the department of transportation abdomen lists have suggested there is enough money to keep the program running until that time. phil lebeau will be joining us as 7:40 eastern time to give us the update at that point. gm's board is expecteded to address the topic of opel later today. it could recommend a bid by canadian car mfer magna. we may be getting an answer. >> good morning, mike. >> good morning. >> it's easy to be a few minutes late on friday, right? >> yeah. >> that's all right. i came rushing in myself. joe is not here to give you a hard time. but thank you for joining us today. >> great to be here. it's friday in the summer. >> still a lot going on, though. the fdic reportedly plans next week to soften its restrictions

on equity firms. officials are hammering out details of the final rule. the fdic is trying to walk a fine line, bringing more capital into the banking industry while trying to avoid putting banks in the hands of investors who might promote risky practices. we'll talk more about that later in the show. >> we will. mike, do you need more private money coming into these banks? >> any money, becky. i was astonished when sheila bair proposed to make stronger requirements for money coming in from private equity. yeah, i think they shouldn't have people in who are not going to be good owners on one hand. on the other hand, i don't think they should make it tougher. they need all the capital they could get. >> and maybe it's a good thing when you realize how quickly banks are failing out there.

another bank is expected to be taken down weekend. i understand the private equity. not wanting to put money on it. >> now wasn't the time to do it. >> companies meantime are stepping up purchases of their own debt. we are seeing evidence in the second quarter filings. the wall street journal reports some bankers believe activities like this could signal corporate executives. it's important to note that there's roughly $1.4 trillion worth of below investment grade debt that's coming due over the next five years. so the other side of this equation is the idea that companies are going to grip with the fact refinancing will be increasingly difficult. mike, even though we talk about being past the worst parts of the crunch, people aren't feeling too complacent yet. >> no. and the consumer confidence numbers indicated people generally are feeling that way. corporate treasuries are feeling that way. so everyone is feeling that way. >> dollar general is filing a $750 million ipo. the discount retailer was taken

private by kkr back in 2007. no word on which exchange dollar general will list, nor on its prospective symbol. but it's nice to know that there are going to be more ipos in our lifetime. >> isn't it something like 3 1/2 years and traditionally taking a new company to tom to market versus 1 1/2 a few years ago. >> exactly. we're in new times. >> the justice department is approving a deal between sun microsystems and oracle. the european commission also must sign off on the deal. oracle has been incredibly inquisitive and this will be, if it works out, mike, transformational, maybe, in some ways, right? like people? >> yeah. he continues to do it.

there's few people who take advantage of this environment, like ellison, maybe it's transformational. guys, listen to this. morgan stanley is reportedly planning to hire as many as 400 traders and salespeople. reuters says about half have joined the firm. the wall street workers want the people for its equity exchange. but after many, many months of layoffs on wall street, you're starting to see people going in the door. >> there are help wanted signs at least somewhere on the street. if you had said that in september about this time last year, people might have laughed at you, mike. >> that's exact lit rye. >> markets today on a friday, busy with existing homes coming out and we're looking for a 5 million rate. we knowny will be speaking at

10:00 a.m., as well. the title of the speech, by the way, reflections on a year of crisis. and we'll talk more this morning about exactly what do you want to do at jackson hole? do you want to further the ball? he's done so much. >> terms of communication. >> you have to walk the tight rope. >> or do you want to preserve your capital? >> that's probably why he talks about reflections of the past year. but what the market is going to be listening for is tell us about the coming year. when do you start getting out of this? >> nothing can happen. >> but we'll look and listen to every word and we'll hinge on every reflection and we'll say maybe this is what he means, maybe this is what he's signaling. >> we have to justify steve leisman's -- >> that's right, the cost of his travels. >> it's expensive. >> you don't think this is going to be potentially market moving, no matter, even if he doesn't want it to be? >> yes, if he says anything, yeah. >> that's at 10:00 a.m. meantime, asia had a decent

night overnight. we got some great manufacturing data out of france and germany. nooip nymex is up 41 cents on that news, close to a ten-month high at $91.72. the dollar, i think, had some interesting action, especially up against the yen now below 94. euro is at a month high versus the pound after we got that good manufacturing data, the german pmi. in gold, which hasn't been the story lately, certainly not if you're looking for an inflation hedge, we're up $2.70 today to $944.40. let's go overseas, chloe cho has the latest moves in singapore and first, though, to london. and i hope, ross, this is not the last day we will be seeing you at eight minutes after the hour. >> not the last day forever. i will be here this time next

week. >> missed you. >> miss you. >> what's going on in london, man? >> well, the ftse cnbc global 300 is up at its best levels of the day, carl. european stocks are certainly firmer, as a result up nearly 1% for the ftse 100. the dax and the cac 40 and smi are up over 1%. it's all due to the strong numbers we had for pmi out of the euro zone. the composite pmi up to 50 from europe. it was up from 47. that is the sharpest rise we've seen in that pmi for some time. in germany, it was even stronger. the pmi composite hit 21.42. and services could increase business for the first time in a year. the results are optimistic as the last time back in january 2006 showed you the strength of that number and that's why stocks today rallied. the sectors that were influenced

by that, autos are at the top of the pile. vw did pretty well on the back of that. we have seen a little bit of weakness in some of the resource stocks today. and so that sector is a little weaker. that's really down to bhp billiton, which came out and said it did not expect to see clean demand until early 2010. chloe, over to you for the asian day. >> thank you very much. you know, as you guys get the date started, it's going to be an interesting picture. today, very volatile trade and investors solely focus on the shon high case for many days. all of a sudden, we got this news that the chinese regulators may tighten capital requirement rules at banks. all of a sudden, the shanghai

composite was on a roller coaster ride. all in all, the shanghai market closed up 1.7%. a couple of reasons here, and i did plenty of phone calls to try to make sense because the same mainland banks that closed up in shanghai actually closed down in hong kong trade. first of all, it seems like there seems to be a lot of optimism that before china celebrates a 60th national anniversary on october 1st, that somehow the regulators are going to step in and stabilize the theme just as carl as you probably noticed kind of the olympic event that you cover. and also, another thing, npos certainly doesn't seem to be a problem for the banks and also bank earnings so far has been coming in lined with expectations. and plus, you're getting plenty of assurances from the authorities that they do not want an abrupt halt to the kind

of lending they saw that we've been seeing and also in the august figures apparently pretty much higher than july, but about a third of what we saw the record pace that we saw in june. so all in all, quite a peculiar picture. also, before i let you go, japan down 1.4%. aside from the china factor, cash for clunkers coming to a close on monday seemed to put a lot of the automakers there in reverse gear. so that was the picture over here in asia. so it really remains to be seen how investors there in the u.s. digest this piece of news out of china. back to you. >> sometimes we take our queue and sometimes we do our own thing, chloe. have a good weekend. >> have a fabulous weekend. >> let's check on markets this morning. mark visit ner, senior economist, subodh kumar, happy friday to you both. mark, let me just start.tner, s subodh kumar, happy friday to you both.

mark, let me just start. what does ra good economist want to hear from fed chairman ben bernanke today? >> well, i think the question is how do they have the political will to unwind what they've done? chairman bernanke has laid out the case that the federal reserve has the ability to unwind the stimulative actions that they've put in place. but the real question is, can they do it with the high unemployment rate and can they do it if the unemployment rate peaks in april of next year and falls to 10% in may? are they going to have the green light to raise interest rates? >> he's held town halls, right? he's gone on 60 minutes. he's written op-eds. he's done things that few fed chairman ever have in terms of being transparent and talking out loud. is this the form in which you want to do that? >> well, he certainly lass a lot of support because he has a lot of intellectual firepower in that room and a lot of friendly faces in that room, too.

there's an awful lot of support. i think this is probably the best forum for it because there will be a lot of discussion about what the risks are and about what the importance is of laying out a clear and believable exit strategy. because anything that reduces the risk or the perceived risk to the economy in the financial markets will increase the willingness of businesses to invest and to hire more workers and bring back economic activity. if we have a lot of doubts about how efficient the fed is going to be at withdrawing this liquidity and that there's a threat of higher inflation somewhere on the horizon, i think that's going to lead to a lot of resistance on the part of businesses to stand up and start growing their businesses again. >> businesses to invest and subodh, investors to invest. part of his mission today is to say i know what i am doing. it's okay if you want to buy stocks to buy sfoeks, i guess, right? >> absolutely. and it's all about confidence. that is what bernanke has done

just a wonderful job of in these town halls and all of the different venues that he's made appearances in have helped restore confidence. and that's worked in the financial markets to a great degree. it hasn't worked, as well, in the real economy. we've seen a rebound in production from very depressed levels. but final demand, if you sum up consumer investment and demand, it's still negative and it's still declining this late into the summer. >> somebody yesterday on our show called the american consumer maybe the best economist in the world. they knew exactly what their balance sheets look like and what to do about it. subodh, you've been calling for a correction like many have 106% to 15% in the short run. but markets this week will argue that we're going to grind it out and we're going to grind out out on financials and things you might have thought were at risk. >> it's going to be a fascinating day today and next week. let me explain why. first of all, i am in the correction and leadership camp.

today what we have, in asia where all the growth is, markets have been pulling back. europe, where we have cyclical aspects of pmi, the markets have been going up. so i think the u.s. markets right now see two very different models, if you want, of action right now from europe versus asia. and in my opinion, the issues about deficits and about how far can you drive the markets up just on things aren't getting any worse is going to come to the floor. so i'm staying in the correction camp. but the reality may be between the bulls and the bears, the market goes sideways. so that's possible, too. >> subodh, there are those who are saying this market looks like some in the past where the stock market in the u.s. gets divorced from the underlying fundamentals and goes off on its own. in this case, up. are you concerned with your forecast that those people will be right, that this will continue? >> well, it's not that i'm worried about the earnings.

i just think that, you know, peak earnings come in 20 11 and not next year. so one thing i would like to say, mike, is this issue about deficits and how do companies finance is going to be very important for the direction of the markets because in the 1970s, when deficits were high and inflation was high, the cost of borrowing was extremely high. for japan in the 1990s, when rates were very low, essentially deficits were high but companies couldn't borrow because banks wouldn't lend to them. >> subodh, that's exactly what i'm talking about. between '72 and '74, an ugly market, the dow went up 74%. it was completely away from underlying fundamental peps. >> but. but i think what you'd have to see is the market moving more towards the quality stocks whereas in the last five months or so it's been low quality and cyclicals that have moved up.

what you're saying is entirely possible. but i think it would have to be a different leadership from what we've seen. >> mark, as an economist who i guess is sort of shackled to the fundamentals, what do you make of a market that operates in the face of them? >> well, i don't know that it's totally flying in the face of the fundamentals. we didn't get armageddon. i think there's a big relief trade off of that. >> subodh's argument is that that is over. we did the loop deloop and now we're off square one. >> i think that's one part of it. the other part is that companies have done an incredibly good job of managing costs. and i think there's some excitement about what happens when final demand does kick into gear? we're going to see a nice snapback into profits. i think there's optimism about that. then the markets always get ahead of themselves. so i'm not that worried about the magnitude of the rebound. i have been surprised that it's

lasted all through the summer. and this is one of the few times in the post war period where sell in may and go away did not hold. >> but there was a a big mistake this time around. guys, have a great weekend. good to talk to you both. mark and subodh, we'll talk to you later. >> great. coming up, we will make a visit to our friends at the weather channel and get the weekend's forecast with you. (announcer) this is nine generations of the world's most revered luxury sedan. this is a history of over 50,000 crash-tested cars...

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welcome back, everybody. if you are on your way to the airport this morning or on your way to the beach, listen up. scott williams of the weather channel is back with us this morning. what can we expect? >> good morning, becky. first of all, let's talk about hurricane bill. it still remains at a category three status there as it continues to make a beeline towards the north and the west at about 17 miles an hour. maximum sustained winds are at 120 miles an hour. a right heavy storm here. the eye wall not looking as symmetric as it was earlier and

some dryer air on the eastern side of the system. so where will bill go? as we go in time here, it will continue moving toward the north and west and eventually more toward the north. as a trough digs southward over the lower 48, that will help to build back out into the open waters of the atlantic basin. but it looks like it will make landfall around the nova scioscia area, but look for increase deadly rip currents around the eastern seaboard as we progress throughout the weekend. not in association with hurricane bill, but we are going to watch a cold front move into the northeast for the upcoming weekend. some lift out of this frontal boundary will set the stage for heavy downpours. around the newark area, philadelphia, as well, albany, anywhere from 2 to 5 inches of rainfall out of that frontal boundary. but definitely dangerous rip currents for the upcoming weekend in association with hurricane bill there.

so we can expected is to see wave heights around bermuda from 18 to 24 feet. so as we take a look at your business travel right now, no current airport delays out of the northeast. this will change, folks, as we watch that frontal boundary moving towards the northeast. look at the forecast for the big apple. you'll need the rain gear later on this afternoon. temperatures, warm and muggy. a few of the storms could be on the strong to severe side of things there. as you look at your travel forecast here for friday, st. louis, 77 degrees. atlanta, scattered showers and storms. likewise around philadelphia. back to you. >> scott, we're going to have you do a tailored forecast for long beach island monday and next week. >> i don't like the rain. >> next week looks great. >> what about sunday? >> iffy there because we're going to see the chances for some rainfall not in association with bill, but with that stalled

utah frontal boundary. >> so there's a good chance you're going to get some sun, but be careful if you get in the water because those rip currents are dangerous. >> deadly rip currents. i advise staying out of the water altogether this weekend along the eastern seaboard. >> scott, thank you. appreciate it. >> let us get a look at this morning's upgrades and downgrades. we've gotten so much good information from retailers over the past few days, not just retail sales, but then the individual earnings as they came in with their fiscal quarter. so now the analysts are weighing in. children's place upgraded to buy from hold over at citi. their target remains 37. most of them here talking about valuation. limiteded brands upgraded, as well, from buy to hold at citi. the target from 15 to 18 now. the firm, as becky was saying during the break, expects improving margins and sales. >> that's what the company said, too. so if you listen to these earnings calls, you get a lot on

insight. >> gap was upgraded. >> you, too, can be a retailer. >> upgraded from outperform to market perform at sbr. the target, 18 up to 24. have you seen the ads for the jeans? >> yes. and the new denim thing they're doing all across the gap brand, it's the gap stores themselves that are focussing on that brand. they're talking about the idea of increasing their advertising and their marketing on this. that's a big deal when you haven't seen that from a lot of these retailers. it's been all that cost cutting. >> i mean, if the customer is going to open their wallet again and they're going to do it with limited fashion, you want to make sure it's done at your store, right? >> that's why the advertising, and if it's smart, and it looks like they're doing it smartly. there will be some dollars out, not a lot. >> it happened when the uptrend begins, right?

>> if joe were here, he would love to do this next one. dick's sporting gt goods downgraded from a buy to a neutral. finally, nike estimates were cut at thomas wizell. they're talking about weaker sales at foot locker. their rating remains overweight and their target remains 63. >> coming up, we are going to head to the futures pits in chicago for a trader's take on today's top stories. plus, charting a course. we have a technician's tale of the markets right now. key numbers and levels that you need to know. also, we'll get the pulse of the american consumer. we'll be asking what the retailer tells us about the u.s. economy. our friday is ending with a flourish. "squawk box" will be right back.

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♪ . good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with carl quintanilla. joe is off today, so mike holland is spending the day with us. federal reserve chairman ben bernanke is set to deliver remarks at the kansas city annual symposium at jackson hole, wyoming. standing by at the cme this morning is ben lichtenstein. ben, we've been talking this morning about what to expect from ben bernanke. probably a lot of people are not expecting big surprises, but will you be watching the words and his gestures very closely? >> most definitely. anytime bernanke is speak, we're definitely focused on the words.

we're seeing the market digest a lot of information we've been receiving. and a little bit of housing data coming out today. the market right now is trying to touch on to these levels that we've seen, these upper extreme levels that we've seen, 1015 in the s&ps. we had a wide range in the overnight trading session here. so there's a lot happening right now and the market is poised for a move one way or the other at this point and it seems to be pointing towards the upside direction. again, it's anyone's guess whether or not we'll test those levels or kind of retrade ask pull back at this point. but the market is set for a move one way or the other, big time. >> ben, a lot of people have watched it carefully and believe we won't come out with any surprise today whatsoever. if that happens to be the case, what does the market react to at that point? >> i think it's fairly typical of bernanke not to necessarily come out with any surprises. he is forthcoming for the most part, always has been, which is

a complete shift from what we were used to when we were seeing green span come in and he would always kind of, with unusual words and a difficult way of presentation, telling us what's going on. and it would really require the investor to look more deeply into the words and bernanke kind of lays it out there and is very candid in terms of what he's looking at. so assuming that we don't get any real shocking news at this oint, the market could possibly continue to trade on this uptrend that we've been seeing over the past few days. >> we've got an options sxiration today, right? >> yes. >> so in recent history, the market trend has been up on the oopgzs expiration. is that likely to be the case today? >> possibly. even in the situation that we're in right now, if we were to open up at these levels, we would be in a gap higher situation in the s&ps here. not sharply higher, but

certainly a gap situation. so that's just a sign right now that the market is trying to seek out val at this point and i think in a very short-term basis we're in, you know, kind of a horizontal development phase right now in a very -- a longer term basis, we continue to be in this extreme vertical development phase that we've been seeing. right now, again, the levels up above are important to keep an eye on. 1015 in the s&ps, basically, 1017 in the s&ps at this point is one of the big levels to the upside and to the downside right now would be yesterday's low, i think. >> is it true that the market is trying to focus on positive news? why did the market trade higher after the philly fed instead of paying attention to what happened with the jobless numbers? >> oh, yeah. i think so right now. i think there is an ee norm ymus amount of optimism out there right now that we're slowing trying to come out of this recession. inflation is relatively tame. we've been seeing, you know, losses in terms of the dollar,

but not necessarily extreme losses. so things are slowly start to go turn around. again, assuming that we don't get below that major psychological level on the dow, up 9 thousand, i think if we continue to sustain this sort of level of optimism that we're seeing. i don't think that we've been able to track this extreme, you know, type of optimism that we would like to see in terms of the retail sector. and that's one of my major things that i'm looking for right now is to see how this back to school shopping season turns out. you know, one thing that i was shocked to hear the other day, but i heard a christmas holiday season commercial already come on the commercials. so there's talk about retails promoting holiday sales earlier this year in order to drum up business and influence the retail sector and the consumer. but i don't think that's necessarily going to do it. we're seeing unemployment at extreme levels at this point. and we're slowly kind of getting there on, you know, a broader base level. that's the real factor and that's the real key right now at

this point is to whether or not this market can kind of overcome some of the hurdles. and we talked about this a couple of weeks ago. the market has been in kind of a sprinter's mentality at this point, but sprinters aren't hurdlers. right now this level up and above, ,000 in the s&ps is a big hurdle to get of. and we have yet to do that with any conviction or anything initiative in terms of the buy activity on the upside here. >> ben, thank you very much. >> thank you. my pleasure. >> and you give us the perfect transition. we're going to focus right now on the american consumer. it has been a big week for retailers, including gap. joining us right now with his reaction is tom filandro. tom, ben was just talking about how important the american consumer is, how the market is looking for that. yesterday, gap came out with earnings that were a penny better than expected, but this was not a story about a strong american consumer. it was really about cost control, correct? >> that is correct. this was definitely all about defensive posturing. their inventories were well

contained, margins were up. but on the demand side of the ee kwaegz, they reported same-store sales at 8%. that was against a 10% decline a year ago and a year before that, 5% and so on. clearly, the market share has been eroding away from the gap. since 2004, they've lost more than $2 billion of market share. their brands have become less relevant. the top line of demand has become challenging. >> but the company is talking about new marketing spending. does that give you a sign of hope? >> certainly one cannot -- you can only squeeze so much out of the model on the defensive side. so taking an offensive stance and with this aggressive marketing campaign as you alluded to earlier at the gap brand, highlighting the 1969 jean, a 40-year anniversary, it's grassroots, it's not on television, we like to see that. ad spend was up 15% in the second quarter, will be up 20% in the third quarter. they need to be more aggressive to get the consumer to trial the

product. the advertising, i believe, suggested they are feeling better about their merchandise assortment and better about the overall presentation. but again, the underlying consumer trends have been challenging and i think it's going to be a difficult back to school and holiday selling season. >> is it working, though, gore gap, these ads? >> i think it's drumming up some excitement, in particular in major cities like new york, fran, and los angeles. in fact, they've been out of stock with a lot of the smaller sizes, suggesting that it is working. more broadly speaking, it's not yet completely caught on. i think we need some time for that to be in the stores for quite some time. remember, the denim business is a key transaction, but in particular for the gap. so they do need to be successful in denim to create that loyalty and decree connect with the american consumer. >> when you look at the three store brands under the gap, you've got gap, old nay very and banana republic. have old navy and gap been able

to turn things around? is banana still the superstar? >> unfortunately for banana, they're in a bad position. lux brands have not been the place to be. they are professionally focused on that consumer who is looking for higher -- you know, higher income assortments. it's been a challenging position for banana republic. old navy's business has improved. we think they've done a great job with their marketing campaign. you may have seen the super model campaign. it's interesting, it's fun, it's exciting. that's what that brand is about. but they're also at value. they should be sitting right in the sweet stop of what the american consumer is looking for. old navy is showing signs of strength. the gap, not yet, but this campaign might be the tipping point for these brands. >> you know, tom, the market still looks undecided about what it thinks about these results. the gap closed yesterday at 18.85. the gap between the bid and the

academy is 18.25 to 19.50. would you buy this stock today? >> we're still positive on the price. as i said earlier, you can only squeeze so much out of this company defensively. we need to see these offensive strategies taking hold before we want to get more aggressive on the name. >> how do you feel about a gap versus some of its peers, like a limited and an ann taylor, any of the special stores? >> i think everyone is unique. defensive side for gap looks good. you mentioned limited. with the swine flu, concerns out there, bath & body works could have a stellar season and they've done some great jobs reinventing victoria's secret. they're a broad business, so we like that company, as well. players like to gaining market shares. in between that, it's been very challenging overall. >> swine flu is helping bath & body works? >> yes, we think it has.

we made a call about two months ago happening in stores. moms are pick up these mini anti-packs and making sure the kids have them. >> tom, it's great to see you. thank you. >> joe would have perked up with victoria's secret, right? >> yes. >> too bad he's not here. >> we do miss him. >> if you have any comments or questions this morning, please drop us a line. we'll take a quick break and get news making headlines outside the world of business when we come back. carol, when you replaced casual friday with nordic tuesday, was it really for fun, or to save money on heat? why? don't you think nordic tuesday is fun? oh no, it's fun... you know, if you are trying to cut costs, fedex can help. we've got express options, fast ground and freight service-- you can save money and keep the heat on. great idea. that is a great idea. well, if nordic tuesday wasn't so much fun. (announcer) we understand. you need to save money. fedex

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ick today. welcome back, everybody. it is time for a check on the news outside the world of business right now. alex witt joins us with a roundup of the headlines. good morning, alex. >> lucky me, three days in a

row, i'm up early. >> lucky us. it's great to see pup. >> cute cue r girl. >> former secretary tom ridge says he resisted the apparent effort to influence the vote to raise the terror alert level and then attorney general john ashcroft. after serving just eight years of a life sentence for the death of 50 passengers for the bombing of pan am fly, abdul was released. this has triggered outrage among the bombings killed at lockerbie, scotland. brad pitt teams up in a movie that follows a squad of eight violently vengful jewish american soldiers in nazi occupied france. you know what i'm having

fufun doing today, carl? inglorious -- >> it's the little things. >> and alex, the good things about getting up early is you can say it a whole bunch of time and nobody can say anything. >> believe me, i happen, i'm going to get it. >> good morning, good to see you. >> bye, you too, guys. when we come back, we'll treat mike holland for a trip to the chairs. later, the pulse of the american consume perpendicular we're going to hit the grocery store aisle and try to get the real story on who is spending and who is skimping.

welcome back. we're in the chairs with mike, who is -- >> i am not joe. >> you are not joe. if it's friday in the summer and you would think we would shy away from heavy policy discussions but the health care thing is so interesting. it's so hard to back away. paul krugman is in "the times" talking about why the left, not the right, why the left is so disappointed in obama. he says, you know what, co-ops are a sham, for one. he goes, but we might be able to do universal coverage without a public option. some european countries do it but he says they've lost faith in the overall health care strategy. that's undermined confidence in

doing so without a public option. he also says on the issue of health care they thought they elected a dfigure, he's if you dry with technotalk. the guy, whether you agree with him or not, has not been able to solve concerns on the right or especially the left here. >> it's interesting you bring that up. most of the time we don't plan or prepare what we're doing here. we like to surprise each other. . . i picked the same topic but from "the wall street journal," jerry -- >> i gave that to you. >> i read it. you did talk about it. carl and i didn't talk that he was going to be doing krugman. if you think there are big fireworks, if you think things are heated watching these guys yell at each other back in forth in the town halls wait until september that's when the real fireworks will take place, that's when congress comes back to washington and and obama will have to decide what plan to

take. the small option is basically a stripped down reform of the existing approach out there. this gets rid of the public option. it would have a much smaller price tag than the $1 trillion of the bills going through congress right now. and it would not be financed with a single large tax on wealthier americans, but, rather, a smattering on medicare cuts and smaller taxes along the way. cuts and taxes on this. they say the medium option, the big question is whether any republicans would vote for this, but the medium -- i'm sorry, the question is whether the republicans would vote for the small option at this point. the medium option, the question is, can you go ahead and just cram this through? can you get the blue dogs in the house on board with this? this is the key op option you're talking about. you would not have universal health care but an extangs of health care coverage. and then the third option, which is not one, we were talking about this before, third option is one floated by james carville, the democratic

strategist. he says, forget it, put legislation together that has every bell and whistle any of the democrats on it -- >> just put them on the accelerator. it's like kamikaze policy. >> if the republicans want to vote this down, if the blue dog democrats don't want to get on board, that's fine, let them go back and run on this as, the party in favor of the status quo right now. >> that's good for carville. he's about campaigning. he's not about health care refo reform. >> that's a very risky strategy. >> and they make the point, it depends, do you want policy or do you want to play in politics in the next --. >> carville is politics. >> there's also the possibility the other side could argue we saved americans from ruin, we prevented this disaster. it's not a sure-fire -- >> the polls are all over the map. if you're trying to figure this out as a strategist, like james carville, they watch polls very

close closely. they could say, wait a minute, maybe that's not the best strategy. >> if you had to vote on the small, medium, large, what are you -- >> i can't answer that because i -- >> i don't understand. >> i think you have to see something go to the president's deck. so much variance in the proposals. >> and three lines included. >> the first one seems the easiest. >> it seems the easiest because i don't think you have anybody questioning something needs to be done. there needs to be some reform. the problem is, if you look at not only the number of uninsured americans but if you look at the cost and the rising costs over the next -- the projections over the next ten years, this is unsustainable. it can't last the way it is. >> tort reform is never involved whatsoever. >> to. >> the insurance companies are, because they're much easier. >> we asked howard dean about that when we had him on about the tort reform question. he said, it's not something -- it's too big of a political land mine right now because it's one more group who would be out

gunning for shooting this down. but we have talked to doctors who have said it's a huge issue. in fact, we'll be talking a little later on a senator who is also a doctor. one of only two. >> delivered 4,000 babies, i understand. >> yes. >> if it goes nowhere, mike, is that market positive? not just because that -- because there's no policy change there but because it might take the likelihood of any other big policy getting passed for the next couple of years. >> which is what the dry technocrat referred to by krugman, i.e., obama said is the problem, which is why he wanted it before the august recess. right now the proposals that are there, even the least of the three becky just described, are not market-friendly. irrespective of whether you are a democrat, republican, progressive, conservative, these are not market-friendly things. they are -- >> why not? >> because they all take -- they're not free. the cbo, which is a democratic

institution, right, they came out and said what they said. it's going to cost more. so we'll have more borrowing, less productivity from companies. so those are just a few things. >> we'll talk more in a little bit. when we return we'll have this morning's top stories. we'll take a trip to beautiful jackson hole, wyoming. we'll have the talk of the grand tetons when "squawk box" comes right back. i'm racing cross country in this small sidecar,

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officials gathering in jackson hole, wyoming, looking at possible avalanches, crevices, cliffs that could send the economy offcourse yet again. steve liesman is there and watching for falling rocks. out of gas. car shoppers have until monday to take advantage of the government's cash for clunkers deal. the lucrative debate ran out of green fuel in just a month. what are dealerships saying and what is next for the auto industry? and make it three in a row. stocks extending their winning streak despite that surprise jump in jobless claims. will investors march to the beat of a different drum into the weekend? guest host mike holland is here and helps us break down where this market is going as the second hour of "squawk" begins right now. good morning -- i go friday morning. walk to "squawk" on cnbc. i'm carl quintanilla along with becky quick. joe is off.

in his place, mike holland, chairman of holland & company. we've been having fun. >> he can't be replaced. >> no, he can't. as much as we dream about it. no, we miss joe. he's getting some well deserved time off. markets not looking too bad. we'll try to grind this out on an up note. europe mixed overnight, asia doing well. future are positive. we've had three straight and despite all the worries this week about china or jobless claims ticking higher, they're still some bullish sentiment in this market. oil's a little higher as well despite the inventory data. actually the inventory data was largely bullish. 69 cents to the upside at 73.60. ten-year at about 343.. dollar and yen, that's an interesting story, below 94 but the euro rebounding quite well, up to a month high against sterling because of the strong -- the more strong signs that manufacturing, at least output in france and germany, is

hanging in there. gold hasn't done a whole lot all week but was up slightly earlier. a lot to talk with mike about those things and more, including the chairman's address in jackson hole. first we'll go to becky with top stories. >> good morning, everyone. federal reserve chairman ben bernanke is set to deliver remarks in jackson hole, wyoming. he's expected to discuss the challenge of pulling back aid without disrupting a recovery. steve liesman is in jackson hole and he'll have more in a minute. general motors appears ready to pick a buyer for opel. they're expected to address the topic today. it could recommend a bid by magna or go with the drusles based financial investor rhj international. morgan stanley is reportedly expected to hire 00 traders and salespeople. reuters says half have already joined.

they want workers for the foreign exchange, and derivat e derivatives business. >> as you said, fed officials are meeting in jackson hole, wyoming, on the agenda, the economy, state of financials and whether or not we are, in fact, on the road to recovery. or whether we could fall off the cliff yet again. our seniors economic reporter steve liesman is in jackson hole. he's been koving the event all week and he joins us with more. before i get to it, steve, let's get right to the real news and that is this reuters story. i don't know if you heard us talking about it in the last hour. it's largely about color in jackson hole, what's going on, who's going on mountain trails. they say the lodge's bar is the only one around for while and it's known to feature a beer-emboldened television correspondent playing guitar. is that you? >> i'd have to check on that. i only have the single source there. we don't remember, steve.

>> so there have been rumors about a tv guy playing some guitar there. there's also rumors this year about a certain administration official who brought his harm harmoni harmonica. so i'll be checking on that for you. >> wait a minute. is that austin? >> you know, i can't confirm or deny that either. >> usually, you're such a -- usually you're such an aggressive reporter. i sense you wanting to, i don't know, not take part in this story. >> some things we just don't want to know, carl. some things are not for -- but, look, if it happens, i'll tell you when i come back, all right? how about leave it will? we're about three hours right now -- i can't believe they wrote about that. they really are lacking. they should be talking to the fed guys out there. i mean, you can walk down the stairs and talk to the saudi arabiaen essential banker if you want -- >> sounds like avoidance to me. >> of all things to talk about, the blue herron bar. we're three hours from ben bernanke speaking but we understand it will be a retrospective on the last few

years of the fed's response to the crisis. we'll be watching it closely for clues about, you know, what he thinks worked and didn't work and for clues about when we think he might pull back. there's two camps here. one is one with itchy fingers, they're ready to pull back now and one with patient fingers and they want to wait it out, make sure the recovery is entrenched before they remove any of the stimulus or a combination the fed has put out there. that stuff, the official topic. then, of course, the hallway topic or the trail talk, and that's about ben bernanke, whether or not he'll be reappointed. the speech he gives three hours from now could be the last he gives as fed chairman. we talked to jacob frankel, a monetary policy expert. hes, you know what, president obama, put us out of our pain. >> lowering interest rates didn't do much. obviously, it wouldn't have been a good thing to keep interest rates high. but there was really no traction in bringing interest rates down. what helped was a big credit programs, stepping in to replace

the private credit markets. they've done that in a very big way. and i think in a way which on balance has been helpful. >> so that was obviously not jacob frankel, that was marty fe feldstein. i don't know if we have the frankel sound. let's give a listen. >> we are now in august. there is nothing, no new information that we get between now and the time that a new chairman of the fed would be appointed. there is nothing to be gained by delaying it. if there is going to be a decision, why not remove the degree of uncertainty now? >> very good friend of "squawk box," rick mishkin added after that, he said, you know what, it would be good for the economy if we knew either way right now. particularly he believes, mishkin, in bernanke, reappointed. one thing out there are the fiscal deficits. that's a big part of what we're

talking about here, going to be talked about here. there's a paper going to be delivered tomorrow and the issue is what does the fed do if the fiscal authority, the treasury, runs trillion dollar deficits. that's the stuff i'm concentrating on here. >> steve, stay right there. we're going to bring in a larger panel to talk more about this. bob mctear, former president of the dallas fed, cnbc contributor. kevin ferry the chief market strategist at kronus futures management and our guest host is mike holland, and steve is still here with us as well. kempction i want to start out with you what the immediate reaction might be from the market today? what are you going to be listening for? what are you hoping to hear from ben bernanke when he speaks later today? >> well, that reaction started last night. and i would say it was a very enjoyable show. steve, you should be commended. i could have watched for another hour. i think it was very straightguard, sobering talk from a very good panel.

so the market started to move immediately, becky. that is that i think the key thing that i took away was that the unanimity of the guests that monetary policy was extremely impetus and remains that way. i think the fed has used extended period of time to substitute for that verb yiage. the market hasn't wanted to play along. that was key and the market started moving last night. >> do you expect there could be any curveball bernanke throws today? >> interestingly enough i think the only thing we're looking for, becky, is how heavily will he weigh in on the fiscal side? he was appointed under the idea that he did not want to be put in that position. he didn't feel that was his role. greenspan was very comfortable in that position. so i think he's going to be forced into it. and i think you're also seeing it really draws a line between what they're going to attempt to do here, which i think is more

respectable and what they're trying to do in england, which is push more into the qe. so i think the market would like them to exit qe and stay on the monetary side. and that might give him the upper hand to say something more aggressive about containing future budget deficits. >> bob, steve brought up the point that it's not necessarily what's going to be in this speech today that's, discussed in the hallways behind the scenes. the point is, this could be the last speech ben bernanke gives as the head of the fed. do you think that should happen? do you think he should be reappointed? >> if i had just returned from vacation i would be astonished we're having this debate. to me, it's a no-brainer. i think he rescued the financial system, which in turn kept us out of a great depression. so i think he certainly should be. and i think he probably will be. >> steve liesman, given what probation mcteer just said, and

that seems to be among people who are condescending, they believe that's the case, why is it with your contacts at the white house and treasury, why is there this reluctance to give any head signal whatsoever about bernanke's position? >> well, you know, i've been talking about this for a while, mike. you've got to remove yourself from where you live, wall street and sort of the washington place where you are, which is everybody sort of sees what bernanke has done, understands it, but what about on main street? to what extent does main street, a, blame the fed for what happened and to what extent is bernanke associated with the feelings about the fed? that's really the rub here. the question is not what wall street wants. the question is, how the decision reflects on obama. and i don't think the politics of that are either clear to obama right now, and, b, i think there's discussion of, you know, are there alternatives we could have? the administration has it's plate full right now. i wonder if they've considered

what frankel told us last night, which is, you know what, between now and january, what are you going to get, some unemployment reports, a gdp report? is that what you're going to base your decision on? an economist said, hey, are we going to make this decision based on one month's unemployment rate? i hope not. >> is there any downside to the administration not suggesting they're going to reappoint him right now? does it create any uncertainty or is there a problem with it. >> i think the downside is the uncertainty. i'm taken back to the interview i did with george friedman from stratford back in maine pep said, first of all, wall street has no vote here. be, the americans blame bernanke and the fed for what's happens here so that would be the downside. why would you apoit this guy? if that's the actual case, what the american public thinks of bernanke. there was the poll of the fed that put the fed below the irs in terms of popularity as a government agency. that's an issue.

bernanke has been trying to make a comeback. he did the "60 minutes" interview, the ton haul with jim lehr. maybe it's too late. the fed had been doing it for eight, nine months before they turned to the american public and said, here's what we're doing and why we're doing it. then the story in the "times" the other day about how unpopular the fed is in congress right now. you can -- you might -- that might reflect american opinion. i'm just saying, i don't know what the answer is. we have to remove ourselves from what wall street wants to kind of figure out the politics of this, which is more what main street wants. >> bob, as the former president of the dallas federal reserve, does it shock you to hear how far the fed has fallen in these polls and how much animosity there is out there? 250 congressmen signed a bill that would strip a lot of the powers away from the fed. >> it does shock me. in my day, most of the criticism came from the populous left. and a lot of it now seems to be

coming from the right. i will say that in his town hall meeting bernanke didn't do as good a job as he should have. he should explain that all these programs involving -- involve lending money that will be paid back, even the treasury's programs will ultimately make money for the taxpayer. the impression out there is that people are printing money and giving it away. and they don't really understand that it's going to be flowing back. and i think they ought to -- there ought to be an education program on that. >> yeah. >> kevin -- >> i saw some -- bob, i saw some central bankers in the bar last night. they were buying beer with printed money. >> yeah. >> they gave them the money and they actually got the beer back. it wasn't a wheelbarrow full of money. >> they still accept, it right? >> if you were to buy a beer on a fed expense account, and you can't do that, but if you did,

it would create -- it would create money. it's amazing that people talk about creating money as if it's just started and only has to do with long-term treasuries. any time the fed purchases anything, new money is created. >> kevin -- >> the trick is to have it created at a rate that's appropriate for the economy. >> right. kevin, bob brings up this idea we are going to get our money back, maybe more than we think. we heard that from aig this week. the one program that bernanke specifically said made him upset. but the problem is, and we hear this from el erian who has this grand thought that once the public loses faith in their leaders, even those who are not supposed to be political, we have a problem. that's sort of what's happened with the fed, right? >> definitely. i was going to suggest, we could appoint paris hilton to the head of the fed and they would be far more popular but i wouldn't feel any better about it. it speaks to getting the message

out. he's not the most sexy guy when he speaks, but they're doing an incredible job in an incredible, nasty situation. so i think -- >> kevin, kevin, quick question for you. >> sure. >> next week, potentially, we hear that bernanke's not going to be reappointed. what's the stock market's reaction? >> not good. >> how big? >> big. >> thank you. that's bob's point. everyone knows, who has anything to do with economy, that we're not talking, steve, only about wall street, we're talking about a lot of economists. >> oh, yeah. what about if -- what about, mike, if the san francisco fed president were to be apointed, everybody regards highly but seen as a dud when it comes to the bond market. >> yeah. >> that's the market changing. one of the few things going on right now that's positive is the u.s. stock market. so i don't even want to go there. >> gentlemen, thank you very much. good to see all of you. >> i like those -- >> come back when the tetons are here. >> how big? >> big. >> that says it all. any comment or questions this

morning, drop us an e-mail, squawk@cnbc.com. up next, the state of the american consumer. we'll hit the checkout aisle with the ceo of supermarket giant a&. monday will be the last day for the government's cash for clunkers. phil lebeau with what's next for the auto business. oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it!

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now the answer to today's aflac trivia question. in what year did alaska and hawaii officially become u.s. states? the answer, 1959. we know stocks have been recovering lately but our next guest is among those who say there's a disconnect between the stock market and the supermarket. eric claus, the president and ceo of a&p, pathmark, waldbaums, a buchlg of names, especially in the new england. good morning. >> good morning. >> you said you brought

croissants. these were made in the state, right? >> i heard joe going yesterday, the french, the french, the french, i'll bring a one made in america. >> i'm sure he's watching now. you think we probably have gotten ahead of ourselves in terms of anticipating the consumer really coming back. >> well, in our business we kind of lag the stock market in the sense that the supermarket -- i guess we probably are a direct reflection. unemployment rate. if you look at our business, we got into it late and we get out of it late. i think that's typical of supermarkets. >> so, is it that they are not spending as much when they go in? are they not going in as often as period? i saw you're taking om stores you have aimed at upper income -- middle to upper income families and turning them more into value stores. >> yes. just to back up, about a year ago when i was here, things were completely different. you know, we had a bit of

inflation, 2%, 3%, things were looking good, the whole market was good. when we started, we felt like things aren't so bad in the food business but we really did get in later. the changes we see are amazing. i mean, you just see promotional spending. people are buying things on spebl. they're completely trading down. you know, they're buying -- the demand for ground beef versus what it was before or bologna or mac and cheese is significantly, significantly up. ebt, the benefits -- social benefits for food, food stamps, are up significantly. >> your part-time workers aren't turning over, right? you'll keep what you've got. >> yes. >> what have people stopped buying in the grocery store? >> anything that's discretionary. floral, for example. discretionary items, the more expensive cuts. and a funny thing, it might sound odd, who wants to hang around and look at trucks -- car trucks in a shopping mal, bl,

you'll see three different competitors in shopping carts because they're doing the trips. they're going from one store to the other. >> you think this is a fundamental change in the u.s. consumer, right? >> yes. i'm canadian and i used to run a canadian company. we're spreading the geese also. and if you look at just the whole -- the whole change, in canada, for example, the discount part of groceries significantly bigger than in u.s. europe it's that way. u.s. is probably the last kind of part of the western world that's really civilized that has so much less discount shopping. and i think that this --. >> you think it's a fundamental change? >> completely. and i think this is going to stick. >> forever? >> yes. if you look at our company, we recently raised some capital, we

had a fantastic equity player who has a great player, allow us to take all of our stores -- we operate four different formats. what shifted in our business now, a year ago i would have talked about building or renovating many more fresh stores, high-end stores, and today we're looking at taking a significant part of our stores and converting them to banner or price discount. >> does that mean your competitors are the walmarts, the super walmarts that carry groceries versus whole foods a couple years ago? >> yes, absolutely. because we operate in the northeast, they're not as prevalent, like the metro new york market. the club stores are doing -- i mean, everybody's selling food today. and the consumer today really, you know, they're conscience about value. the 401(k)s have tanked. i mean, we really see a difference in our consumer. >> speaking of value, where are

your high yield bonds trading, what yield? >> they were 11.75. >> interesting. >> there was a story in "the times" today about starbucks actually raising prices on their coffee, in some cases as much as 8%, 30 cents. mcdonald's has taken the people who are value-conscious and left them with people who are tolg pay. does it make sense for a company like that to say, our population may have shrunk but we'll try to get as much margin out of them as you can? >> i can't speak for starbucks or mcdonald's, but if they think they have a niche and they want to differentiate themselves, that's fine. we say a a&p fresh store which has croissants with 20 different types of dough, a pound of butter, fat free, cholesterol free, or a decadent apple pie

which -- you know, a pie like that sells for $7.99. you can go into a price cou discount, you'll find a pie that's $2.99 or $3.99. so it's a different consumer. price has a lot to do with value. it's not just because the price is higher. if you have the value, and people do recognize value, but it really is, today, it's on much more price-driven consumer. >> as you bring price points down, do margins necessarily come down. >> depends how you bring them down. in our pathmark, that's been our pain since we bought that in 2007, is that's a consumer more economically-challenged more than the average and our price position was too high. we had to bring it down. therefore, yeah, that affects margin. private label sales across the country are off the charts growing. >> what happens happened to your costs? >> you know, varies on the commodities. >> overall, up or down? >> i would say overall flat.

there's big deflation in certain categories in produce, inflation in meat, but overall flattish. when they started coming down, also a lot of the cpg companies don't like to bring their costs down. they'll bring down other things such as rebates you get on other things. overall, it's really -- it's much more a price game, much more aggressive. promotional spending is up significantly. and people are really looking for -- they're looking for bargains. >> eric, thanks for coming in and thank you for breakfast. >> yeah. enjoy it. >> come back soon. >> will do. coming up, what is next for frugal car shoppers. the cash for clunkers program burning through $3 billion a month. our own phil lebeau is taking a look at this.

i will do everything in my power to kill this puppy before it ever gives birth. >> that's senator tom coburn, the republican from oklahoma at a health care town hall yesterday. he's going to be our guest at 8:00 a.m. eastern time so make sure you stay tuned for that. meantime, let's get over to carl who is standing by with

some top stories of the morning. >> thanks very much. take a quick look at futures this morning. to begin with, pretty good picture shaping up after the dow put together three in a row. and futures are positive this morning, although you can see smuckers will be trading as well. federal reserve chairman bernanke will deliver some marks at the fed's annual symposium in jock son hole, wyoming, 10:00 a.m. eastern time, following a year of emergency measures to jumpstart the economy. he's expected to talk about the challenge of pulling back without disrupting a recovery. j.m. smucker posting better than expected earnings, the maker of jellies, jams and jif peanut butter. gap, banana republic posted better than expected earnings despite a drop in sales. cost cutting was the key. your tools of the trade, oil, gold, currencies, we've got it all as we get ready for the weekend.

let's take a look at the future. you're going to see that those dow futures are higher today, up

about 35 points above fair value, after three days of gains. remember, it's a friday in the summer. the time for our friday morning trading block. watching the futures at the cme group is peter. on oil is peter butel, and boris of feorex and our guest host is mike holland. peter, let's talk about three days of gains. you see the futures positive yet again. what's happening here? >> i think it's easy to forget that bond yields are only 3.5% going out for ten years. when you look at a dow jones industrial basket, which yields about the same thing, it makes stocks look pretty compelling. we haven't seen the rates rise. we haven't seen inflation series. we haven't seen long-term rates spike up. so owning equities in this environment is not that bad of a trade. >> and from the fed head today we'll be listening to bernanke. what are you thinking, peter? what would you like to hear? >> well, i think he has to

reiterate that the fed's on hold for a long time. they're in the process of letting the banks prepare their balance sheets. they're giving them very cheap money. they're letting them use that money to make loans and to hold the securities and all of the nonperforming assets on their books at a very, very low cost. but i think bernanke's got to also explain to the markets, or at least calm them, as to how they're going to exit from this very low rate policy. he's going to be careful as to how they word it today to make sure nobody thinks this is happening too quickly. >> boris, that will be key for the dollar today as well, i guess. >> yeah, i'll make a prediction, bold prediction that the fed isn't going to exit from any rate for all of 2010. >> we may not hear -- >> 2010? >> 2010. i think they stay at this level for that long, absolutely. yes. >> because people are talking about january. i mean -- >> they're going to raise rates? no way. no way. >> necessity priced them --

february's humphrey hawkins meeting seems to be a big fak for for a lot of people. if you look at the options in libor and fed fund it looks like the first tightening would be the march meeting. >> when i look at the currency market i feel like i'm trapped in a richard pryor skit. overnight we have strong european data which means the recovery trade is very much alive and risk assets will still be bought. the path of least resistance is to the upside. that having been said, i'm still looking to china and china looks precarious. overnight we had the warning they're going to raise capital requirement there. ultimately, when you look at the whole story, i believe chinese domestic growth has peaked and export demands is not going to grow because the consumer in the u.s. is more abundant and europe is not going to be export to china and middle east as easy as

it was able to export at 125 euro. we have a lot of headwind going into the second half the year. short term i see rick assets still getting bought. >> peter, if any sort of growth idea, growth trades are not in vogue, why are we talking about oil touching its highest levels of the year, above $73 this morning? >> well, it has all been based on equities or the dollar. and when we have the dollar getting higher and equities flat or lower, then we return to the fundamentals. this week we had a reasonably supportive department of energy report. we had an 8 million barrel drawdown in crude oil stocks but we're still 15% higher than a year ago. demand is still down more than 2%. it's better than it was. it was down 6%. but there's still really no sign of life here, or no sign that demand is going to come surging

back. we've just got plenty of oil in storage. >> peter butel -- >> we don't deserve to be at these numbers, i don't think. >> peter, having said what you just said to becky's question, natural gas looks like it's going to zero in this environment. >> free natural gas for everyone! >> and in that environment we have rumors or actually, in fact, we don't have a name for a big hedge fund that put on a huge trade to the upside. where do you see natural gas from here? >> well, we just broke under $3. it's the lowest it's been since 2002. >> right. >> i've got to think that, you know, there's some upside. we have not had any recovery interest in natural gas where we've seen a lot. oil's doubled. natural gas has made new lows. we'll be using electricity long before people are hired again to drive. i like the idea of buying natural gas. certainly in preference to oil. it's right now at a record high

ratio of like 23 to 1. usually it's like 8 or 9 to 1. i like the idea of buying it. it's just, there's no place to buy it yet. we have to see it stabilize and build some sort of a bottom. >> there's no place to store it. >> yeah, no place to store it. and no industrial demand yet. and even hurricanes don't scare people that are short in natural gas. we've got a huge short open interest, speculators short in natural gas. it's very unusual market. we have like two or three speculative shorts for each speculative long. it's been this way for two years through the winter, through hurricanes. we can't really explain it. they've got to be having that position against something else. but it seems that the shorts are in it for the long haul. that's why some people are saying they're going to be giving it away. you buy a gallon of gas and get some natural gas for free.

obviously, it won't come to that. but it's looking like it. i mean, very, very weak. >> peter, boris, thank you, guys, for joining us today. we have to leave it there. we'll see all three of you very soon and we'll hear more from mike in a minute. >> get more market thoughts from mike holland in a second. up next, the government's pulling the key on the cash for clunkers program. phil lebeau will have that story. we'll see if it was a success. or a fuel you'ailure. what's next for dealerships. here's a look at the biggest volume movers cross the indices.

the obama administration hoping for a smooth ending to a program that spurred auto sales but also created some headaches for a lot of dealers. we're talking about the cash for clunkers program scheduled to end on monday. our phil lebeau joins us now with more, about how this will wind down, phil, and whether or not we're going to be talking about it in the months to come as a good or a bad thing. >> reporter: i think overall the industry will look at it as a good thing, carl. sure, there are some headaches that go along with it. overall, this has brought a lot of people into the market who previously probably were just going to be driving old cars and driving them for a long time. let's talk about the end of cash for clunkers. you mentioned that it's ending

on monday. 8:00 eastern to be specific. that's when they're going to wind down the programs. so all the dealers in it know they've got to get all these deals done. it lasted just four weeks. remember when they were saying this is going well into september. they're finishing early to ensure adequate funding. so far 457,000 vehicles have been sold, approximately. they don't know an exact count as far as how many were sold. about $1.9 billion in clunker rebates have been submitted so far to the government. but the government has paid out just $145 million so dealers. they've reviewed just under 40% of the applications. what's the problem? paperwork. a lot of paperwork has to be submitted with every single sale to ensure that the clunker is, scrapped. it is not going to be recycled. that's how they're trying to limit any froud that goes with the program. dealers say waiting for the rebate, it's not just a headache, a lot of money out of their product. the government is requiring

extensive paperwork. this is to prevent fraud and recycling of cars. most dealers will tell you this was a worth while program because it brought people into the market who previously were probably going to drive an old car, maybe stick $500 or $600 every six months or every year just to keep it on the road. this was the incentive to get them in there. the real challenge now, selling vehicles without a $3500 or $4500 incentive. >> speaking of which, phil, and stick around because we'll chat with mike holland about this, j.d. power adjusted their forecast and they cut retail forecast for 2010 by 100,000 in light of what they said the expected pull-ahead in sales. did we borrow from the future, in other words? >> they're not alone in cutting their forecast for 2010. i know standard & poor's is expecting some automakers to have to bring down expected sales next year. had is the big debate in the industry. how much sales pull forward has

taken place? some people that i've talked with in the industry of are of the belief there's not going to be a whole lot there. if anything, this has churned the market. this has brought people into the show rooms, if they had a clunker, now they'll think about buying. we'll know in the next couple of months. >> this program is coming to an end right about the time the factories are bringing workers back. is that the exact wrong time to be starting up your line again? >> reporter: they have to, becky. their inventory is so low right now. you know, we can't really show it here. this lot when we were here two weeks ago packed with ford focuses. now you're seeing very few focuses, a lot of empty spaces. it's not just at this dealership, it's around the country. they have to ramp up production. >> but will they be in the same position if people stop buying? >> reporter: this is different. this is different. these are ju dishes moves in increases of production over the third and fourth quarter. it's not like they're adding

500,000 units. we're talking 20,000, 25,000. so they're, very careful about how much they increase production. it is a concern worth watching if we don't see sales stay at the level they're at. they believe across the board in the industry they've been -- >> stay at the level they're at with cash for clunkers or stay at the annual sales pace they've been at? >> reporter: well, cash for clunkers is going to move it up in that 12 million range. if it stays 10.3 to 10. they can live with that. drops under 10, that's a problem. >> did we hear correctly the auto companies are fronting to the dealers the cash in anticipation of the government? >> reporter: yep. >> and is there any validity to the criticism that this is like triple-dipping on the u.s. taxpayer? in other words, they -- >> the auto companies, you mean? >> the auto companies. we lend them money, we bail them out, we then do cash for clunkers which some people say is free money and now we're

lending money to the dealers as well? is that-s there any validity to that whatsoever? >> reporter: i don't buy the validity that it's triple-dipping with the automakers lending money to their doerlealers. we had on mike jackson from auto nation, given that's a huge publicly traded group, they're waiting on $45 million from the federal government. you take a smaller dealer, we went to a ford dealer in chicago. they're waiting for 100 grand. for a small dealership that's a pinch on liquidity so that's what the automakers are doing. they're saying at least until you get your reimbursement from the government, we're going to cover you on that $3500 or $4500. >> the question s where do they get that money to do that but that's a whole different subject. >> it must are been weird, phil, for some dealers who had nothing to do, one or two visiteders a day, and then, bam, all of a sudden you've got the stores -- the office is packed. this must have been an

incredible thing to go through. >> buy more coffee. >> reporter: you know what, carl, it's like shooting fish in a barrel. i've been at this dealership, people walking in, i've got a clunker, i want a new car. there's no haggling going on. there's no debate. seriously. and that has been a once in a lifetime thing for a lot of dealerships. now they're going to have to get back to the more normal business of people looking around for the best deal out there. >> phil, thank you very much. we appreciate it. we'll see you again soon. >> reporter: you bet. still to come on "squawk box" this morning, we've got a list of stocks you need to watch ahead of today's trading session. plus, more town halls and more americans voicing their opinions about overhauling health care. we have senator tom coburn, congresswoman marsha blackburn, they're both holding meetings in their state, they'll report back about how their constituents feel about the plan. um bill--

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stocks to watch this morning in honor of joe, who's off beginning his summer vacation. j.m. smucker came out, q1 earnings, 92 cents, ex-items, we're not sure if there's come pirable to reuters forecast of 80 cent. revenues were slightly heavy. and they did reaffirm for fiscal 2010. looking for aps of 365 to 380. the street's at 375. we'll see what happens with j.m.

later on. intit, guide's next year to 189 to 196. that is below the street at 201. also guiding the street -- well, actually, revenue is 3.3 to 3.4 straddles where the street is at 3.3. brocade after the bell last night eps of 12 cents ex-items, a penny ahead perform the the company revenue was light. that's been the ongoing dynamic. it's like a broken record, comes out, beat the street but the top-line growth is absent. >> yes. even back to retail we were talking about before, it's like we get to a period where they can't cut expenses any more and there's no top-line growth. we're talking about gap. that's the -- a few smart people are able to get market share and build top line. we heard from mr. claus from a&p, the consumer doesn't look like they're about to do

anything to the upside. even in i.t. you have the same phenomenon. >> when you talk about the american consumer, the retailers we talk to say they're not even building up their inventory for the holiday season. they're not expecting anything to turn this year. does that mean that the huge gains we've seen, like 40%, 50% gains for some retail stocks and beyond are unjustified? >> there's no doubt that they reflect things other than the underlying fundamentals. doesn't mean it can't go on. the shanghai exchange, for example, which we all agree is nut, is as as good as the monday mentals are. i'll be in shanghai next week. people say the numbers are all bogus. it's not. the companies are doing okay but not up 80%, 90% like the shanghai. we have stocks outperforming the fundamentals and that's serm true in the u.s. >> one other name, radio shack, which is now the shack. have you seen this?

>> what? go they're repurposing their brand. >> sued by shaquille o'neal. >> like they're that cool. is it because radio -- >> brian shactman already owns that. forget about that. >> radio's considered a little analog. >> outdated. >> oh, yeah. >> the shack, seriously? >> good for them. >> they did boost their repurchase, their buy back from 90 million to 200. no expiration date for the company's buy back program. >> good. >> yeah, some decent stuff in there. beck? coming up, we'll have this morning's top stories. plus, we'll be heading back to the grand tetons. steve liesman has been making the rounds, chatting with fed officials, playing his guitar, trying -- >> harmonica. >> -- recruit harmonica players everywhere. he'll fill us in before mr mr. bernanke's speech. people across the nation storming town halls, talking health care. one senator, one congresswoman.

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the markets wait for word from the mountain. fed chief ben bernanke ready to address central bankers in jackson hole, wyoming. but will he provide any clues about the state of the economy and the fed's next move? sounding off on america's health care crisis. >> i will do everything in my power to kill this puppy before it ever gives birth. >> oklahoma senator tom coburn checks in with us on his way to another town hall meeting. "squawk box" begins right now. ♪ rocky mountain way ♪ better than the way we had ♪ oh oh oh happy friday.

welcome back to "squawk" here on cnbc, first in business worldwide. i'm carl quintanilla along with becky quick, who is here physically but mentally -- >> i am right here. there's no place place in the world i'd rather be. >> she's already on the beach. >> except maybe the beach. >> joe's got the day off. our guest host, of course, mike holland of holland & company, been having fun for a couple of hours. one more to go here. futures are positive. dow seems to want to put together four in a row, we've already had throw. asia was mixed. the big story will be the fed chief, ben bernanke, delivering a speech in jackson hole in two hours. called reflections on a year of crisis. we'll check in with steve liesman in a moment about what the fed chairman may say, what he want to accomplish as always are on jackson hole. >> you said all eyes because joe is not here because you would wrap your fingers -- >> going forward. >> he doesn't like that. >> i know. in other headlines today,

transportation secretary ray lahood says the government's $3 billion cash for clunkers program will end monday at 8:00 p.m. the department of transportation analysts project there is enough money to keep accepting the submissions until the deadline. we just heard from phil lebeau who was talking about what this really means. the big question is, what happens to sales once you take away those big incentives. will they continue or will we see them drop back to where they were before or some pessimists like mike holland think there will be a bigger drop -- >> i've never been a pessimist. just a realist. >> we just did. we've talked an awful lot about this. if you were luring people in that were a few months away from buying new cars, what happens? >> of course. some people are new purchasers, some aren't. >> general motors appears ready to pick a buyer for their european carmaker opel. they're expected to address the topic today. they could recommend the bid by magna or by the brussels based

financial investor r.h.j. international. talks with opel have lasted for months. it's been a huge week for retail earnings. shares of gap are called higher this morning after, in a broad trading range earlier this morning. gap is the owner of old navy, banana republic and namesake stores. you can see right now, the bid on gap is $19.49. the ask is $19.50 after that stock closed at $18.85. came in with better than expected earnings, beat by a penny despite a drop in sales. cost-cutting obviously the key. >> yeah. meantime the fdic reportedly plans next week to soften its proposed restrictions on private equity firms buying failed banks. the journal says officials are hammering out details of the final rule. the agency's expected to back away from some aspects of its proposal in july, such as a requirement to buy out firm's bidding on failed lenders, maintained much thicker capital cushions than banks themselves. the fdic is trying to walk a

fine line bringing more capital into the banking industry while also trying to avoid putting banks in the hands of investors who might promote some risky practices. your argument, mike, is you'd like the liquidity. you'd like people there to catch the falling baby if, in fact, it falls. >> the last thing i think you wanted to do over the last sel months, carl, was keep liquidity and capital out of the banking is system. i think to figure out a better way was to say we're going to give you a tougher stand. there has to be a better way. >> like telling the life guard, thanks for saving my life but i don't like the way you're addressed, something like that? >> that's what mike jackson was saying. like the color of the preserver dish. >> gift horse in a mound. fed officials meeting in jackson hole, wyoming, on the agenda, the state of the economy, the state of financials and road to recovery. our senior economics reporter steve liesman is in jackson hole. he's been doing quite a bit of good work and not all of it involving television.

steve, i guess people will want to know, to what degree is the chairman going to move the ball forward today? if, in fact, that is his choice? >> well, you know, i think the chairman in any event would be out there today defending what the fed has done during the crisis. perhaps it's doubly important because the fed chairman is up for reappointment. i think he's going to make the case. i think there's a sense here that maybe the fed hasn't gotten credit for what it's done even while it might take the blame for not seeing it or acting sooner on the crisis here. you know, it's -- we talked to marty feldstein about the recovery and the recovery is about as shadowy as the mountains are behind me. marty says he's worried about a double dip. >> i think we're going to see positive numbers in the third quarter but, again, it's driven by what? by a strong fiscal stimulus package, by cash for clunkers,

by some inventory restocking. so the big question is, what happens next? what do we see in the fourth quarter, first quart he of next year and there's a real danger that it runs out of steam. >> reporter: you know, the fed has this problem of figuring out when to make the turn. and the economics -- and understand what the economy is telling us. it also has unusually this time around, a lot more toll pipolit the table. i just started making a list of all the things -- the political things on the fed's plate. there's bernanke's reappointment, fundamentally a political issue. secondly, exit strategies are very tied into politics as does the fed move before unemployment rate is down substantially? when it does move, what does it sell in sell mortgage-backed securities? does it get heat from the builders? fiscal deficits are a big issue if the treasury's going to run trillion dollar deficits. what's the fed going to do with its policy? it may be tougher. regulatory reform and an

oversight bill in congress co-signed by some 250 representatives. so all of that embroils the fed in these two things that are out there. the first thing is getting the turn right, gauging the economy correctly and then the second thing, finessing the politics of monetary policy which i consider to be much more on the plate than years in the past. carl and becky? >> steve, one quick question. you know, some of the critics of bernanke are obviously writing in advance of the speech today. one is making fun of the title of the speech "reflexes, memories" they say unfortunately the trip down memory lane will not begin in mid-2003 when bernanke stood with greenspan cutting rates. it's ironic the man who sparked the fire is looking for accolades because he put it out. does he know he's facing that today? >> reporter: i think so. i just wonder when i hear that where that get you. the debate over 2000, 2003, 2004, 2005 is interesting to the extent i think it informs policy

today. was the fed too slow in coming back? there were 17 members -- 19 members of the fed that all voted in favor of that. it was a time politically you'll remember or economically when inflation was very low. how does the fed in a situation like that raise interest rates. greenspan decided to do it in quarter point. the question is, whether that should inform policy today and how quickly the fed should get out. i will tell you, it's interesting, some papers here today will point out that one of the pitfalls of previous efforts to fight banking crises like this is getting out too soon. one paper, it's been said before, so i can reveal it, says fiscal policy doesn't work because essentially it's never been tried. they point out the halting efforts in japan and in the united states and the great depression where they did fiscal policy and then they stopped doing it. so we don't really know how well it works. >> steve, what i will say, though, is you said the economy is about as murky as the mountains behind you. just while you've been talking they've been getting a little

clearer. tells you how quickly things can change. >> oh, imprek's good. >> if they can extend the segment and i keep talking i'll get out of the way because it's really beautiful in the morning when they have the -- >> pull back a little bit. have the camera pull back. there you go. >> crisis and recovery. >> reporter: get in there. now, guys, do you see a with the -- with ta "w" or "v" in those mountains? did you hear what don cohen said, what do you call a central banker without water? >> what? >> reporter: a lack of liquidity. >> oh. >> oh. >> that sounded fishy to me. >> steve, thank you. we'll, watching you through the morning. again -- >> >> reporter: yeah, watch the mountains, not me. >> we'll see you in a little bit. thank you, steve. for the month of august senator tom coburn has been meeting with constituents, answering their questions and answering their concerns about

the move to overhaul of health care. take a listen. >> what you're talking about them doing is socialism. >> amen. >> that's what it is. it's saying we can't trust any private sector changes to solve the problems. and we're going to trust that the federal government can't solve the problems. well, i can tell you, half the problems we have in health care today are because of the federal government, not in spite of. >> joining us on the news line right now while en route, in fact, to another town hall is senator tom coburn. senator, thanks for joining us this morning. you're on your way to another town hall meeting as we speak. what have you been hearing from your constituents? >> i think mainly fear and worry. they all want the health care problem solved, as do most of the people on my side of the aisle. the question is, is how you do that is critically important to them. they see all the money we're spending and then they see a large amount of money associated with fixing the problem. and they just can't buy that the

federal government needs to spend more money and needs to be in control of health care. and that there's got to be a private sector solution to it. >> senator, you are one of just two medical doctors in the senate. as a medical physician, what do you see when you look around the system? what do you think needs to be done? >> well, i think we need to do a lot. i think we need to utilize the forces that we know work well in other areas of our economy. one of those is transparency and market forces. number two would be that we need to make sure we don't harm what is working well. we do have a very expensive health care system. and we can get a whole lot more value out of it. but to destroy some of the central tenets of it in name of getting value goes against the first medical tenet, which is do no march harm. we have very good care, but it's way too expensive. there's lots of ways we can come

together, democrats and republicans, and fix what's wrong without putting the government in charge of it. that's the real fear. the fear -- the reaction you're seeing around the country in terms of health care really, it's the undermining of that -- the underlying of that is this tremendous overspending the amount of money that's been spent in washington. people have a great fear of that. >> senator, i know it's always dangerous to look at poll numbers, but you look at the percentage of americans who want in their words -- in the polls' words, a complete overhaul is well above 60%. it's come down a little bit. there's a difference between finding a bipartisan thing that sort of takes a couple kninickst of this monstrosity or those that reinvent it. are republicans willing to reinvent it? >> no, i don't think so. i disagree that we need to reinvent it. 8% of the cost of health care today is cost-shifting from the federal government. another 8% of the cost of health

care today is the tort system we have in this country that creates defensive medicine costs, give nobody value and actually hurts people. there's 16%. if you fix that 16% tomorrow, you would make available to the 47 million, 23 million would then be available and can have -- afford health care. the thing that's limiting care is cost. that's what's -- that's what inhibits access, is cost. i disagree. it depends on how you ask that question. do you want health care cheaper? everybody's going to say, well, let's change the system. do you want to continue to maintain control over your health care, and make it cheaper, then a lot of people will say that. the plans that are out there are different than what people say they want. that's the real disconnect. quite frankly, the american people get it. especially -- you know, if you look at -- we've had crowds all the way, 1200, 1500, with the union showing was 925 people

just in a town of 25,000 people. you think about, 4% of of the people are coming out. nobody generated them out. they're scared. they're afraid that what they have now isn't going to be available to them. >> senator, over the last several days the public option portion of this discussion has been generated most of the heat or a lot of the heat. yesterday we heard from nancy pelosi that the house would not pass a bill without it. we heard from senator conrad that the senate wouldn't pass one with it. where does that leave president obama? >> well, i think that the president has to lead with the leaders in congress. what i would suggest to him is he call in components that haven't been involved in it, people that really want to get it solved and work and see that we -- we can solve this -- look, we can create a much more competitive insurance market. if that's the goal of a public option, question do it a whole

lot better without having the government in the financing business. of the insurance. so i think the president's going to have to lead. the problem's been a disconnect from what he said versus what they produced. i believe the president that he wants to solve these problems. and i believe he wants you to be able to keep your insurance. and i believe he wants the cost to go down rather than to go up. but what they have produced is something totally different than that. and what he has to do is he has to lead the hard left of his part. he has to bring in the conservatives on the republican side. we can hammer out something that can effectively, markedly improve access and lower costs and improve quality if this country in items of health care. >> senator, would you vote in favor of a stripped-down version thatt that included something like cooperatives. >> they're still regionalized, fill financing by the federal government and still going to have a government organization that's going to essentially destroy private care through

health insurance. you're going to transfer another 100 million people away from the plans they have today into some type of government-run, whether it's a co-op or centralized washington, you're still going to eliminate that segment of the market. what we need -- look. there's no question we need stronger competition and more transparency through the insurance market. and there's no question they can be more efficient. but the answer to that is not a government-run program. the answer is, is let's do risk readjustment. let's create real indemocrat fiction. let's create incentives where people want to manage people's chronic disease and do it in a way that actually saves money and prolongs lives. we can do all of those thing. part of the problem with a lot of insurance is states have mandated that you'll cover all these things that most people don't need. we have disconnected the purchase of health care to the payment of health care. >> all right. >> and if you reconnect that up,

where people have an incentive to be a good shopper and get good economic value, we're going to markedly lower costs, especially if you eliminate the cost shifting and do some type of tort reform. >> senator, we want to thank you very much for your time this morning. we lz you're on your way to another town hall. we appreciate hearing from you and hope to see you again. >> good talking to you, becky and carl. in the next half hour, ten congresswoman marsha blackburn will be joining us. >> everybody's got a town hall story. it is the summer of the town hall meeting in some ways and from coast to coast lawmakers still facing angry taxpayers up in arms over health care. we'll talk to "meet the press" moderator david gregory about the politics, played out and what it means for the.'sgame plan. futures hanging in there in a tight range. options expiration today, we'll see what kind of effect that has. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading.

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we'll be talking more about health care over the coming days. you know, one thing, mike holland, is that you learn the weekends are not safe because so much policy gets -- >> news. >> -- gets massage the or at least modified based on the rhetoric that comes out over the weekend. speaking of which, david gregory is moderator of nbc's "meet the press," joining us from washington. david, you can't rest. you have to watch on sunday because so much of these things pivot on what they say on your show. what do you think is the most important question going into this weekend, given that all of a sudden co-ops seem unacceptable to both the right and left or anything in between? >> i'm not sure that's the case on co-ops. i think co-ops are still, held up, at least on the senate side, as something that some of those moderates can support. >> really? okay. >> i mean, at least that's part of the legislation. you are right that certainly within addition i mean, you heard senator coburn who thinks it's a tantamount to a public option. i'm not certain that's quite

true. on the left you have the same concern, not the extreme left but more of the conservative moderate democrats. the point about all of this, though, and the big question is, what's the president going to do now to reframe the debate in terms of how he talks about it publicly and how is he going to shift strategy internally? how will he personally work those democratic senators differently and affect this process to see if he's got the votes, if he can get to 60 to get something through the senate? will he hold onto the idea of a public option, which to talk to negotiators, people working on this on the hill, is dead. and they'd rather he not be talking about this at all. the president knows he's got a lot of democrats, the base of his party, who have voted for this on the house side and who say they will not support anything that doesn't include it, who are still pushing hard for it. >> although, david, even just from a technical perspective, it's a little tricky in the senate when you have two senators, both senator kennedy and senator byrd, who a lot of times have been too ill to make it to the floor. you can't necessarily count on

those votes. is that why senator kennedy, you think, is moving ahead to try to get his seat filled quickly? >> that's one of the reasons for sure, that he would want to make sure that a vote would be cast. that's something the white house does have to factor in with both of those senators. the bigger problem, though, is the fact that he's got a number of more moderate democrats who are not on board at the moment and who are not going to support this the way its presently configured. the co-op idea and the public plan is very interesting. senator coburn mentioned you'd have, you know, tens of millions of people who would flock to the public plan. the congressional budget office says that's not the case. it would be on the order of 10 or 11 million people who would move over to the public plan. and that, in fact, private insurance enrollees would go up by 3 million people. so it's not at all clear that that is the case. we know that a public plan would drive down costs. but there's other factors there, including all of the government

funding for it that turns off a lot of the more conservative members. >> the journal this morning floats the idea, apparently from james carville, that one plan could be, for the democrats, swing for the fences, right, if it hits, great. if -- i mean, add all the bells and whistles if you can. if it doesn't, blame the other side. does that seem politically tenable given the vienvironment we're in? >> yes and no. they could certainly try to force a vote and try to persuade democrats -- they have to keep this out of their own backyard and persuade democrats not to join a filibuster of the plan, even if they want to vote against it and lay it at the feet of republicans. but they have to start to turn public opinion around right now. there's new polling out this morning indicating that the president's job approval rating on health care is at 41%. that's where bill clinton's was in '93-'94. that's part of the problem here, is that even allies of the white house on the health reform

effort have said that the right has effectively delayed and kind of taken control of the terms of the debate. that's why you see the president doing what he did yesterday, going on a radio talk show, doing some other things to talk about this in moral terms and to try to cut through misinformation and change people's views about what they consider to be part of this reform bill. >> david, how unified do you believe that the blue dog democrats are right now? is there any splintering going on right now? >> i don't think there's a lot going on right now. i think the president can try to change that dynamic some. but again, he's trying to balance a very difficult thing here. you saw how they reacted this week on the issue of the public option because they know that the base of the party feels adamant about that. that it's got to be part of it. they feel like it's a grand departure from where he was in the past month supporting that. so, you know, the president's got to cobble together a coalition here on the left that's going to be sustainable.

even as he -- he's making it pretty clear that he thinks the right has made a decision that republicans in the leadership made a decision to turn this into clinton care of '93 and to oppose him on that basis. so he's got to look for a democratic-only solution. >> david, we've got to go. i will mention you are going to talk health care this weekend, orrin hatch, chuck schumer. we'll talk to you next friday. >> look forward to it. >> "meet the press" on sunday. check your local listings. we'll pick up on america's health care crisis with congresswoman marsha blackburn of tennessee. we'll find out what kind of response she got from taxpayers. dow futures up by 32. s&p up by 5. existing home sales coming out at 10:00 a.m. ben bernanke will be speaking. stick around. fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center.

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welcome back to "squawk" here on cnbc, first in business worldwide. we're one hour away from the opening bell on wall street. becky is literally just almost pushed herself away from the desk because she's half an hour away from vacation. >> i did not. >> yes, you did. >> a busy day shaping up. federal reserve bernanke set to deliver remarks in jackson hole, scheduled to begin speaking in an hour and a half at 10:00 a.m.

eastern, following a year of emergency measures to jumpstart the economy. he's expected to talk about the challenge of pulling back without disrupting a recovery. steve liesman's in the grand tetons. he'll be checking in with reports all day long. a weekly report released late yesterday shows banks have trimmed borrowing from the central bank's emergency lending program. banks averaged $30.7 billion, down from $33.9 billion. but the fed did increase the financing activities in other areas. t.a.l.f. lending was boosted. in a program designed to drive down mortgage rates, the fed ramped up its purchases of mortgage-backed securities guaranteed by fannie mae, freddie mac and ginny mae. >> that's good news. they say the cash for clunkers program will end monday, 8:00 p.m. the department of transportation analysts project there is enough

money to continue accepting submissions until that deadline. but after that, beck, game's over, we think. >> 8:00 p.m., they say at that point. now or never. let's check out shares of gap right now. the retailer's been sharply higher this morning. at least in the late morning after coming in with third quarter earnings that were better than the street was expecting. they beat by a penny even as it's chains saw declining revenue, down by 7%. they talked about full price sales, inventory control, cost cutting, all helping the bottom line. if you take a look at the stock, the bid's at 19.37, ask at 19.80, almost a dollar above where it closed yesterday. shares up about 40% over the last few months, though. people are watching this closely. the key news may be what it's doing now in terms of marketing spent to try to get consumers in, maybe win market share. let's check on the markets. futures have been above fair value.

dow futures have been up by about, oh, 34 points above fair value. we have rick santelli and jeff of indexfutures group.com standing by, mike holland is in studio today. rick, lots of data today. the philly fed yesterday showing improved activity and yet you're talking about the ten-year end, the week below 3.5%. what's happening? >> reporter: i think what's going on in manufacturing isn't necessarily the litmus test for what the credit markets may be concentrating on. also keep in mind, this month, the month of august, with supply is bias to the upside for prices and downside for rates. i think you're getting a bit of an artificial look. but to be sure, there's still am out there that are looking for inventory cycles to come and go but not necessarily hugely optimistic. on the real bread and buttered, nuts and bolts of the economy two, three, four quarters down the road. >> rick, we get two numbers coming out -- or two events happening at 10:00 a.m.

we'll be getting existing home sales for july. ben bernanke will start speaking. what's the handicapping on the floor for both those events? >> they'll be looking for the fourth month in a row of better xising home sales. it doesn't mean the housing market is all great. there definitely continues to be some better optimistic news on housing but yet foreclosures, the amount of upside-down mortgages in the prime zone seems to be the new area of distress. as far as mr. bernanke, i'll tell you what, the new conventional wisdom on the floor says he may keep his job and we may not see a tightening until after the november election in 2010. >> rick, next week treasury auctions, do you see any problems with any of them? >> i'll tell you. that's a great question. i don't see any problems in the foreseeable future. like the credit crisis, let's say circa 2005, when many out there couldn't believe the spreads were so tight, there's something happening down the road, i don't think we should assume supply is going to be an

easy issue as far as the eye can see. i think it's time now to be announcing fiscal restraint. i wouldn't assume the markets in the world of a global investors are just going to gobble this up forever. >> we've been talking about the stock markets up three days in a row, futures are higher once again today. what's the general sense on a friday in august as we head into the weekend? >> becky, a lot of the action we've seen this week has been taking place, one, because of expiration. august expiration is historically a time when we end up making highs. when you see highs made in august. there is a lot of activity, even though it's not one of these quarterly expirations. the other thing is china came out last night and raised their cap requirements. a lot of the selling we experienced earlier in the week was directly coming out of that asian theater and that asian time zone. now we know exactly why. because a lot of that cash needed to be repatted rated back. we need to take a step back. we are in a 3%, to 4% range.

all of this volatility is a precursor so a much bigger move, which is probably going to be coming in september or october. the one thing i will add, becky, is that you're going to have that fed chairman speaking in another hour. what mohamed el erian talked about the other day what teams to be a lack of coordination among central bankers where they're starting to worry about national -- you know, some of the national pressures taking hold of policy and if that's the case, this must be a bit of a warning signal for the dollar down the road. >> jack, i should share with you for something i heard last night from one of the most successful chinese investors. he said with concerns about chinese authorities and stopping the freight train of their stock market, he said, don't worry about them pouring water on the fire. they're not going to do that. they will simply pour less gasoline. just passing that along. >> you know what, that's an excellent point. remember, the chinese are very cognizant of the fact they're also going to need a stronger u.s. consumer to take off some of the inventory they've been

building over the course of the last couple of months. so all of this is a very ince incestuous relationship right now. >> guys, thanks much. big story of the morning, the fed in jackson hole. our steve liesman is there. he'll be telling us what's happening. later this morning, he will catch up with axle webber, who is the president of germany's central bank. as you can see, the sun's up already. mountains are looking beautiful. also, while fed officials enjoy a bit of r&r in the tetons, members of congress are on august recess. it's anything but fun in the sun. con t ♪ yes, you're lovely... ♪ what do you think? hey, why don't we use our points from chase sapphire and take a break? we can't. sure, we can. the points don't expire... ♪ there is nothing for me... ♪ there's no travel restrictions...

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when we come back, the summer of america's health care crisis, town hall meetings across the country getting overheated. taxpayers sounding off. we'll talk to congresswoman marsha blackburn on her town hall experience from just this week. first, futures hanging in there close to the session highs, although it's been a tight range. some decent action in asia and in europe this morning as well. "squawk" comes right back. i'm racing cross country in this small sidecar,

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the justice department approving oracle's acquisition of sun microsystems. it was one of the final hurdles in the company's plan to close the $7.4 billion deal before the end of the month u.s. officialsed they were looking at questions about oracle's plans for licensing sun's java softwares. the european commission also has to sign off on this deal as well. as you probably know, some protesters are going to extremes when it comes to vocalizing

their outrage over the overhaul of the government overhaul plan. barney frank had a heated exchange with womone woman who d an altered photo of president obama with hitler mustache. >> why do you continue to back the nazi plan? >> having a conversation with you would be like talking to a dining room table. i have no reason to. >> some interesting tape. actually a lot of interesting stuff that happened before that -- >> the woman was holding a protest sign that had depicted president obama as hitler, so you can understand where some of barney frank's outrage was =÷ coming from. she was using words like nazis and nazi policy. >> and he said having a conversation with her was like having a conversation with the table. and said that the fact that she was able to speak was a huge testament to the first amendment in this country. joining us to talk about that

and a lot more, the pulse of america on educating americans on the health care plan, congresswoman marsha blackburn joins us, the deputy whip. good to see you, congresswoman. >> good to see you. thank you. >> is that woman's behavior inappropriate, harmful, toxic, and should congressman frank have spoken to her that way? >> you know, one of the things i think is happening is when people feel as if they're not being heard, members of congress are not listening and there's frustration, then you're going to see outbursts like this. i think what we have to take into account is this. the american people are so frustrated with trying to deal with the bureaucracy in washington to begin with. you know, they don't like dialling a number, punching a button, getting put on hold, having to go through all of that process. then they've been watching what has happened since the first of the year with the stimulus, with all the bailout, with the gm situation, the cap and trade bill. and then here came the health care bill, which is a very

personal, personal issue. >> right. >> and i think their frustration is mounting and they feel as if washington has not been listening to them. >> so that means it's okay to walk in with the president looking like hitler? >> no, it does not mean that it is okay to walk in with a poster like that. nor does it mean it is okay or acceptable for congressman frank to respond in that way. i think it is imperative that we as members of congress conduct our town halls in a way that ensures individuals they are going to be heard. that is what i think most members of congress have sought to do during this august recess. i'm having lots of town halls. i've had ten. i've had listening sessions. i'm talking to civic clubs, chambers of commerce, making certain that we're visiting with as many individuals in our district as we possibly can. >> is it -- >> and hearing their concerns. >> can anyone show up? >> yes. we have -- >> it's open? >> yeah. we've had open to the public town halls, we've had facebook

meet-ups. we had chamber of commerce meetings. we go through several different venues. what is so interesting about that -- >> let me stop you quickly. when you go in there, are you prepared to spar with them or are you prepared to be a punching bag? because there are two different ways a politician could go with this. >> well, i think there also could be a third way and that's for a civil exchange and for listening and hearing people out. everyone has the opportunity to come and present their views. and they should. and we as members of congress need to be listening to what people are saying to us. >> but, congresswoman, you've seen the tape this weekend. >> yes, i have. >> you've seen arlen specter's session. there is a point -- i mean, on the one hand these town halls are so important, it is democracy in action, but is there not a line which you have the ability and correctly argue

to say, hold on, you're no longer expressing free speech. you're, hateful. you're tainting the argument with yourive rhetoric. >> that comes when you have someone or if there is someone in a town hall that wants to be disrupti disruptive, then if you are moderating and handling that town hall, then it is important to handle that situation. but there again, i think we have to be very careful. we have to be respectful of the fact that the american people, we are a government of, by and for the people. people want to weigh in, they want to express their thoughts. i've always told my constituents, you may not always agree with me, but you're going to know where i stand. and you're going to know the process that i go through to arrive at the decisions where i arrive. and i share that with my constituents. and through facebook, through our website, through e-mails, we do our very best that question

do to keep them informed of what is happening in washington. and i think that communication is vital. now, when there is -- when your constituents feel they are locked out of that communications process, that is when you're going to see this type disruption. it should be a lesson to all of us that it is imperative that we talk with our constituents. it's a form of leadership. communicating with them to make certain they understand the issues that are coming before us and then what the decision process is going to be, the evaluation process, what that's going to be. >> there's been some chatter this morning about one potential idea for the democratics would be to go heavy on a bill that pleases the far left and just, i guess, dare republicans to vote it down. is there a sense among republicans that you dare them to do just that? >> i think that there is a sense of extreme disappointment from the american people on this

saying, well, we're going to go it alone, we're going to force this through, we'll do it all with democrat votes. and that is the type rhetoric that causes individuals to put their guard up and say, you have got to be kidding me? look what you've done with stimulus. look at how you've mismanaged so many different federal programs and now you're telling us -- >> some would argue -- >> -- you're just going to disregard? >> some argue the verdict is still out on stimulus. cash for clupgers, although messy, you can make an argument it has been a success. would you disagree? >> i would disagree with that. we have auto dealers waiting to see the first dollar to come from the federal government. and there are some of us who thought the better way to do cash for clunkers was an 18-month program where it would have been a tax rebate or an incentive. letting individuals plan for those purchases and auto dealer plan for individuals coming in and getting that tax credit. that would have gone through the process, extending it a little

bit longer. i mean, there were other ways to approach that rather than setting up a program that you started, you got it out there, then you had to pull it back, then you had to re-fund it. there's a debate -- my goodness, now we're hearing gm is going to advance money to the auto dealers if they go ahead and continue to participate in the program for the weekend. that just shows you how, you know, the private sector could have handled that a little bit better than the federal government. >> congresswoman, one last quick question. you've been quoted recently on a radio show, i think it's fred thomps thompson's show in tennessee, that you had strong feelings about secretary of treasury timothy geithner, that he should resign. is that correct? >> this was some time ago, with secretary geithner, that i felt like it was imperative that the american people have someone there they can have confidence in, who is is going to move forward and be a strong, steady hand on our nation's treasury. we hear from constituents every

day, still very concerned about fannie mae, freddie mac, about the credit crunch that is there, our businesses that we are looking at, is they are having their -- the debt service that understanding of private markets. >> private markets, okay. at the time your words were he caused many problems than he solved. >> that's right. >> that was a rough time for him. i think you would agree. others would say he found his sea legs. you would like to see him go? >> i think that i would like to see a little bit more attention paid to what we need to be doing with consumer credit and also with commercial lending. we are greatly concerned about how some of our employers are going to be able to move forward.

they are talking with us about credit lines and some of the problems they see coming in the fourth quarter of the year. >> congresswoman, thanks for your time. good to talk to you. >> you, too. >> a busy recess. my gosh, not a recess at all. congresswoman, thanks so much. >> thank you. waiting on bernanke's message from the mountains. but is that all that art cashin is wait for this morning? 90s s. ♪ singer: buckle up, everybody 'cause we're taking a ride ♪

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all right. it's time for the "trader's edge." joining me is art cashin, floor director of ubs services. you warned us, this is expiration day. what's the sentiment this week, which normally you see higher trade for expiration. what do you see next week? >> becky, you may recall two weeks ago i told joe kernen about october 22nd. one of the dates to look for, as the start of ramadan, there are several eclectic cycles that are combining, indicate there's a high possibility that we could see a change in sentiment. so that's something to watch for

next week, to see whether this stroll back to the old highs ends. we're looking at -- we saw the merrill lynch money manager survey. a lot of bullishibullishness. it may be an extreme john murphy who puts out his charting service, says that both the dow and nasdaq look to be heavily overbought. so we'll see what happens next week. >> art cashin, one of the dates highlighted on my calendar right now is next tuesday because i heard from a birdie last night that art cashin is going to guest host "squawk box." >> yes, that's why they invented the v-chip so you can protect your children from watching certain things. >> i have to ask you, you've been talking about the dollar as being the key to the stock market. what do you see here? >> well, it's uncanny. mike, you and i go back quite a way. i don't ever recall seeing the direct parallelism. it's actually an inverse pa

parallelism. we've got buffett, we've got pimco, and last night steve, everybody is talking about the possibility of the dollar going into free-fall. so it's something that the fed and treasury have got to manage. a weak dollar mayhem the market but not in free-fall. this is a dangerous game we're playing. >> we'll be watching you tuesday. >> thank you, sir. >> thanks, art. see you soon. >> have a good weekend. when we come back, it is all about besh nank today. that's the one big thing to watch out for. we'll talk more about it in just a second.

all right. it's been a good three hours with mike holland.x thanks for coming in. overa overall, do you think today is going to shape up constructively? >> art cashin said it, the dollar is weak, oil is up. everything looks to be okay. the chinese market was the original indicator. >> mike, thank you. always good to talk to you. >> have a great vacation. >>ly. see you guys later. make sure you join carl on monday. "squawk on the street" is next. ben bernanke preparing to deliver remarks at the kansas

city fed's annual symposium at jackson hole, wyoming. existing home sales, economists are expecting an increase for the fourth consecutive month, 2.2%. two events, u.s. equity futures are pointing modestly higher. that's cnbc.com news now. i'm courtney reagan. live from the financial capital of the world, this is "squawk on the street," for a friday morning. good morning, everybody, i'm mark haines. positive open as investors anxiously await fed chairman bernanke's address from jackson hole. that's about an hour from now. they're hoping for word the economy has stopped stabilizing and started expanding. senior economics reporter steve liesman will have more from the tetons in moments. >> good morning, everyone.

happy friday. i erin burnett. oil futures reaching $74 a barrel this morning. natural gas futures extending their declines and seven-year low yesterday. this whole conundrum of why natural gas is one way and oil is the other is a significant one. futures are looking good. >> they are. we needed $1.32 to get to fair value. six points above fair value and 40-point gain on the dow at the open, if it stays that way. >> and federal reserve chairman ben bernanke delivering remarks at the kansas city fed annual symposium. no, they do not do it, mark, in kansas or missouri, they go to wyoming p. he will speak to we lowing a year of emergency measures to prevent it from literally crashing. he's going to talk about how to get out of all of those emergency measures. senior economics reporter steve liesman has more. they could do