good morning, good morning.

dell's quarterly reports beat the street. the markets at this hour, a fairly mixed bag in asia and china. european stocks are stronger out of the gate. u.s. equity futures are pointing to a positive open at home. it is friday, august 28th, and "squawk box" begins right now. ♪ everybody's working for the weekend ♪ ♪ everybody wants a little romance ♪ ♪ everybody's going -- >> good morning, as mandy said. welcome to squawk here on cnbc. i'm carl quintanilla along with mandy, who has been spending the week with us. has it been worth your time? have you had fun? >> i had fun. i want to get up at 4:00 a.m. tomorrow morning, as well, carl. >> well, you're going to do this next week, in part, right? >> and you won't be here. >> we'll see how the vacations work out. >> okay. >> and our guest host this

morning we think will add even more, tony craszenzi. and jim iuorio. weren't you just giving us the data 24 hours ago? >> yes, i was. >> i know you're still miking up, trying to give us a mild heart attack. the dell number res going to set the tone, we can. the xeertmaker, a 28 cents, nickel better than expected. revenue did drop, 22 cents. did beetle st street. we'll talk to a dell analyst sometimes in the next half hour so we'll talk about what that means for tech and the market overall. taiwan rallied on the dell numbers. >> they did. let's take a look at the economic agenda for today. personal income and spending at 8:30 eastern time and then the

university of michigan's consumer confidence number coming out at 10:00. the pce index is seen riding by about 0.5%. notable numbers out of japan overnight, the total number of jobless people in that country jumping more than 40% last month. can you believe that? japan logging a record drop in cpi with fresh needs for deflation. >> talk about the elections coming up there sunday, as well, which are going to be huge. in this country, total discount window borrowing bs, averaging 29 billion last week down from the week before. but borrowing by commercial banks did rise. could interest rates be taken as

negative? they could. the bank of england's governor has hinted he may do the same to avoid a liquidity trap, but the acb and the u.s. fed are thought to be less likely to move to negative rates. it's a perfect morning to talk about that with jim and tony, as well. >> we'll get to that in a second. from the economy to the markets right now, let's take a look at the bullish sentiment that seems to be on the increase. the investment intelligence advisers sensitive index gauges outlets. the index shows the portion of bullish stock advisers increased to 51.6% in the past week. that is the highest level since december 2007. bearish sentiment, meantime, has fallen for the year. the barrett sentiment indicator breaking more than 1% is one sign stocks are making an

intermediate jump. let's get to tony and jim. >> i assume the pits have been busier this summer than normal. >> not a normal summer at all. a lot of people stayed instead of going on vacation. it's been fun. 4/. >> how about you, you're still settling, aren't you? >> yes. i lived 25 years in new york and now i'm settling in california. it seems a bit strange. >> if i told you that we would be putting six out of seven weeks up on the major market, would you have believed me if i said that in march or april? >> maybe. whenever we have a shock and look at all the shocks we've had throughout history, go back to world wars and such, you see that it takes a number of months, but only then before investors seem to change their mind in terms of what the future will be like. they have at the beginning the sense of armageddon and eventually they shed it. i think it's human nature to move on and adapt.

it's not extraordinarily surprising, given human nature, and it's not surprising to have trillion of dollar. >> no question. when you think of how bad we felt back in the fall, and it felt like one of the dark armageddon days, you have to think that that panic worked its way into the stock market, we're under valued probably like we're overvalued. what do you think will be the fair value for the s&p? >> i think somewhat lower than here. i think we're looking way far ahead and we see a rowzier picture. just like dell earnings yesterday, they were not great. things are stabilizing. that's not things are gang busters, but every day we rally. it doesn't make sense. >> which will we hit the brick wall? >> what you do is pick your levels and try to hit it

technically. i think people will realize this is not your father's recession, there is going to drag on a long period ooh time and consumers are not spending money. >> people have a sense of optimism, but i don't think it's a complete sense of optimism. we saw the treasury was at 390 and it got down to 340. it's the accepts of looking beyond the inventory data we have. i don't think people are being full and thinking there's going to away tremendously rowzy picture down the road. >> where would you see it heading into the year-end, then? >> well, it would be in the fours, more than likely. there will be a projection that the fed funds would rise. >> you think there may be a cap just under four, right? >> for now, until we get a sense if this is sustainable, self-are he inforcing in place.

and a time of the job cuts you'll be eeg is permanent. >> yeah. we have with the bls showing that the amount of job loss habl significant. almost half of those are structural changes in the economy, the automobile industry, the construction industry, retail. many of these jobs aren't coming back. when general motors brings workers out and numbers look better, are they going to be continuously hiring? no. >> there are two camps, aren't there, here? one camp says we might get a lull after some of these temporary and also maybe even reversible factors that are in the market right now. we might have to see more policy stimulus next year and the other camp says we ain't seen nothing yet. there is so much coming through the pipeline in terms of that 7 or $8 billion.

what do you think? >> the most likely scenario is that we can't see the so-called "w." we're bouncing back. industrial production is rising sharply. but to fall back as sharply and with the confidence that policymakers would do something, we probably wouldn't fall back shortly. >> in items of markets, though, you talk about october and september being scary and they usually are, right? washington is going to come back to work, that's even more terrifying. tax credits are going to start expiring, that kind of thing. but the tone of the data has been pretty good. and i guess do markets -- with they turn down before that tone disintegrates? >> this administration has shown us that even the mildest need for something happens, they'll throw money at it.

you know, i have confidence that they'll throw everybody at it. does there have to away market break in the fall? no, there doesn't. summer was supposed to be sell in may and go away. what happens in the fall? everybody is different now. i think when we're in the mist ofhat correction within everyone thinks it's armageddon coming again. >> does buy and hold work any more or do we basically have to use short-term trading opportunities? >> the bad thing is, buy and hold, if you're talking about ten years, sure, it works now because the s&ps are at 1,000. when they were completely overvalued and multiples were wrong a year and a half ago, then we probably should have been looking at ourselves saying, then it didn't work. now it probably did work. >> if you pick the right ones,

you'll get your bond back. >> gentlemen, we will get back to both of you. >> just a second. in the meantime, let's take a look at the state of the markets right now. the futures are suggesting another positive day out here in the united states. at this stage, we are above fair value. as for oil, an interesting state of affairs. we did drop below 70 bucks a barrel. now we are firmly above it, above $73 a barrel. as for what's going on with the ten-year bond, currently sitting at 3.48% and the dollar board, now here is an interesting thing with the dollar. we saw quite a big drop in late trade yesterday to the tune of nearly 1%. in overall trade, the dollar clawed back some of that lost ground. euro/sdorl, 1.435. as for gold, it's been stuck in a pretty tight trading range for

the whole of this week. looks like groundhog's day, doesn't it, carl? $952 for what you have to pay for the gold stuff. >> the golden groundhog. >> yes. to the oversees markets now, christine tan is standing by in singapore. first, let's get out to would you cease sa porresonp. >> well, i hope we're friends, mandy. i like to think of us as that. >> yes, we are. >> it's a relatively friday news flow wise. however, still a lot of activity in certain places. you were just talking about confidence, the potential for a recovery. remember that you do have a bond guide sitting around the table, so you would be less optimistic on a full scale recovery that you've seen in the equity markets. but it does seem like we're seeing bleeps of a bright spot.

last year, of course, just as a reminder, the dow was off by approximately 6%. a completely different scenario right now. the month of september historically is very weak. december will be crucial to see whether we see that crucial comeback, as well. and most of the people, i ask these days whether we could end the year higher. it's a positive note. we might be looking at gains coming, even if we see a correction during september. let me show you what we're looking at on the best performing sector. at the moment, up by over 2%. technology and chemicals, eyeing the launch of the snow leopard put out by apple today. i want to mention with regards to the assumer that we've had -- on the back of them giving upbeat comments about how they anticipate that revenue will

gradually improve for the rest of the year. they came through with a smaller than expected drop in their first half profits. other than that, the uk economy, we saw the first reading, the first reading on the gdp data, the real reading 0.7% growth in the second quarter, which was slightly smaller than expected 0.some better than anticipated general confidence figures out of the euro zone. now over to singapore for more details. maura. >> hi, louisa. good to see you. better than expected gdp data in the u.s. kind of increased confidence in terms of the global recovery. but shanghai bucked the trends on worries about a fall in bank lending. the composite there slumped as much as 3% before paring losses to end 3.9% lower. according to local media, new loans by china's four state-owned banks fell sharply. the hang seng fell 0.7%. also on concerns about liquidity

driving up. despite weakness in the region. all there is by the lort decline in jobless rates. the national elections weekend also in focus with the opposition democratic party likely to win sunday's elections. that's it from asia. carl, i trust you are being nice to mandy? >> i think the bigger worry is whether or not she's being nice to us. >> is that the question, is it? that's the water cooler talk. >> don't worry, we talked about this already. >> where is my coffee, carl? >> thanks, christine. >> let's see how the u.s. markets are shaping up so far this morning. we're, of course, preparing to wrap up another week of trading. i think for global markets we're clocking up to seven weeks in a row now? >> this would be seven. >> there would be seven if we finished in the plaque today. loining us now, allow brian and we've got tony and jim, as well.

christian, it looks like it could be the seventh week in a row. are you starting to get jittery? >> very nervous. this is not a buy and hold market. we've seen so much intersecter volatility, obviously, financials and consumer discretionary stocks have led a time of the charge in the last few weeks. we think those are ready for a big sell-off. >> not just a little sell-off, but a big sell-off? yes. the financials have been held up by a little more than vapor in the last few weeks. very thin stories. about 35% of the nyse stocks was accounted for by four or five stocks. i think when people come back from later day, and we think

will will follow for months to come. >> even when times were good, leading up to 2007, they never really returned. it was an institutionally driven rally. after a couple big shocks, it seems like they won't return. do see any evidence that the household sector has been participating? >> well, i can there's two household sectors. one is participation in the economy. all are about 75%, 80% of spending. but the households that are over 100,000 dollars in net income, 17% of households. i don't think they'll be as significant -- >> how about in the market? >> in the market, well, very over exaggerated i think the presence of the retail investors. most of the retail investors are going for the plan. there's a lot of cash on the sidelines, yes, but they've been

participate i participating. >> lou, let me bring you in here. what do you think? >> well, i certainly agree with that. i think you've got to trade the market and not your opinion. i wouldn't agree more. i think the market is overstretched i think the economy is a lot more precarious than it's given credit for. and, you know, in regards to the retail customer, i think that as tony said, because of the shocks the last couple of years, should the markets start to slip, in particular if it should slip as far as that key level in 875 or so on the s&p, that the retail customer won't come back because of the shocks of the last couple of years. >> let me follow this question to everybody, lou, christian and jim. we've all said here that it won't last, meaning the market movement. this seems to be a prevailing view, then. >> if it doesn't go down --

>> remember when we were in the tech bubble, every week someone in barrons was writing an article about how we were going to bubble and how it was going to burst. sure, they were right, four years later. this could be ridiculous. you said that the banks are up on vapor, but the whole market is up, even earnings season, it was all just from cost cut can, right? but my point, as a guest, is i can get there is weren't with he we supposed to do this? kind of buoy, reflat equity prices in that order and real estate prices and get a confidence back and the hope that things catch after that? is there a chance of that? >> there's a chance of that, but i mean, it's going to take a while to come through. you have 718 worldwide stimulus packages in effect as of now. if that isn't enough to lift the market, i don't know what is. but we've got a market trading at a forward multiple of nearly 15 times when the treasury ten years at 3.4%. so that is a huge inverse yield.

>> lou, you're trying to jump in there. >> i am trying to jump in, just to say isn't this what we're supposed to do? in many ways, we've done exactly what we're trying to do in the past back up to 2001, to 2002, the market retraced at 38% and the recent level of 1014 was exactly that 38%. and even though it seems this time that we've been just down and the market had been getting beaten up for an extended period of time, the -- from the high back in 2000 to the eventual low, the first low, anyway, in september of '01 was 18 months and this time we went from an october '07 high to a march '09 low and that was 17 months and both rallies have been six months and of similar magnitude. so we're doing, even though it feels this time in certain respects because we were so beaten up that we've done a very tremendous thing and a substantial thing, we've done what we have done in the past. and really, nothing more at this stage.

>> so i guess i'm wondering, where the excuse to sell comes. i guess in a normal market when the fdic comes out and says our list of problem banks is up to 400 plus, right, and by the way, our insurance fund is down to 10, wouldn't that have normally been an excuse to sell off? why didn't it happen this week? >> well, i think volumes are very light. >> but light volume doesn't mean a lack of -- i mean, it means a lack of buyers and sellers, right? >> sometimes it take times to filter through and everything is not immediate. some of the corrections you'll see will be post labor day. northrop, l3, general dynamics all did well yesterday. there will be some rotation going through there. >> that sticks to the issue that i'm talking about, we've seen a few of us talking about the market expects things won't get worse, that the sugar high won't last. so maybe we should be thinking about the contrary scenario, where things are actually

better. but let's not go too far with that point, though, because secular issues are strong and palpable. >> in the meantime, christian, thank you very much for your time. lou, thanks for joining us, as well. >> when we come back this morning, on your way to the mountains or beaches, watch out for danny. we think it could be a category 1. 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

we are back and scott is with us with some good news, i hope, scott. >> well, we continue to talk about tropical storm danny. it has weakened a bit, now just a minimal tropical storm there. maximum sustained winds at 40 miles an hour. very asymmetric. you can see the center of circulation as it continues to move towards the north-northwest at about 9 miles an hour. but the big question is, where will danny go for the upcoming weekend? well, it is no longer forecast to become a hurricane.

just a minimal tropical storm. more like a nor'easter, if you will, as we continue into the upcoming weekend here. so as we go in time here, saturday, just kind of side swiping part of cape cod as we move into early sunday morning here. so minimal impact along the cost. the farther east it will be, definitely we will see minimal impact. so as we look at the overall forecast for the upcoming weekend, here we will expect some rain and some wind across the northeast and new england. but, of course, the track of danny will really determine that activity and scattered showers and thunderstorms as we move along the gulf coast, but remaining hot here as we move out west and into the midwest. back to you. >> scott, last weekend with bill, it was -- the weather would be fine but the rip tides were the danger. this time there will be more rain and still danger of rip tides. >> all in all, we will see increase in the swell and some

rip tides. but you have to keep in mind it will be there, but the impact will be minimal. >> scott williams, thanks for that with more troubling weather for the weekend, at least this time around. corporate headlines this morning, japan's top automakers say production sank last month. japan's total output dropping more than 12%. honda's output falling almost 16%. >> toyota is shutting down the california factory that it ran with general motors for 25 years. this is the first time ever the japanese automaker is closing a major assembly plan. gm decided to withdraw from the plant in may. toyota says it will move production to other plants in the u.s., canada and back to japan. chrysler is now accepting liability claims on production lines built in june. while in bankruptcy, the

carmaker had abandon all claims. but now they're accepting warranty claims, lemon law claims and safety recalls, but not for lawsuits filed after june 10th. coming up, the bulls seem to be charging towards the close. we'll get a run down of this morning's top stories. stay with us here on cnbc.

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♪ here comes the weekend >> not quite the weekend yet, but we're getting awfully close. good morning, welcome back to squawk here on cnbc. i'm becky quiom carl quintanill mandy drury. i think becky gets back on monday and will be here with you and steve leisman, which will be interesting. >> yeah. good show for monday, actually. our newest host today, pimco's high proef file ticket, coming back to his hometown of new york. and also a frequent face to cnbc viewers, jim iuorio. shares of dell had earnings of 28 cents, a nickel better than expected. revenue was down 22%, but still beat the streets. consumers are coming back, buying pcs, but corporations are still being stingy with their

purchases. joining us now, dan bearinger and jason, good to see you. slow, steady process. nice upside on margins. but that, like a lot of companies have said, it's too early the call this an inflexion point. what was your take coming out of the call? >> yeah, that's right. the consumer helped a lot and public spent was a noticeable area of strength down 20% sequentially. but dell is still not seeing strength from corporate refresh, a corporate client refresh. >> how does it square with what we've heard from the likes of apple and hp? >> very much in line. everybody said that a refresh at the corporate level is likely a calendar ten event. and strength that we've seen so far has been in emerging market and consumer and public again. the public dollars are coming in to i.t. >> dan, your take?

>> no, i mean, obviously, it was a good report. i think it proet much follows suit with what we said before. hp had a pretty good number. so i think the dell number just kind of follows along with that and like you said, i don't think we can follow and say this is the bottom and we're going to head straight up from here. but it seems like the worst is behind us in terms of the downturn and hopefully we can start coming out of this valley. >> jason and dan, there is something we know in the economics community which is known as the financing cap. there's a large gap now and typically that means companies don't have the ability to spend on cap ex. certainly they don't seem to need a lot of capacity right now with capacity utilization rates in the country at 68%, and normally about 80%. so aside from wanting to keep up on the productivity front, what will be the -- will companies get the money, for one xb and what will be the impetus for cap

x going forward? >> i'll start, dan. a lot of hardware has been delayed, software and services and i.t. have held up better. but hardware is one of those things that you can push out, you continue to use what you have and just get by. but within tech, balance sheets are reasonably healthy and we will see cap x come back. we will see hardware replaced. timing is really the only question. but it's not likely a near term event. >> so competition is the main thing here? is that going to drive companies to invest in cap x? even though they know volumes aren't up a lot, they want to stay up on technology? >> competition helps, but certainly the cost of an older machine, whether it's a server or pc, switch, storage, it starts to get expensive when it's beyond the three, four-year mark. >> dan, on the call, i think they made a point that if you're running xp, right, a computer system that is eight years old, i mean, there is going to be a

refresh cycle at some point, right? >> yeah. i'm hopeful with microsoft coming out with their new operating system, i think it's october 22nd, windows 7, that that will hopefully create a buying spree in terms of pcs and people upgrading from xp and vista. the only thing i'm worried about is some of the past upgrade cycles we've seen from microsoft have been somewhat muted where people say, well, we'll stick with what we have right now. we won't upgrade. but xp and vista were not as well received as people would have hoped. i don't know if you remember windows 95 when it was on the cover of time magazine. i think projected growth is maybe about 3% to 4% and maybe about 10% in 2010 after we were down about 5% in terms of

shipment, unit volumes in terms of pcs. >> jason, i want to take you back to your comment about growth if emerging markets. obviously on one hand, there's huge growth potential in emerging markets. on the other hand, there are a lot of homegrown pc companies gaining traction on the home turf, like lenovo. how is dell going to shape up against those? >> well, and average selling prices are lower, typically. and dell's strength is u.s. enterprise. so it's a challenge, but it's also an area of opportunity for companies like dell. >> jim, how do the numbers -- >> well, it seems to me that everything we see, and there's no good numbers, it's just that they're not bad and they're neutral, but everyone rejoices. if it's the way the market has been going over the last couple of months. and i guess that's good. it's the necessary step in the going forward. but to me, it's the necessary blockbuster. and not only is dell not, but

neither is hp or anyone else. >> and also, do they need it? there's a lot of extra capacity in the economy, you have labor and equipment. >> but to his point, eventually, especially with computers, you have to need it at some point. >> the hardware, that is a great point that the guest made. and i word, though, if the world, it's growing and emerging markets doing well, if that will make america want to be aggressive about its i.t. purchases. and i would guess that its competitive spirit in america will make it so. >> jason, a quick comment on the stock. it will pretty well. what's your view in the next 12 months? >> i would expect some up stock today. we're on the sidelines right now. we think that you need to see a damageable, visible corporate refresh to drive this next leg up. >> and dan, the results, i

think, at least to me last night, sort of brought you back to the days where they literally were the gang that could not shoot straight. do you remember that and how far they've come from that? >> right. i think we're in a little bit of a turning point. like he was saying, it's still a little too early with dell computers to say that we're back on track with them. i don't think we're back to the days that we were from '94 to 2000 when they were suggest a juggernaut, but hopefully they'll continue to show positive sequential improvement and we can start to get more board with the stock. >> jayson and dan, one way out of economic slumps are innovation. is there anything in technology that you could see that could give us a period of innovation? like in 1995 when there was a technology shot? >> there's one area with an i.t. called virtualization where we're able to centralize more resources, drive productivity, it's taking place in the data center today mostly at the

server level. cloud is a component of virtualization. but it's a theme that's going to drive spins for years to come. >> all right, guys, good to talk to you. thanks for the insight on the stock and it will certainly help us out today. jason and dan, appreciate that. i think after hours it was up 7%. >> absolutely. as for the overall markets, let's take a look at what the futures are telling us right now. lty this stage, we're above fair value, so it could be another day in the black for the markets. as for the oil markets, well, pretty bullish, actually. we're now back above 73 bucks a barrel, despite briefly dipping below the 73 mark. we got slightly bearish inventory data. as for the ten year bond sitting at 3.48% and the dollar which did take quite a plunge in late trading yesterday did gain back some of its ground in overnight

trade. at this stage, we're just below the 94 mark on dollar/yen. gold, 952.4, about five bucks a troy ounce. if you've got any comments or questions about anything you see here on the show, e-mail us. we're going to take a quick coffee break right now. but news making headlines outside the world of bus when we come back. you g#

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welcome back to "squawk box." retail news this morning, j. crew's second quarter profits recessing nearly 40%, beating revenues on stores and direct sales. earlier this month, the company said it would return to its roots, opening fewer brick and mortar stores and focusing on its kal logs. as for the shares of j. crew, they finished yesterday sitting at 32.76. my, oh, my, i'm going to have to get some glasses. >> i don't think they could put that monitor any farther away. is that 20 feet to that monitor? becky has the same problem, though. electric discounts now arrive by cell phones, twitter, e-mail and facebook as the industrial try toes reach some younger shoppers. one coupon processing company says the use of electronic discounts and coupons more than doubled in the first half of 2009 compared to the same period

of last year. overall coupon rose to 22%. it had been declining since 198 given the state of the economy, people are -- it's like a magnet. discounts and value are a magnet. >> no question. and that's the way it's supposed to work. i can them on my iphone. >> and you use them? >> why waste money? no question about it, saving money is awesome. my wife believes if she goes and buys a sweater at half price, she made that money. so she comes home and says, i made this much money today. i hope she's not awake yet. >> probably not, looking at the time. okay. everything must go. california is hold ago two-day garage sale. govern arnold schwarzenegger wants to turn extra clutter into cash to help the state troubled finances on sale nearly 600 state-owned vehicles, thousands of pieces of office furniture, computers, electronics, jewelry,

pianos, even a sfufrboard, a food saver and an xbox 360 gaming system. and i believe, as well, that arnold schwarzenegger has personally signed a number of these items, as well, which could bring maybe a few extra hundred bucks right now. >> every dollar counts in that state right now. could pimco manage their balance sheet, the state's balance sheet? >> from what i've observed there, the taxes, you can feel it around you, but in new york, there are high income tax rates, but the sales tax rates -- because in new york, there is no tax on low-priced apparel. there is a tax there and so you feel it. >> if this is successful in california, do you think other states will jump on the bandwagon and start having other garage sales, as well? >> i hope they would just cut their budget. come from illinois, it seems much more simple to not have

three of your brother-in-laws on the payroll. allegedly, i don't know that it's true. >> be careful going back home. >> i'll have to change my name and my look. >> let's check on the news outside the world of business. alex witt is here. >> we're going to take everyone live right now to a place where much of this nation's attention is focused, that is the jfk library in boston. after decades of public service, thousands of people gathered in massachusetts on thursday to spend just a passing moment in the presence of their late neither right theret. edward kennedy. thousands came to pay tribute and their last respects to that ledge aendary senator. after a year-long inquiry, federal prosecutors have decided not to charge new mexico govern bill richardson in an alleged pay to play scheme involving a top political donor.

that investigation sent richard to withdraw as the xherz secretary back in january. stay, a modern day dog hotel in chicago averages 65 clients a night. then for $25 bucks extra, fido gets a dip in the indoor pool. that's for dogs only, just saying. can you imagine? andy and carl, you don't want to go anywhere near that thing. although some people do. there you go. >> there are all kinds. >> do they do that where you are, usually, mandy? i don't think so. they're not probably that creative. >> no, i don't think so. >> not that fun loving. >> alex, thanks a lot for that. coming up, we're going to shout tgi friday to chairs. we're going to take a walk over to where the chairs are and talk about this morning's hair-raising headlines. then if oil prices are high why have priced doubled since

the beginning of the year? d sta. good friends -- we compare our progressive direct rates, apples to apples, against other top companies, to help you get the best price. how do you do that? with a touch of this button. can i try that? [ chuckles ] wow! good luck getting your remote back. it's all right -- i love this channel. shopping less and saving more. now, that's progressive. call or click today.

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welcome back. with are in chairs this morning. i think we all have something to talk about.ó you know, this bernanke identitó theft thing which broke actually yesterday, "newsweek" reported it and then treasury came out ó and announced that bernanke's wife was in a starbucks, had her purse snatched and inside the

purse were personal checks, credit cards. this guy, who is still at large, there's an aarrest warrant outstanding, takes the checks, deposits checks into a third person's account, withdrawals that money using false identification. the bernankes didn't lose any money but the fed chairman and it just shows you how endemic the theft is. >> my question is, is this actually coincidence or do you think, in other words, like there was a thief and he saw a bag and he grabbed if and opened it up and it was like, man, i got -- >> or a person that hasn't been watching the news in the past year because they would know who bernanke was. >> it was a crime of opportunity. i don't think they're stalking bernank bernankes. it's random. >> watch the replay on conan o'brien's joke about this. hoethy picked it up when they noticed someone was trying to purchase a few companies. i want to talk about a story that shows the signs of the

times here. ford has got a little fiesta, very popular in australia, it's going to be launched in the united states next year. and instead of spending thousands and thousands of dollars on a big ad blitz, it's actually tapped 100 bloggers and has given them a ford fiesta for six months. during those six months they have to upload themselves driving the car on youtube and use as many social networking sites as facebook and linked in as possible to spread the word. i think it's going to catch on. >> another way of marketing. >> yes. >> to use as many means of communication as possible. >> the wheel is on the left side. if they bring it here -- >> they there-v to move it. >> to australi tratralians driv- >> we drive on the left. we're opposite of you guys. >> that's interesting. i've spent a lot of time asking american car companies over the last few months, but ford all of

a sudden seems like they're doing everything right. >> they're progressive. it's a way of cutting costs. >> it shows they're willing to push the line a little bit and try something different. i think it's cool. >> i'll be a blogger. >> i'll take a car. >> i'll take a car. >> i don't know how to blog, exactly, but i'll learn. >> i don't even know how to tweet. >> i started that. >> you've got something on harley. >> the journal, actually, i don't know if you can pick this up but a picture about people in india driving harleys. it speaks about this growth handoff. they eventually want to have -- if there's going to be an engine of growth it won't be in the united states because the consumer is having difficulty. it has to be the rest of the world. we hope as the rest of the world moves up the income rung they'll be buying more american-made products and global trade will pick up. >> and what's the running price of a harley there? like 1,000 bucks? the average salary of a person, a commuter, is $1,000. it would be difficult to afford the hog right now. >> in india and china, you have

the motorbike, the dad in the front, baby on the lap, mom on the back with groceries and a chicken stuck on the back. really cool on the harley. >> they do look good. >> just a short time ago we didn't think anyone anywhere was going to buy nonessentials or an american-made product. people are and it's a good thing. coming up this morning's top stories and also jim and tony take on them. plus, could a brawl be on the cars? tony's old "squawk" friend jim will be joining us, the fed, the economy and everything else. who says bonds are boring? not me. our top-notch guests when we come back. taking its rightful place

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the summer streak. the blue chips make it eight in a row. is this rally for real or just a result of a junior trader's club? the storm making its way north. we'll get the forecast for your weekend. crustaceans in crisis. love surprises at historic lows. great for consumers but for the industry, it's getting real ugly. "squawk box" begins right now. ♪ good friday morning. welcome back to "squawk" here on cnbc. i'm carl quintanilla along with amanda drury as joe and becky get some time off before labor day. our guest host, the newest member of pimco's bond team,

tony and frequent face you guys know jim, usually if the trading pits. a lot to get to. some good dell numbers out last night. personal income and spending is on the way. first headlines with mandy in the control room. >> very concerned about thoe those crustaceans. dell, we'll be watching shares of dell today because the computer maker may provide a boost. quarterly earnings came in above estimates after the bell. indications dell's business is stabilizing and it is doing a better job of defending prices and profit margins. also a day after securing a loan to pay off the ious, california is hoping to raise more money through the unprecedented sale. they will hold a sale of surplus items, we have prison uniforms to office furniture and office xurlts. it hopes to raise a few hundred thousand dollars. apple's iphone is about to

go on sale in china. unicom struck a deal with apple. the launch is expected in the final quarter of this year. china is the world's biggest mobile phone market and growing. get a look at futures this morning. had a pretty decent night in asia overnight. taiwan responding to those good dell numbers. taiwan up about 2%. the nikkei up ahead of the elections. future stateside look positive. we are waiting for personal income and spending and consumer sentiment later this morning. dow putting eight straight together here and we're looking for our sixth week up in seven weeks. oil, denied at 75, as you probably remember, rebounding a little bit now, clawing back to $73.15. the ten-year note which we've been waiting to see if and when it would climb above 3.5. dollar, which just got shellacked late yesterday, a lot of action regarding the dollar and the swiss right now, we are still below 94 yen.

and gold, which as mandy pointed out in the last hour, has not been a key story but it rebounding a little bit this morning, up 6 bucks to $953.30. let's get a closer look at the u.s. bond mark with jim and tony. normally you and tony come on and have some disagreements but i think looking at some of your notes, you guys may be agreeing on a little more these days. yeah? >> yeah, it sounds like it, because i'm in the sugar-high camp with pimco. a lot of what we've seen in the markets has been either government stimulus or the fed manipulating interest rates very low. they've accomplished their task of pulling the economy off the floor but can the economy survive without all of this sugar being injected into it? my fear is at some point they'll be forced to pull it out, or when they do pull it out we'll see instability in financial

markets and the economy. >> tony, if you're trying to = hold a scum tour together but you know when you put your hands off it it's going to fall, your inclination is not to take your hands off. >> glad jim concurs. glad to have that respectful view of his. jim, his view is based on the idea there are these major secular issues that face the economy. there are three that stand out and pimco has the same view. the income story will be weak for some time because of the overhang of job losses. secondly, there's been huge wealth destruction in the country that will tend to raise the savings rate. third, of course, credit is readily available. these are major structural problems, secular issues that will overhang the economy for quite some time. so once we get passed ar high, mohamed el erian's line -- >> that's becoming as well known as green shoots. it became part of the lingo around here. >> i think that's what markets

are behaving as if. he mentioned in the earlier show the fdic figures from yesterday didn't cause much reaction. you would think there would be a reaction in equities and probably because people are looking at this perhaps as a sugar high. lastly, the ten-year meeld moving from 390 to 340ish, 345, suggests people are more pessimistic. there is this feeling there is a sugar high and it will be difficult to sustain growth. >> you talk about the lack of credit availability, the question, of course, is why aren't banks lending yet? i mean, considering the huge amount of measures put forward to try to get them to lend, what's going on? >> jim would agree with the idea that banks are fearful of losses. they still have toxic assetings on their booblgs, the ppip, the public private program that was supposed to remove private as t assets have bank's book hasn't gotten off the ground. >> how long is this going to take? >> as value stabilizes, we see

the case-shiller home price index up two months in a row. if assets stabilize banks will be less fearful for losses and they might lend more. i tell people all the time watch the h.h release on the federal government website. see, are banks lending more or not? if not, the money's not moving out of the door and it will be difficult to get things off the ground. asset values is one of the keys. >> back to the sugar high thing. are you confident they'll start pulling away the punch bowl in a timely fashion or do you think they'll leave it there and overstimulate? 2005 rate were 3% when the economy was absolutely booming. are they going to do that again? >> i think it's like walking a dog with a very long leash. it's difficult to navigate. i'm confident in the leash-holder, bernanke, it's very difficult to navigate. >> jim? >> i would agree with that.

and i would add in that everything you've heard from the feefsh federal reserve has been about extended period, longer period of time. let me be blunt about it, don't think they have an exit strategy right now. i think they'll try to stay at zero as long as they can. and i'm afraid they are going to stay too long. i think that if they were going to make a mistake, they would rather make the mistake of staying too long and having an inflation fear than removing stimulus too early and having the economy go down. >> but is it going to become harder and harder to justify staying so accommodative if we get better than expected economic data? >> it will over time. right now the data isn't quite there where they can justify it. what i'm afraid is going to happen is this will come very fast. the data will be kind of, you know, mediocre, mediocring a little better and all of a sudden we've seen this with markets many times, the market will just like decide instantly the fed's gone too far. then at that point when they start to pull back, it will be too late.

so they're not looking to try and be preemptive. they're looking to be reactive. looking to be reactive i think they'll be too late. somewhere down the line we'll have a big inflation worry and i think that eventually lead to a much higher bond -- >> the cynics would say the audience is the voting public. 2010 they'll keep things sedated until fall of next year. the question is, will the bond market raise their hand before then? >> yes, they're vowing to the public where china's holding all our dollars and our debt and we start toing fiscally irresponsible. like they made comment of last week, what's to stop them from starting to dump our dollar, our long-term debt and cause a mini crisis. >> it's conflicted -- >> but instead of talking about a little inflation. self-inflicted wounds. they're losing money on the policy. >> if the deficits continuously rise, they're trying to send us a signal to watch it as we run

up the deficit. can i ask a question? what do you think the fed would do if we enter the "w" scenario, we get off the sugar high, it gets problematic for what the fiscal and monetary authorities would have to do in case we fall back. what do you think we'd have to do? >> that a problematic thing. i think what they should do is start to reduce the size of their balance sheet. all these lending programs and securities they've bought, they should start reversing some of that first. but the fed has been sending a signal that what they're instead going to do is they're probably going to raise rates on -- on interest they pay on reserves. so they're going to try to buy securities and bloat their balance sheet on the one side, the quantity. and then on the other side they're going to try to manipulate the price by raising interest rates. and i'm afraid that doing both at the same time is going to be very messy. it would be better if they did it sequentially. reduce the size of the balance sheet first to get it back to a normal size. then look to raise rates.

so, you know, what are they going to do? they'll probably do the latter, raise interest rates, continue to buy securities, send mixed messages to the market. that's what i'm afraid they're going to wind up doing. that's why i'm a little worried about once we come off the sugar high it can be kind of messy. in fact, warren buffett said that two weeks ago. he said that the removal after stimulus could be as exciting as the credit crisis was. let's hope it doesn't get that bad. >> yeah. jim, why -- people like buffett are so vocal, and others -- >> roubini has been saying the same thing. >> and mohamed el erian and pimco. do traders sort of laugh because they're under the influence? >> well, traders never talk about what they should do. it's just a question of what they think they're going to do. so what they should do obviously is start to pull back at a reasonable pace. they didn't do that before, probably won't do it again. nobody mentioned a potential currency crisis. that's good. i mean, we're at precarious levels in dollar/you'euro, if t

dollar tumbles you don't worry the dollar won't be the world currency? >> we've seen it move from 75% to 63% currently. one percentage point per year. euro has gone from 20 to 27. it's been more slow. it wouldn't be movement in prices but changes in policy. i would say that if there's a downturn in the economy next year and then 2011, it will expose the idea that the fiscal and monetary push didn't work. then they'll be worried. perhaps, an expansion of the balance sheet beyond what the rest of the world wants mike hasten the diversification pros process, hasten the move to alternatives to the dollar. there is no alternative now, by any means -- >> i was going to ask -- >> where would they house assets? the-n china's bond market? they don't have one. >> euro? >> not in europe because of the many problems -- there are many

problems within europe and some are greater than ours. and it won't happen in brazil either. there are -- the bricks countries, they don't have flexible currencies right now. >> the imsdr, not a viable alternative? >> there's no bond market for that. there's $7 trillion of world reserves. there's no market for these just yet. it's going to take a long time to develop. >> jim, last point. i'm gegs yuessing you think we' worse off because the fed chairman has been renominated. >> i'm not a fan much the fed chairman. i think early on in the process he made a lot of mistake. he was slow to recognize the crisis. he endorsed a lot of the policies of greenspan that has now ruined his reputation. a lot of people have been giving him high grades for the reaction he had in the last year or so, but i thought as any fed chairman sitting in that chairman in september of '08 would have had similar policies as well. i'm not suggesting it was a

mistake. i've graded him a "c." i thought we could have done better by finding someone else. he's been renominated and we'll have to see. he has a tal order in front of him right now to try to reverse this out to see if it works. maybe he should learn from greenspan. at one point a couple years ago, greenspan was a greatest central banker of the 20th century. then when we realized his easy policies led to a crisis, his reputation went down. we've got easy policies now that have prevented the market from going down. let's see if we can get out of this without having it create  another level of instability. >> yeah. jim, always good to talk to you. have a good weekend. jim bianco. >> back to our guest host, tony and jim with us in the studio. if you have any questions about anything you see on the show, e-mail us at squawk@cnbc.com. coming up, though, the outlook for oil, which has doubled off the year's lows, still well below where it was last summer. "squawk box" comes right back. ♪ come on fire me up

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now the answer to today's aflac trivia question. on this day in 19 88, what actor won an emmy for his performance in the miniseries "inherit the wind"? the answer, jason robards. let's get you an update. notable numbers out of japan on the economy side. the total number of jobless people in japan dumping more than 40% last month from a year earlier. logging a record drop in cpi, stoking deflation. we'll head out to our colleagues for reaction. let's take a look at oil prices rising after a volatile week. joining us now is jack gerard, president and ceo of the american petroleum institute.

good to have you on the show. it's interesting because we got some pretty bearish inventory data early this week. then suddenly we're back above 73 right for you. what are you attributing that to? >> it's difficult to predict. you've seen the price, it's jumped around a little bit in the short term. as we all strive to get economic recovery, listening to your earlier guests, we're all anxious to see that return soon. and the hope is that the fundamentals and the stabling influence of the market will come back into play as we recover here and start bringing jobs back online. but we're going to see -- continue to see a little movement. but it's -- it's staying relatively flat, if you will, even though it tends to jump from day to day. >> how much of this is an inverse dollar play? obviously in the later stages of trading in new york yesterday we see a drop in the dollar. >> again, i think there are a number of variables that influence it and move it up and down. over time the dollar has some influence. the demand questions. i mean, if you look at where we

are today and some more recent data we've released, our inventories in this country, particularly on gasoline and distillant and other things, we are above avenlgs of what we typically have at this time. while we've seen decrease in demand slow, we fully haven't turned that corner. so a little bounce around for a variety of reasons, again, i think our hope is focused on economic recovery, which will bring some stability to it. >> jack, tony, pimco. >>, yeah tony. >> when we look at commodities generally, we generally feel that the demand side of the equation won't provide much of a boost. but the spri side of the equation has changed dramatically in some areas. we know the baker-hughes rig count has gone from 2,000 to 1,000. a lot less drilling out there for natural gas, for example. so to what extent will the changes in investment toward new

supply impact the price? in your opinion? >> well, it's, as you know, it varies considerably. what we've seen as the rig count has dropped, it's begun to stabilize. we see more coming now back online. what we have in the united states -- let's take natural goes, for example. through modern technologies and our capacities to produce, we have discovered and now find a recoverable resevrves, if you will, beyond anything we thought of a decade ago. we have an ample supply out there. the real challenge now is the economy recovers on the demand side. i understand what you're saying. but i think demand is an important play here. as it begins to recover, as the manufacturing sector begins to recover, then some of the high demanders for our product, we think that price hopefully will stabilize and begin to rise. you can't -- i don't know any better than you do whether it will be tomorrow or a year from now, but clearly the

fundamentals, economic fundamentals are important here. >> jack, quick question. this trade, the crude oil trade specifically, it seems it has a tendency to create bubbles from intrinsic demand, the dollar play certainly, and then the speculators seem to rush more and crowd this trade a little more than others. i don't know why. but it always seems to play out the same way. then we get to a level where we see a definite decrease in demand just based on the price of it. are we near that yet at $80 a barrel? $85 a barrel? when do people start looking for alternatives aggressively? >> i think that's very difficult to predict. all you have to do is look at it in our experience about a year ago as it relates to gasoline. and you see that even on the consumer side of things, as the price begins to rise at some point the price breaks where you begin to see the change -- or the effect or the reaction, if you will, of the marketplace. again, though, i think what's more important here in the funtd mentals longer term, is the

broader economic situation. where we look at it on a global basis, remembering oil is traded on a global marketplace, you see what the chinese continue to do as their demand has gone up considerably over the past six months. and i'm very well aware of about what they're doing around the globe in terms of securing other energy sources. so, again, that economic recovery, that demand side is something to watch. it's difficult to predict at what point and who will come back into the market. i think there are a lot of people and other investors out there who are watching for what they perceive the bottom to be and when it begins to rise. and you'll probably see additional investments in energy because everybody knows and understands that energy's the life blood of our economy. and our hope is particularly those of us here working in washington is that this congress gets a ride. as we look at energy policy, as we look at climate policy, that we don't do things to further

erode or hurt our job creation, our rig count, or our ability to provide those needed resources domestically here in the united states as that demand begins to rise. >> speaking of which, jack, the ft runs a piece about supposed leak memo from you to your member companies saying, hey, let's organize a bunch of workers from the industry to a bunch of rallies and protest the proposed climate change legislation. you guys, are you that active? are you that worried about it? some people thought cap and trade, as a political threat, had been diluted. >> it's interesting when you look at that question. we've been on the country side for the last couple weeks and will continue for the next few weeks, we have put together some he educational forums, about 20 states where we'll go bu and have some conversations. what's fascinating and what has surprised me, as we create these forums, the turnout has exceeded our wildest expectation. there are a lot of people out

there. there tends to be a lot of focus on the health care debate right now -- >> you think this is not far behind? >> not far behind it. what we're finding, farmington, new mexico, which isn't considered a big metropolitan area, 1200 people showed up at that get-together. >> is -- >> there's a lot of interest. as you educate the public to, they're geing active. >> thank you for your comments. when we come back, a little off the beaten path. crustacean crisis, why lobster prices are plummets to historic lows and why economists are standing up and taking notice. i can't wait to take this one on.

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♪ rain rain go away ♪ come again another day ♪ all the world is waiting for the sun ♪ a little soggy out there. a little wet on the outside. but looks like the markets might have a positive start to trading day. let's take a look at the futures so far, still sitting above fair

value. earnings out earlier this hour, tiffany's, earned 39 cents a share for the latest quarter ex-certain items, six cents above wall street and raised guidance for the year. dell earned 20 cents a share for the latest quarter, five cents above estimates. company executives say dell's business is showing signs of stabilizing despite a challenging environment. and tropical storm watch in place for the north carolina coast as danny weakened. let's get back to scott williams for a check on the weather. >> good morning there, mandy, and good morning, everybody. tropical storm danny is hanging onto dear life here as it has maximum sustained winds at 40 miles an hour. still moving to the north-northwest at about 9 miles an hour. asymmetric as most of the thunderstorm active on the north and east side of the center of

circulation. the upcoming weekend, the big question is, whether will tropical storm danny head? it continues to be more toward the east and that will bode well for the eastern sea board for the upcoming weekend. we are expecting some increase in the surf and some rainfall. squally conditions as we move bow the northeast. you can see the forecast track here, near the outer banks of north carolina. during the day saturday, it could sideswipe the cape cod area as we progress throughout saturday afternoon into the overnight hour saturday into sunday before racing up the eastern sea board. as far as some of the impacts, if you will, associated with danny, as we go in time today, rainy conditions around the big apple, philadelphia. that's in association with the frontal boundary that we are watching. but as we go in time, during the day saturday, we'll have this frontal boundary bringing heavy rainfall. also watching danny as it moves up the eastern sea board. you will see some squally conditions and heavy rainfall.

now, by sunday, much improved conditions as danny will move up and out of the picture. but we still will see some isolated thunderstorms across the area for the upcoming weekend. so really we have somewhat of a triple threat as we move into your forecast period for the upcoming weekend. for the rainfall, before all is said and done across the northeast, anywhere from 1 to 4 inches of rainfall but we will see the activity enhanced by that frontal boundary, not necessarily from tropical storm danny. carl? >> scott, thank you for that. wow, 4 inches of rain. that's a lot of rain. as we get to our friday trading block, kevin ferry is at cme this morning, fresh from his guest host stint wednesday. we got through durables. broin dolan, tony and jim, our guest hosts. good to see you. >> morning. >> the conversation here at the table is the same as it's been for weeks. that is, a list of reasons why

this pullback can come. you walk in in the morning, you look at dell's numbers and the overall tone and it's pretty good. >> yeah, no doubt. more of the same is exactly right. i think probably today into monday all i would say is try not to read too much into what you see. don't believe a lot of what's going on. what's moving up, they term it high beta and it sound like it's more important than it is. we like to call them zombies. >> you mean volume leaders this week, right? >> yeah. started a couple weeks ago. why are people even allowed to trade fannie and freddie? i don't even know. that's weight going on. i wouldn't overread it. the point is, it's a ten you ated process. if this was the last day of the month you could say we'll wrap it up but it's going into monday. i would expect it to continue. one other thing i'd point out,

the yen, trading with us, down a little today. this is an historic election sunday night in japan. i think that those results could definitely reverberate through the currency markets early in the session going into monday. >> yeah. speaking of which, brian, weigh in on that. i mean, we haven't talked a lot about the japanese elections. maybe for good reason. but it's going to be -- it's going to be big. it will be historic, right? >> it will be. this will be about the second or third time in -- since 1955 that the lbp has not been in control of the japanese government. but the democratic party of japan still has a lot of difficulties in terms of basically having a real plan and being able to implement that plan through the existing bure rack racy which has been the constant throughout the post world war ii japanese era. in items of the currency, what i think is most likely to happen is that it's going to be a negative for the equity markets.

in that sense, be a bit more positive for the japanese yen. in the sense that weakness in stocks, tended to be a bit of a positive for the yen. if that regard, also the other big thing that the dpj was talking about was potentially distancing itself from the u.s. and from holding such large u.s. dollar reserves and u.s. treasury reserves. that doesn't -- they've been recently stepping back from that. doesn't seem like there will be a massive shift in items of the government trying to pursue a weak yen policy. i think in the short term we see a little stronger yen reaction. ultimately there's a bottom at about 90 to 91 in the dollar against the yen. >> brian, how much do we and particularly the commodity currencies care about what's going on in the shanghai market, which dropped another 3% in overnight trade? >> that's a big one. that's one i'm watching closely. the japanese leading -- excuse me, the chinese leading index just recently came in at about 103. that is about one point off the high seen at the peak of the

global expansion in the middle of 2007. if anybody thinks seriously we're in where near those levels of of economic growth, then you have to think there's going to be a major pullback in terms of the japanese -- excuse me, the chinese output in production. that's a negative for commodities. >> kevin -- kevin, what's changed now that the u.s. market is shrugging off these fears about what's happening in shanghai whereas at the beginning of last week they were all talking about it? >> well, are they shrugging it off? i think we'll get a better picture as september unfoelgdz. i think that's important about china. how are they producing these numbers if not by legislative mandate? when the japanese figures shows they're struggling mightily to export and overcapacity was a huge issue. i think those are going to be big, big themes in the fourth quarter this year, starting right away when we get back into september. >> kevin, it's jim. when looking at the shanghai composite, are we discounting

the down 3%, up 5% because of how volatile it is? we're talking about a market that rallied 300% a year ago and 100% this deflator is what i mean. >> the trader, not investor, the trader over here seems to have a pretty comfortable feel for things that are more broadly volatile over there. and so they've done a good yob of digesting it and muting it down as it comes back over here. but it does show that people have to get used to a bumpy ride. it dropped 5% overnight one time over there and everyone was ho-humming it. is-t sh it shows the system is supportive enough to weather those type of things but sooner or later, people have got to pull the numbers apart and say, what the heck is going on over there? >> it's hard to ignore what's going on in china, even if it's volatile. we can perhaps see the shanghai composite index as a sentiment

indicator as to what's going on with the economy. >> well, we -- >> we have to care, right? >> yesterday we were talk about how they were going to try to rein in redone tant capacity. rich bernstein laughed outloud. >> they're still building capacity. >> yeah. >> we have to consider china and the world and difficulties that countries are having in the so-called handoff. even in china there's a handoff. the reason they're producing these big numbers because there's been a shift to investment. we see the consumer there, which accounts historically for about 50% of gdp, had been -- had moved down to about 40% but recently down to only 35%. when you think about the world in general, u.s. is trying to slow the raise in savings rate through fiscal spending. this is helping china because it's limiting the damage there. but they are investing in new capacity at a time when we might pull back on fiscal spending. so where will they be left with this excess capacity probably at the end of the day -- >> they are running in

overcapacity dish. >> yes, we have to make the shift eventually to personal consumption or the handoff will be incomplete there. we need to have more balance. >> speaking of personal consumption we're going to get those numbers here for our consumer in a little less than an hour's time. tiffany came out this morning. even though sales at their flagship store down 30%, they beat and raised their view for the full year. i wonder if you -- i mean, can we -- is the picture for you filling in on how the consumer will be willing to spend? >> no. because, you know, williams sonoma did the same thing. these are just the fact they're beating doesn't mean things are a disaster. it means analysts were tired of, surprised to the downside so everyone moved their estimates down. these are still not good numbers. the fact that williams-sonoma beat, they are good things, but does it give a clear picture of what's going forward? not at all. >> we'll talk about lots of prices down. dollar stores are doing better and low price retail -- restaurants are doing better.

i think there's a downshift in terms of spending. >> brian, going into next week, how would you set yourself up to trade and make money off the forex markets. >> hang on. the dollar is testing the low. the dollar was looking good as about noon yesterday afternoon. at about 2:00 it fell out of  bed. i think next week we'll see a more significant test of the dollar's lows for the year but i like to buy toes lows. i look to use dollar weakness to get long on the dollar, short the commodity currencies, selling the pound and then also looking to basically sell the yen, sell the carry trade on a basically looking for more significant pullback in risk appetite. >> of course, with the potential for correction in the equity markets as well. thanks retch for joining us. >> kevin, are you bringing us the number at 8:30? >> i don't know. they haven't told me. >> i've just been told santelli

will be back. do it yourself. >> it's great to see you guys out there. >> great to see you. coming up, call it the crustacean indicator. the xhi economic situation is getting ugly in the lobster capital. world, maine. an industry in the tank next. 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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♪ japan's top automaker says production sank last month. toyota's global output dropping more than 20%, marking the 12th monthly decrease for the biggest carmaker. honda falling down 16%. toyota shutting down the california factory that it ran with general motors for 25 years. this is the first time ever the japanese automaker is closing a major sa assembly plant. gm decided to withdrawal from the 50/50 venture last may. chrysler is now accepting product liability claims on cars built before it exited bankruptcy in june. while in chapter 11 the

automaker abandoned all product liability claims but the detroit news says the new company is now accepting warranty claims, lemon law claims and safety recalls but not for lawsuits filed before june 10th. that's the day when it exited bankruptcy. we've been talking about this story all morning long. the lobster industry is in a boil. prices are in the tank. and there is no sign of a recovery. things getting ugly. janet is at owl's head, maine, with the sad state of lobstering. i mean, first, just tell us -- bring us up to speed on what's happening with prices. what is going on? >> reporter: well, a couple yeeshgz you could probably get $12 for this guy. now maybe you're going to get, i don't know, $2 or $3. so that in a nutshell tells you the story, does it not? you look at the scene behind me here and you do understand the lore, but lobstering is struggling and there's a whole new chapter playing out up and down the coast.

but particularly, or perhaps the best example, is on tiny makinnis island, smaller than central park, has only 50 full-time year-round resident. you have to get there by a once a week ferry or a small plane. earlier this month one lobberman shot another there, reportedly in a dispute over territory. now residents on that island are asking the state of maine to provide protection for them. meaning that only residents or the children of residents could come in and mine those areas for lobster. people on the island say it's not about keeping out competition. it's about protecting what they have for future generations. >> people might look at this situation and say, you're trying to keep competition out. >> we are. we're flat out. it isn't the competition that we're worried about. it's the people who aren't going to put anything back. >> i just think it's a symptom. i just think it's something

that's been an undercurrent forever out here, ever since the first settlers were here there's been an undercurrent to territory. i think it's boiled to the surface this year in an unfortunate way because of other external pressures. >> reporter: and those e ternl pressures are economics, the price of fuel is up, price of bait is up and the price they're getting for their catch is significantly down. you add in increased competition and it can get explosive, as it has on the island. even here in quiet owl's head earlier this month, two lobster boats were sunk in the middle of the night. a lot of tension going on, a lot of discussion about what's right, who should have access to the waters here. as one lobberman put to me yesterday it's like a farmer that has land. just ours is on water and we don't have ray fence around it. >> we talk about protectionism

all time on this show, or the threat of protectionism, usually between countries but hardly ever between neighbors. i guess the orders from restaurants, january etd, are the real problem here? in addition to commodity prices you mentioned, they're not getting the orders they were two, three years ago? >> reporter: that's correct. because people are not buying this delicacy, even as there are signs of recovery. this is still considered very much a luxury item. and the big canadian buyers who represented a bulk of the purchasers for the lobstermen here in maine have significantly cut their orders. they were impacted by the credit crisis in iceland. all across the board, people are feeling the pinch. it's not just the lobstermen on the coach. everything in maine revolves around this industry. >> is there any hope amongst the lobster people who get them out of the wurt that maybe at some stage prices will pick up? >> reporter: they are hopeful. lobstering is not an industry you go in for money.

people here do it because their father did it and grandfather did it. simply, they love it. you look at this and it's beautiful out here. it's a way of life. they're not hopeful they'll see prices of a few years ago but they're not leaving the industry either. >> i can imagine it would be pretty brutal out there on a maine winter. beautiful now. looks lovely and sunny -- >> but you'll eat well this weekend, i know that, knowing you. >> reporter: sorry, carl? >> you're going to eat well this weekend. >> reporter: this is in a fedex box in an hour on its way to you. >> i don't want to pu be the one to put it in the pot of boiling water. interesting stuff. when we come back this morning, we'll get stocks to watch. dell will be a big mover. we'll show you which names you need to know before the opening bell rings. personal income and spending, another key to the consumer.

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do i think we'll lose 1,000 banks over the next period. >> how long? >> two years. we've lost 81 this year. the numbers are climbing every day. >> john kanas, ceo of bank united on "squawk" about 24 hours ago. he made those comments, drudge picked up on it and it ended up being the lead headline most of the day yesterday. does it seem like a reasonable

claim to you? >> we -- all we have to go on is the fdic's list of problem banks. so over 400 now. because we can't know for sure, we don't know which of those -- what the names are, but it seems high relative to the problem list that the fdic. but it does speak to the idea that banks do have problems with capitalization and why investors should stay high on the capital rung, because there are tremendous ricks out there. and why we need economic growth, inevitab inevitably, to help these banks to recapitalize. >> what was interesting in another point he made, was 1,000 sounds like a bad number of potential bank failures, but he also said some of these banks should never have been given a bank charter in the first place. we're dish. >> that would be one in eight banks. there are about 8,000 banks remaining. there were about 15,000 banks. we're shrinking in size. you can go to other countries like canada and find there are a few banks.

maybe that's the right model. we do have a large number of banks. it inevitably will shrink -- >> it's the reflation going on, and real estate prices are feeling that, too. won't that make a lot of the problems go away if, you know, real estate stabilizes and -- >> the key outlook for banks is asset in value. that's why wie talked about case-shiller. banks have been shy about putting out their cash. that's why cash balances are extraordinary. >> you have a chart of that. >> we do. we have bank cash, looks reich the same chart you would see on bank reserves. bank cash has gone from $300 billion steadily for a few years until recently, of course, and up to a trillion now. we don't have the charted. banks are securities, buying agencies, mortgage-backed securities. they make up a quarter of their assets. the cash banks are holding is

extraordinarily high. >> this is cash assets at commercial banks. the larger point yesterday, mandy, you remember was a lot of these banks served local small businesses. >> mom and pop stores. >> that would be a larger point. >> small businesses make up over half of job growth. just a lack of credit availability, when we rock at the three major factors in terms of what the overhang is for growth and restraints on growth, that's one of the keys. the other two being income growth likely to be slow and, secondly, wealth destruction and what that means for the savings rate. >> let's get a couple stocks to watch here as we go into a friday in august. there's quite a bit happening. we've got -- dell will be one to watch which had earnings of 28 cent, better than expected. we were looking for 23. margins surprisingly to the upside. they said the second half of the year probably would be stronger than the first. talking about a potential refresh cycle in the months to come. tiffany beat, 30 cent ex-items, we were looking for 33.

they boosted guidance even though sales down a third year over year. you could help remedy that. >> no, my husband will remedy that. i never buy my own diamonds. coming up, this morning's top stories. breaking economic news at :30 eastern, personal income and spending. and political power plays. we'll be talking economy, budget and health care, the biggy, as congressman paul kanjorski when we come back. more and more acs are turning to fidelity for a smarter way to trade online. only fidelity lets you back-test your strategies against an entire portfolio of stocks. plus you'll get advanced, customizable trading platforms. and you get the kind of execution you'd expect from fidelity... ...with a dedicated specialist to talk about even your most complex trades.

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the bulls roll on. blue chips moving higher to an eighth straight session now. is this rally for real or are the bears on vacation? >> sorry, folks, we're closed for two weeks to clean and repair america's favorite family fun park. >> what? >> the budget blues. america's health care crisis, the loss of the political icon. >> the work goes on, the cause endorsed, the hope still lives and the dream shall never die.

>> congressman paul kanjorski and "meet the press" mod tore david gregory on all the event shaping everything from main street to wall sfreet. plus, the american consumer on layaway. why this growing trend is putting up the red flag. and we find out how much everyone out there is making and spending. "squawk box" begins right now. ♪ my momma told me you better shop around ♪ ♪ you better shop around ♪ shop around >> good friday morning. walk to "squawk" on cnbc, first in business worldwide. i'm carl quintanilla along with amanda drury while joe and becky get some time off. joining us is tim of pimco. they've been calling this junior trader week because that's left who's on the floor. the fact you are here is actually a compliment, right? >> i'm guessing. i'll take it as acompliment.

>> i'd rather be in while others are out. >> on the economic agenda, personal income and spending at 8:30 eastern time, half an hour. we'll get the university of michigan's consumer confidence number. prediction, personal spending is up 0.1%. pce index seen rising half a percent. futures ahead of that news have been in the black for most of the day. largely because of dell's solid earnings last night. tiffany beat earlier this morning. in fact, let's get to mandy in the control room. >> i'm polishing off oatmeal cookies. we'll be watching shares of dell. the computer maker may provide a boost to market sentiment after quarterly earnings came in above stimgts. also indicators that dell's business is stabilizing and that doing a better job of defending prices and profit margins. also a day after securing a loan to pay off its ious,

california, is hoping to raise more money through an unprecedented two-day garage sale. the state will hold a sale of surplus items ranging from prison uniforms to office uniforms to computers. it hopes to raise a few hundred thousand dollars. carl, i reckon you would look fantastic in a prison uniform. you could wear it on "squawk." signed by the governor himself. >> i'm not sure if that's a compliment or not. despite jobless claims falling for the first time in three weeks, fears of a jobless recovery persist among many analyst. what is the reaction on capitol hill? joining us paul kanjorski, chairman of the capital markets subcommittee. you're back on the hill. getting ready for the recess to be over. >> getting ready and we have several meetings set up and we'll have a very active september and october. and i feel november and december. >> how do you think -- what is -- i mean, everybody assumes that health care will lead the agenda when you come back. is that going to be the case? >> i think that will lead in the

beginning the public view, but on our committee and regulation reform and handling some of the problems, rating agencies and other thing, we'll be extremely active. i would think that would start coming into view again. >> what's been your reaction to some of the data we've been getting over the last week? it's been decent. home sales, durables, jobless claims, people beginning to wonder if we're stalling out because although the pace of firing may have eased, people are still filing new jobless claims. >> that's true, carl. actually, i'm more optimistic coming back in the fall session than when i left for the break. >> really? >> yeah. i think this isn't going to be a spectacular explosion, but i think a lot of the media, including yourselves are perhaps approaching it in a negative way that that will happen. >> no, no. you must have us confused with some other media. >> probably. >> when you were -- as you've

been on reescess, i assume you d town halls. >> i had telephonetic town has. i spent most of my time going to medical clinics, talking to a large group of people in one-on-one situations and groups. i think i got a pretty good feel. i did a telephonetic town hall where i could talk to on the conference call 5,000 people at a time. >> are you getting a sense -- break it into two parts. have their views on health care been as vociferous as we've seen on television, and are there hopes for the economy getting better or worse? >> yes, i think one of your guests earlier in the show talked about the cap and trade reaction that they're getting when they're going around the country. >> yes. >> and it's not too dissimilar to the health care thing. i think what's being reflecked is an awful lot of ang sgrit in

the system. that's why we -- it looks like it's termed well on a specific issue. i'm not sure it's on a specific issue. i think it's anxiety on everything. but with you get a chance on a one-on-one situation or in a cooler atmosphere to explain whether it's health care, whether it's cap and trade, whether it's the budget or where we may be going in the economy, people seem to settle down. i think this is a very good time for a strong presence of national and state leadership all over the country. and we have to start exacerbating the good feelings that we can do it. we can develop our own destiny. i'm looking forward to the president coming back from vacation all charged up and ready to go. the american people want that. >> i have a quick question for you, it's jim. are you -- one, were you surprised at -- maybe not at your town hall meetings but at the push back this country was giving towards health care or does it not really exist? was that overblown by the media?

what's your feel on what the barometer is on what the public wants? >> i think it breaks into two segments. i think it's an excellent question. i think there were a whole group of people that realized it could be exacerbated for political purposes. you could disregard those. there was a strong feeling out there, we would make a mistake if we missed. the fact there's an awful lot of confusion and misunderstanding among people. that's our obligation to educate and inform before we move on. i don't know that it was extreme. i think -- as a matter of fact, i'm encouraged with the fact that we have a democratic process going on on major, major issue, very difficult. what we have to learn from this is let's take our time, let's explain what we're going to do. let's -- it's, you know, 17% of the gross domestic product. it affects every individual very personally. and you're not going to take a risk and change your health care on a maybe. you want to know. so we got this obligation in

government and if leadership to let this be a soft landing for people to really explain to them what's going to happen, what potentially can happen. but everywhere i run into this dichotomy. almost all people want health care reform. they just don't want it where they don't know what it's going to be. so they want it explained. they start to get more comfortable with the amount of knowledge and information that you give them. >> congressman, this is tony of pimco. what major regulatory reforms do you expect in the fnl financial sector to come out of the next session of congress? do you think the movement in financial asset prices recently, the improvement in financial conditions, might change the debate in any manner? >> well, it may. i want to make sure we don't exacerbate reform. we should have reform. there's some major areas that we need the reform in. one rating agency i've been working on it intently now for six, eight weeks, we're putting a bill together.

but we don't want to go overboard. this is not the time to take a sledgehammer or a baseball bat to our regulatory system. this is a time to say we have to be surgical in our approaches. we have some holes. we have some vacuums and some limitations. let's address those. in some instances, quite frankly, we have a lot to do because, well, for instance, in our international situation with the eu, that's a major problem. we just haven't been paying attention to that relationship and the effect that it has. you know, the other day i was going over some of the figures. the relationship between the united states and the eu on trade on a daily basis is $2 billion. our largest trading partner. now, that's -- when you've got a neighbor living as close and as interrelated as we are, you should pay a little attention to them and they better pay a little attention to them because by doing a slight movement -- somebody told me, we have more investments in belgium capitalwise than we have in

china. >> well, they make great beer in belgium. >> that's right. >> we are american. >> that's right. >> congressman, you're a democrat. but of the ones we talk to, you're generally considered one of the more reasonable ones who tells it straight. we've had senator lieberman say it's really not time to pursue this public plan. that given the new deficit projections we just need to do a reset and take two steps back. do you think if we get a bill by december, it will include such a measure? >> i think we have to discuss that issue. i don't know whether -- i think the thing that exacerbates the public plan is the idea that government would run it. it may be ideal to find some other mechanism, whether a nonprofit or a co-op. we have to take the time now to start rebuilding faith in government. i mean, after all, you know, if we start thinking about it, the government and the people are one in the same in the american system. so if you're going to condemn

the success of government, you're condemning the success of the people. and that's not really something most people want to do. they think they can make the judgments on their lives and we just have to reassure them that we're responsible. when i say we, those of us in official office in government. we know athey want. >> we've asked a number of congressmen and senators this week if the passing of senator kennedy would change the debate? some have argued that, yes, the memory of his legacy will be worth something politically on the hill. others say, you guys are -- you simply are too pragmatic to take that very far. what's your thought? >> i would probably agree with the latter group. you know, tease are hard guys up here. they love senator kennedy. i love senator kennedy. but senator kennedy is no longer here with us in items of running this bill through. and we've -- we're going to spend several months more. so by the time we get to the

final decision, i think will be less influencing. >> congressman, we'll be all eyes, we always use that cliche, all eyes will be on the hill once you get back to work. good to talk to you again. >> very nice talking to you all. >> congressman paul kanjorski. let's get back to our guest host, pimco's tony and "options action" contributor jim iurio. i've completely butchered your name, haven't i? >> you got right. >> have i? how about that? gentlemen, we've been talking about health care and whether or not i guess this is awhat a lot of people have been asking, whether it will be harder to pass health care without senator ted kennedy. it's not actually, you know, 120 0% one way or the other. some people say, actually, you know, people will be gal vanized, democrats will be gal vanized trying to push into something in the spirit of what he spent his lifetime to achieve. >> the big overriding story is what we've seen amongst the

american public. they haven't given the obama administration a free pass. the democrats a free pass to do whatever it is that they want. and what's on their agenda. they do have to work with the other i'd of the aisle. we see shots on cnbc seeing obama's approval rate declining and rallies increasing. the financial markets like divided government. you can go back to the reagan years or even the clinton years when republicans took over congress in 1994. divided government, something we don't have technically right now but a little more in the practical sense it's been good for financial markets. >> it's not just the approval ratings. it seems like the rise in s&ps coincided a lot with the push back on health care. because joe lieberman is absolutely right. whether or not you agree that health care's what we need, it's -- we don't need it right now. we don't need to make big

changes that might strap companies that already hugely strapped. it seems like the wrong time to do it. the clean air bill that passed -- or almost passed a couple months back. these are taxes on companies already floundering. >> it's interesting how scared people are of the government. but i think it was peter buckmar put out a rasmussen poll yesterday. government jobs are the top employment choice, 29%. if you're looking for job security, you want to work for the feds, right? >> i almost laughed when he said that. the government and people are the same. i'm thinking, yeah, there's a huge percentage and growing every day. >> tony, jim, we'll get back to you in a couple minute. breaking economic news on the way, how much merndz are making and spending, personal income and spending is about 17 minutes away. then the loss of a political icon, the passing of senator ted kennedy does have democrats trying to rally around health care reform. we'll talk about that with moderator of the "meet the press" david gregory.

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♪ it's going to be reflective emotional weekend for many americans. you're looking at a live shot of senator ted kennedy's casket and the procession of americans passing by to pay their respects to the lion of the senate, losing his long battle with cancer, the third longest serving senator in u.s. history. david gregory is moderator of "meet the press," planning a tribute, i imagine, to the senator. we've had a couple days now to reflect on his legacy. what are some of the smartest things you've heard from others since wednesday? >> well, you know, ted kennedy represented a time in the u.s. congress that has passed a lot of us by. i mean, i can say as a younger generation of reporter covering washington, what he came in to

the senate that he came into in the early 60s does not exist anymore. it's a harder, more partisan, more polarized place. you see it in the health care debate now and all of this talk about whether senator kennedy could have made a difference or a lot of people who think he could have. the divisions run so deep now over the role of government, particularly in the area of health care, that there are a lot of people in the pipe who say, it may not have made a difference at all. they've certainly felt his absence along the way. i think what you really pick up, and i have talking to some of his proteges over the last several days s how deep his impact was on them as legislators and just politically generally. he was so important to senator kerry, ultimately getting the democratic nomination. and, of course, we've talked a lot about his impact on then-senator obama. that endorsement turned the race around in many ways during that tough primary struggle with senator clinton.

>> you're getting to my next question is. if his impact as a living senator didn't move health care further along before, can the memory of his legacy help as some have said, democrats go out and win one for the gipper, or in this case, teddy. >> i spoke to a senior white house adviser who said perhaps it creates an emotional lift. beyond that they're realistic about the limited role it can play. the white house has a lot of work to do. and as one said to me, washington's a pretty cold-hearted place. one you get past this time of mourning and remembrance, it goes become to what it was on the health care debate, which is in a tough place. >> david, what's the latest word on who can potentially step into his shoes? >> well, that's the subject of some intrigue in massachusetts right now because the governor duval patrick is trying to get the law changed to allow him to name a suck successor as a

caretaker for a period of time until the election next year. that would be a change in the law. they tried to change it before and it failed because there were concerns if senator kerry was ee electriced in 2004 a republican governor could have put in a republican. there are some cries of hypocrisy about with i caretaker would do to impact the chances of others in a special election. what we know are two things. vickie kennedy has indicated she does not even want to be a care taker senator. secondly, senator kennedy himself in his conversations with the governor did not specify who he would want to fill that seat, which pretty interesting. >> beyond senator kennedy, we've had the president on vacation this week. we thought it was going to be a quiet week. clearly, it was not. reappointment of chairman bernanke, of course, given the news about bernanke, the new deficit projections, is the

president coming back to washington with a stronger or weaker hand than with he left? >> i think he's in a difficult place now. not only because of what's happened to his approval rating, because of the health care debate, but the deficit numbers only add to the imperative that a lot of certainly republicans but even more conservative democrats say, has to be number one. that is, cost containment in the health care industry. that's the fight he'll have to wage. and, yet, the base of his party is very much attached to the idea of a government plan, a public option in the health care debate. he has got to maneuver around these difficult blocks in this debate right now. >> talk to us about what you have for the weekend. >> we'll have a special tribute to senator kennedy. an hour-long edition of "meet the press" which includes his special role on the program going back to 1962. you'll hear his appearances over the years on the issues and on his life and his pursuits in politics. we'll also hear from senator john kerry and bob schrum,

robert kennedy's oldest child, and it will be an interesting hour. >> we look forward to watching it. see you next time. david gregory in washington. make sure to tune in to "meet the press" this sunday. check your local listings for time. are american consumers spending more of their hard earned income? we'll get numbers coming up in eight minute from now and cash-strapped consumers looking to ease the pain in the pocketbook. retailers are going back to an old standbito help, the lay dast way.

if you look just at dell's numbers from last night and tiffany's numbers from this morning, you might think the consumer was doing a little better for some confirmation. we got to tune into breaking news that bets to happen. we'll find out how much americans are making and spending, personal income and spending is up in about five minute. jane wells on the latest trend in retail. it's called layaway.

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we have breaking news that's about to be released. the government's personal income and spending report, rick santelli and, of course, we

still have our guest hosts here in the studio, tony and jim. rick, the numbers haven't come out yet as far as i know. talk us into them and kind of what we're expecting here. >> well, i think it's pretty darn easy. jobs is number one. the reason it's number one is because you need an income from that job to consume. if you recall, last month we had a dropoff of 1.3 on income. you know, americans like to spend but in order to spend you need some ammunition. so i think not only is the number important, i think that any possible revision to last month is going to be key as well. we're about 15 second out. if i had to lay the table here, you know, we have a drift up because we had a refunding, meaning treasury prices tend to rise. but we've all known that for weeks. we actually see the opposite effect today. hey, the number's coming out one second. yes, there was a revision last month but only 0.2, from down 1.3 to down 1.1. current month is spot on.

unchanged on income. up 0.2 on spending, which is good news but expected news. but last month this camp was also revised ironically 0.2 from up 4 to up 6. let's run from the inside numbers quickly. year over year deflator down 0.8, pretty close expectation. but it is double, it's double down the minus 0.4 last. month over month, year over year pc core, 1.4 is expected. what's the after malt of that? yields are a bit higher, still a bit higher. we see treasury prices moving down a bit, equity prices moving up because at least we didn't see any more negative on the spending. >> jack, what about you? what's your reaction on this and how do you think the market might react when it opens up for good? >> i think that it's a bit of a nonevent. more importantly, if you really want to break it down, i think if there's any disappointment at all, the fact income didn't rise a little bit is maybe just, if nothing else, one of those

little black clouds we have to watch over the course of the horizon. i would say if you calm that with maybe, say, another bad consumer confidence number later on today, you might be looking at the whole question of a consumer-less recovery once again. that's the question. in fact, if you even break down the dell numbers. jim, i think as a trader you know when i'm looking at. look at the dell numbers. one of the reasons they ended up beating the street is because they were farming out production. you can only farm out so much production. you can only cost so much jobs. then you've really got to worry about how you start to create jobs and how you start expanding the economy. right now, a lot of assumptions are being made and unfortunately priced into the market. >> you can expand that, too, like the employment picture. there's a certain number of jobs you can cut before you can't cut anymore. there's a certain amount of time you can let your computers become outdated before you can't let them become mother day outdated. the thing that surprises me is i thought the market wouldn't like the fact that personal income didn't rise. i thought that's what everyone was focused on.

i guess everyone's going to interpret this as positive? >> one thing is you were talking about skeleton crews, those that have to be here because our kids are going to school, holding our pockets and putting our hands in our pockets like we say on the floor. more importantly, the portfolio managers that are out there buying the market right now, if you think about it, have to buy the market. i keep hearing this from everyone i talk to. remember, it says portfolio manager on their door. it doesn't say keeper of cash. they keep seeing the market go higher and higher and putting that money to work. >> that's totally true. why are they buying five really bankrupt companies or government orphans? >> because other people are buying them. they can't miss a move. >> i think you guys are all right for the last two, three, four weeks, maybe the last two months but the last couple of days, this equity might have run its course and now the ends of a short squeeze in bankrupt companies e you can't pull back the stock because people or

entities that own it have no real vested investing interest. it's an invention type interest. >> at the risk of poking the bear i'm going to ask about the dollar. the dollar weakened against the euro. that could give us another leg up. this has been -- >> oh, great news. let's burn the currency -- >> i'm not saying it's great news. i'm saying it is aiding in the stock market rally. it's undeniable. >> what's undeniable? >> the fact that the weak dollar is part of this upward trend since march. how cue say it's not? >> how can you say it is? >> it leads every time. >> leads what? >> leads the stock market rally. >> stock market going up in price doesn't mean rats anything about the state of the economy. >> it does, too. >> no, it doesn't. >> not a huge mment -- >> gentlemen, gentlemen -- >> talk to me in a year and a half. >> jim, you and i know that a deteriorating dollar in the long run is not good. in fact, i think it was mohamed el erian from pimco -- >> long run, short run.

>> it's not a question -- tony, you can comment on this. it's not a question of how long it's going to take for it to deteriorate. it's how it's going to deteriora deteriorate. that was really the question we all had and, really, if you start to see a spiral in the dollar, jim, i have to tell you, you're going to see people running for the exits with equities, too. >> on the dollar, converse fiction worldwide we'll see dollar fall. let's go back to the data. the bigger picture is the savings rate. we saw it dip down to 4.2%, quite low. historically from the upper single digits where it moved toward 10%. there are more adjustments to come. we've seen consumer net worth, household net worth from $60 trillion down to $50 trillion. typically a four cent change for each dollar change in wealth. take the $15 frill onhit you get an adjustment in spending. that's at least what we should expect and something more simply from deleveraging.

the 4.2% savings rate suggests to us there's more consumption holding back, so to speak, to come. you'll see restraint on spending, limited growth in the future because households want to build their balance sheets and it will take them a long time to do it. >> one last question. if they're saving, what should they hope for, a little donation or inflation? >> they want purchasing power -- >> a little deflation or a little inflation? if i had money in the bank, which could prove to be best for my money's value? >> you're fired up today. >> a little deflation. >> depends on what you're holding, rick, of course. >> cash in a mattress. >> cash in a mattress. certainly deflation is what consumers want. >> interesting, isn't it? >> gentlemen, we have to wrap it up. thanks much. rick, thanks for breaking the news for us. >> thank you, mandy. >> we'll get back to jim and tony in a moment. meantime, joining us with

his outlook on the market, the economy and hopefully his take on that data as well, warren stevens, ceo of the investment banking side, $5 billion under management. good morning to you. >> good morning, carl. hopping on tony's point about the savings rate, it was 4.2%, 5 in june, 6% in may. an ardent bull might look at that and say, well, they're not as paranoid as they were 90 days ago. >> well, you know, i don't think you can make too much out of any one number. but our view is that the consumer is under a lot of pressure to repair their balance sheets. they're not in the mood to spend very much. with employment the way it is and the under employment, if you will, with people having furloughs, i think the consumer's in a pretty tough spot. so savings rates kind of bounce around a little bit. in fact, i think there's a lot of question about even what goes

into those numbers and how accurate they are. >> government data, you have doubts about government data? >> yeah. well, doi on some of that, for sure. >> that sounds like a double-dip scene airyoe you' scenario you're painting there. >> i think there's a chance of a double dip. i don't know how high the probability i would put it. there's certainly the chance of it. i hope it doesn't happen but could be. >> second quarter story about cutting costs. no big deal. because when the consumer comes back, and they will, we just don't know when, these companies are going to be like cars that run on plutonium. they're just going to be -- it's going to be rocket fuel. do you see it that way? >> i'm not sure i understand what you're saying. >> they lower their cost basis, super leveraged for any increase in top-line growth. >> well, i think companies are

well positioned for when the market returns, but, you know, what rick was saying earlier, people got to are some income to spend. and what we're seeing in our -- with our clients and in our private equity investments, there's still a lot of people looking at making layoffs this year. and certainly not hiring anybody. then you factor in the furlough situation, if you will, where people are just not working as many hours as they were. it's going to be a while, i think, before we see -- before we see top line growth in a lot of our clients' business and in the businesses we're investing in. >> tony here as well. one thing we haven't mentioned, tony, if you have an option arm and you know it's going to reset, that gives you one more incentive maybe not to -- maybe not save but certainly not spend like you were used to. >> to be careful, although i think prevailing view is that the federal reserve will keep interest rates low so the reset

story has improved substantially. with respect to private equity, how do you see it as an asset class now, so to speak in terms of directing money toward private equity, of course it's having difficulty and what's the outlook? . >> in our private equity business, we don't have a fund. it's all our own money. and we've never really invested in a way that a lot of our other private equity firms did by trying to maximize leverage on those investments. but i think given the credit markets, there's -- there is certainly less money being put to work in private equity today. that's a good thing for us because we've never been too dependent on maximizing our leverage in those particular investments. so as an asset class, you'd are

to say there will be less activity there. not only because of the lack of credit markets but also, how do you exit? >> can i ask you something that seems to be here in your notes? it's a word we don't often use anymore, stagflation, because at the moment it seems that you're saying it's actually your greatest fear. it seems at the moment there really aren't that many inflationary pressures around. >> i think that's right. but in the intermediate to long run with our stimulus and federal deficits, there's very strong likelihood it seems to us that inflation picks up. you know, that's certainly somewhere down the road. but it looks like to us it's inevitable. i don't see any way they can remove all of the -- all of the monetary stimulus and fiscal stimulus that they've injected into the system. and i hope it is not

stagflation, as we all remember. that was a painful time. but, again, i think you have to factor that in, that it is somewhat of a possibility. >> warren, do you think the markets will reflect that by the end of the year? are we -- do you think we might have tapped out for '09? >> well, again, i don't know about what the market's going to do the rest of the year. i'm, frankly, surprised it's rovd the way that it has. but i think the market's going to face some headwinds for the rest of the year. i do. i just don't see -- you can only cut costs so much. and businesses have made their numbers by cutting costs, but at some point, you know, you're just not able to do it. and a lot of businesses are there. >> warren, appreciate your insight today on an important number. >> thank you. >> warren stephens joins us from little rock. futures, a goose egg on income. we had 0.2 on spending as well.

the futures have barely budged. awfully close to the session highs. saving rate for july 4.2%. we come back we'll get to jane wells speaking of income  and spending with a hot trend in retail. jane, what are you doing in an empty kmart parking lot? >> i just put down my starbucks coffee and trying to stay away. attention, kmart shoppers. it may seem like the great  depression to a lot of people and some buying habits born of that era are back. ba wha do you do when you don't have cash and credit? we'll remind you.kn hat i do? i introduce them to the most fuel-efficient midsize sedans... ...and suvs in america. i don't know if you've heard, but this fuel efficiency thing.. kind of a big deal. anyway, ford and lincoln mercury have you covered... with showrooms full of fuel-efficient cars, trucks, suvs, crossovers, and hybrids. how's that for going green? now, get 0% financing plus up to $1,500 cash back on most ford, lincoln and mercury vehicles. go to ford.com, or visit your ford or lincoln mercury dealer.

it really has been a very big week for retail. j. crew's second quarter profits rose nearly 3% beating forecast and higher revenue on stores and direct sales. earlier this month, the company said had returned to its root by focusing on catalog and website by opening fewer brick and mortar stores. they're projecting stronger than expected third quarter results. as for shares of j. crew sitting at 32.76. one retail trend is making a come backback and that's the layaway plan. jane wells is in -- where are you? >> reporter: burbank. >> it's like we're back in 1975 or something. >> reporter: oh, we're going to go further later today. back before banks were giving away credit cards like toilet  paper, there was layaway. you put down a deposit, they se aside a product, and then you get to take it home with you when you come if with the whole

cash. i think i put my prom dress on  layaway. that is old. you didn't are to qualify for layaway and unlike a credit card, there were no interest charges. >> that's the best part. >> reporter: kmart shopper liz remembers the old days and now layaway is back at kmart and sears, claiming the program which in recent years has been popular leading up to christmas actually just exploded this summer for everything as people couldn't or wouldn't use their credit card. >> i was using layaway like crazy. now i came in today because my older son is going to be a daddy, so we're kind of looking at some of the stuff for baby to lay it away. >> people are paying with cash more, credit cards less. like our layaway, you can get the new, hot items right now, take your time to pay them off in our eight-week period and then take them home and have ne great items. >> now, manager lloyd davis  says, in his opinion, less than 5% of the customers fail to come

through at the end in cash in time. there's a 21st century twist on this called elayaway.com it's a layaway operation for 1,000 retailers. layaway popular with large electronics. to boost tv sales, sears is going deep. throwing long with an add about guys waffling and deciding what tv to buy, with someone famous for changing his mind a lot. >> we found there's some guys out there niced on making decisions. it's not their thing. they waffle, don't know they're going to do. >> nose guys drive me crazy. >> reporter: now the brett favre ad launched this week. not sure sears is running it in green bay but it is getting a lot of play on youtube, along with these outtakes. >> check competition -- >> this stays green, by the way. is that okay? >> well, i used to like green. >> what if it were purple? >> tempting. i was going to retire today and then i was like, nope, going to go back to work. >> good choice. >> you think?

>> reporter: sears and kmart resurrecting layaway as brett favre tries to resurrect his le say. later on the call, guys, the  return of the christmas club. >> what's the christmas club? >> you save for christmas throughout the year. >> oh. >> reporter: yeah, like a savings account for christmas, but now it's -- >> it's your -- your company sponsors it, right? >> no, you. >> probably layaway fans are going to krous fi me for saying this but don't you think this is just once again encouraging people who can't necessarily afford items to go out and buy them and then we just get back into the excessive debt mess we were in in the first place? >> reporter: well, except you you don't accrue debt. all you're out if you can't kco up with the deposit, which is  10% of the purchase price. if you fail to come up with the total in cash in eight weeks, are you out that, your deposit and then i think there's a $10

cancellation fee or something like that. >> understood. >> reporter: it's not like a credit card situation. >> thanks. >> nice to see favre can laugh at his own situation. >> that was funny. >> although some people don't find it so funny. jane, thank you. great stuff as always. >> fantastic. next, how strong is the summer bull or are the bears still away? art cashin will have the trader's edge for us.

welcome back. it's time for trader's edge. let's get straight out to art cashin floor of ubs. >> i'm going to watch the internal dynamics of the market itself. we're going to watch for the university of michigan confidence data. away from that we're going to see if the s&p can get up through resistance at 10:35, 10:40. that seemed to restrain eight little bit yesterday. although the bulls had the playing field pretty much all to themselves with that collapse of the dollar late in the day. oil rebounded, and stocks rebounded. and this relationship between

the dollar and the other asset classes has become amazing. >> we were talking about that just a moment ago. >> i think it's the main driver of almost everything, don't you, art? >> absolutely. it's calling it all of the way through. there are a couple of guys in the currency markets that maintain they're reacting. you can't prove that to the guys up here on the floor. >> no. watching it too closely. everyone has become a currency trader, no matter what you trade. >> absolutely correct. >> how much are you paying attention, art, to the consumer spending in the month of july? household incomes were pretty flat. >> i think, that's going to be a bit of a stretch. that's how we look to see how much confidence shows up in the data just before 10:00. i was really happy to see that you guys were talking about things like lay-a-way plans and christmas clubs. all this is coming back into vogue. may be hope for me.

>> the point i think is that you might bother more scars of the depression into the '80s and '90s. when we think of this, which is not a depression but a very severe recession, to think that the consumer is going to have problems for the next five, six, seven, eight years, that doesn't seem like a stretch, does it? >> no, it's not going to be attractive at all. i agree with mohammed el erian and others, the market is way ahead of itself. the growth that we're going the see over the next seven years, this is like the biblical story of the seven lean years, this is going to be seven pretty lean years. >> go for the good marinade this weekend. >> the ice cubes don't stand a chance. >> have a good weekend. >> great working with you, mandy. >> me, too. we have a final strategy session with tony and jim in just a second.

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