building the competitive edge. >> good to see you and thank you so much. see you soon. that will do it for closing bell. thank you for joining me. follow me on google and twitter plus. i will see you. fast money begins now. >> green mountain and avalanche. the short seller joins us with what is new with the trade. we are trading visa and hopefully after hours as well. the fall from grace, what are the legal ramifications for the stock. the former fed governor joins us to talk about why friday's job numbers are crucial and why foreign exchange is key. live from the nasdaq this is fast money and let's get to the biggest story of the day.

the implosion occurring at chesapeake energy. the second largest producer in the country. this is the story they had been hitting on for sometime. >> this is his job to create value. the fact that he did it doesn't mean he should get a new contract and $75 million. this is outrageous. >> the one thing you can't make a play is chesapeake itself. there were lots of problems. >> i wouldn't be a buyer because the company is too leveraged. >> all kinds point to something catastrophic. >> why anyone would begin to take a position in chesapeake. >> and nobody has taken the bait so far. some analysts say the value of the assets are valuable. it should be trading at about $30 a share. almost double the current prices. >> i guess you could make that argument, but you have all this legal problems out there and if you are going to make a bet here, you are making the bet on

natural gas. why not buy natural gas or some other driller and not have to worry about waking up and finding out there is another lawsuit. >> that's a great point as far as securities if you want to get exposure. this was 30 or 25 a month ago. when we were talking about this, this is a man-made disaster and it's shorts. the gift that keeps on giving. another thing is listen, you don't have to be naked. it gapped up above 20. those sorts of moves are going to be susceptible. the options market was not pricing adequately. it's a great way to play it. >> here's an interesting wrinkle. chesapeake's shareholder changing the 13.6% ownership from passive to active saying a change is made to be and we quote this from the filing, more active in corporate governance

and management matters and third parties concerning proposed corporate transactions of a significant nature. you flagged this initially and it was a change in the 13. >> it wasn't actually a change in the holdings, but the way they categorized the holdings. from a passive investment to allow you to be passive or active, but they laid out the things that they may do to be active. they normally don't do that. they are pretty plain vanilla. things are starting to spinout of control. the bonds are down and they owned 13.6% and they have to protect that investment. this board has done a horrible job and it's the same board with the exception of one. there was a gentlemen who left after the whole map fiasco in 2008. that same board is here and it is astounding to me that they can allow this to happen again.

we don't know what shoes to drop there. if you are looking for a pure play governance, this is the one. however if you are just looking for nat gas or energy, we don't know what else is on the balance sheet. i don't know. there could be. could there be other things? we see the reuters story about the hedge fund. that's another conflict of interest. how does he have time to do his day job at all? thank got they took the chairmanship away. now he has time for more conflict of interest. the board or this ceo. i don't know how they allow it. >> let's not forget, the assets have a value here. it's difficult right now to determine what that value is. when we see the option markets start to react and the big money

players and acquiring that upside potential. that would be the time i would want to sniff around in chesapeake for now. we can waiver around. we are above 20. we pull back and we are at a 52-week low. there will be opportunities to trade this stock, not necessarily invest, but to trade it. they traded it extremely well. i would love to seat big option players step back in. >> on the options side. >> on the options. >> who knows what the downside is here in the equity. who knows. >> the assets have to have some specific value. >> we don't know what's against them. we don't know what is against it. how we have a billion dollars out unbenounced to the board and the company is doing business and there is no conflict. by the way, i didn't want to disclose that. it's ridiculous. >> 9.5% bonds due and they traded at 106 and change.

then at 113 in change. there is a big decline in the bonds. short selling has gone up and record high. 8.4% of the shares are now short. compare that to 7% of the shares a month ago. there is a market change in the sentiment of this stock. we were talking about the options. can you even fathom putting on a trade here to play for a potential outsider? even for a downside. >> i think dan made a good point and mispricing it. one of the things they have to pay attention to is that the equity is really a small percentage of the enterprise value. we are talking about $11 billion in a $20 billion enterprise. that's something that people have to focus on. that can swing around violently. we are seeing long dated put buyers. a lot of them are putting credit exposure. look at the ones that are expiring and they are yielding almost 5% that to me is

incredible by credit and options traders at this point. >> i want to add one more thing. that actually ties their hands in terms of disclosure. they need to reveal the trading they are doing if they buy or sell more than 1%. it's not without a cost to switch. they foal they must do it. >> that was cool in the press release. they separate the chairmanship and the ceo position. we are pleased with the action and they are probably psyched. the activist on the board. we wonder what they have up their sleeves. you see a buying opportunity? . we have been short this name for sometime. you see it come dun to these levels. the key around 2:00 and they made a statement along the lines

of doing whatever they can to increase shareholder values. if there is going to be a deal here like pete was saying, if a deal is coming, it comes quickly and would get done in the mid-to high 20s. fundamentally, flawed company and a terrible story. there could be a trade. >> don't you think anyone looking to buy the company has to weed through a lot of crap first? >> yes, i agree with that. remember the assets that are there, there is not that much crap to weed through. >> how much do you estimate them to be worth? how much is in the share price? should it trade higher based on asset valuation? i talked and they said there is billions worth of off balance sheet debt for the company. >> right. i think the company down here at 16 and change is completely undervalued. if you could strip all this out and the last 48 hours for the company could go away and it was a bad dream, they could be on a

fundamental basis, 24 or $25 stock. i think there is a lot of whether it's coming from private equity or a big deal looking to average down on the xto acquisition, somebody looking at this could be licking their chops and saying they can buy i distressed asset cheap. >> i think the point is they can get more distressed. if i were exxon, i would let this company go out of business. not only do you have the assets and maybe even some of the wells don't work anymore and the guess prices go up. i would let check peek wither away. >> you sound contrarian for the sake of being contrarian. the stock got hit on the earnings call because the guys are already in the process of selling assets to fund expenditures. what he just said, these assets could get much cheaper very

quickly. >> let's go to the point you made. if you had took away the 48 hours and you take a look at the fundamentals of the business, are they transitioning from the liquids and seemed like in the production they were cutting primarily the production of nat gas liquids and not nat gas. that seems to be the wrong side of the trade. >> the company traded down last earnings announcement the stock was up at 31, 31.50 after hours. it came down quickly. no way they are hitting on all cylinders. this is a fundamental valuation even if you discount them. say it's worth 30 and you want to put a discount on it because of the headline or because of the problems they had in transitioning or the problems they had in selling off pieces of the assets. if you get to that level, there is somebody out there that i think maybe it is more for the point of giving the other side

of this. if there is the largest shareholder almost 14% out trying to drum up interest in this company, i think they will, but i don't know where it would get done. >> thanks for presenting that side of the argument. in the minority at least. >> one good point, you don't want to be short. it could be up 20%. >> why need that. why do you need that we will face the class action lawsuits. meantime, want to continue with the after hours action. they are getting hammered after the second quarter earnings. the story here is disappointing full year guidance with a minor problem there. it is down 39.5%. in terms of the stock, is this in the category of uninvestable securities out there?

dan? >> when you see short creep ups the way it was, you see investors make the case as public low as they have. the trade at the end of the day, they put their reputations on the line. if you read that presentation and find it on the web, this is a half size of the stock. >> the margins are down and they introduced a brand-new brewer that didn't seem to help. not yet. they have been following the story and also monitoring the conference call this evening. >> i should say the tone on the call is not really what i would call very, very doubt. why the numbers look at what they appear. he was not really coming up with one single reason. i would say the most interesting

part of this whole thing and they expect more moderated growth going forward. that means the growth story to me is what i am writing on, the growth story is over. >> the growth story is over. a lot of people would say it was over a while ago, but what happened to the company at this point? if they are not giving reason or two reasons even for reduced full year guidance. >> they are giving multiple reasons and saying we are trying to figure it out. you ended up with a situation where they talk about manufacturing. they are manufacturing and being under utilized. what's going on? >> underutilized? sounds like no demand. >> they didn't say that. >> underutilized manufacturing facilities. the inventory problem at the stores. they are not managing or no demand or both. >> by the way, they are cutting the cap spending. that was such a big number there

coming forward with a while back. i think we have a situation here. the patents are about to expire and you have a lot of competition coming into the space or appearing to violate the patents and prices are expecting to come down and this is the quarter they came out with. as i pointed out, two months ago, the partner, the italian coffee company sold their stake in the company. corporate executives selling shares and lots of things that made people wonder what's going on. by the way, one thing you didn't see going into this quarter and the announcement was the bulls coming out saying they look good. that's what they had been doing in the prior quarters. >> thanks a lot and keep us posted on what happens on the conference call. herb did mention starbucks. >> he should have. that was the biggest thing i read into. they are slowing down on the keurig. the projections they see going

slower. maybe because starbucks is out there taking market share away even though they have their own partnerships together. i think starbucks is too cheap and i own them for that reason and i own the calls in starbucks for that reason. that's the stock to be in and i don't think green mountain is the stock to be in. when you see a 25% short and this violent move in the aftermarket hour, unless we start to see a flush tomorrow morning, i don't start getting interested in green mountain for a while. >> pete makes a good point. people have not stopped drinking single served coffee. they're just not buying for green mountain anymore. dunkin brands came out with big numbers about a week ago. i look to that to play as well. >> you know who is short? whitney from t 2 partners will join us later to give us an update on what he plans to do given gm's move to the downside.

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whole foods reporting a 14% increase in second quarter sales. essentially a beat and a raise. jane has the latest from the earnings conference call. jane? >> they call this the best results in the 32-year history saying that several records were set in gross margins. a lot of questions about that. for the quarter at 36.3%, an increase of 70 basis points and it was evenly split between leveraging occupancy cost and the product cost. what they are paying for food. they were able to get more

aggressive and the costs are decelerating and the sales were strong. they had more buying power. operating margins set a record at 7.1%. the ceo said he doesn't consider gross margins over 35% sustainable. he wants to guide back down to the 34-35% for the quarter. records set in sales per store coming in at $697,000 a week on average for stores. all stores and all regions and all ages works out to about $971 per square foot and they are raising eps for the year to a range of 244 to 247 saying that six cents of that will be an extra week in the year, but even if you take that out that is stronger compared to a year ago. you will have the coceo as soon as he gets off of this call. >> that's exciting and thanks for that. the profits per square foot is

doing better than the urban stores. there is a major urban build out in new york city about a block from me. >> they did their part to help the margins out. i love whole foods. it's a great stock. 13 or 14 quarters they beat expectations and this continues to go and do well. a well-run company. it's going to gap up and wait a day or two and you get back. >> it's about inventory management and cost controls. if you look, what have we heard? intuitive surgical blew out the numbers. that told you something about the economy and people's willingness to spend. you look at a name like starbucks to get closer. their numbers were impressive. when you look at whole foods, this shouldn't have been a surprise. the surprise out of this was the fact that they are raised in such an aggressive way for the full year. that makes me have to reevaluate. this is as far as a pe, it looks ahead of itself. now based upon close to a $2.50,

it's not quite as expensive. >> let's move on and hit the call of the day. the strategy team saying mega cap stocks in the leadership group going into 2013. the nifty 50 is poised to break out versus the rest of the large cap space. they had a handy dandy chart. there we have it. the not so nifty 450. the lower 450 cap weighted stocks versus the 50 biggest on the s&p and that gap should in fact close. do you buy that? we have been seeing that on how they have been trading. >> for makes a lot of sense. the nifty 50 are diversified and i don't need to worry about europe. i tend to have a bit of cash and their cost of capital is lower because they are larger companies. it makes sense that these would be the place to put money to work.

>> i have to take them down here and some of these guys, when you think about the uncertainty you are facing and the data we saw this morning, as opposed to decoupling, some are them get the revenues from the euro zone and the multinationals. if we see a hiccup this summer, some of these will have a hard time. >> they're get a lot of revenues from asia. >> and the dividends. you another one of these guys? >> we are heading into an uncertain period. >> they told us what they will be and they hit the numbers exactly what they say. if they say 8% in china, i am guaranteeing, 8% in china. >> i have to take down the take down and get back to reinforce. i think that the mega caps, all the issues you say may be true, but they are so out of whack, you get all that was for free and things get ugly.

where do you hide in the big safe places to be. when you look at a name like microsoft, it's not as sexy. >> you are fired up. the way i think about it is tactically. we are going to a period and the anniversary of a volatile-month period. some of the data, i think with the s&p up about 1.5% you take a breather and see how things settle out. the big jobs numbers on friday. >> i don't think it's hiding. the big caps are not hiding. that's a great place to be. >> let's stick with the names. you have a trade and what is it? >> so i'm looking at selling the august 37 put for 2.70 that kwleelds over 7% on a stand still basis. this is a company that trades pretty cheap here like people have abandoned the types of names and the stock is trading

about 4.5 times ebitda basis and this is a good way to take a neutral to bullish position into the summer. >> you get to more options action and follow us on twitter to get constant trade updates. anyone in the minors? >> they are fairly interesting and you look at the copper space and how much of that is incumber and available for sale. if you get a lot of incumbered copper, they should do well. >> i preferred it over fre port for a long time and continue to like that name. i know they areetting beat up and i expected to see some of that and i think there is great opportunities in these as well. >> coming up, focussing on funds and giving you the best way to make monoetf. a new segment you will not want to miss. the oldest industry we are tradeing it with the c herks e. it's very important to understand

how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies.

breaking news with chesapeake energy. bill else inner of florida is seek a d oj investigation. the latest development. just when you thought almost all the shoes had dropped, perhaps not quite yet. we will see if they respond to bill nelson's request for an investigation into chesapeake energy. of course chesapeake continues lower right now. what else is continuing lower? certainly green mountain coffee roasters on the back of their disappointing earnings. they had the manufacturing

plants. managing partner of t 2 partners. he was an dissipating the weakness. >> feeling great about it today. they have been as short as the 80s. down $20 from 50 to 30. we are not interested in covering a single share. they are playing out as we anticipated. it's a combination of two things. we are affecting the company and it's not the weather and the dog ate my homework excuses. it's two things. rising competition and they haven't come off patent yet. that is coming later this year. secondly, i can't quite put my finger on it and prove it. there enough warning flags about they were stealing sales from future quarters. the last few quarters to make the numbers look extra good and juice the stock. what happens when you steal sales, the future quarters catch up with you and we are seeing the first of what will be a

series of big misses. >> that was a major point in david einhorn's presentation. shortly after is when you got short the stock? >> we were shorted for a couple of years and credit david for doing fabulous work and giving us extra angles and more ways to win on this. we took the position up after seeing his presentation. he identified other warning flags. >> how do you see the story ending? in the aftermarket session right now. what happens? >> when you have a company that you think has both fundamental competitive problems and accounting problems on top of it, i can't prove it, but that's the belief. there can be no bottom on these. this reminds me a lot of krispy kreme. history never repeats itself, but it rhymes. this is rhyming with krispy kreme. as long as the company will

continue to miss quarters, it is putting guidance out for earnings, 5% lower than the previous guidance, it will be a lot lower in our opinion. the only question is it's hard to short more of a stock and that's what we are considering not covering. >> in terms of management, you look at a situation like this, you were short for the 80s and average cost? it doesn't matter. what do do you from 30 and what are you trying to get to? full warnings to everybody. dangerous business. today at about a 3% position. the largest long position is a 16% position for a perspective. that's where we have to think about how to size it. fair warning to everybody. keep your short positions a lot

smaller. green mountain hurt us a lot and well over $100 less than a year ago. we took pain going up, but we were convinced we were right and took a couple of quarters to play out on the downside. thanks for coming by and we appreciate it. the value investing is coming up, correct? >> coming up after the berkshire meeting and if i can grow in the next great stock pick, they report earnings on friday and they will be blowout and have the annual meeting on saturday. that's the largest position by far. >> we're mentioned david einhorn. green mountain and -- he is short herbal life. that is going in his favor. meantime up next, they are drilling down on why a top legal expert said the troubles may have only just begun and we are

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welcome back to fast money. let's hit on visa reporting

earnings and second quarter earnings topping estimates on the top and the bottom lines. they are raising the guidance that were higher. quickly reverse. you are going long. >> whitney might have come had to california. unfortunately the numbers looked incredible and the fact that maybe they are getting looked into by more follow-up to some of the issues they and mastercard had been facing. when you look at the pure numbers, i like the mastercard numbers. they are getting 46% or better of the revenues from the emerging markets. that's where the growth is for visa. i realize it is pulling back and i'm not happy about that as a long call owner. i still like what the company is putting out as far as what the growth is and cards and people going cashless. >> more clarity on what visa is being investigated for. this is a request from the department of justice.

visa prior to the turn around had been at an all time high and quickly reversed that. you have to wonder what mastercard is doing. it went into the earnings at an all time high and fell off and it is trading lower as well. you have to think this is an industry-wide thing and they are all falling in sympathy. we will keep you updated and debit pricing is what the d oj is looking into for visa and what was revealed on the conference call. the trust is recording first quarter earnings and that beat expectations underscoring the receipt turn around. joining us and first on the interview is a chairman and coceo. hamid, great to have you with us. >> nice to be here. >> i wonder what you can tell us about europe and the sequential gains in europe were heartening for a lot of analysts. 25% of the portfolio on the

square footage was in the likely places like germany. >> we are fortunate that over 90% of the european portfolio and we are a big player, the largest player in the sector and over 90% are in the good markets. basically excluding southern europe and only less than 10% in italy and spain. we are in the good markets and we have the best properties in the best markets and what demand exists. that is more robust than you would think reading the headlines. >> what percentage of your sales will you see that going? >> we have a couple big yon of

assets. a little under 10% are in japan. the opportunity in japan is post tsunami and earthquake, there is a real understanding about the importance of modern buildings that are psych mickally sound and built to standard. companies will go to redid you not ant facilities. that's what we do. there is really very little overall growth, but there is a shift in demand from older facilities to the newer facilities that we occupy. that's good for the occupancy and the rent and good for the development business. we have an active new development activity in japan that is accelerating. >> i have to ask but what's going on in the united states. industrial real estate and you believe that they are in 2010 and 2011 as you remind them on the conference call, you saw softening happen which you didn't see in the prior months.

what are you anticipating here? >> based on what we know from the customer base and the portfolio, things are looking much stronger than they did last year and the year before. i think the risk is all the things you talk about the ceo and you are right on the edge of do i commit to a new facility or don't i? it will depend on how you feel about the political decisions between now and your end. absent the factors, what our portfolio and the customers tell us, the business is pretty robust. it's really the best year since 07 in the business. we are climbing out of a pretty strong decline in 08 and 09. now we are in the third year of a solid recovery. what's amazing is how little construction there is, new construction in the last two to three years. that limits the supply and gives

us pricing power and grants in the period of time markets. >> we have to leave it there, but thanks for your time. the ceo and you have been looking into yielders overall. >> this is interesting because you have the japan opportunity which is something that is new for the company. here in the u.s., we have the porters that were doing well. a nice place to play. >> we top the get to more drama surrounding chesapeake energy. a handful of class action lawsuits against the company have been filed. let's bring in the attorney and a specialization for securities fraud. are you planning on. >> i have gotten calls, but haven't done anything yet.

>> from what you know about the case, the details are murky and unclear. what are the most likely grounds. >> the ceo defined self dealings. $112 million salary on the street. a billion dollar personal loan and he is running a $200 million hedge fund trading the same as this firm. it's self-dealing and a breech of duty. he has a duty to the shareholders to look out for their interest and not his own. none of this was disclosed. you have a material nondisclosure and call that secures fraud. >> is there a possibility that the board has been doing this? they have been in place since 2008 and they approved a lot of these things and knew what was going on. >> absolutely.

if the board knew what was going on and we see from the minutes in the meeting, they could be held personally responsible. this company is in big, big trouble. it's unheard of on wall street for a ceo to be running a hedge fund and trading the same stocks and same commodities. this could be front running and insider trading. i don't know where this ends. >> the liability is a personal liability and that would be covered under directors and officers's insurance? >> they could be, but we may be going beyond that. many of the cases we have seen starting with worldcom, directors had to come out of their own pocket when there is fraught and a settlement or award against the company. in this case they will make this guy pay personally. >> we have to leave it there. we do appreciate your time. coming up next, walter rob, coceo of whole foods join us.

#

> the company is reporting the best results in the 32-year history.

joining us from whole foods headquarters, thank you for joining us. i wanted to ask you a couple of questions. you have record gross margins of 36.3%, but you are saying this is not sustainable. anything over 35% is not sustainable. how come? >> we had an exceptional quarter. the organic orange is lined up nicely. we are saying we would love to do that every time, but don't model. that's where we will be. we continue to expect to produce strok results. >> i may have missed it on the all, but did you have a boost from the pink slime scare? >> we had a major jump the next day, but it settled back down as -- it stayed elevated, but that doesn't explain and is not big enough to explain all the results. >> let me toss it over to you. >> i wanted to ask you about price increases. late last year, you may be approaching price stealings with

dairy and meat. have you hit that yet or do you foresee more increases? >> inflation moderated nicely and inflation is running under 2% with the exception of the meat area. everybody is getting more flexibility and i think we are out of the danger zone in a better place. i think the results suggest. 54 are it's karen. just a follow-up on that, the amazing gross margin, is that from pricing or the ability to get better prices from the suppliers? how did you get that spread? >> i like to shift to the sales momentum and i will go back on the question for a second. half of that gross margin is occupancy which we are continuing to show the discipline on as an operator and half of that is on the cost of lowering. a combination of better buying and better inventory and better operating discipline around shrink and pricing management.

a lot of it is mechanics and getting better at fundamentals. it's around some of the retail fundamentals. >> given that what you have been able to do again in terms of sales of square foot, is there a push to expand more in the suburban areas and why do you think the difference at this point? >> i am not sure that's true. i don't know what numbers you are looking at, but the number of this quarter was the sales to square foot and highest on the basis for sometime. we are experiencing sales gains and momentum in every part of the country including canada. maybe you are back on the number. i am not sure what you are looking at. >> can i ask another question? ? you had 9.5 that will go down to 8.2 to 8.9 and that's quite a

drop. >> for you adjust for easter, you are looking at numbers like 8.9 or 8.4. you take the results and we raised our guidance. if you look at the guidance for the back half, we raised our guidance on comps. we brought the lower range up 90 basis points and raised the top end, suggesting we are narrowing the range and fairly confident about the ability to continue good sales the balance of the year. >> thanks so much for your time and our thanks to our own jane wells outside of whole foods. coming up, the former fed inside or why this jobs report can be one of the most important of the year. they are up after this. ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements.

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the labor department will release the april jobs report. a fed insider said the report is one of the most crucial indicators of the year. let's welcome randall crossner and the professor to explain. great to see you. why is it the most crucial? because of the notion that qe 3 is on the table? >> this report and the next will tell us whether we are having

another false dawn. we saw this in early 2010 and early 2011 where the labor market seemed to be recovering. the wind came out of the sails. with this report and the next one, they will find out whether that's through or not. that will be the basis on which they make the decision late june. >> okay. we need to switch gears and get to your recommendations. obviously this whole notion that the next two reports will determine whether they are embarked upon and goes to the notion that there is volatility in the market. you want to diversify and where are you recommending they diversify? >> it's important to think about diversification and common risk factors like we saw. we had a global slow down and stocks went doub and you want to diversify that way. they want to be in part of the portfolio so they can take advantage of opportunity to tops up or at least avoid having a

fire sale like others have. area that potentially can do this is something like a relative value index. even if all the world stock markets are going down, that doesn't mean that the way it goes down. >> we have to leave it there. we had so much after hours news. we a preerksiate your time. the university of chicago. you want to be careful and you don't top the go into that is highly correlated. >> that are is happening over the years and not only that, you have to decide which bank wants to cut or debase more. it's trickier than diversifying, but still a good concept. >> we're have the first move when we come back. stay tuned.

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