floor as we get set for the closing countdown. the market moved a little bit lower. dow jones industrial average is off by about 86 points, the nasdaq under pressure by about 20 points as well today. all day we've been markeding this being the one-month anniversary of the beginning of the summer rally and asking the question, if the pullback we've seen not only today but over the past couple days is the start of that summer selloff. take a look what's happening in the financials today for example. it's certainly one of the critical areas within this market and a critical area to look at today to see one of the leadership groups to the downside as you take a look at names. citi down 6%, bank of america down 4% or so and wells fargo down about 5%. one of the reasons for the pressure in the financials today and perhaps in the market overall is because the influential analyst dick bove put out a note questioning the rally saying it appears to have run out of gas saying it's ripe for a pullback.

that could be one area that's weighing on markets today. technology stocks, applied materials we're waiting for the numbers to close out. it's really the last big tech company to come out with an earnings report. there's been some weakness throughout tech today. apple shares down about 1%. research in motion has been weak. microsoft has been weak. obviously microsoft is weighing on the market because of that weakness, as well. the fed meeting going on, it began it's two-day meeting today. no rate move expected as we said. but there will be the statement that will be parsed certainly there. also, the resale sales reports coming out later this week will certainly be watched. there's a lot of cash on the sideline. that's what a lot of people are talking about. the question is, when does that cash come into this market and the dollar and oil certainly watched closely as well. the closing bell is going to ring in a second. regis is going to ring it for the anniversary of millionaire.

the closing bell will continue in a second. it's 4:00 p.m. on wall street. don't we all want to be a millionaire like regis? welcome to the "closing bell." i'm michelle caruso-cabrera. here is what we're following at the close. the market market selling off for a second straight day. concern over the outlook for bank earnings. the stock slump taking its toll on the energy markets. crude oil prices falling more than 1.5% to close below $70 a barrel. applied materials moments away from reporting earnings. we'll break down the numbers as soon as they hit the wires. the dow jones industrials lower by 96 points, 9240. low of the day was 9216. nasdaq down 22 points. got really clocked today.

1969. and the s&p 500 lower than nearly 14 points. it is back below 1,000. 994. let's get more on today's action. bobpy san nayny is at the new york stock exchange. what is the problem? is it dick bove, that we got the fed meeting tomorrow? what? >> a little bit of everything. the real weakness is in the financials. that makes sense. bkx is up 30% in the last month since we've had the summer rally. that's the points where you start taking profits. it makes some sense. we were down 120 points. we cut our losses almost in half, not quite because in the last 15 minutes, the dow dropped a little bit more. we were down 70 points. a little worse towards the close. financials were weak but off their lows for the day. energy is a secondary problem here. it has underperformed the market for a while. take a look at the big financials. here's the big five financials at the dow jones industrial

average. you add up these numbers, folks and almost 50 points of the decline in the dow is due to these five companies which includes our parent company, general electric which often trades like a financial stock. there is your weakness. dick bove did make comments about taking profits earlier in the day. the stocks were kind of weak right at the open. take a look at the vix. c boe. volatility index a measure of the put, call activity option activity on the s&p 500 for the s&p 500. you see it spiked up. that's the highest level in a month we've seen with the vix showing nervousness on traders' part. moving to the downside late in the day. how about energy stocks here. we've seen some real rolling over here recently as some of the big names like oil service companies, baker hughes valero, hess, going nowhere. demand has been weak. capital expenditures weak. this makes a little bit of sense. that too has been underperforming the market.

you want a little bit of a referendum on health care? how about an ipo right smack in the middle of the space. mdion is going to be pricing tonight, a pretty big ipo. we'll interview the ceo tomorrow that does medical billings systems. the president has made trok nick delivery of systems a real centerpiece of his health care reform bill. $13.50 to $15.50. it hasn't happened yet but as soon as we get the numbers we'll let you know. >> thank you, bob. we've got what i think are explosive headlines coming out of court. rebecca jarvis is standing by. other people knew no sales were taking place. >> did i pascally said other people noou on top of that, he's saying madoff knew since the early '90s. here's statements coming out right now. he says i represented trades were taking place when they were not. most of the time money just went into bank account of bernie

madoff, one that he controlled. he also says he knew no such transactions were taking place and that he had helped perpetuate the illusion that the sales had taken place. he also said i ordered fictitious trades to reflect returns certain clients wanted but the important thing here not only madoff but others knew about the problems resulting back in the early '90s. the allegation of criminal activity back in the early '90s, not only madoff and dipascally, the company's cfo but others also knew. >> we knew that nobody could do this all by themselves. yet, madoff himself would not turn on anybody. now this guy is talking. >> absolutely. he's the one talking. we're waiting to see who he talks about more specifically. if it's only going to be that mention of others or if we're going to actually hear there were specific named individuals in the madoff family who knew. on top of that, funds that knew that helped aid and abet this

crime as it took place. >> thank you, rebecca jarvis will have more. president obama sending his proposal to regulate the derivatives market to congress. they would regulate over the counter trades and get the power to set position limits on them are going to be on a clearing exchange which is significant. and then banking regulators will oversee the big banks that deal in derivatives. the federal reserve beginning its two-day meeting on interest rates today. central bank is not expected to do anything with rates but investors will be paying close attention to any clues the feds give about the outlook for growth, what flea going to do with quantitative easing. one billionaire investor thinks the u.s. economy has bottomed. george soros says the stimulus has helped the economy find footing and thinks we we will see positive growth in the third quarter as a result. thomas lee is chief u.s. equity

strategist. good to see you. thomas lee, do you agree with soros, are we going to see growth in the second half of the year? >> yeah, i think we're definitely going to see growth. a lot of the early signs from emerging markets gdp growth coupled with promising data on industrial prosecution support not only third quarter growing but start of a growth psych. >> is that all price in? we've had a huge rally. is that already in there? what does that mean for stocks snuks take a lot of the encouragements from what's happening. high yield bonds probably one of the best returns ever and you're starting to see very healthy flows into equity. i think there's still a lot of upside for stocks year end. >> eric ross, do you agree? >> i think we can. we're going to into the august season going to be choppy to flat here for a little bit. i think the second half we're

setting up for a pretty good run. inventories have been drawn down substantially. you've got production below consumption. any positive economic news that actually pulls a stronger than average gdp number out of this. >> i hear all that. but then scott wapner pulse out this great stat where he says the vast majority of the stocks trading are above their 200-day moving average. at what point does it not get long in the tooth. >> most definitely. a tremendous rally up 49% from the lows. earnings driven rally. 86% of the s&p has reported. three quarters beat revise the expectations up about 14%. you're talking about, this is an earnings number. if we can sustain that, if we go into a lull period before the september quarter reporting series, we're going to be sustains by the economic news. but as we go into the october number, if we can continue to beat the numbers we can see the

the rally continue to extend its legs. >> you think the end of 2009 outlook is 1100. what sectors do you buy into? >> i think year end it's going to be financial and cyclicals without question. so you know, we've got attractive evaluations for when you look at normalized earnings. i think investors are going to be responding to improved responsibility. it's going to be in those groups. this week, i think an important data point is going to be short interest. the rally since july from july to july 15th, short interest increased. now we'll get the month end data after we close tomorrow. >> i don't mean to cut you off. we've got breaking news of applied materials. thank you though. jim goldman has the results. >> michelle, you've been seeing these numbers move across the bottom of your screen. let's go into them. the company reporting a four

cent a share gap loss on the quarter. but that you excludes stock-based compensation. when analysts look at this number on an apples to apples basis versus the eight cent share, they'll be using two cents instead. that obviously is far better than expected. much better than expected top line perform as well, $1.13 billion consensus was around $955 million. the big question here for applied materials is going to come with fourth quarter guidance and whether this company is seeing a market improvement in business for the back half of 2009. and any kind of guidance the company can give us as far as global semiconductor equipment orders are concerned. as we look at new orders, the company was able to book $1.07 billion in new orders on the quarter. but the backlog fell to $2.59 billion. that compares to $3.16 billion for the previous quarter. all of these numbers obviously substantially lower than the company's third quarter of last year but by and large, the

company was able to beat and beat effectively on the top and bottom line. that top line number is going to generate a lot of interest because as we always focus on the bottom line, everybody analysts and investors alike want to see growth as far as sales are concerned and applied materials was able to perform at least on the top. we'll get more indications what this company is expecting for the fourth quarter and that is so important for so many different sectors in technology in about 20 minutes time when the call begins. >> here's some of the other stories we're following on the ticker right now. william acman's capital management cutting overall stake in target to 4.4% from 7 points to 8%. move actually increases common stock ownership a move he says reflects his desire to remain a long-term investor in target. jetblue upgraded. better than expected traffic in

some of the markets have allowed it to return to growth sooner than rivals. taking a look at shares of jetblue higher by 4.5%, to $5.34 a share. intercontinental hotels swinging to a loss after gaining $101 million a year ago because it had to write down the value of some properties this year. the owner reporting a 19% drop in revenue per available room. $12.04 a share. crude tumbling $1.15 a barrel or 1.5% to close at $69.45 because of the market pullback and expectations the government will report another big rise in weekly inventory supplies tomorrow. coming up, the chairman of xto energy tells us where he thinks oil and natural gas prices are heading over the next year. also ahead, sobering numbers on the housing market. a new report predicting 30% of

mortgages will be underwater by mid-2010. is that really accurate? would that kill a housing recovery? some answers coming up. later, new details on the effects of those toxic assets on the financial system. why it could be a really big make for the small banks in the near future. find out how it could affect you when the "closing bell" returns.

welcome back. we have more breaking news from the courtroom where dipascali is addressing individuals about his involvement with bernard madoff and talking about what actually went on, what his relationship as cfo was with the company. he says that at bernard madoff's direction, i lied under oath to the sec, i tried to throw them off the track. that's a quote from the courtroom. he said in january of 2006, with others, i made fake trade blotters and ledgers and his apology for his conduct, he said i just wanted to make very, very clear i know my apology means

nothing but i hope my actions moving forward mean something. bring some small measure of comfort to thosety harmed. so michelle, again, we get this recurring theme of what's going to happen in the future. he's talked about the others who were in with he and bernard madoff on this crime. on top of that, now he's saying i'm hoping that my actions going forward make some kind of difference. so going forward, may be fingering more individuals. back over to you. >> hmm. this is going to be so interesting. waiting to hear also if he gives any hints where the money might be hidden, right? >> absolutely. >> if he knows all this other stuff. >> that's a good point. >> this is very, very interesting. taking a look at business headlines, second quarter productivity roads at 6.4% annual rate, the fastest pace in six years. because the number of hours worked fell more steeply than the output. the labor department says the labor cost component of the report contains some errors and

it's going to issue a correction as soon as possible although it's not expected to impact it the huge productivity number that surprised a lot of people. the commerce people reports the wholesale inventories dropped 1.7% in june. the tenth consecutive month that the they have fallen. sales rising .4 percent. inventory to sales ratio at lowest level since october. opec expected daily demand to fall by 480 thousand barrels a day, a decline from its previous forecast because of the weak global economy and rising supplies from non-opec nations. let's get back to the oil and gas conference innocence denver. xto energy is an attendee. they have hedged nearly all of their oil and gas production into next year. joining us to discuss the strategy is is bob simpson, chairman of xto energy. good to see you again.

>> thanks, michelle. thanks for having me. >> you have hedged nearly everything for next year. what does that mean? you're getting paid how much for oil? >> we've had almost 100% of all for next year at $96 a bare rel. >> wow. >> we think that will be above the market. but that was a combination of some recent hedging, coupled with some we did last year at $126. that's an average. >> you're taking a bet though, right? you're taking a bet that it's going to stay low? i mean what if it goes higher? aren't you going to regret it? >> that will be okay. we'll start hedging 2011. so we're always -- there's always another year. you know, historically, 96 is high. there's only been one year that we've exceeded that. >> that would be last year. >> i think that's a good number. natural gas we've hedged about 40% close to $9.

so we have some more work to do there. we'd like to hedge half to two-thirds. we'll be doing more hedging as we go forward. >> we should point out, you're making nearly six bucks on what's the metric, million -- whatever, yeah. >> and mcf or 1,000 cubic feet. but yeah, we do think there will be a recover in natural gas prices outside of the otherwise next year. i wouldn't be surprised if a year from now, natural gas was trading for around 7 for close to double wa we are today. >> what's whaets going to drive that? is that going to be recovery in the economy? >> it's both recovery and the contraction and supply. we had 1600 rigs operating last year natural gas drilling. today it's just under 700. we've seen a 3% decline in on

shore production already. we think by winter, natural gas will be in a decline of around 10% year over year. that will start showing up in a higher priced. coupled with a recovery in demand from the economy in general. >> how strong though you? heard the stats what opec is saying in terms of demand next year. when you say recovery and demand, just how much? a weak recovery or a strong recovery? >> a modest recovery. i think the supply decline will be a more important factor. if you look at natural gas supply in america, up until a couple years ago, it had been in a slight decline. then we ramped it up about 14% on shore through that massive drilling effort. without that, we look for natural gas supply to return to more like what it was a couple of years ago. and that bodes well for the price. that coupled with a modest

recovery next year in demand and then over the years maybe a more robust one. >> mr. simpson, i'll be very interested to see what happens with your hedging program. southwest airlines henced the price of oil for so long and it bed them well and until the price fell dramatically and then it hurt them. that's the hencing game. that's how it is. >> it is. and so far, we've been very fortunate. >> yes, you have. good to see you. enjoy the rest of the conference. health care issue taking center stage again today. president obama making a big pitch to win over the millions on the sidelines when it comes to reform. the latest on whoese look fog win over next. mr. evans? this is janice from onstar. i have received an automatic signal you've been in a front-end crash. do you need help? yeah. i'll contact emergency services and stay with you. you okay? yeah.

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battalional over health care continues. this time the president is making a move to win over american who's already very health insurance. john harwood has the latest op his efforts to sell his controversial plan. john? >> michelle, this is a critical point in barack obama's attempt to sal vanilla his health care plan. lawmakers are fanning out across the country having meetings. the anger was right on the surface when senator arlen specter of pennsylvania had a meeting today. people were getting right in his face. many are conservatives who barack obama is not trying to win over because he knows they're lost. he's trying to get people who have insurance, people in the center of the spectrum and his objective at his town hall today was turning down the temperature. >> where we do disagree, let's

disagree over things that are real. not these wild misrepresentations that bear no resemblance to anything that's actually been proposed. because the way politics works sometimes is people who want to keep things the way they are will try to scare the heck out of folks and they'll create boogiemen out there that aren't real. >> the question is whether that kind of applause he generated in new hampshire is going to be able to drown out the boos and heckling and disturbances at some of the other town halls. president has two more sessions before the end of the week to try to continueling this plan but he's got a tough fight. >> how controlled was this town hall, john, when we talk about the people actually attending? >> i think they white house tends to screen fairly carefully whenever the president goes out and has a meeting. you've got the secret service involved it controlling fipt, ticketing processes.

i don't know exactly how people were selected, but you do notice that there weren't the people who were screaminging and yelling the way you've seen at some of the lawmakers where it's an entirely different kettle of fish. >> where they can't screen people. thank you, john. recent data has suggest the housing market may finally be stabilizing. but a new report is raising new doubts about a recovery. we're going to tell you what's going on and what it means for the overall economy when we come back. these days, when you have to spend, shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from over 300 online retailers with our add it up program. just sign up and use your bank of america debit

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welcome back. bernard madoff's cfo frank dipascali has pleaded guilty to criminal charges. now, he started with this company, bernard madoff's firm at the age of 19. he is now 52 years old. lives in incomes and in his statements leading up to that plea, which by the way, the judge has accepted, frank dipascali mentioned that the fraud taking place at madoff's company was known by not only himself but by others that he was aware that there were

fraudulent things taking place as early as the late '80s and the early '90s. he said that bernard madoff specifically asked him to keep the sec off his whack to keep him off their trail and in this day in court, he talks about all of the fraud that had been taking place and also talked about the fact as i mentioned that others were involved. he has yet to name those others but now has the time with u.s. governmentment to talk about who else was involved. that will be the next step as he's interviewed and asked exactly what took place at bernard madoff's firm for all of those years. >> let's put an exclamation point on this for folks just tuning in, dipascali in court and he is using the phrase "others." other people knew and he's going to turn on them. >> sounds like it. >> bernard madoff would never turn on anybody. he went to prison saying he acted alone. now we're hearing from this guy who's going to sing like a

canary. this is more of a turning point than madoff getting busted was. >> he now faces on these ten charges up to 125 years in prison and the judge has made the comment in court that if he should comply with the u.s. government and if the government should send him a letter, that is send the judge a letter requesting a shortened sentence, the judge is saying he will take that into account. he's not saying it's going to make an absolute difference but he will consider it. did i pascally, the more helpful he is, the sound of things here since he's facing 125 years, the more helpful he can be, perhaps the less his sentence will be. >> we've got mary thompson inside this hearing that rebecca is describing. we're going to get her on the air. i want to hear everything she has to say how did i pascally acted. i want all the details. this is the moment we've been waiting for when it comes to the madoff scandal.

real estate data service zillow.com, that's the name of the company, unveiled a startling report on the state of the housing market. diana olick is in washington with the details. hi. >> hi, michelle. we're beginning to see a real trend in sales gains in certain markets. while prices aren't gaining, they're not falling as fast either. take a look at a new report from zillow.com to give you a real sense of local color. u.s. home values posted their tenth straight quarterly decline but the rate of decline is slowing ever so slightly. it was 12.4% in the quarter before. zillow finds 39 markets where sales volume is up year over year. so far, we've mostly seen month per month gains. big ones like miami, l.a., phoenix, las vegas and denver all showing gains. granted the market showing gains are the most distressed markets and the activity is mostly foreclosures. take a little snapshot of that,

las vegas, sales up 40% year over year. in june, 67% of those sales were folks. again, we have to get rid of the foreclosures. so not bad. prices are down by half putting 83% of all homeowners underwater on their loans. nationwide, nearly a quarter of borrowers are underwater and that will keep the recovery slow. >> you're not going to see a return to rapid appreciation. this is probably going to be an l-shaped recovery where values stay relatively constant once they hit the bottom. >> one more interesting factoid. of all the homes sold in june, 30% were sold for less than the homeowner originally paid for it. people who may have owned the home for several years. again, showing how some of these investments really went bad. 30% selling for less than they paid for. go to realty check.cnbc.com.

>> we want to look at the impact this could have on a potential recovery in the housing market. to discuss the statistics, stewart gabriel joins us and mark zandy is co-founder and chief economist of moody's economy.com. good to see you. stewart, let me start with you. zillow is estimating that 30% of homes or mortgages are underwater by next year and deutsche banc says 48% could be underwater by the first quarter of 2011. is that possible? >> i would suggest that the  deutsche banc estimate is an extreme estimate. we're going to see some more house prices declines whether  they turn into default and  foreclosure is a different  story. many homeowners are underwater and not defaulting. indeed, we oftentimes see a default when there is a traumatic event. a trigger event. >> i want to dig into that in just a second a little bit more. mark, let me ask you, do you believe those numbers and if you do, it has to do with there's got to be an even more dramatic

fall in the prices of homes, right? >> by my estimate, there's 16 million homeowners underwater as of the end of june. that's about a quarter of all owner occupied single family homes. that sounds pretty consistent with the zillow data. i expect prices to fall another 5, 10% bottoming out next spring early summer. at that point, i think about 17.5 to 18 million homeowners will be underwater, less than 30%. so to get to 48% which is what db is forecasting, you need pretty significant price declines. >> stewart back to the hoint you were trying to make and highlight the perniciousness of being underwater. if i own a home that i paid $120,000 for but is only worth $80,000, whether or not i can pay is almost not the issue, right? at some point, you think, god there's a lot of sunk cost here but i'm never going to recoup this investment. because of the way mortgages work, a lot of people can mail

in the keys. they call it jingle mail, right? whether or not you can pay doesn't end up being the issue. this leads to higher and higher defaults and hurts the banks. what do you do? >> that is correct. and in many instances it's very, very difficult to recover. the point that i was going to make is that we have instances in which borers continue to pay despite the fact that they're  underwater. but indeed, when we see a trigger event, a job loss, a marital separation, a health related issue, this is when we really see the default kicking in. of course, we've seen terrible job loss over the course of the recent economic downturn. we've loft every job that we gained over the prior economic boom period. and all of that job loss feeds into a very difficult housing situation currently. >> mark zandi, what does it mean for an economic recovery. >> it's a wait. as long as people are underwater and defuels rise, foreclosure is increasing, prices continue to decline.

that's core rose sib on the financial system and makes it very difficult for households to out and spend. they're worthless. it's vital that policy makers come up with a plan and hope flit president's plan will kick in to a more significant degree and forestall some of these foreclosures. >> you mean like reducing how much people owe when it comes to the principal and things like that? we're already ripping ourselves apart on health care reform. >> yeah, well, under the president's plan, there aren't any principal write down. >> it's any part of the making the home affordable. a lot of banks are refusing to do it right now. >> it doesn't work under the current plan. the only thing that works is to reduce the interest rate to get the mortgage payment down. i don't think that's going to solve the problem. in my view, if you really want to make a difference here, do you have to have a plan that has incentives for real principal write-down and we don't have that yet. >> you're talking about crazy social unrest if you start

writing down everybody's principals. talk about the loan modification program. >> people that i was talking to today are saying one of the biggest problems is that so many people are not qualifying for this program. that's because they're underwater far more than 25% which is what you're currently allowed to be 125% loan to value. so that's number one is the problem. number two, a lot of these people are not answering the phone when the banks call them. they're telling us 50% of people that need a modification defaulted on their loan, the bank called them, they don't want to talk to the bank. the bank is going to the property, sending people out, sending letters. they don't want it. there's another issue with that. another problem you're also seeing is that as prices continue to fall farther and farther, as you say, there's the jingle mail issue, people walking away from homes but they can't sell their homes and can't move up. that stops the entire moveup market why we see all of the sales activity happening on the lowest end of the market.

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small banks could need more financial help. that is according to the latest report from the congressional oversight panel of the t.a.r.p. hampton pearson is in washington with more on why toxiraq loans and securities may pose a problem for smaller financial institutions. >> the report is a bit of a mixed bag. the congressional oversight panel saying big banks, especially those that were stress tested are equipped to handle more bad loans but making the point that small banks could perhaps need billions in additional capital to deal with the toxic loans still on their balance sheet. >> the treasury has not been focusing on small banks because keep in mind with the small banks, they are the once who hold principally whole loans. ppip is not directed toward them

or getting bad assets off their banks. they disproportionately hold the commercial real estate mortgages that all projections look like are going to be big trouble in the next few years. >> rising unemployment and a possible collapse of the struggling commercial real estate market are the biggest risk factors says the oversight panel. estimates vary about the value of those toxic assets. the federal reserve says american banks have just under $600 billion they're hold. the international monetary fund puts the figure closer to a trillion dollars. >> risk is the key word here. one of the things that's deeply troubling is that there's no good estimate of how much toxic waste is still left on the books of either the large or the small financial institutions. >> now, there is a dissenter on the panel, texas republican congressman jeff hensarling believes this report is almost a

defacto stalking post perhaps targeting smaller banks. we did make several calls to get a response from the community pankers association today. those calls and e-mails were not returned. >> thank you, hampton. let's talk more about whether or not small banks should get a helping hand. joining us is cassandra teroy and stephen hagan buckle, managing partner at tara cap partners. also on the board of a small bank, landmark bank in ft. lauderdale. stephen, you're on the board of a small bank. do you need a handout? >> no, we don't. i think getting into banking was made too easy when we started landmark bank 11 years ago, you only needed $5 million and someone with a banking background. i think today the challenge is that a lot of these smaller community banks took on very risky loans. the reason we don't need any helping hand is because we did not do any developer or builder

loans or any residential loans. and as a result of that, we're the second most profitable bank in the state of florida in our asset class. >> good for you because sandra, let me ask you this. a lot of people will be watching and saying you give all the big banks money. you can't give the small banks money? >> i think there has to be an equal playing field. there are shareholders of big and small banks. to say that small banks can't have access to the same programs just seems to be a very inequitable program. there are a lot of small banks that are very good banks. but it doesn't mean over the last few years, they didn't have to stretch for some yields in their securities portfolio and end up buying things they shouldn't have. >> stephen, how do you feel about that. she talks about shareholders. i felt that shareholders ever got baled out. it's one thing to keep a bank standing and another thing to bail out shareholders. just as we complain about transferring taxpayer dollars,

that's what we did to the stock market. >> like i said earlier, the risk is when you're doing risky loans and don't have enough shareholder equity to cover loans through your loan loss reserves then you're in trouble. those are conscious decisions that those bank leaders and directors made. they were bad decisions and risky decisions thus exposing their whole existence. >> it's not a question of the loan portfolio. there are a lot of very strong loan portfolios out there that doesn't mean that the bank's not going to have a problem because of the securities portfolio. i think there's a big difference. >> well, most community banks are not that heavily weighted in the securities arena. most of their loans are tied towards commercial loans as suggested earlier and some residential loans. so i don't think the typical community bank is that heavily weighted in securities as are the bigger banks. >> let's keep this actionable.

sandra, bill rock is a long-term investor. what are you investing in? what are the strong names you think will survive. >> we're being very careful about entering any new positions in small banks. what we have bought are things we think are very strong balance sheets and very solid securities portfolios, west america bankcorp out of california, wabc, f and fg in new york. >> first niagara. >> but they're very solid balance sheet well capitalized. they know exactly what they own in their portfolios both lending and securities. that's really what's going -- there's going to be hundreds of community banks that are going to go under in the next couple years. i have no doubt in my mind. you have to tread into these extremely lightly. >> stephen you run a distressed private equity fund. everybody seems to be doing that. what opportunities are you

seeing there? i hear over and over again, i'm managing distressed assets, buying distressed assets like the latest thing. >> there is a lot of competition but there's certainly a community out there in private equity that's willing, ready and able to absorb a lot of those so-called top of i can assets. we view them as very, very great opportunities long-term. if you have the patience and private equity, we can turn them into great opportunities. so we feel that there are enough people out there to absorb those assets. we also feel that there's enough banks. i think there's too many banks, one on every single corner and other community banks. >> toxic assets that you're interesting in buying, i keep hearing nobody wants to sell them. especially after the accounting rules. >> there has definitely. a shift going on, that's correct. earlier on, we were able to pick off more of those, now now it's a little more challenging. >> time is going to heal a lot here. >> always does whether it's

banking, love, et cetera. guys, good to see you. good discussion. >> thank you. >> former baseball star turned investor lenny dike stra is in bankruptcy court today. jane wells just spoke with him exclusively. details when we come back.

time now for going global europe. >> hello. it here are the stories we're watching in europe tomorrow. the bank of england will issue its inflation report. a view of the british economy. it's expected to paint a gloomy picture. that's certainly what the market is anticipating. will the central bank be that pessimistic. could it cash the market out with its report. we'll ask how ing is weathering the financial storm and the chairman and ce off of continent continent continentale. we'll be live in hanover with the latest. tune into cnbc world to catch all the action overseas.

i'm guy johnson going global with your money. >> wrups hearing of baseball star turned investor lenny dykstra just wrapping up prosecutors arguing his chapter 11 filing should be a chapter 7. jane wells is live outside the courthouse where we just interviewed mr. dykstra exclusively. >> actually, it's a creditor and the trustee. lenny dike bought himself extra innings as a judge put off for three weeks a decision whether to turn his chapter 11 bankruptcy reorganization into a liquidation. one of his creditors claimed dykstra lied saying his mansion is insured when it wasn't. there's some dispute about that. the judge wants proof of insurance by september 1st. more importantly, we want dykstra to prove he's got a plan to help him reorganize. all of his current income is going to his estrained wife at

the moment. >> the judge says you have no income coming in, your pension is going to your wife. she wants proof you've got a road map here to have income. what is that map? >> follow the yellow brick road. it's a good road map. and you'll see. doing a little reality show. everything isn't always as it appears. so on what day, the 1st she wants me back. >> okay. there might it be this guy named louis vuitton involved or something. we will have some investors. >> he says he's close to getting a big investor to sign to relaunch the players club magazine. the judge says he also has to list his two homes for sale and she says "he has to show me where some money's going to come from or she may convert the case to chapter 737 we have a whole lot more ludding the interview. >> let's get to jim goldman standing by with more details

and news breaking in the after hours. jim? >> michelle, we've got the guidance from applied materials highly anticipated by tech vin evidenters across almost every sector that the money is flowing into. the company looking out towards its fourth quarter. while visibility remains somewhat strained they are saying economic and industry trends are generally more favorable in the current quarter than they were in the last quarter. the company anticipating a ten to 20% increase in revenue substantially higher than what wall street was anticipating and indeed, the company is also now projecting that earnings will return to profitability break even to up four cents a share in the company's fourth quarter. again, way ahead of where wall street was anticipating this company to perform. >> that's good news. we can see the stock reacting. straight ahead a closer look at some of the events that could move markets tomorrow. we're back in a minute.

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