>> lumpy. >> yes. a lumpy mattress. >> a lumpy report on the mattress company. everybody have a great weekend. we'll see you next week. that will do it for "power lunch." >> and "street signs" begins right now. have a wonderful weekend. welcome to "street signs." i fast food and buying in bulk. how much longer can mcd's get you to keep buying. and also on the radar tempur-pedic and e than alan telling us the economy needs to sleep. and who else is hitting the century mark this year? stick around to find out. no, it's not herb. >> all right. karl, thanks. it's an up and down week ending on a pretty up note for wall street. major averages all higher for

the week. the dow within 1.3% of erasing april losses so far. dow and s&p on pace for best weekly gains in weeks. and not being led by apple, which is lower again, but by microsoft up 6%. check out apple by the way. down nearly 2%. and nearly 5% for the week. it's also down eight out of the last nine sessions. and bank of america is the biggest drag on the dow. it's down 5% after a downgrade by none other than analyst mike mayo. he's slapped a sell rating on the company. bob, can you explain this reaction to mike mayo's downgrade? >> well, he still has some influence. look, ax appropriate to use but he still has a following. very influential for a while. bank of america isn't growing much. everybody seems to be growing a

little bit except bank of america today. we've got that rep and warranty issue still out there. if it gets worse, bank of america's going to bear the brunt of that. and do remember too, kelly, the important thing is with the old acquisition still out there with the countrywide acquisition as goes housing in a certain way, so goes bank of america. i have not been very happy with the housing numbers in the last week. so there you see bank of america to the downside. i know you mentioned microsoft. i'm greatly relieved, but more worried about apple. down eight of the last night danes. again going to do north of 30 million shares. when apple starts having he vi volume as it has the last six days, the market gets flutter ri. we're sitting at a one-month low for apple. there's the thing i'm most worried about. >> it's amazing. apple by the way is down 10% from its high on april 10th. quite the couple of weeks for that company. bob, thanks so much. rick, the big event everyone's talking about is the french elections. what do you think happens on sunday if it looks like

[ inaudible ] is leading here. >> i'm not sure how the outcome is going to be. certainly looks as though sarkozy doesn't make it on the first vote his tenure could be coming to an end. now, whether that occurs or not, i think what's important here is the threat between politics, citizens and many of the programs and leaders around the globe. and i think we're going to have the same issues in this country. listen, if the population doesn't really get the issues, they're always going to vote for the path of least resistance into the perception of their wallet. so instead of raising the age of retirement, they'd rather lower it. politicians need to be more honest, but it's hard to get elected. and i think that's the cacatch- we'll see play out in europe, and probably november in the u.s. >> bank of america lagging not because of the downgrade but also concerns about housing data into next week and talk about

maybe that death cross breaking below 50-day moving average. >> yeah. good stock to watch. meantime mcdonald's up after reporting a golden quarter. citing strong global sales and oddly enough a boost from the leap year of all things. should investors leap into this old school titan? bring in matthew, mcdonald's analyst at la zard capital. good to have you with us. >> thank you, carl. >> i'm hearing management implying slower growth, limited buying power yet you're maint n maintaining your buy with a 108 price target. >> i think still stands out offering you better than 10% upside. i still think it's a buy. and i don't see too much risk on the downside at these levels. i think i echoed what they said as far as they did cite cpi coming down in the at home market for food, the grocery channel is putting a little bit of a ceiling on their future price increases. and they're a little concerned about the austerity measures in countries like you just mentioned in france. >> and layer on top of that

potential, and i mean potential worries about labor markets, employment in this country, which they're highly loenched to, right? >> exactly. i think you do have to consider some of those incremental costs coming on in the next few years and what that could mean to restaurants and certainly mcdonald's. >> mcdonald's has been so innovati innovative, if they're lagging and struggling with some of these head wipds, what does it mean for the rest of the sector? >> well, in part to give them some credit, i mean, you did put in the context they've had an unbelievable run. they're at record margins right now. so i'm looking ahead though. and the stock is at just off of its all-time highs. so as far as valuation in the near-term, there's limited ability. i think it's got about 10% to 15% opportunity for upside. however, i think there are some other names out there that have maybe lagged over the last couple years. one that we like is jack in the box in the smaller cap land. and larger cap land i'd say starbucks still has a lot of head room to go.

and their same store sales are probably not slowing as much as mcdonald's might be on the verge of. >> that's it, matt. this is herb greenberg. you start thinking about talking about maybe 10% increase here possibility on the stock price, but when i look at this thing, i remember there are a number of smart people scaling out of it last quarter when it was well over $100. does it become a game? does it become a pawn game at this point? you buy, sell, buy, sell, based on limited upside potential? >> well, it depends what market context you're in. certainly management is top in the sector. and they've lived through the toughest recession we'll see for several years. so i would think that it is a hideout for lack of better terms. and it definitely served the investment community very well during the last three years. >> hideout, i like that one. one question on chipotle. you watch chipotle at all? >> i do. i cover chipotle. i have a neutral on it. valuation is my number one concern. >> let me ask you one question here.

i was talking to one of these independent research guys. tommy at equities research he's been watching the company for a long time. he said look at that operating cash flow. that operating cash flow took a huge hit this quarter. i don't think it's ever taken a hit like that as long as this company's been public. any concerns there? >> well, yeah, i think you do have to look at that as far as where you're coming from. yes, the operating cash flow took a bit of a hit. i think also when you look at their pace of growth, simply top line growth it's a crowded growth company right now. it's a phenomenal restaurant concept. very productive. high returns. high unit volumes. however, the years ahead are going to be slower than the years they've just recorded. and the margin opportunity ahead's going to be a little bit, i think, diminished given how much they've improved over the last couple years. so at the current valuation i think it looks a little stretched 40 times in excess of 40 times right now. and it was probably due for a pullback. again, coming off its all-time high. it's sort of a high class issue they're running into. >> yeah. couple themes running through both of those names.

matt, appreciate as always. see you later. >> all right. one thing investors are always hungry for is profit. the s&p is up over 10% year-to-date. earnings beats continue to roll in fast and furious. let's bring in all star investor portfolio manager of the permanent portfolio fund with $17.5 billion in assets under manager. they're up about 50% over the past three years. michael, what's going to dominate the calendar next week? is it earnings or the fed? >> well, i think it's going to continue to be earnings because we're not all the way through the earnings season. so far the results have been pretty good. and a little bit surprising given the negatives we expected coming into it. the rates of growth are going to slow. we've seen the peak of the cycle. et cetera, et cetera. i think earns to date have been pretty good. the big news over the weekend is going to be the european and french elections. i think most people suspect a runoff into may. the larger picture is sort of a general trend or direction. you know, if ho land is successful, you'll be seeing a run towards higher taxes,

reduction of spending, those austerity measures and probably less of a slant on growth. which i think is really what europe needs to help pull its out of these long-term structural problems that they have. that issue bears watching in the long-term and will affect the u.s. over the long-term. >> michael, i want to ask you about apple too. down 10% from highs earlier this month. when you see that owned by a lot of hedge funds falling, does it concern you? >> no. i think it's had a great run and it's a great company and been supported by earnings. the valuations did get excessive. they're coming down now. i think it may have still further to fall because there was such a run-up in the stock. but long-term, you know, it's probably still a good growth bet. we haven't earned it because of valuation issues. but, you know, it's also dependent on a continued, you know, exceeding expectations in the product cycle. and that's a very difficult thing to do continuously. so it bears watching. >> you know, we also want to talk about this issue about what's happening with the elections in france. sure there may be a concern that there's a tilt towards more

taxation, but the same time you could argue if he's going to roll back austerity measures, that could support growth in france maybe the eurozone going forward. is that going to potentially offset some of these concerns? >> well, if rolling back spending in government growth austerity measures, that's an issue. i would rather see it come from the private sector. i think the issue is if you're raising taxes, then that's more money coming out of the private sector. and that's probably not the direction that europe needs to go. i think so much attention has been paid to austerity, higher taxes, to support the deficits and et cetera that, you know, growth is an issue over there in many countries. if germany loses the support of france through a policy directional change, that's going to put more pressure on germany to really fund the whole thing. and that gets dangerous. so i think the structural issues remain. and it bears watching for the political climate over there. >> sure. another thing we want to mention the nasdaq has turned red for the day. anything concerning you with momentum in the market heading

into next week? >> no. i think the u.s. market has had a great run. we may be subject to profit taking. we had a small selloff, but we haven't had a technical correction in a while. even if things sold off from here and recalibrated, i don't necessarily think that's a bad thing long-term. buying opportunity in my view. >> michael, thank you, sir. >> thanks, kelly. >> i got to tell you something, it was just a week ago i was here, bob pisani was here, we were chatting, there was a panic in the market. just a panic of just a week or two ago and the market takes off and we get back to where we are today. a guy who looks at individual stocks like me, i just shake my head. >> you don't like the return of correlation? >> no. i don't like the return of correlation. not at all. but it gives stock pickers great opportunity because it creates the inefficiency in the markets. >> could create some buying points, that's for sure. >> absolutely. next on "street signs" is it time to get bullish on america? what one industrial titan is

feeling about the u.s. and beyond our borders. and how one investor made a bold call on bp today. other distressed companies he's showing some love to. that's coming up. with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade. monarch of marketing analysis. with the ability to improve roi through seo all by cob. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above,

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check out shares of microsoft. mr. softy up 5.5%. you don't see that very often on earnings from last night just a few pennies shy of a 52-week high. the last two years, as you

probably know, up just 4%. microsoft has had some positive impact on the nasdaq 100 today than apple has had negative impact. you were just talking kelly about officially in correction territory. >> it does feel like 90s or something. another big reason the market is up ge the industrial titan knocking it out of the park on its first quarter and offering an outlook pretty bullish on america. mary thompson joins us now with more. bullish on america? >> maybe that's a little overaggressive. you know, ge had good operating earnings. came in at 34 cents a share, a penny ahead of estimates. couple of key drivers here, strength in its energy business and transportation. as far as the outlook in energy ge is a global company. they do get close to 50% actually 47% of their revenue from america, but the rest is spread across the world. so here's what the ceo had to say about the global outlook.

listen up. >> externally global markets are improving, but volatility remains. infrastructure demand is generally healthy and u.s. is better. we're watching europe with caution. >> again, europe is a theme here. they're very cautious about it. they did point to the fact they have been bringing down their real estate portfolio there. they're going to do a second quarter review of the european portfolio as well. they were talking about their health care business there. and health care orders, equipment orders were strong up 12% for the quarter. the drivers were u.s., china, japan, europe down 6%, northern europe opposed from southern europe. >> i've heard big story was industrial orders, energy, profits, i've heard the big story was capitals real estate portfolio. >> yes. capital ls real estate portfolio the first profitable quarter since 2008. industrial orders up 20%. backlog of industrial orders a record $201 billion. >> is this still a situation where ge's getting penalized for

capital or reasons getting hurt earlier or trying to make industrials bigger part of the company? >> no. i don't think they're getting capitalized anymore for ge capital, the finance arm. what people were concerned about in this quarter and it wasn't unexpected is that the profit margins on the industrial side declined. and they are still even though they declined in the first quarter, saying we will gain 50 basis points in the margins for the rest of the year, but the first quarter it was suspected. seasonality in there as well. >> we should mention 49% owner of this network. >> yes, nbc. >> nbc universal. interesting quarter and gives you reason for hope if you're looking broadly around the world. >> it does. i want to mention they repeated what their goals were for this year. and then they do expect eventually once they get fed approval to have the finance arm start paying a parent to the dividend -- or dividend to the parent. thanks. >> mary, thanks. >> sure.

>> meantime cytec making product used in everything from planes to cars to pharmaceuticals blaming asia for the sellout for the rest of the year. stock pretty flat after earnings today. started the morning in a worse position. year-to-date up more than 40%. shane phlegming is the chairman, president and ceo and a new face to cnbc. we met in the green room a few minutes ago. good to have you, shane. >> good to be here. >> how much is europe? >> europe's about 30% or 40% of cytec's total revenues. i guess a take a little exception with outlook for the rest of the year we're projecting 23% earnings growth year-to-year. i feel pretty good about our year. growth being driven by energy platforms focused on the mining industry. the downturn in europe is hitting our cash business but seeing a lot of secular growth driving real good growth, double digit top line growth, 20% earnings growth in those other two sectors. >> we hear great things about

aerospace at large. is that offsetting europe? is it in any way being impacted by europe? >> well, europe's dragging us down, but it's not impacting the aerospace business per se. if you look at our aerospace markets, transport being the biggest, boeing and air bus, those drive increase usage also seeing good growth in our military sector as well as business and regional. so aerospace is growing globally. mining business is growing globally. metal demand is very strong. that's a global business spread around asia, europe, middle east, africa, latin america all growing well. again, pressure from europe is only really impacting coatings business and that's what led to i guess a little bit of a disappointment from the analyst expectations. >> there's still concern if you're raising revenue by increasing prices even though volume's down that's not a sustainable way to keep the business growing going forward. >> correct. that's not a good formula for the long-term. point back to the two growth platforms where we saw good volume growth as well as price growth. in the coatings area we saw

volumes decline in q-1 driven primarily by europe. we did recover with price but we have to get growth going in that business as well. we expect to see secular trends, coatings will grow overtime, but the macro economic situation in europe right now does not bode well for coatings this year. >> you're based in new jersey, yes? >> correct. >> you have something like 5,000 employees. >> correct. >> huge exporter. >> correct. >> how much of your manufacturing is actually done here in the u.s.? >> our manufacturing is pretty well balanced with our revenue. to 35% roughly of our sales are in the u.s. and i would say a similar percentage of our revenue comes from products manufactured here. we try to manufacture where our customers sit. >> is nat gas a feed stock? >> nat gas is a minor feed stock. we recently divested a big user of nat gas. nat gas is a feed stock for propolene. we're not seeing the all-time

low natural gas prices unfortunately bring the costs down. >> can i ask before you go what it would take to bring the rest of those jobs here to the u.s.? >> again, we need to match our production with where the market demand is. as airplanes continue to get build, we'll add capacity. we have a major 200 million plus to make carbon fiber for the airline industry that will come online. what will create additional production for us here is additional consumption of our products here. >> thanks so much. >> my pleasure. thanks for having me. >> just ahead on "street signs," rising fuel costs are creating rough seas for one cruise line. he's out of here. herb plays cruise director next. >> and with the awesome milestone in boston. what it would cost to build the shrine today. "street signs" taking you to the ball game next.

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than an hour. the park, get this, costs $650,000 to build. today that's about $15 million. a far cry from the half billion ballparks of today like marlins park and yankees stadium. >> can i mention real quick it is my sister's birthday. >> that's more important birthday. >> happy birthday. >> happy birthday, miss evans. look at companies started in 1912. l.l. bean, liberty mutual, lockheed. >> it's my aunt's birthday too. i'm going to keep rattling them out here. shoutouts all the way around. april 20th is an interesting date throughout history. rising fuel costs on the high seas. that's today's disaster du jour and herb is with us now. >> shares of royal caribbean, which is actually headquartered down in the hometown of yours truly hit rough waters after lowering its forecast for the year saying fuel is the big

variable. bookings which had tumbled after carnival's costa concordia hit a reef are recovering. but also said they remain volatility especially in europe although the cruise ship i'm going on in a few weeks overppad or close to it. >> you're from miami? >> a beautiful place to grow up. >> i was born there. i am a native. i take pride in that. >> you're going on a cruise? >> i'm going on one in a few weeks. i've been on a number. yes. >> to the italian coast. >> yes. >> why? >> i will be on the coast. it won't come soon enough. >> i want no part of that. but have fun. we're going to check on a little sunshine on this friday. it comes in the form -- i'm looking over here of tight forming, tight fitting exercise gear that herb's wearing under his outfit today. check out shares of underarmor. the stock up nearly 5%.

it's cracked the $100 mark. earnings beat estimates and the company says it benefits from new styles of gear like the armor bra and rc running shoes. >> still conversation by the way in the conference call about inventory has been an issue. they're trying to get that correct, but i want to point that out. >> big momentum stock up 40% year-to-date. he's not wearing it under his clothes. although he could. it fits that close, that tight. all right. coming up next on "street signs," big stock drop that could keep you tossing and turning at night. and, later, the science of spending. have you ever walked out of costco spending a lot more than you planned? you're not alone. we'll tell you how they do that when "street signs" comes right back. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003.

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welcome back to "street signs." 90 minutes left in the trading week. let's catch up on the day's top stories. first of all, take a look at stocks. believe it or not they're on track to post a weekly gain. dow, nasdaq and s&p higher on stronger earnings reports. earnings beats from microsoft and ge contributed to the boost. and volatility gauges are falling. the vix is dropping below 18. that's its lowest level for the week. all right. we want to look at the flip side of that which is that brent crude is higher today trimming its weekly decline.

final oil and natural gas trades are coming in now. let's get to courtney reagan at the nymex with the energy close. >> good afternoon, kelly. it does look as if we're going to settle higher for crude on the session. a little short covering and a little help from the dollar being weaker today. but if you look at that spread like you mentioned between brent crude and wti, that premium has narrowed for this week. it was about $20, right now it's 15. i'll be remiss if i didn't mention gasoline down 6% this week. that's already seeing some pull through at the pump. your prices should be lower in the coming days. kelly, back to you. >> courtney, thanks. today is the two-year anniversary of the explosion of the deep water horizon oil rig that caused the massive oil spill in the gulf. brian shactman is in louisiana. where do we stand with the claims process? >> kelly, thank you. the claims process is starting phase two believe it or not two years later. phase one the gulf coast claims facility processed more than a million claims, handed out over $6 billion to 220,000

individuals and businesses. there's about 20,000 claims left. ken fienberg who headed that has gone and patrick juneau has come in and process and deal with those 220,000 claims and deal with this court ordered settlement that could cost billions. >> what about people on the ground? >> well, here, right now on the docks we've been on today the shrimpers and oystermen, they're unhappy. there's two real reasons for it. one is they don't feel like they've been compensated well enough. they talk about people in other areas that aren't as affected by what's happened that got money. they didn't get sufficient amounts of money. and they're worried about what's out there. the shrimp boat behind me is about to go in the water in a couple weeks for brown shrimp. scientists haven't come out and said it but they feel like the shrimp underneath the water there might not be what people want to eat. >> brian, you were there for the spill, by the way.

and every year after. >> yeah. >> from visiting down there over the years what do you think has changed the most? >> well, a couple things jump out at you, kelly. one is the media presence went down from the spill two years ago to last year and now they're just not here. and the second thing is there's a real disparity between who will talk. this year if they're close to a settlement or think talking will jeopardize the money they'll get from the bf funds, they won't talk. and the people that do talk to us they were either rejected or unhappy with what's going on. people on one side clammed up and the other side want to talk all the time. >> when money talks, people clam up. brian, thanks so much. >> the spill certainly taking its toll on the stock. in two years b.p. down by more than 30%. our next guest says he saw an opportunity in bp and made money investing in the company since that time. whitney tilson joins us and a

well-known knicks fan. good to see you again. >> good to see you, carl. >> i remember asking you at the time why you were in 15% returns, how does that happen? >> basically this falls into the category we call panicked headline investing. it's when a big well-known company something terrible happens to it and the stock collapses. usual i there's some sort of taint. bp's a classic example where it was almost immoral to hold the stock. we love buying stocks when we think the sellers don't care about price. they feel career risk. they feel shame and embarrassment. and we like to take advantage of those emotions. so we started buying a stock when it had almost fallen 50% from 60 down to 35. but the thing is to do this you have to have a strong stomach. and you got to be patient. we were a little too early. stock kept falling. we kept buying it all the way down to 27 where it bottomed. our average cost was under 30. we bought some call options as well. we figured they were going to cap that well and within six

weeks the stock was back to mid-40s and we took most of our money off the table. >> i was curious about the call options because it didn't seem likely that it just came from trading the common. was this a once in a every five years kind of story? talk about the rareness of this opportunity then. >> sure. well, bp was unique in some ways, but in fact i would say almost weekly certainly a couple times a month we see opportunities in this category that we call panicked headline investing. for example, last year we bought jefferies group when it fell to, you know, $12 or $13 after mf global blew up and everybody thought jefferies would be next. we bought netflix when it fell almost 80% from $300 a share to $77 a share. other examples that we didn't pull the trigger on but we wish we had would be news corp. with the phone hacking scandal. hewlett packard when it fell 50% or so and meg whitman came in. so you can make a lot of money doing this, but you got to be careful because, for example,

this week nokia, rimm, first solar are all in the headlines. those companies -- the businesses are in full scale collapse. the stocks are down 60% to 80%. yet we are short those three companies because we don't think their businesses are going to stabilize. we see lots more bad news coming. so the key is you have to invest in businesses that are at least going to stabilize their operations. and the bad news will fade. if the bad news continues, you're in a value trap. >> whitney, i have to come back to bp for one second. that situation that did result in the loss of life, do you ever feel like you're dancing on people's graves? >> it comes up when you invest in tobacco stocks, for example, which we've never done but for economic reasons. look, you to separate out, i suppose, and we have a fiduciary responsibility to our investors to try and invest their money wisely using logic and rationality. obviously our hearts went out to all the people affected most importantly the people who died

in the bp accident, but the thousands of people's livelihoods that were effected, et cetera, we felt like as investors we had to put that aside. >> whit, this is herb. when we get into netflix, which you also mentioned, that's not quite a -- well, they have a business model issue there as well. they are reporting next week. it will be interesting to see what they say. but wouldn't you put that in a different category? and wouldn't the risk in netflix be greater than say the risk even in a bp where you were buying the headline risk? >> bp one of the reasons we were comfortable is they were the fourth most profitable business in the world. they had enormous profits. enormous hard assets. incredible balance sheet that gave us a lot more conviction. i have never seen panicked headlines like those around netflix. a former darling in three months. the stock went from $300 to $77. people, you know, they had this horrible botched qwikster idea.

>> they've also got a model that's challenged. the challenge with the model of course is if they really want to get their streaming content up to snuff, they're going to have to spend a lot more money. that's going to have an impact on the profitability. lumpy for lord knows how long. >> this is one where we manage the position size. never let it get above a 5% position. our bet there was that they would abandon qwikster, that idea. and they were still offering a great product to 20 plus million customer who is were very loyal who really love that streaming product. and that those investments in more streaming content would pay off. so we're going to see more on tuesday whether they show a nice rebound in subscriber growth. we're betting on that. as the stock has run up, we take money off the table here because we can't let this become a big position because it's risky. >> some of your biggest holdings are in berkshire, goldman, speak

of selloffs. >> in january i went to italy to visit a friend he had misfortune of buying at half book and by the time i saw them in january they were trading 20% of tangible book. we thought about buying those. those fell in the category as well. italian banks, everybody thought italy was going to default and so forth. those stocks have done well. it was a circle of competence issue for us. we got comfortable when goldman traded down to a 35% discount. citi group was a 60% discount to tangible book last august and september. so we pulled the trigger on those. >> last question here. you'll forgive me, nokia, first solar and rimm don't seem like stretches for a short idea. what are you counting on? are you counting on getting wiped out? >> in the case of rimm and nokia, they are fundamentally disadvantaged against the apple/android world. we don't see anything that they can do to change that. and so nokia still got a $14

billion market cap. rimm's got a $7 billion market cap. so sometimes you can make money on stocks that have already fallen 60% to 80%. if the news just continues to be bad, they're going to continue to go down. similar story to first solar. the world has changed. the news is terrible. and, i mean, i have no doubt plenty of value investors are sort of bottom fishing here thinking that it's a smart panicked headline investing. but they're betting on a stabilization of the business that we think there's very little chance of. >> whitney, have a great weekend. >> thank you. >> go knicks. whitney tilson. >> coming up, nokia messing up business for apple. >> and cost co, how do they get you to buy all that stuff that was not on your list when you walked in the door. we're going to ask herb why he's thinking about dropping his membership. ♪

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bob pisani here. coming up on "closing bell," u.s. airways and amr may be nearing a merger. we'll take a look at which carriers could be the big winners or losers if the deal takes off. plus, does netflix need to change its business model? or is the company better off with a change of leadership? and after nearly 3% decline since monday, should investors buy apple shares ahead of its earnings next week? that's all ahead at the top of this hour. first more "street signs" with carl doing double duty once again, carl. >> thanks a lot, bob.

beyond big tubs of mayonnaise and monster size packages of toilet paper, did you know costco sells 100,000 fresh roasted chickens a day. they've figured out how to get you to buy them and a whole lot more. no wonder costco shoppers spend more than they planned. there are no signs or directory. costco wants shoppers to wander and stumble across items they weren't expecting. >> i do try to go down every aisle just in case. >> that sense of discovery and low prices are what draw customers like this new york marketing executive and mother of two. >> this is my favorite thing at costco is the meat and lasagna. you can't make it for that little. >> like many shoppers, she tries to stick to her list. >> chicken.

>> but admits it's difficult to pass up a bargain. >> that was not on my list. >> exactly what costco wants. >> sometimes i'll end up with like three packs of tooth paste. get it just in case. >> and spending more is impossible to avoid when everything is sold in bulk. want waffles, here's 60 of them. like eggs, how about 90. mayonnaise, here's a tub. >> it's part of the american psychology that more and bigger is better. >> marketing consultant pam danzigger studies what they do and why? >> what costco does is understand their consumer. understand what excites them and then having the product to be sure to excite them. >> in house they have a couple terms, triggers are the staples you go in for. the milk and so forth. the treasures are the things you weren't expecting to buy, herb,

and you did anyway. a phenomenon i think happens in your family to some degree. >> not anymore. i've been a member longer than jim cramer. i have been a member here since december of 1991. the san rammon, california, store. i've been in similar stores throughout the country. once you get to the demographics i'm at where it's just two of us at home, you know, i always say my wife we're going to go there and get something -- do i really need to spend this much money on this when we're only buying a few things? we're getting the water. maybe if they always had select-a-size paper towels i would really want to continue going there. >> you show restraint. your one of the households that goes in and doesn't come out -- >> you never go anywhere with my wife. she can get you in, out, knows what we're going for and no dodling. >> do you think there's a long-term demographic headwind? >> if i'm thinking about it, other people are thinking about it. so as the population ages, as people trade down on their

homes, do you need the mass -- you know, the big quantities? >> the american family size has shrank over the years. >> household creation. >> but it's one thing, it's shrinking. i'm not talking about going from five to four, i'm talking about going from four to two. and that four to two is a big change, let me tell you that. >> their margins are what you typically have for a retailer in that business, so they have to do the membership fees and business going. >> and that fee keeps rising. as a business journalist it's a great place to go because i can see when people are trying to offload something. >> the average income of costco shoppers is something like $96,000. >> twice the national average. >> much higher than what you would expect. >> they don't mark things up more than about 14%, 15%. and we didn't get a sense of that until we found out their hot dog, which still sells for $1.50 with a coke as it always has, there's a point at which their supplier said i can't sell this to you for $1.50.

we'll do it ourselves. >> wouldn't you want to see that sausage making. >> i can walk right past that thing. i get in and out. it's not a problem. >> cnbc original documentary the costco craze inside the warehouse giant does premier next wednesday night. >> wait a minute. >> at 9:00 p.m. eastern/pacific. a guy who knows more about costco than i do -- >> you talk about costco and not invite me on the set? >> battle of the costcos. >> what bothers me the most is he is right. he's actually right he's been a member longer than i have. and it just galls me. look at my name on my card. >> jimbo cramer. >> i can't wait for your documentary. i'm fooling around with this. i'm sorry. the reason i'm fascinated by costco is because it's changed the way i do everything, carl. i go to the supermarket once a month. that's all i have to do. fortunately, talking about melissa, i don't have an

apartment. i have a house. >> what happens as america gets more urban? isn't that the appeal of dollar stores? people can't afford to go shopping once a month and drop that dough. >> filled with mercedes and eco buy things at the dollar store. it's not that cheap. costco is genuinely cheap. and you know, carl, i'm sure we're going to hear about it. they don't make a lot of money on a lot of things. >> and that's where their membership fee comes in. that's a lion's share of their profits, the annuity, rollover aknewed at a 90% rate. >> what have the dollar stores done, they have taken away -- >> i don't know, jim. >> the empty nesters get in there, i think there is an issue. do i really want to get in that norwalk parking lot and fight for the space? >> that's -- yeah, there's a real problem. there's a lot of customers and they make a lot of money.

but it's always the liquor ones, right? they make the most money. >> one of the biggest retailers of wine in the world. >> i was so disappointed in connecticut. i looked for the wine section and they don't have any. they can't sell it. >> i'm a huge fan. this will be my single favorite thing we've ever done at night because i do love costco. and i can tell you once i bought -- i don't mean to break your break, but you've bought tires and sears and i mentioned it, to the former ceo. they had their head of merchandise call me to verify what price i paid and to tell me that will never happen again. >> he will with, they are the biggest sellers of cashews in the country. >> what struck us -- and i don't mean this in a naive sense. no pr.

they didn't know where we were, what we are up to. >> you can follow that woman around the store and -- >> if you get into the front end and how they time the front end to make sure everything is moving like clockwork there and that is such an important part of the store. >> isn't it the greatest that you don't have to eat, you go there and can have dinner. you get the samples? never eat before you go to costco. >> thanks for coming on. it's nice to see you with the sleeves rolled up, too. >> there goes the mike. got has intervened. jim cramer. >> i love what you're doing with costco. and, you, for once you're ahead of me. >> when did you get your card? >> 2007. i had a family card, for heaven's sake. we're all jokers. we don't have black cards. we don't have executive. >> let's get to breaking news. simon hobbs has that for me. >> we've got breaking news coming through from the imf.

and indeed the g-20 which has removed the major cloud hanging over europe. they have firm commitments to increase imf resources which to 430 billion. they say that is a firm commitment. that's a major move. we fear that they might not get that and perhaps monday or tuesday it could royal confidence into the markets as two years ago. that cloud it would appear has been removed and christine lagarde has done an extremely good job. we thought it would take weeks. back to you. >> simon, thanks. furniture retailers are raising red flags. ethan allen issued a profit warning. joining us is managing director. he follows the furniture stocks

closely. we were talking about tempur-pedic being up. what happened? >> the stock was up 60% going into last night's close. obviously it didn't meet aloft the expectations so the stock fell. >> john, this is herb greenberg. i went through this call, the last investment conference that they were at and one thing i really noted was the change in tone as it came to market share. and in your report you actually say you think the concerns about market share declines or perhaps not growth are overblown. and i've got to tell you, there was this issue of competition from serta and the i-comfort, it appears to be taking hold. what do you think about that? >> this issue started cropping up all throughout last year. the market share focus is misguided because the market share focus is on the elastic

memory foam or specialty beds. that category is growing 20 to 30% a year by our calculation. and tempur -- >> when you get a competitor like serta with their bed that has gel inside to make it a hot sleep, as they might call it, the impact of that, it seems to be really taking hold right now. >> our guess is serta is spending $30 million advertising on i-comfort. tempur-pedic will spend $50 million. >> what are we learning? what are all these figures telling us? >> well, i think we're gradually improving. i think it's glaciel. it's slow.

we have a long way to go up and it k it's a little misleading. and we haven't seen it lift yet. they are doing well because of what specialty bedding is doing. we look at apple. the store that and who that might be. their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. [ yawning sound ] ♪ ♪

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