2010. sales trends are not really improving. top line not there as well. that hit all the restaurants as well here. rebecca jarvis is going to give you all the details on the july retail store numbers. but here's some conclusions. still cost cutting, not much revenue growth. there is some incremental earnings improvement. several companies did raise their guidance. overall that's good news, but demand is poor. inventory numbers are leaner. if we get any kind of sales pop, boy, are we going to get an inventory replenishment. let's talk about aig. again, second day, big volume here, two theories about what's been going on. number one, earning coming out. maybe a really good quarter. maybe they'll get some news on their investments, maybe announce a debt for equity swap. i heard half a dozen theories today. more importantly stock lending desks appear to be making it more difficult to borrow. announcement the government was banning naked short selling may have made many lending desks more conservative. take a look at the big financial names. huge volume in bank of america and citigroup. other citi did over a billion

shares several days in a row now. two-month high for citigroup. bank of america, that's the high for the year. 300 million shares a day for five days in a row now. as we know, michelle, yesterday radian, some of the other mortgage companies came out and made some positive comments. back to you. >> thank you, bob. we have quarterly results from cbs. cnbc's julia boorstin has the details. julia? >> hi, michelle. yes, we're getting earnings per share on an adjusted basis of 8 cents on revenue of $3.01 billion. that's down from $3.39 billion in the same quarter last year. and also lower than analyst expectations. if you break it down division by division, you see that cbs has been significantly affected by the advertising downturn. the vast majority of cbs's revenues do come from advertising. and just to give a comparison, that 8 cents this year compares to 49 cents in earnings per share last year. television, which is the vast majority of cbs's revenues, coming in at $1.947 billion.

that is the vast majority in terms of revenue. that's down from 2.1 billion in the year ago period. we saw radio revenues down from last year. outdoor advertising down from last year. and interactive is the only division that is showing growth. michelle, back over to you. >> interactive, i'll assume that's going to be like internet and things like that, right? >> absolutely. and also we have the acquisition of cnet, which is one area they're really trying to bolster revenues there. the one growth area in terms of online advertising, the only growth area in advertising. >> but still so teeny. thank you, julia. >> very teeny. very -- >> okay. retailers, as bob pisani was talking about, sluggish july same-store sales. some, though-r a little more optimistic about their outlook. cnbc's rebecca jarvis did the deep down when it came to all the details related to retail. >> deep down. i like that. it wasn't a pretty sales line, michelle. a group, retailers averaged more than a 5% decrease in their july sales. the majority, 59%, missed

expectations. but a handful of retailers offered some very optimistic earnings forecasts. macy's, for example, they reported worse than expected sales declines in the month of july, but they're forecasting earnings at almost three times greater than what analysts were expecting originally. aeropostale, jcpenney, the gap, they followed suit. they upped their estimates as well. and as you heard bob pisani break it down, the thesis here is this. the retailers are going to be able to beat in the coming quarters because of cost cutting, because of margin improvement. that's much more so than because of their outright sales growth. inventories at retailers, they're running about 10% to 20% lower than last year. consumers are still strapped for cash. and saving what they have with unemployment running at multidecade highs. now, it's one of the reasons some of the best same-store sales are coming out of the off-price retailers. t.j. maxx, ross stores, companies we highlighted yesterday, they beat on their july expectations, both came out with same-store sales up 4%. meantime the biggest sale sprieszs came out of a handful

of retailers that managed to outperform their very low expectations. we're talking about the limited, nordstrom, and zumiez. they delivered sales declines but managed to beat the street with those. and & kohl's, they came out about half a percent positive for july when wall street was looking for a 3% drop. with back to school in full swing, high unemployment, a desire to save continuing, those are big unknowns for the retailers going forward, michelle. so there's a lot of speculation about all right, if we don't see those employment numbers coming back this will be something important to follow tomorrow. if we don't see those employment numbers coming back, is the consumer really going to come back? and that's a big question for not only the retailers themselves but the economy as a whole. >> of course. because it's the vast majority of the u.s. economy. thank you, rebecca. >> thanks. >> take a look at the dow jones industrial average. up more than 40% since its march lows. that's a nice chart, isn't it? earlier today on "the call" goldman sachs investment person abby joseph cohen said the bottom we saw a few months ago was the start of the next bull market. >> we do think that the new bull

market has begun. it may prove that it began in march of this year. clearly, many people were looking for better signs on the economy, and we're now getting them. >> how much further does this market have to go? do these folks agree with abby joseph cohen with larry kudlow, who thinks we've also started a new bull market? here to break down today's trading action and give us their take, eric maranaki and john derek, director of research with u.s. global investors. good to see you. >> good to see you, michelle. >> eric, do you agree, is this the start of a new bull market? >> i think so. we've had two years of very tough performance and the decks were cleared in march and companies are reporting good earnings. and if you look at earnings revisions and the level of outperformance for the last three weeks now that earnings season's largely done, we've had two times what the average has been in terms of up side delivery on the report card

since 1996. >> okay. so you see the earnings picture there at least in the past so far pretty good. john, what do you think in terms of whether or not we can continue on this bull market? do you agree with eric and what are the reasons? >> i think i agree. i think this is very similar to 2003, when we saw earnings increase i think ended the year around $55 per share for the s&p. s&p ended around 1,100. you think this is more or less trough earnings this year. so that's about 20 times earnings. but that's probably not too bad. the market's probably going to run ahead of earnings -- >> john, what's going to drive that earnings growth higher? >> i think we're definitely in the stage -- we're in the economic recovery stage. the recession is more or less behind us. we're definitely getting more and more indicators all the time that's indicating the recession is over or indicators that are telling us in the past that this is when recessions have ended. for instance, you know, pmi numbers, globally, unemployment claims, et cetera. so i think, you know, the idea

is that the economy is going to recover and maybe recover quite a bit stronger than many people expect. >> so eric, what do you do here based on what you believe about the market? are there certain circuits that have not gone along with the overall rally we've seen? are there still areas that are cheap? >> well, that's one of the positives, the fact that 8 out of 10 sectors have done as well as they have. so it's been pretty broad. the performance, that is. so you can find opportunities essentially in any sector, any industry. our preference, however, is if you do anticipate or think there is a possibility of a little bit of a pullback, the best way to be a little defensive there is stick with high-quality, high-growth stocks with strong balance sheets. >> apple, monsanto, gilead, those are some of the names you've told us that you like and that you own. >> yes. >> and john, what do you do right here based on what you believe about what's going to happen with the markets? what particular sectors would people be best invested in? >> sure. i think you're definitely in the

cyclical upswing cycle of the phase. so i think you want to be exposed to cyclical areas of the economy. such as energy, materials, technology. those kind of things that are classical cyclical areas that are going to benefit from just the increase in economic activity. you're in the right part of the cycle. for those kind of investments. >> and does that mean also stay away from the classic defensive or non-cyclical areas when it comes to like consumer staples, health care, utilities, things like that? >> exactly. i think while generally the market's going to probably appreciate over the next, you know, 12 to 18 months or so i think cyclical areas are going to outperform, and so while these other areas may do okay i think the other areas will outperform. >> eric, what's the biggest risks to your outlook? >> oh, the unemployment figure gets markedly worse from what people expect. i think that's the lynchpin. if you get unemployment under control i think people feel a lot better, consumer confidence

will go up, business investment will increase parallel with that, and it will be reflected in earnings growth. >> guys, good discussion. thank you. eric and john, see you later. >> thank you. >> here's a look at today's other business headlines. the labor department reporting that initial jobless claims fell by a larger than expected 38,000 last week to a seasonally adjusted 550,000. but the number of americans continuing to collect unemployment claims jumped by 69,000 to 6.3 million. the government will release the highly anticipated july employment report tomorrow. the "wall street journal" reports former aig chairman and ceo hank greenberg is paying $15 million to settle s.e.c. allegations of improper accounting issues. former aig cfo howard smith will reportedly pay $1.5 million to settle the charges against him. and ford says it is on track to break even or become profitable on a pretax basis by 2011. the automaker says it will be able to do that in part because it will achieve 14 to 15 billion dollars in structural cost reductions by the end of the

year. meanwhile, the senate voting to confirm judge sonia sotomayor to the supreme court. in a 68-31 vote largely along party lines, sotomayor becomes the third woman and just the first hispanic to serve on the high court. democrats have praised her as a moderate, while republicans accuse her of bringing a liberal agenda to the court. the government reportedly paying wall street firms around a billion dollars in fees to break up aig. is that a good deal for your tax dollars? does the move signal a return to business as usual on wall street? we'll have this-some answers in just a moment. and then a little bit later on, betting on a recovery. find out if restaurant stocks are worth sinking your teeth into right now as a way of playing an economic rebound. we're going to break down some names just a little bit later here on "the closing bell." like sonoma valley... no, my friend, these grapes are very... sierra foothills... - foothills, ha. - idaho. with fields of the finest hops known to man. harvested at just the right moment, to produce the perfect balance of flavor...

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here are some of the other stories that we're following on the "closing bell" ticker right now. citi investment research upgrading american express to buy from hold, hiking its price target to $36 from $28, citing improving delinquency trends, fewer credit card loss write-offs, and the company's focus on higher-quality borrowers. american express shares today higher by a little more than 3%. it was a broad rally for a lot of the financials. bernstein research upgrading

mgm mirage to market perform from underperform raising its price target on the stock to $9 from 7 because of lower debt levels, stabilizing occupancy rates, and improving margins. mgm mirage today lower by a third of a percent. cowan & company downgrading biotech celgene to underperform from neutral because its cancer drug may never reach wall street's high sales xmgs expectations. the analyst will also says celgene faces greater risk from hacking challenges than some of its rivals. shares of the company lower by 3%, 1.77 to 54.73. in trying to recoup billions of dollars used to bail out aig, the government is orchestrating the break-up of the insurer. today's "wall street journal" estimates that the companies involved could rake in about $1 billion in fees, and some of them have taken other taxpayer money as well. should those firms have offered a discount or is it business as usual and a sign of health in the financial system? we get the thoughts of tony fratto, he's former white house deputy press secretary and a

cnbc contributor, and paulie qwali, president of qwali & associates, a washington, d.c.-based strategic consulting firm, also a former chairman of democratic national committee's business council. guys, good to see you. paul, let me start with you. what do you think of some of these big banks that got taxpayer money also getting funds to help break up aig? >> a sound banking sector is both a necessity and an indicator of a recovering economy. so nobody wants a weak banking sector. >> but i hear a but. >> i think the question here is if these banks are in fact going to get the taxpayer a good rate of return on this sale, then if these fees are in the normal course of business then i think that's fair. but i think there are going to be a lot of people in washington -- >> jim, what do you think? yes or no? >> again, i think -- based on what i saw in the "wall street

journal" today it looks like the fees are fairly high by again -- >> you told our producer that this was the biggest atm fee and that you are schizophrenic on this. >> i think everybody has to be schizophrenic a bit on this. we still have financial institutions that are taking taxpayer money, have not paid back the taxpayer money, and at the same time we're depending upon them to provide liquidity to consumers and businesses around the country. it is a fine line that we have to walk. >> tony, what do you think? >> these guys that are working on these deals, they're the best and brightest in the world. they're incredibly talented and these are very, very complex deals. and if you want to go out and pay for less talent you're going to get less talent and that's going to be an ultimate cost to the taxpayer. so you want these guys doing -- if you're going to rule out anybody who got government money or government assistance, who's left? and especially you want the best and the brightest. >> he says a billion bucks sounds high. >> the government's in a position to negotiate with these guys. they negotiate the contracts.

if it's a morgan stanley that they're talking to and they don't like the price morgan stanley's giving them, they can go to one of the other banks. that's the way it works and the government can do that. but you need the best people on these deals. these are incredibly complex resolutions. aig operations all over the world, you've got to do it right. >> paul, still, it's got to sting when it comes to the obama administration and treasury seeing those headlines, right? when it comes to public perception there's an issue, isn't there? >> there is no question that the perceptologists are going to have a field day. it's such an easy issue to demagogue. and if that's the business you're in this is an easy one to do it on. there is a difference between due diligence and demagoguery. and i think everyone in washington involved in this, people at the fed, people at the treasury, people in the white house and on capitol hill are going to do their due diligence and i expect questions to be raised. but tony got it right. if you want the best talent disposing of those assets for the highest rate of return for

the taxpayer, then you want to pay a fair market price. the question is is this a fair market price? >> dictionary.com says there is no such word as perceptologist. but we'll see if william safire can get on board with you and get that into the lexicon. tony, what's the ultimate word here when it comes down to this and the fact that on the one hand you really want these banks to succeed because they have taxpayer money and at the same time you don't want to help them out too much because they needed taxpayer money in the first place? >> that's exactly right. washington really is schizophrenic on this because you know the banks are going to beat up. we saw that with goldman today, goldman getting beat up from regular critics because they went out and made money. and you know, we want these banks to be strong and healthy. they're still the best in the world at taking capital and delivering it in the most efficient way to its best uses and that returns value for our economy. we need to back away from that vengeance that we had a few months ago and keep us focused on building a strong financial system. >> but paul, we often see from

this white house vengeance, speculators. even the most recent speech it seems constantly president obama likes to decry, deride, be derisive about wall street. >> i have to part company with you there, michelle. i think the president's rhetoric and actions and his entire economic team have been extraordinarily responsible throughout this process since january 20th. in fact, when the president got a bit out front early on, when some of the bonuses were discussed a few months ago, i believe it was a wednesday of that week, it was by thursday the next day he walked back from these comments and didn't allow the democratic caucus and others to demagogue that issue. i watch not just what they say but i watch what they do and i think this white house is performing admirably in this situation. >> thanks. good discussion, guys. good to see you, paul. thanks, tony. >> good to see you, michelle. >> all right. health care reform. another polarizing topic.

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president obama's health care reform proposal is facing not only tough opposition from republicans but also from within his own party.

cnbc chief washington correspondent john harwood spoke to two of the democrats' most powerful senators about if and when health care reform legislation can be finalized. john, is this going to happen? >> well, there's a good chance it's going to happen, michelle, but there are a lot of hurdles to overcome, divisions to overcome for president obama. as you said, not just between republicans and democrats but within the democratic party. take the issue of taxes. split between the left and the conservative democrats, senator chuck schumer of new york said he's open to those taxes on million-dollar incomes that house leaders have proposed. kent conrad of north dakota not so much. take a listen. >> i wouldn't teak anything off the table. i think it's really important to get a health care bill done. and so there are better ways and worse ways. but to draw a line in the sand right now on anything is unproductive. if you believe in -- >> if we're going to bend a cost curve, the things we need to do need to be in the health care sector. the cbo has said to us yes, you

could raise the revenue in that way. it does absolutely nothing to bend the cost curve. >> now, another potential split is between the white house itself and congress. the white house has cut a deal with drugmakers to prevent the government from negotiating lower prices in medicare. both conrad and schumer told me we didn't cut that deal. here's what they said. >> do you consider the congress bound by the deal between the white house and the drug industry? >> i do not. i have supported and always believe that it's in the interest of the united states to be able to negotiate lower prices with all providers. >> well, henry waxman has already said he's not bound by that deal. i would tell you that the agreement causes me a little heartburn, and i want to find out more about it. i think the drug companies have gotten away easy, too easy. >> and michelle, one of the key questions is how long are negotiations between republicans and democrats on a bipartisan bill allowed to go on. the so-called gang of six republicans and democrats went

down to see president obama at the white house today, but chuck schumer told me if they don't have a deal by mid-september we may need to do this with democrats alone, michelle. >> wow. all right. good stuff, john. thank you. second half scenarios. can we really see a sustained economic recovery this year, or should we expect something else down the road? what investors need to know when "the closing bell" returns. >> here's a look at some of today's winners and losers. announcer: some people buy a car based on the deal they get. others buy the car of their dreams. during the lexus golden opportunity sales event, you can do both. it's an opportunity today. it's a lexus forever. special lease offers now available on the 2009 is 250.

call or click today. time now for "going global europe." >> i'm guy johnson. here are the stories we're watching in europe tomorrow. we are waiting for some big news from the financial sector. a familiar theme, yes. but ubs apparently set to announce final details of an out of court settlement and its long-running u.s. tax dispute. we're going to bring you the latest live from zurich. the royal bank of scotland posts interim results tomorrow. will we see yet more writedowns from the uk's taxpayer-funded bank? the problems certainly have been

big. will they get bigger, and can we expect a second quarter recovery from allianz? find out when we break the numbers. 7:30 a.m. tune in to cnbc world to catch all the action overseas at cnbc's global headquarters. i'm guy johnson, going global with your money. so tomorrow we get the most important data point of the month. it is the monthly employment report. we all wait for it. it's like our super bowl every month. and it's really important right now, considering the state of the economy. we get three great guests today. charles biderman is ceo of trimtabs investment research. got a lot of interesting ideas about what's going to happen with employment over the next couple months. we're also joined by john herrmann president of herrmann forecasting. and ron insana, portfolio manager at thestreet.com money movers. john, let me start with you. this employment data tomorrow, what's it going to look like and what's it going to mean about the economy? >> here's the deal. right now what we're thinking about is we're at the low 3

handle decline. we have been thinking there was a chance we might be able to hit a 2 handle decline but we think that's more or less in line for the next -- one of the next one or two months. so it's very nearby. and then within two to three months we should be at declines of about 100,000 and we think we're actually going to see positive growth in payrolls before the year end. >> positive growth in payrolls before the end of the year. ron insana, do you agree with that? >> yeah, i don't disagree at all. i'm pretty bullish on the economy. i'm concerned about the stock market having run too far too fast relative to where we are in this economic cycle. having said that late in the day both deutsche bank and goldman sachs changed their estimates for tomorrow morning. deutsche's at 150,000 jobs lost. goldman at 250, which is below consensus now. so it's altogether possible we can get some better than expected numbers. what that means about the trajectory of the recovery is still uncertain but it's important we're heading in the right direction. >> i think it's important to keep in mind in terms of this trajectory and stuff, i know it's an issue of debate, are we m, are we w, are we any --

>> the shape of the recovery, right. >> because right now we are very clearly in the v portion of the recovery. >> the bottom leg has gone down. >> we are up. my models are showing 3.9% third quarter. >> wow. >> and i'm a conservative forecaster and i've got it tracking easily at 4 1/2%. >> charles biderman, do you agree with this? and i understand there's a big major revision coming to the employment numbers at some point. >> i actually feel like the one-eyed guy in the land of the blind. i don't know what the two guests previously think will guarantee this recovery here, growth and whatever. the b.e.a. revised, dramatically revised downward income growth to -- by 3% each of the first five months of this year. hidden in there on their website they never announced it to anybody but they made a major dramatic revision, which says that tomorrow -- the bls gave them the -- >> bureau of labor and statistics. yeah. >> bureau of labor and

statistics tomorrow will be having to account for a 3% additional wage loss for the first half of this year. there's only two reasons people pay less -- make less. one is the wages are cut. wage deflation making less money. and the other is they lose their jobs. so it could be anywhere from half a million to a million additional jobs lost earlier this year. and the bad news is that the rate of decline of year over year withholding is increasing. not flattening. not decreasing, not getting better. so the real numbers based upon income tax collections, corroborated by actions of corporate insiders who are decidedly heavy sellers, not interested in buying -- >> the first point is on an income tax, income tax data always lags the cycle. it lags coming into the cycle and it's lagging the bottom. >> income is concurrent.

realtime income is concurrent with what's going on. >> at best it's concurrent. and michelle, we have to remember that there's a process that takes place in each economic recovery and the jobs data in the last two recessions most dramatically lagged the data that we have in other parts of the economic recovery. >> not true. not true based on the realtime data that i've been tracking month after month for 15 years. >> i don't track any data at all. >> i can give it to you if you want anytime. >> i don't want to get into a match of any kind. all i'ming a is the cycle, michelle, typically is led by the financial markets first, the real economy, and then some other important indicators like improving labor statistics. >> growth rate and withholding in june 2002 before the market made its bottom, a big spike -- withholding turned down dramatically in august. march of '01. well before the official start of the recession. withholding predicted the

economy -- >> my memory -- zblif the data. >> i have the data too. and it was from my memory of the early part of 2001, it was that it was still positive into july. still positive year on year. >> withholding has -- it was positive. it had plunged from high single digits -- >> what do you do with your money based on your perception of what's going on with the economy? >> i would buy tips. the u.s. -- >> inflation protected treasuries. >> charles, why on earth would you buy tips if you think we're still seeing accelerating job losses? why wouldn't you buy nominal treasury bonds? because if the economy continues to weaken and tax revenues continue to go down, aside from the deficit issues, which are in my mind somewhat separate, a weaker economy is going to push inflation expectations down and bond yields will go right with them. >> ron, the -- treasury is printing -- the preserve is monetizing a trillion of the trillion six debt. they're adding a trillion dollars to the money supply by fiat, debasing the currency.

>> then keep doing it until there's some competition for capital in the private sector. >> john? >> yeah, people say i'm not willing to take the base -- >> charles, you're getting into some sort of esoteric area of the labor market and the data. so if you're going to battle on though terms, we're going to have to battle but that's a little far afield from what we're really coming here to talk. >> okay. >> but here's the deal. the normal bls monthly survey covers around 72 million workers. they're capturing a big chunk of it. the qcew the census survey captures 98% of workers and so far the census survey has been showing that the information in the monthly labor report has not been missing by very much. >> okay. so charles -- >> as of yesterday's revision -- >> i want -- charles -- enough. i want to get something actionable. he says tips. ron, would you buy this market or no -- >> i went to cash on monday. can i just add one thing? charles and john trudell in the "new york post" have been talking together about this type of fudge factor or whatever

miscalculation exists in the employment book for years, and it's been wrong. i just want that to be out there. >> done with that. >> we love stocks here. we still love stocks. we think stocks are going over 10,000 before thanksgiving. and we think we're headed toward 12,000 next year. >> as i said, i went to cash because the market's gotten very far ahead of itself. i'm worried about some seasonal and cyclical factors, i'm worried about some geopolitical issues, and the stocks i favored the most, financials and home build querz-v run so far so fast we want money off the table. >> we see productivity over 5 1/2% for this quarter. for the second quarter he think we're going to run over 4% for the next four quarters, each quarter. earnings surprises are to the up side. don't want to get out of the stock market now. >> deep divisions across the three of you. that's what makes the market. we'll see who's right. thanks, guys. charles, john, and ron as well. so if you're looking at a potential economic rebound, what are some of the good places to start making bets? coming up we're going to tell you why restaurant stocks may be worth sinking your teeth into ahead of a potential consumer

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hit herbalife now holds quarterly tournaments. according to the boss, though, it's not all fun and games. >> you go in there 2:00 or 3:00 in the afternoon and you'll see people playing ping-pong. and you'll see business taking place. so it's social, it's business, it's community. it's all in sports. >> yes, a sport. players can send the ball flying over 70 miles per hour. and while johnson participates in many different sports, he says his ping-pong game needs work. he's currently ranked in the top ten. >> i've not made it past the third round in any of our tournaments yet, but i'm going to.

a pair of companies in the restaurant industry reporting

earnings today. brinker international, they own the chili's chain, swung to a better than expected fourth quarter profit of $42 million. but the casual dining company says at the same time that its first quarter earnings will fall well below analysts' expectations. same time wendy's arby's group reporting a second quarter profit of $15 million because of improving margins at the wendy's fast food chain. well, that missed wall street estimates. the company did say its july sales trends were showing improvements. taking a look at the stock, brinker's lower by 17 1/2% today, got hit very hard on that report. wendy's higher by 7%, though, on those optimistic comments about july. restaurants have struggled during the recession but some investors are betting the sector will get a boost when a recovery sets in. not everyone is convinced, though, that the stocks are a good buy. we're going to debate the topic with r.j. hutaby, restaurant analyst at morningstar, and harry raidy, ceo of raidy office management. r.j., let me start with you. we've seen a lot of these stocks run up pretty dramatically based

on the assumption we are going to see an improving economy in the second half and naturally people will eat out more. is that logic correct, do you think? >> i think that is absolutely correct. we've seen a number of stocks particularly in the casual dining space really run up since the beginning of march. i really think the casual space has kind of gotten ahead of itself and right now i think actually the quick service -- quick service restaurant space is a much better, more attractive on a valuation basis. >> casual dining you think a lot of that stuff is priced in so the darden's, brinker's, the cheesecake factories? >> i think they've the doen ahead of themselves again. people looking into the back half of the year, maybe pretty mature. i think we're looking at at best appropriately valued. >> but quick serve, that would be the mcdonald's, for example, the yum brands of the world. do you think they still have room to go? >> i think they do. i think we may see a bit of weakness on the top line coming up in the back half of the year. what i'm looking at is companies have done a great job streamlining their business operations. cost structures look like they're in good position.

and they get a great tailwind with commodity costs coming back. the back half of the year. so i think from my perspective valuations look great on that end. >> okay, harry, casual dining space, a lot of those stocks are at 52-week highs. have they run too far too fast? >> well, we're contrarian investors and we're deep value investors, so we like to buy stocks at their 52-week low. many of these stocks are trading at their 52-week high. that's not the end of the world because we also short stocks. so we're seeing a lot of short opportunities. and so we see these stocks in two different categories. one trading at their 52-week high where we think there's too much euphoria built into the stock and we see those great short opportunities. and then we see some of these stocks kind of trading in teen multiples, kind of trading in the middle of their range and we view those as fairly valued. and some of the ones we think are in the overvalued short candidate category would be the cheesecake factory, chipotle

mexican group, the california pizza kitchens. but on the long side we own morten's restaurant group. morten's restaurant group is trading at 40% of book value. we think the company has $1.50 of earnings power. the stock's at $3.50 now. we think it's a quadruple. >> and we want to warn people, of course, the novice viewer, when you talk about shorting stocks, that means you borrow it, you sell it, and then you hope that the price goes down so you can buy it back cheaper later. but if it keeps going up, you've got a lot of risk on the table, unlimited risk as opposed to when you own a stock outright. what about the issue of inflation? there's so much debate about inflation, whether or not we're going to see it because the fed is essentially printing money. and these companies, they have so much commodity exposure. r.j., how much should they be worried about that? or wican we just put that aside for now? >> these companies are fairly resilient. it's not too big of a concern for me. >> how about you, harry?

>> the space is so expensive right now that i think they're vulnerable to lots of variables and that could be one of them. when these stocks are trading at 20 times earnings in a cyclical consumer discretionary-oriented space, highly competitive, you know, 20 times earnings just seems ludicrous to me. >> got it. all right. good discussion, guys. r.j. and harry, thanks for joining us. stocks lower for a second straight day. but matt nesto says there are six reasons to be optimistic about growth going forward. find out what they are when we come back. tdd#: 1-800-345-2550 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.

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it is still a long way until christmas, but we have an early present for you nervous bulls out there. in fact, he has six of them. matt? >> half way to hahn canukkahhan. it's interesting because this is all based on the goldman sachs beige book, if you will. they do this quarterly. it's essentially a collection of

an ofanof anecdotes from the conference call. here are their six findings. we'll call it a call to arms. one, economic stabilization. they say demand has bottomed. they heard a number of instances of that. there are signs of improvement. also, they say spare capacity and utilization. lots of talk here in industrials, technology and energy. easily can expand to meet any future demand. and they also say that the -- they are hearing that the cost cuts are going to be more permanent. inventory restocking. don't expect further real scale-backs and slashing of inventories. second half, restocking is going to be a boost to growth. also, cost-cutting, helping margins. my gosh, how many times have we talked about cost cuts? they say simply it's allowed

companies to weather the storm. if only our, well, elected friends in washington followed the corporate friends in terms of their cost-cutting efforts. amen. i hear the choruses over there. the operating leverage is going to be a huge one. just a little bit -- a little spark will start a fire in terms of growth. disproportionate is the word. and then lastly, number six in the six geese allaying,esh po ee to the brics. they're talking up the relative strength of the emerging markets. bang. if you take a brick to the head and add leverage, these are four things that are -- pretty much not working really well today, but in the bigger picture here as we look at the second half of the year, those are the kind of stories that they're looking at. back to you. >> good stuff, matt. thank you. now let's head over to the nasdaq market site.

melissa lee is standing by with more on what's ahead on "fast money." >> we've got a big show at 5:00 tonight. we'll give you the setup ahead of the job reports tomorrow morning. 99 cent stores and imax, we'll talk to both ceos. and we'll have charley gas preeny, the man known to put ketchup on everything, he'll give us the lowdown. much more at 5:00. >> thank you. a rival mobile carrier is turning up the heat in the telecom wars. details on that. announcer: some people buy a car based on the deal they get. - others buy the car of their dreams. - ( beeps ) during the lexus golden opportunity sales event, you can do both. it's an opportunity today. it's a lexus forever. special lease offers now available on the 2009 es 350.

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verizon and at&t have dominated the wireless business in the united states. but now another carrier is making a big push to increase in market share. jim goldman has the details on the big fight that's brewing. jim? >> good evening. look no further than the skies above san francisco this week to see the splash that t-mobile is trying to make. this was the scene high above downtown wednesday. stunt jets and a team of 100 parachuti parachutists. the latest smart phone running the android operating system from google. t-mobile spending a small

fortune to get the word out about this handset. $17,000 to rent san francisco's skies. 50,000 for those jets. over a half a million dollars for the event. go big or go home. earlier in the week, the focus was on the blackberry curve. while at&t and verizon still control the u.s. market, they are gaining subscribers even as sfri sprint is losing them. >> by the end of the year, we'll expect to have around 12 different 3-g devices. that is very important to gain new shares and attract new customers and to attract new users. >> the competition among carriers and smart phone makers was already hot with new t-mobile momentum now. it seems to be heating up even more. while t-mobile admits the turnaround still has a ways to go, the trends are certainly

encouraging. michelle, back to you. >> jim, also in the technology world today, twitter had a big issue with denial of service attack and facebook was slow as well. are all those issues resolved? are those sites up and working again? >> they are in the process of being resolved. twitter seems to be back online. same with facebook. live journal also affected by this. twitter was a denial of service attack. facebook thinks that was the case. live journal says it was all too coincidental that we were suffering the same kinds of issues. it thinks it was a d.o.s., but they're not confirming it either. >> fascinating. cyberattacks and cyberwars. thank you, jim. >> okay. before we go, look at the day on wall street. the dow finishing lower, second day in a row, down 24 points. nasdaq below 2,000 here. 1,973. decline of 1%, off 19 points. s&p 500, below 1,000 now. 997.08. a decline of a little more than

five points or .5%. this may be nervousness ahead of tomorrow's very big jobs report. the july employment report. we are looking for evidence that at least the pace of decline when it comes to jobs is slowing. no one is expecting a good number. a lot of people talking about a loss of 370,000 jobs. that would be terrible. that is terrible. but it's also not as bad as those declines of 500,000, 600,000. so that's the number to watch. 8:30 tomorrow morning, market mover. thanks for watching. "fast money" is up next. you have a very good night. net profit at cbs falls 96% in the second quarter on continued weakness in the advertising market. christina romer tells cnbc the nation is still in a recession and a key economic report is out tomorrow at 8:30 eastern. that's july payrolls. some firms are reducing their forecasts, though, on job losses. that's cnbc news now. i'm mary thompson.

"fast money" with melissa lee starts right now. will a dismal jobs report tomorrow end the 50% comeback in stocks? we have your next move. welcome to "fast money." i'm melissa lee. these are your "fast money" traders. we've got a big show for you tonight. charley gasparino on a big shake-up at morgan stanley. we have statistics on this market that will make your jaw drop. and a ceo that is turning harry potter into eye-popping profits. first, let's get to the "word on the street." what do you make of that rally today? well, not the rally, but the pullback? >> well, it's less than an inspiring day. a lot of people trying to get out ahead of tomorrow. you know what? i got to tell you something. that 1,005 level was the same thing we made in november of '08. a lot of people saying double tops. i'm hearing it myself. i wasn't that inspired one way or another. tomorrow is clearly the day. i will say this. a lot of people say bull markets

end on great data. you might see that tomorrow. >> well, you know, it's funny because that's what people are not expecting tomorrow. i think the market is skewed towards the down payroll. we actually had mixed data this morning. i think it started in europe when the bank of england -- this is sigsignificant, people. effectively, they're telling you it's not working. their banks are not lending. their economy is not reflating. they're not worried about inflation. so i think you have to be careful of that. i think that the numbers today were mixed. the ism was weak eer than expected. this is the most important number for our economy. >> people are always looking for opportunities, though. the opportunities they saw in the market today was this dip. they get that dip, they want to get back in. if you look at the industrials, they tipped over about 1:00. 3:00, suddenly everybody wanted to get back into the market. the market was off 60, 70 points. then we start back to the up side. keep an eye on that volatility index. it's a great indication of what's going on. it's up from 23 to 26 despite the fact