term. >> all right. we will leave it there.

gentlemen, great conversation. we so appreciate it. thank you. we'll see you soon.. jan hatsius and steve liesman, we appreciate it. now let's take a look at some of the other stories we're following on the "closing bell" ticker tonight. and they include the "washington post" swinging to a profit. a $12 million second quarter profit compared to a $3 million loss a year ago. that was largely due to growth in the company's education services business and the cable tv business. print advertising still down, ad sales falling 20%. but that was better than the 33% decline in ad sales in print in the first quarter. "washington post" shares up nearly 8%. auto nation, the nation's largest auto dealership chain, reported a 29% decline in second quarter earnings. the company made $37 million. and when you strip out charges, that actually beat wall street expectations. sales were down, though, falling by a larger than expected 29%. sales generated $2.6 billion. auto nation stock tonight up a fraction at $20.68 a share. and weyerhaeuser's second quarter loss widened.

the company lost $106 million in the quarter. that did beat wall street expectations nonetheless, but sales were down to 36% to a weaker than expected $1.4 billion in sales due to slumping demand for its building supplies. once again, similar situation throughout this earnings period. weyerhaeuser shares tonight down 1 2/3%. well, we went from very, very hot down here on wall street to now the sky just opened up. and it has begun to rain. we'll keep you posted on the weather here. meanwhile, wall street rages. the bonus rage resurfaces in washington. the house voting to put restrictions on how executives are being paid. but will cushing compensation just lead to aengs disof top talent on wall street?? we're going to check into that story. later on, the shanghai index up 87% in 2009. the second best performing market in the world. what is up in china and how can you be part of it? has china come too far too fast? we'll check on that story. stay with us. today there's a way to save more for retirement,

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the house voting today to restrict how wall street executives get paid. this coming on the heels of a report from the new york attorney general saying nine

banks that received government aid paid out nearly $33 billion in employee bonuses last year. is more oversight really needed on wall street's pay culture? joining me now, both sides of the argument weighing in. jones day's bob profusek along with the seiu's stephen lerner. gentlemen, good to have you on the program.m. >> good to be here, maria. >> stephen, let me kick this off with you. what are your thoughts on executive compensation what & what would you like to see done about it? >> well, i'm sure this won't be a surprise to you but i think attorney general cuomo hit it on the head. we have a system now in which wall street and big bankers win and taxpayers lose. what's really crazy here is we're almost a year from when lehman crashed. these guys are unregulated, unrepentant, and unreformed. they get the bonuses whether they make money or lose them. we need to do something about it, whether it's a combination of what we need to do on the hill, but more broadly than that we need to challenge i culture that says no matter how bad they strip the economy these guys get

billions in bonuses. zm wait a second. what about this argument, though, you that know, there's all this great talent and they need to get paid and if they don't get paid they're going to go across the street or into another country and work for foreign firms? what about that? >> well, what's fascinating when you read the report is it goes into the fact that people get rewarded whether or not they produce and that the amazing statistic is that the percent of revenue competennsation went to% when they lost tens of billions of dollars from 41%. and frankly what a lot of people are saying is that people who trade in exotic instruments and slice and dice they're not doing something that's benefiting most americans. it may make them rich. and me want to go somewhere else let them go. >> hey k bob, this really does sound like it's backwards, doesn't it? how are you going to defend this? >> well, the cuomo report is interesting. and i can understand the frustration, particularly for banks getting support.

but it doesn't go to the mirt. as usual it's headline grabbing, pointing fingers, bashing wall street. but it doesn't say whether the people that got million-dollar bonuses produced profit. i don't understand, i've never understood this argument, that boards of directors and top management reward for failure. if a trader makes $50 million on his book, he's going to make a $5 million bonus. he can make that across the street. he can go to a hedge fund p he can go to a foreign bank. the notion that everything's broken, so they're going to pay him whatever they want, they can't go -- they can't do anything else, is wrong. >> all right.. maybe we should let him go. maybe we should let him go. go to the hedge fund. go across the street. go to another country. the bottom line is these firms took money from the government. >> but let's say the trader that made the $50 million profit leaves the bank because we can't pay traders $5 million, that's just too much. and goes to goldman sachs, which is not subject to any of this stuff. goes to ubs, goes to a hedge

fund. is that in the best interests of taxpayers? the bank had huge losses last year, no question about it, mostly because of asset writedowns. if i generated $50 million in my unit, i'm either going to get paid or i'm going to leave. just like -- >> here's the thing -- >> let me finish. if i hit 38 home runs in pittsburgh and they can only pay me $2 million, i'm going to end up in boston, new york, or los angeles, where they'll pay me more.. >> but what the report actually goes into and this is i think what has people so outraged. only on wall street can you work for a company that lost money, can you work for a division that lost money, and then you claim, well, somebody within the division, they're not really responsible for the company's loss, they're not responsible for the division's loss, some part of the work they did created money, therefore people get bonuses. the whole thing is like a bizarro world. nowhere else in this country can your company lose hundreds of billions of dollars, get taxpayer money, and then you get rewarded. and i think the thing people have got to hear is people are tired of hearing -- it's almost

like a hostage crisis. if you don't give me all this money, i'm going to leave and make the company i crashed in the first place even worse. >> well, what about this?s? what about this? okay. let's say they have a contract in place.e. case in point, this trader andrew hall from spidro, which is a very, very successful part of citigroup. now, what is citi going to do, not honor the fact they have a contract, that they owe this guy $100 million?? >> let me tell you something that's happening in real life all over the country, and maybe it will lead to something for people to think about. he we represent -- >> wait what about -- should we be ripping up contracts? >> all over this country workers have been forced to rip up contracts. people who make $10 an hour have found their pay cut to $8 an hour because people claim there's no money -- >> what contracts did they rip up? >> collective bargaining agreements where workers were told they were going to be paid $10 an hour to take care of the elderly. there's a state budget crisis. they come back and say there's

no money, you now work for $8 an hour. it's even worse than that. let me just give you a difference in how we view this country. we have members -- let me finish. we have members who are not getting paid at all. they're furloughed.d. who go out every day and take care of the elderly and infirm. they don't say oh, i'm going to walk away and let somebody die because i'm not getting my bonus. they're making -- they've gone from $10 to $8 an hour, and it's bizarro land that people don't get that in the rest of the country. people are sick of this. >> but again, if the fact is that worker who got his or her pay cut by two bucks an hour has another opportunity, they're going to take it, and they should. this is america. >> but the problem is that because of the crash in the economy led by wall street there's less and less opportunities for most americans, and that's what they're furious about. >> but that's the question. we live in a market economy. we can't get away from it. and you can say all we want -- >> we live in a market economy where we spend trflz dollars bailing out the so-called market. >> from the taxpayer's point of view, let's take this energy trader at citibank that -- citicorp that maria mentioned.

are the taxpayers better off if that person walks across the street who's making that bank a tremendous amount of money -- it's lost money last year. no question about it. but he made a tremendous amount of money for the bank. do we want him to leave? do we want citibank's top underwriting investment bankers to leave? do we want their m&a people to leave? i don't think so.. >> you know what -- >> the -- >> but the taxpayers -- you know, it's going to be really the shareholders of citi that get impacted more than the taxpayers. >> that's right. >> it's the shareholders of citi. and that's the question you're asking. now, shareholders probably don't want that. but you know, shareholders didn't want the company to get itself into this mess in the first place. >> here's i think what is making people like me, if i seem a little frustrated, just crazy that's going on. is when times are good we're told we need extraordinary compensation for these guys to reward them for their great work. when times are bad we're told we

need extraordinary compensation to encourage them to do great work. it's always about a teeny group of people at the top making more and more money and most of -- >> i have to stop you there. i understand what you're saying. i understand what you're saying. but let's not forget that the people that you're talking about, it's not just one section of the economy. everybody did well when this market was going up and booming. okay? you had the masses invested in pensions, invested in mutual funds. so let's not make believe that they didn't benefit greatly during the boom. >> but that's actually -- maria, this is -- that's actually a really good point. but it's actually not true that there's been -- for most workers in this country over the last 20 years you've had income stagnation, decline. you have the greatest disparity in wealth since the great depression. >> let's not forget the savings part of it. the savings part. i'm talking about 401(k)s. i'm talking about pension funds and mutual funds. >> and what's happened now? >> they were invested. let's not forget, they were invested. >> and now workers are losing their pension plan. they're not clawing back and getting the money wall street got. workers are losing pension plans.

workers have lost trillions of dollars in wealth. and here's the thing that i think everybody has to really ponder. what does it mean if we live in an economy where wall street recovers, unemployment keeps going up, and the average worker does worse? we can create a two-tier economy where the guys at the top do great and the rest of us, it's tough for us. >> well -- >> the average worker -- >> you're talking -- >> the average worker isn't invested in wall street right now. that's one of the reasons this is so poignant an issue these days, is that it's not like it was 25 years ago when the only people who cared about stocks were big rich guys. everybody's in the market today. everybody has 401(k)s. >> that's the point i was trying to make. but the bottom line is you have to admit some of this does sound bizarro when one guy's walking away with hundreds of millions of dollars. i agree, though, it's not -- don't make this class warfare because that's not what it is. gentlemen, you've got to come back. >> anytime you want to do it. >> i'm passionate about it. you're passionate about it. let's do it again. >> okay. and let's get away from bizarroland back to the real

world. >> have a good weekend, gentlemen. up next on "the closing bell," congress is racing to approve funding for the cash for clunkers car program. details when we come back. this is some story. stay with us.

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welcome back. the cash for clunkers car purchase program has been such a huge success that the house of representatives is authorizing more money before it runs out of funds. cnbc's diana olick now in washington with the details. diana? >> well, maria, it took just this two-page bill and about an hour on the floor and suddenly the house had funneled $2 billion more into the cash for clunkers program. a ranking republican called it martial law tactics. but -- >> i'm very pleased with the progress that's been made in the house today on the cash for clunkers program. i am guardedly optimistic about the direction that our economy is going. but we've got a lot more work to do. >> the clunkers program, which officially kicked off monday, has spent $150 million and has another 800 to 850 million in commitments pending. commitments pending. at $4,500 per car, that's about 250,000 cars clunked and the same sold. 250,000 cars clunked and the

>> let me tell you what we've seen since the official kickoff 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 traffic is higher than our normal traffic. >> though an additional $2 billion funneled from a a department of energy loan guarantee program could add 500,000 new car sales.in opponents argued the government shouldn't play favorites with business. >> the taxpayers are hurting. $80 billion to chrysler and gm. and the auto industry, the auto industry does not have a monopoly on hard times in this economy. >> well, of course, the senate still has to pass the bill. so while the house goes on recess, the senate will take it out probably next week. maria? >> what a story, diana. thanks so much.. diana olick is in d.c. tonight. gdp coming in better than expected during the second quarter. we're going to get into the economic landscape next.. but president obama's poll

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welcome back. president obama said he is guardedly optimistic about the economy. after the second quarter growth numbers came in better than expected, a contraction of 1%. now, while signs of stability are on the horizon, the president's approval ratings are still on the decline.e. are economy and health care too much to handle at once? why the discrepancy here? joining me now with more, cnbc contributor tony fratto, former white house deputy press secretary, and greg valliere, chief policy strategist with soleil securities. gentlemen, good to see you as always.. tony, what do you think? what's behind this slipping in the president's poll numbers? >> i look at it two ways. really two factors, maria. you know, first of all, while the economy might be stabilizing, you know, we went down so fast and so hard the economy may be stabilizing, but

conditions for most americans rg, you know, still kind of rough. we see unemployment still high. you still have lots of americans underwater in their mortgages, their savings, a lot of their savings have evaporated. so it just doesn't feel all that well to a lot of americans right now. and you see that reflected in some of the consumer confidence numbers. the second thing is the president putting out lots of policy initiatives that sounded, you know, maybe pretty good to a lot of americans when it was just rhetoric during the campaign, but now you start looking at the actual policies like the cap and trade bill, like the health care bill which is now actually unpopular. and the big deficit out there.e. and you see that erode iing the president's personal popularity. >> it's interesting to see health care really represent the mood of the country. and health care has pushed people over the edge a bit. >> yeah. it really has. i mean, there were a lot of

conflicting messages in the health care debate, you know, that we need to spend more than a trillion dollars in order to cut spending, and you know, we don't want the government running our health care but we're going to set up a government-run health insurance program. so these things are confusing for americans. >> and greg, you say look, once the economy rebounds and job creation is back on the front burner you think the polls come back for the president? >> i have a different take. yes. i think that his numbers have pretty much bottomed. and i was saying around memorial day he might get to 50 on his job approval rating, and he may. but i think there are two big stories that are going to turn things around. number one, this tremendous rally in the stock market. don't forget, about half of all americans own stocks and we all know something's going on. there's a recovery that might not be wimpy, that might actually be a decent recovery. number two, i think today was really, really important. here's a government spending program, cash for clunkers, that worked. and there's been all this radio

talk show stuff that government spending is horrible. well, you know, some of these programs actually do some good.. so i think obama's numbers have just about bottomed. >> hmm. interesting. what do you think about that, tony? >> i don't know, maria. with all due respect to my good friend, greg, there's a lot of uncertainty about the economy going forward. i mean, i'm not as bullish on growth. we've talked about this on the air before. i think we're going to see maybe some choppy near 0, near 1% growth for a while.. >> oh, no. much stronger.. >> you may get it for a quarter, greg, but still, think about long term. it's just hard to see where growth is going to come for this economy. >> greg, where's the stimulus working? where is the stimulus working in your view, greg? >> that's the tremendous part of the story. it hasn't really started to work yet. so the critics are right to that extent. but -- >> why not? how come china's stimulus package was so successful?

china is back to 9% growth. and they had a smaller stimulus than we did. how come our stimulus can't get out of its own way and their stimulus has been so successful? >> their stimulus as a percentage of gdp has been much bigger. but the stimulus is backloaded deliberately. in addition to inventories having to be rebuilt, a much better auto story on and on and on, even housing hitting bottom, we get a stimulus coming in late this year and next year.r. i think gdp is going to be in the 2% to 3% range by the end of the year. >> the president said today -- >> that would be nice. go ahead, tony. >> the president said today it was the stimulus. the president said that coming out of the second quarter it was the stimulus that contributed to the lower deterioration in the economy, in gdp. but look, you ask for where the economy, where the stimulus is working, and you're always going to get some stimulus -- the government puts cash into the economy, you're going to get some stimulus. it's hard to see where you're

getting even a 1 for 1 impact from the stimulus right now w because remember, the federal government doesn't actually spend money with the exception of defense spending. everything else that passes that money through the state, it takes a long time. a lot of the states are harding a lot of that money, and it just takes time. >> this is a story to watch. second half of the year people are betting on that stimulus to really have an impact. we'll be here following the story and we'll be watching and talking about it then. gentlemen, thanks. we'll see you soon. meanwhile, china has had the second best performing market this year, returning a whopping 87% in 2009 on the shanghai stock market.. up next, we're talking about whether that is a bubble about to burst or if there is still reason to be bullish, and how can you get in on that 87% move. back in a moment. i'm jim goldman in the silicon valley. this is "tech check."

oh, it's good to be george lucas. his high-tech filmmaking empire behind this summer's top blockbusters, including "transformers," "wolverine," "harry potter." so far north american box office this summer has topped $2.3 billion, up over 6% from the same period a year ago. hollywood thanks george lucas. mergers and acquisitions gaining steam big-time, thanks to big blue. a billion-dollar deal earlier this week followed by ibm follows big moves by amazon, intel, oracle, and cisco. some experts say netflix could be next. and get a load of the newest g-phone from t-mobile and google.. my touch 3g is a notable improvement from the first g1, slimmer, slicker and a better touch-screen but not nearly the number of apps that the apple iphone has. a new technology but still a long way from challenging at&t's dominance. that's your tech check. i'm jim goldman in the silicon ally need it these days. how come? well if you're hurt and can't work it pays you cash...

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welcome back. the summer rally is under way on wall street. that's for sure. but over in shanghai in china equities have been on an amazing run since november, when the government detailed its stimulus package. the market year to date, the shanghai composite, is up 87%.

even though we did see weakness overnight. has this rally run too far too fast in joining me to talk about that is jean allrich, chairwoman of china equities at jpmorgan. and senior economist at standard charter. great to have you both with us. it's so nice to have you. so you're both really -- you're on the inside, you're on the ground in china. and you have a great sense of what's going on. jean, is this a bubble?? >> well, potentially, you were seeing a tremendous surge in equity prices as well as property market prices in the last six months. in some ways we're seeing actually prices surge beyond the fundamentals. so we're seeing piling into the equity markets. and if you look at the property markets, transaction volumes and prices have all surged to all-time highs. >> let me ask you this, because the shanghai we know was down about 5% on tuesday amid this concern that the central bank could curb explosive growth in

liquidity. are we going to see a repeat of the precipitous decline we saw in chinese equities last year when the bubble burst, do you think, stephen? >> no, i don't think so. at the moment we've got the central bank the pboc worried about inflation, but many other parts of the government are still worried about the economy, employment, and they're telling the central bank to hold off. we've got this battle and i think we're going to last at least another three months with all that's going on in the economy and maybe in the fourth quarter we see the tightening just beginning. very quietly, very moderately. >> why do you think this market has been as strong as it has been, jing? >> we have a tremendous surge in bank lending so far this year. now loans basically tripled.d. you look at the new loans extended in the first six months of the year, that's 1.1 trillion u.s. dollars. that's half of china's first half gdp. so confidence has also returned to the market. we're seeing consumer spending, investments all surging. so it's natural for the country's stock market to

reflect the resurgence in confidence. >> david, do you agree with that? >> yeah, more or less. we've seen a tremendous acceleration of growth in the second quarter. the big question for the equity markets is when is this liquidity going to be turned off and secondly can you continue the acceleration into next year? we think 8 persi% to 9% this ye to 9% next year. real estate coming back, exports. but there's no second wave of stimulus the government can give the economy. so limited acceleration from this point. >> so we might need some catch-up to catch v cap catch up with the market expectations in terms of real fundamental evidence. >> very possibly. and there's going to be choppy waters when the central bank does get the power to come in and start changing the reserve guidance. >> jing, let me ask you a broader question because everyone is waiting for china to transition itself from an exp t export-led growth story to a consumer story where the chinese customer is going to actually be out there spending money.

how long does that process take in do you think they've begun the transition?n? >> you know, they've already begun the transition. if you look at the year to date car sales-n june alone car sales were up 48%. china this year will sell 12 million cars. we're also seeing a very strong interest in buying home appliances. you know, china has its program called old for new. people are encouraged to trade in their old appliances for new one. so again, we're seeing a surge in home appliance sales. so that's just two simple examples.. if you look at mainland china, especially in central china, consumer spending has been very resilient. >> what are some of the companies that you think will benefit from that? are the chinese loyal to certain brands? as far as consumerism, what do you think benefits? if there are american companies. >> well, you know, we're seeing the chinese brands actually gaining a lot of traction in the second-tier, third-tier cities.

donxien doing very pl. these names may be unknown to american audience buzz they're doing very well in china. >> this is such an important topic. the chinese story is something our viewers really want to know more about, and certainly the companies we talk about so much in america want to fish where the fishes are, if you will, which is what someone recently mentioned to me. thank you very much for joining me. we'll be there in november, actually. so i hope we see you on the ground. stephen green, jing ulrich, good to see you again. up next we'll tell you about a new potential blockbuster drug on the market in the i fast-growing diabetes market. d#0 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 'course a trade doesn't always work out my way. tdd#: 1-800-345-2550 but when it does... tdd#: 1-800-345-2550 ...man... do i love that feeling.

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call 1-800-552-7724 or go to our website. i'll see you at 3:00! announcer: captioned telephone - enjoy the phone again! welcome back. we are here, in front of the new york stock exchange talking about calloway golf. the stock is one of the names going the distance, that's for sure, this summer. company shares are up 27% this month despite an 82% drop in the profit last quarter. in just a moment, we're going to be talking about calloway golf, and we're going to show you some

interesting segments, so stay with us on that. meanwhile, we want to talk about the headlines we're following at this hour. let's take a look. the names in the news here. the fda approves a potential blockbuster diabetes drug from bristol-myers squibb and astro zeneca. diabetes drugs have been become more than a $5 billion business as this disease becomes more prevalent, unfortunately. >> alpha natural resource shareholders approving the takeover of rival foundation cole. the all-stock deal is valued at $1.4 billion. the federal appeals court ordering a smaller sentence to joseph nacchio who was sentenced for six years in prison for insider trading.g. the appellate judge said the original trial judge overstated hoch nacchio made from the

illegal trades. a lower court will determine what his sentence will be reduced to. let's get over to the nasdaq market site and get a preview of what's coming up on "mad money." melissa lee standing by. it was a red hot july, but how do you trade august? our traders will give your best plays for this coming month. also we'll have two first on cnbc interviews. the ceo of mcafee on his outlook. the traders and i will be live with you at the top of the hour. back to you. >> thank you very much. we're taking a look at this market rally. the summer rally getting back on track for a second straight day. jean walsh joins us now with the highlights of the rally.

welcome back. as promised calloway golf stock one of the names really going the distance this summer. the stock has done very well. it is up 27% this month, despite an 82% decline in profits last quarter. let's talk about the business of golf, right now. as well as the state of the consumer. i'm joined by ceo george fellows, ceo of calloway golf, along with duncan meteor, good

to see you. thanks for joining us. before we get into some action here, which i'm really looking forward to, george, can you tell us about the business? >> the economy climate affected the game rather substantially, but we're beginning to see some signs perhaps it's turning around and we anticipate by 2010 we should return a little bit more to normal. >> and as far as the business of golf in particular, what's drives that? >> well, golfers are a very unique animal. they love the sport. it's a passion, so regardless of what other conditions might exist, people find the time to get out there. as a matter of fact, through june, despite the economic clima climate, the number of rounds played is up 26%, which is really surprising given this environment. >> interesting. duncan, i know you reported earnings this week. you are seeing the market very strong. can you characterize what you're seeing in terms of business the last three months? >> through june for us was actually quite good.