was reported. >> james, tiptoeing for being here. >> wonderful for being here. have a greek weekend. "squawk on the street" begins right now. skbl they were self inflicted. what happened violates our own and starteds of principles. the word of jamie dimon in what will likely go down as a conference call for the ages over a bank regulation. good morning, jim cramer live with the new york stock exchange. the bank mistakes resulting in $2 billion in trading losses. maybe more. we just don't know. having an impact across the board. take a look at future,down almost 70 points and europe has other things to deal with. >> yes, so the road map starts

with a story that is the global markets and j.p. morgan. jamie dimon admits to a 2 million loss. we've got all the angles. >> the market has some other worries, too. china, industrial production, retail sales missing estimates there. and it does look more likely that greece will have to hold some new elections. >> add to that, nordstrom clocked a five-year high is down sharply this morning. >> and credit sweets updates verizon and a tend at. you you would have known that already had you been listening to cramer. stunning wall street today, j.p. morgan chase. the bank says the wagers were made in its chief investment office and linked to a journal report last month. last month, j.p. more depen

chase called the coverage a complete tempest in a teapot. here's what dimon had to say in that conference call late yesterday. >> in hindsight, the new strategy was flawed, complex, fully reviewed and fully monitored. the port foe owe has been more riskier than we thought. >> jim, we just talked with the guys about squawks on this trade. do you understand it? >> i think it's multiphase. i think he doesn't want you to understand it. he's got to unwind it. i'll shoot against him if i'm in a hedge fund if he really told what it is. you know, this was gut wrenching because jamie dimon has spent a lot of time behind the scenes. the reason why he doesn't do it,

he's a folksy, down home guy. they don't do these complicated kinds of things. >> i mean, you basically got the rug pulled out from under you. if you are an investor who believes you are investing by a best of breed bank managed by a best of breed ceo who is balance teed by a fortress balance sheet who called this whole cia issue a complete tempest in a teapot? the betrayal wiped away from the stock is unbelievable. >> i could netted agree more. you've got to feel completely beleaguered here. upset. the conference call with apologies about how he spoke to analysts earlier this week and told them nothing was wrong chl. i don't want to read, if i'm a regulator, i should have picked up the phone. and if they actually buffaloed

the regulators, then i think there should be action. everyone is going to get away with everything here and it's all going to be business as urnl except for the fact that the is that the is going to pass the toughest rule in the world. >> ibutilide is this isolated to j.p. morgan. he was asked whether this would lead to similar losses elsewhere. >> would this be a jp morgan specific issue? >> i don't know. i -- just because we're stupid doesn't mean everybody else was. >> jim, it's unlikely that there's not another bank that has a hedge like that? or is it? >> i think you have to distinguish between the international banks that view this as their business and domestic banks that have said listen, we don't do this. we saw some very complicated hedging done. so domestic doesn't ensure, but

they're not supposed to be doing this. >> we've gotten a lot from barrys so far. yesterday, we got goldman's 10 q where they revealed ha they increased dramatically their exposure through bonds, equities, credit derivatives. when you hear about exposure going up, you get concern that there are hedges against these position, perhaps like what jp morgan took on. >> i think you have to. i know italian notes are up. the bill market is good. i think that -- i was on twitter last night trying to describe how a domestic bank is different from an international. no one cares. jamie dimon says listen, we have to do business in greece and italy. u.s. bank corps, richard davis comes on the show and says listen, what we do is we lend to businesses in america and we lend to consumers in america. if you want to buy a house, we're a good place to go.

i don't know anything about europe. >> so does this make you want to sell all financial snuz does it make you want to buy u.s. bank corps? >> i think people will say you're as stupid as jamie dimon admitted to being. but, you know, maybe three, four days from now it will be a different story. >> you know what, buy less coachly kated banks. buy pnc. at the same time, there are plenty of banks outed there giching jaimie dimon a pass. this size of a trading loss is really just pocket change. it's really no big deal. and they're saying, he's already telegraphed a lot of purchases. he can come out, use this we weakness and buy back shares. >> true. typically, you don't call the analysts and tell them everything is fine and then say listen, well what happened is regulations didn't allow me to tell what was going on. you're really running a very big

risk here. if they're willing to bag seasoned analysts like guy has bb around for ever, why should he think they wouldn't bag me, you, you. >> the broader debate about the itchly cautions for regulation. some say this is not really a vocal rule catalyst. it's more of a capital buffer catalyst. how is i going to change policy? >> well, if i'm a politician, one of the simple things to to is to bash banks. well, jamie dimon, if i were elizabeth warren who's running for senate, i would say, look, you elect me and i am going to make sure this jamie dimon kind of stuff never happens again. i foe he hefr wants to be that. remember, we're talking about the guy that is teflon. he's the ht lon banking don. there isn't enough pam in the world to cover this guy.

>> do you think he survives this? >> yes, he survives it, but from now on, it's just another bank. >> so jp morgan is no longer best in class. last night, you said he's just like all the others. >> except for he has more human being rouse. i find the most arrogant testimony i've ever seen in front of the senate other than when frankie had to go out. you know,corleon did a pretty good job. but i would point out that i think we are at a crux monilate where jamie dimon, i'm not saying he's got no clothes. it turns out he's wearing that same out fit. >> you also feel like you were foeed. >> completely. and i think that your comments about how, as a shareholder, i just i'm embarrassed.

i thought that i had done my research and done my work. obviously, my work was bad. >> this is a school of thought out there today that says thank you, ben bernanke for forcing these banks to swing. they have no choice. this is what you do. >> joy a choice. you can be like wells fargo which is much more profitable in terms of a way to be able to figure it out. i didn't think he was swinging for the fences. i listened to him and what i said was boy, he's the one guy that never would get caught in this. you look back. the wall street journal is doing the job of the sec and the federal reserve. >> and poetic that at the end of the journal story today, when he's asked about what he would pay attention to in the future, his answer is newspapers. >> it's unbelievable. >> i kind of wish the regulators would, too. this is a very jarring thing. and it's not going to go away.

what happens to the downgrades? does this make them scrutinize bank practices and perhaps get more concern because of the lack of risk management practices within firms? >> i hope they do. wow. i hope they do. if you could have what happened here where the wall street journal is saying listen, things are out of control. you know, when you're at one of these firms, you get a book every day about where you are. i don't want this to be like the movie margin call. but, you know, maybe jamie should see that and read the journal this week epode. >> today, the headline is 2008 all over again. and i don't think you're willing to go that far. >> no, i can't do that. when you go over the tarp stuff that tarp puts out about how much stronger we are and how less concentrated our banking business is, you kind of come away feeling good.

but you feel good about owning verizon and at&t. >> well, the fall out over jp more depen chase is certainly one day of the dow snapped a six-session losing streak. weaker-than-expected chinese industrial out put to form a coalition government. we have certainly, jim, a potpourri of concern. >> look, sometimes you just have to admit you're wrong. i hath jp morgan was the way you could invest and that that bank would capitalize. you mentioned the buy back. needle in a hay stack. ja jamie has made a point of saying i'm not going to stand there. i don't care. his float hasn't shrunk at all. so i think that this is a major

blow to confidence. and, again, i reiterate. i got this wrong. i trusted jp morgan. >> do you think this is -- is it a good thing if it were to happen that it happened here because of the balance sheet? or is it an even bigger blow to comforts because it was dimon? >> they do have a fortress balance sheet. it could be a 30 cent hit. he said it could be more. i don't know if he would have disclosed it. if he said earlier this week that everything is fine. there's two apologies. please listen to the conference call. it's much more pathetic than the it aren testimony. this is shakespeare here. you read the text -- you need a living beie nif you decide to b complacent about it and i, again, this is the third time now in a 12 minute segment. i admit i'm wrong.

when you own a stock, it's your fault. not them. >> we'll talk about a couple other names before we run out to commercial. shares of nordstrom, reporting sales a nickel below. the company says such expenditures for the rest of this year will be higher than previously thought. and we did not need another high end retailer. >> no, i like this conference call. what they're doing is saying we're going to invest for the few thure. ture. he said one of the things that nordstrom does, this is, they basically have short term hurt the earnings. i feel a lot better about nordstrom than i foal about dimon back. you know where the money is here. >> they didn't want to be amazoned, either. we were talking yesterday abguilt group.

they don't want to be guilt grouped. so it's another sort of macy's effect where you have this are tailer who is just delivering, diveerering, delivering. and here we have a miss. >> how much did they really miss by because the stock was at 54.5. if it were 48, 49, we could say hey -- motions is a very good company. and they've when i recalling at times. >> system yvette socks, we are keeping an a way ch on. increasing price targets saying the phone companies have shown new discipline regarding pricing and subsidies. specifically they're saying they're going to raise the

subscriber eligibilities and also push out the time frame where subscribers are eligible for a time frame. that is going to severely shrink the growth rate of smart phones in the u.s. >> the ctia conference is this week. one after another. verizon wireless and at&t wireless said it's really important to gain control of some of these subsidies. they're going to push android. but dan hessey said listen, the customer wants the app hmm. i think it's a good report. i've gone through it. but the flip side is if you speak to hessey, the customer won't eat the android. they like the android, but they really love apple. >> you're going to have to mix some wet dog food in with the dry. >> i think the carriers are hoping that people will say listen, i prefer the android. but hope should thought be part of any investing equation.

>> and to that point, the note, highlight sprint has bb the major beneficiary. >> exactly. dopp hessey is hoping that this will happen. he is saying listen, i'm paying $15 billion to apple because i know that my come pet sores want to get away from apple. but my customers wanted apologiesle. in the end -- >> do you think that given the jp morgan news today, money comes out of financials but stays in stocks and goes to housing and retailing? >> domestic. when you go -- i mentioned verizon and at&t. look, i know that i'm doc to get criticism because i said i like housing. ben's comments yesterday, i think it flows back. ben being a little bit more bullish about lending. it doesn't flow back immediately because this is not the flash crash. but this is like oh, no, you're kidding me.

the candidate turns out to be the ceo of jp morgan. >> yeah, not as big of a blow to confidence but not a boost. >> some of the reports says even achilles has a heel. dimon's in the rough. >> there's some great headlines. dimon's are a stock's worst friend. >> coming up this morning, a lot more of course on the fall out from jp morgan chase's $2 billion loss. we'll find out what one of the company's shareholders has to say about that. still look at a dow open. we'll see how they've been down six of seven sessions we're back in a moment. ent. [ male announcer ] you are a business pro. omnipotent of opportunity. you know how to mix business... with business.

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welcome to the world leader in derivatives. welcome to superderivatives. it's not premature for all the analysts on the street. goldman sachs saying all is in tact to $37, which is about where we were trading now. so prediction that the stock will remain pretty much where it is for the next 12 months is a pretty dire one. >> i think it's true. wells fargo is up 20% this year.

almost at a 52 week high. it will get hit today. remember, there are etfs and people like to trade etfs. this is dead money, at best. it's got a yield. the stock comes in. but the luster, the premium, the price of what we'll pay for the future earnings has definitely shrunk here. >> he said tektite get worse. to what degree are they a sitting duck? >> you don't know it, though. you think eh he is au a very clever guy. what was more important is to say listen, i bagged you analysts. i'll unwind this position. would it shock me 6 months from now it turns out it's a profit? nothing shocks me. but maybe that's the problem with banks. nothing shocks me. >> well, this story couldn't have come at a worse time. one reason is that he as has been one of the biggest critics

of the voleker rule. >> we do believe we need the ability to hedge and that volcker allows that. this trading may not violet the volcker rule, but it violates the dimon principle. >> how would you define the dimon principle. you can tweet us and be sure to share your responses throughout the morning. the dimon principle. >> let me just temper everything by saying he tdid survive in 2008. this is not his book. he's done a lot of good. hoe seemed to say listen, it's a separate entity. that was a mistake.

>> he will get this right. but this was the wrong time. >> all right. coming up next, premarket movers, cramer style. get ready for mad dash. take another look for this friday opening bell. we are still looking at the down day. much more "squawk on the street" straight ahead. een listening toe numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees.

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"mad dash." it's going to be an eventful one. a couple of calls on two stocks that get confused a lot with each other. >> yes. beethoven and bach, b, b, b. the man who first put me in block buster for about a 10,000 percent gain and then downgrading bby. and i've got to tell you, best buy, i think, is in a terminal situation here. i think it's better than radio shack. i mean, it could -- terminal stock. look, the company is a big company. i just don't want to own the stock. i think the stock has done a research in motion and radio shack feel to it. this is the amazon company. but what boulder is talking about with bed bath is they made an acquisition last week that made them less amazon. so these are two -- one is a growth retailer and one is a value play that i think has very little value. >> all right. meanwhile, over to you. >> yes, we're looking for some pretty big opens from jp morgan.

the financial and all the action covered right after this break.

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♪ >> there it is. the friday morning opening bell and the s&p 500 at the realtime exshaping. the 27th annual aids walk new york takes place on may 20th. and the advent software posting its analyst and investor day. so we'll see the degree to which jp morgan dominates sentiment over all. gle we had cisco yesterday. john chambers, by the way, i'm going to contrast. chambers did execute. i know this may be a controversial call to think that chambers did a better job than dimon. but i do think that chambers was up front about what was going to happen in the an ex quarter. ened awish dimon was up front and he wasn't.

morgan stanley taking it hard. you've got to wonder if some of the other paunchs will feel compelled on a day like today to say you know what, we weren't stupid, like jaimie dimon was. >> they all make a big point of saying, look, we're not going to dump on each other. but in private, they're going to dump on each other. >> yes, they are. >> i was at an event last night talking to an exec from one bank that we all know. and his general sentiment was i'm glad it's not us. we basically have tomorrow off. >> that's right. i think that international banking is a big, black box. said that over and over again. i think that who should do well are the domestic banks who come out and say this isn't what we do. a visa or a mastercard that say listen, we're financials in our own way. this is a terrible blow.

>> we see a pnc, a wells fargo, certainly not to the degree as some of these other. do you use that as a buying opportunity to create a position there? >> i think that people are going to reassess bank stocks again and i think that the etfs, the conglomerati conglomeration, the pressure is going to stay all day. a pnc, i would certainly not buy that here. it's had a very, very big run. let them come in. and three, four days is okay. i want to caution people that there's so many better opportunities away from financials. i know that i keep coming back to at&t and verizon only because at&t is up in a day that is hideous. >> 52 week high. >> and the same thing happened earlier this week. at&t was the only stock higher than the dow. here's the report that's compelling about why the margin is going to expand. >> both verizon and a tend at.

the yield is extremely attractive. >> domestic company with a 5% or a low -- high 4% yield with margin expansion lead to the greatest growth story of all time, which is wireless, versus a bank that we thought was doing well that wasn't doing well. they've always come out and said listen, we're not levered. the hedges aren't working. >> also doing okay on the dow, intel and invidia we have not touched on. >> they've said some good things. some good yielding stocks vmt notebook sales very strong. that was something invidia's pointed out. doubt want to be a polly an that. not a big fan of technology here because technology is worldwide. you tend to not want to own

technology going into the summer. and a cfo who came on our network, you could do worse than that. >> a week from today will be the facebook ipo. and more talk about the federal trade commission. is this standard? >> i know people are saying any time there's a deal. i think the fdc is making this ahead of a giant ipo. and instagram is a tiny fraction. i think that everything is under the microscope for facebook including the fact that the deal is not going that well. >> there are different reports out there. there's a reuters report saying that it's over subscribed. it's going to have to fend on the retail investor to make questions about the valuation. you can't believe anything out there these days. >> no, you can't. >> we're at a very tough time.

let's take that a step furtherer. this is a very critical moment for the market. >> you can't believe in anything these days. on "mad money," i try to come out and say here's some things that i like. i like them and they're going lower. you have to own that except for verizon and at&t, they are ports innocent. let's go over to bob. >> just a couple of headlines. spain's stock market was positive for the week going in to this morning. but just in the last hour, it's just been moving straight down here. that's avectising things over there. the banks assets sales, more dilution. and spain is now negative for the week. you've been talking about jp morgan a lot.

i'll add two comments from the stocks guy perspective. this is good news from people who wanted regulation. the bottom line about all of this is they're going to be under further pressure to reduce trading, to reduce liquidity. and that's not good for the overall markets. we want more volume, more liquidity to avoid the kind of air pocket that is we see. the second thing i would make is that banks have done great this year. the bank index is up about 19%. that's already baked into the s&p 500. with the s&p less than half that than that, this may be an opportunity to pull those numbers down again. that's a major problem for the stock market. we're getting retail earnings reports in. they're a little bit cautious. cole's was okay, but the guidance was light in the second

quarter. these guys are being very caution. and'm a little concerned that kohl's isn't taking markets away from jc penny. i don't know what's happening there. nordstrom was a little bit of a surprise. the bottom line here is i don't think anybody is being particularly optimistic on guidance in the second half of the year. finally, imagine this, jim. five years ago, the world's biggest commodities exchange goes up for sale. who wants us? that's what's going on with the london metal's exchange. everyone would have thrown money into these things. the lme is for sale. they're in final stages. they're taking second rounds of bidders. and it's the quietest thing. so bidders are the new york stock exchange, the hong kong stock exchange, the cme and the intercontinental exchange. those are the four companies

that are in the second rounds of bidding here. apparently, it looks like the hong kong is ahead of everything. but my point is there's not a lot of enshoes yack because the volumes are down. if lid have been a few years ago, this would have been a freeding frenzy. >> a quick point about kohls. kohls is obviously not taking advantage of it. rich is at the cme group in chicago. go ahead, rick. >> well, thanks, jim. obviously, we saw the ppi number this morning and the energy issue on the top line really was looked passed a bit. but it's still significant being down two tenths. but, really, the news of the day continues to be jp morgan. now, this is the new guy. the old guy would probably be close to under 180. but that's the way the constant rolling process works.

now, let's switch gears a bit. you know, canada, howl banks have you heard having problem ins canada or having mortgage issues or leverage issues or the bank of canada needing to do qe. if we're on family feud, the answer would be beep, beep, beep, none of the above. they created 58,000 plus jobs we learned today. and last month, 82,000 plus jobs. cumulatively. we're talking 140,000 jobs. well, you might be saying big deal, 140,000 isn't that much. but can that's economy is smooch smaller. much smaller. that gives you roughty the same common denominator as the u.s. do the malt. i'm envious. but we why do we have to be envious of canada? because they don't have all of the intrusion in the markets. back to you. >> great points. canada pulled out, obviously, these guys mean business. let's check out the latest news

in energy. let's go to sharon. >> jim, i don't think you can find a trading floor around the world that is not talking about jp morgan and not talking in some way about what it means for market sentiment. even here at the commodities exchange, that's what a lot of traders are talking about. of course, it is perhaps the risk off sentiment is exacerbated. but there's several other factors to consider. energy certainly a drag there. that is something that traders are talking about. also just the currency action which has influenced what has happened to commodities. $95 a barrel. that is going to be the key psychological level to watch today. we're also watching what's happening in the metals market because that ppi data certainly having the impact. but also the china data that we've gotten, that's influencing the metals market lower across the board.

copper at a three-monthed low. we're looking at palladium and platinum as the biggest drags since silver. >> thank you very much, sharon. we're talking about -- last night at 5:30. >> it's early in the day and we've been fuelled many times. but why is target up with nordstroms going down, why is apple relatively holding in donnelley half a percent, despite that horrible credit. there is a sense that always are we too negative. i come back and say every time you're too negative, you've depot to be very specific about what you want to buy. >> i like yield. you get 3.5, 4%. i think the yield is certainly not in question. they've got tons of cap tool. al.

look, do i like it at 42. no. do i like it at 32, yes. at a price, everything works. but jamie dimon tells you about how he's running a fish store or a rest roenheld. well, you know, no. all right. he got amazoned. >> yeah, that's not a dry cleaner. >> no, not a dry cleaner. >> yeah, coming up. jp morgan, ceo. jamie dimon says the bank violates the dimon principles. how would you denine that princele. sthagt ahead. as we head to break, take a look at the early bright spots.

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hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. take a look at jp morgan shares. over the past week, today, it was down almost 9%.

it broke among the 50 day moving average. so, technically, the stock is challenged as well as fundamentally. >> at the same time, jp morgan not made such a big deal about how the whale wasn't a big deal. these days, things are market-to-market. you could say listen, that will come back to life. don't worry about it. but with market-to-market, he did have to own up. the old days, he could have just buried it and we would not have known until the quarter was over. >> do you think some metrics value at risks are dead now? >> that is a very good point. i think that we often talk about that's hedge this, that's hedge that. that word means very little now. in a directional bet, means by the way, i'm making a bet that i think italy is going higher or that junk is going lower. >> we walked by and said if it

was a hedge, where's the gain? theoretically, if you're losing on your hedge, you have a winning position. and obviously, it's much more complicated. it's a layered position. it begs the question of what the point of this test was. how much of the activity isn't hedging. >> it's a risk. you're trying to make money off of it. you want a hedge, may i suggest scott's miracle grow. >> you tell the whale that. >> yeah, like the whale -- if the whale still works. you know, if the whale still works there, then jamie is not the jamie dimon. the whale should be fired this morning. moby dick. don't call me starbucks. >> let's get to squawk on the tweet this morning. as you know, dimon has said this

$2 billion trading loss violates the dimon principle. so we're asking you how would you define this "dimon princi e principle," whatever it is. the dimon cliches are all over the place. >> i'm not taking my money away. i bank with them. i'm going to keep with them. this is a service business and they do a good job servicing. what i feel badly about is all people who do services, my branch manager, everything they did was wiped out by the whale. and that's the opposite. i feel really badly. my bank people -- i mean, the branch i go to. the people who represent my account. they do a fabulous job. and everything they did was nullified by what this fella did in london. >> when we come back this morning, we'll get some breaking news on consumer sediment. we'll get six in 60 with jim as

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♪ >> let's go shopping with jim for six in sixty. six stocks in sixty seconds. >> more worry, more leverage, more -- you hear the chatteder. i just want to say the board of directors, totally heavyweight guys lt i wouldn't be surprised if they take some action quickly. >> getting a downgrade after a very bad day. >> windstream. the acquisition is disa pointing.

that easterble. >> harley davidson. >> this has been one of the great stories of the year. >> more dan stanley recommends a buy at staples. >> this is ahead of the quarter. this company has repeatedly disappointed, but it doesn't go down anymore. >> colgate? commodities. >> go back over the conference call. they said listen, commodities are going to come down a lot. this is the safe haven. >> and buffalo wild wings? >> corn prices are going to come down. people have been very worried about chicken prices. this is going to be a surprise. >> let's talk about what's coming up tonight on "mad money." >> we're going to have to discuss jp morgan. the perspective is you can't trash everything they did because in 2008, they did it right. it's a credibility question. it's a question only of how soon we forget this. and i don't know how soon some of us will forget. my childhood says mea culpa. i made a bad judgment.

>> hast night, you said don't laugh, viewers, but there is leadership in the market and it's housing. >> a lot of things that you pointed out early in this show. where is the money going to go? i think i was too glib. the money goes somewhere immediately. and domestic housing industry is stronger than people think. rates are coming down, still. so what goes into a house is where people are fleaing too. >> and you talked about consistent growth, expanding margins, minimal exposure to europe. almost every negative story we've seen has involved europe in some way. >> right. so when you have a call, like we got this morning about buying restaurant stocks that are domestic, that resonates with me. when we got some situations that -- of u.s. gypsum, the registered sheet rock, that stock is way too low to me. that could be way too low. i'm talking about traditional american plays.

sherwin williams. paint. go to home depot with me and check the aisles. >> let's get to sam and et hg some consumer sentimentment. >> all right, well, we're 7, 7, 8. 77.8 is what my traders are telling me. i'll tell you what, that is definitely much stronger than expected. as a matter of fact, 77.8 is going to be the highest level going back to january of '08 at 78.4. so that really is a whopper of a number. and keep in mind, that is a preliminary read. so it's not the final read that goes this the books. but that's a big number. no dismissing it. i would think that that's going to be an optimistic read for the equity markets, even though it probably gets dinged by the jp morgan trade next month.

>> when we come back, more on the fall out from jp morgan $2 billion trading loss. we'll get reaction from one of the company's shareholders in just a moment. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon. it's the at&t network -- securing a world of new opportunities. ♪

welcome back to "squawk on the street." a shocking disclosure from jp morgan last night. disclosing a trading las of at least $2 billion from a failed hedging strategy. so is jp morgan's best in breed strategy tarnished for good? >> plus, we're sitting down with the one and only bill gross to talk his latest call on qe three. >> and first quarter profit dropped nearly 55%. but the company forecasting a hugely upbeat second quarter sending second shares surging. we'll break it down in just a moment. >> and facebook flagging its mobile business as a potential weak spot for revenue.

so how can strkszuckerburg and fix this. >> jp morgan sending ripple effects throughout the market today after disclosing that trading loss and agregous failure. the stock was responsible for half of the losses we had on the dow. we are climbing back a little bit at the moment as a result of the consumer comforts data that came out within the last few minutes. >> and in the context, it looks like it is a financial story. a contained story in the markets because, overall, we're basically flat on the major indices, which is pretty surprising given where we're seeing jp morgan trade. we've seen it down as much as 9.5%. but really insulated. >> i'm not so sure that today is the day necessarily for the market. obviously, it's more a question, i think, for everybody else. what it demonstrates quite clearly is that the banks are a black box. nobody can see totally into what the banks are doing.

we saw it in prime and we see it again now. jamie dimon can't see it, presumably the regulators can't see it. let me read you this line from nicholas this morning. jp morgan now becomes somewhat unanalyzable. the one thing that made us comfortable with the exposure with the sound risk management behind it providing benefit of the doubt which now comes into question. so my question would be are we relying on benefit of the doubt for the financial security that we have in this country and, indeed, the entire financial system. it would seem from what is happening here, yes. benefit of the doubt is how shareholders operate, regulators operate and it would appear the ceo of jp morgan also operated. and it was wrong in this instance.

not to down play it, it's just that banks are strong enough that the banks still feel comfortable with profits of around $4 billion for the quarter. and even with the bank estimating additional losses being another billion dollars, the real damage to jp morgan is to the reputation of risk managers. it's an understatement to say that reputation is tarnished. listen to a question from mike mayo last night. >> would this be a jp morgan specific issue? >> i don't know. just because we're stupid doesn't mean everybody else was. i have no other what other people are doing. >> dimon's assembled people, one he called an agregous mistake. on last night's call, dimon would pity single out one person. but losses were purely excootsed and badly monitored trades.

jp morgan says a trader nicknamed the whale for his outsider trades and his boss, ina drew who runs the chief investment office are still with the firm. or does the company's chief financial officer, doug bronstein bare some blame. >> we're very confidentble with our exposures and feel very good about the operations of that business. >> comfortable, maybe. but people close to the back in lieu of losses on the trade. now this morning, foe cussing on the analysts and how it might impact overall profits as the bank overhauls its risk management structure. but the bank increases rivals.

big bank crithices who say the firm should be paired back or shut down, likely to become more vocal in the coming days and weeks. melissa, back to you. >> thank you very much. let's get more bringing in analysts from credits or an out perform rating on jp morgan. also, the director of asset management. his firm owns 350,000 shares of jp morgan. michael, i want to begin with you. just a few weeks ago we heard from bronstein who said he was comfortable. >> well, i think you can. i think his bluntness and his character came through on the call to a tee last night. and i think the fact that even though he took the exercise of actually putting out this

release and discussing it in public and being blunt that the structure was flawed, the implement taus was flawed and the risk management was flawed. that level of disclosure is great. that's the type of stuff that you look for in a manager of a risk business like this. >> j.m. morgan has been the large bank that you can go to sleep with. last night, didn't sleep so well. but going forward, you expect that they're going to do quite well and that jamie dimon is the gentleman running that firm. >> senior management was somewhat unaware of the extent that position had gotten. it restated their calculation as

the end of march. >> so is that -- do you think it's a break down of -- is it an indictment of a complex banking model? or should we not throw babies out with the bath water? >> i think when the loss has got to a certain size and that size is relative to the 7 billion a quarter that they earn on a pretax basis, that's when it got, you know, much more significant attention. >> i'm amazed. what are the regulatory implementations here. >> jaimie dimon has been at the forefront. here you have treasury, the hearts of jp morgan that was engaininged in proprietary trading. i know executives at goldman that they can feel like market makers within the books there.

they'll say it's excess inventory for clients who may come along at later point. they're on capital hill and will recognize a major line here in the way that we regulate or try to regulate and that has huge implications for you guys and for the banks moving forward. two points. number one, the vocal rule is not in effect yet. it doesn't violet a rule. and jamie dimon said that putting the vocal rule aside, this violets the factor. >> when we have these regulations, it's quite clear. more regulation is needed beyond the volcker rule. he could have said that over the life, this strategy has made money. in the context of the the bank, it's not something that puts the company or the system at risk. if people want to use it as

an -- as a reason to dial up that, i think that will probably, you know, wibe a logil outcome. >> dialing it up, it almost seems like a foregone conclusion at this point. michael, i'm curious. you seem to be comfortable with your jp morgan position. but does this make you look towards some of the financials which another analyst on the street say are less complicated. we are seeing a wells fargo, u.s. bank corps, pnc trade higher even amidst the steep losses. and jp morgan city, bank of america and morgan stanley. would you look to more of these domestic-oriented banks and say these are less complicated models. i'll go there. >> look, i think there's a lot of opportunities in the financial space. whether it's a bank or whatever position it is, we look at stocks on risk reward. so when we get into a stock, we look at a downside price scenario and an upside target. when you get to a position where it's trading it, the price is skewed down towards that

downside and you've got significant upside. maybe that's an tinted to add to a position. i think just to go back to what was saying is really important. i don't think jp morgan is coming into the office and any clients stop doing business with them or anyone is shutting down their checking account or anything like that. i think that this is an issue which there's obviously panic in the market today. let's look at it from a financial standpoint. it's a 25% hit to earnings. you're putting a 14 multiple on that hit to earnings this year. now, the stock is trading at 7 times. so this is a pretty cig any cant penalty. >> the losses could get worse. jamie was very clear on that and very transparent.

>> oh, by the way, you have a $15 billion buy back. >> michael, i'm really fascinated by your definition of what clear and transparent is. you've had many die ma'amics that you've just given us. what do you think the losses will be on that derivatives book. >> dimon has warned that they could get bigger. how do you think the rest of the people in the market will gain the whale in loonily don? do you have any idea? >> well, i don't run a hedge fund and i don't trade the squirteds. >> but you do hold the stock. this is the point i'm trying to make. do you have transparency on the stock that you are holding? this is the point that i am making on this derivatives book. >> i do not have their trading book. so i do not know all the securities that are in there or how they are priced. but what i have to do, i have to step back and i have to look at the firm in their capital position. basil 3, they're probably going to be where they need to be for 9.5% by the end of 2013.

can they digest a $2 billion loss? a $3 billion loss? $4 billion loss, yes, from a financial standpoint, they can. is this likely tom pact management? it's likely to happen. but if you can take the panic out of the market today and the next couple of weeks yerkou're sitting on a stock that should have a pretty good return. >> united states and british regulators have been in discussions with chase for almost a mornt. this is according to people with direct knowledge of the matter. as an analyst, if regulators have known about this for almost a month, i mean, what is it like covering this company now knowing that you just found out about this last night? >> i think thew the fact that the regulators were looking at it should give you a dedebré of confident.

>> they were looking at it after the reports started surfacing in the wall street journal and in the new york times. and, yet, jp morgan still didn't disclose that regulators were in there looking at these specific positions which they say they were comfortable with. >> saying, you know what, i still trust them? >> well, i think that, again, you know, going back to the way we've described it before is that they have handled it. i think in hind site, the comments that they made on the 13th of april are dispushing. they are. but in the overall scream, we feel confident that they are handling this position today and propactively. >> all right, gentlemen, a great discussion. thank you for your time. >> financials next to the broader market. we're going to sit down with the bond king himself.

yes, bill gross will talk about his latest thoughts and the need, the expectation for qe, partly, presumably, for his mortgage holding. stay with us. the hyundai genesis. in a new, faster-acting formula. s tio-y siin lxtes zemethan a porsche panamera s.

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a third robbed of qe there fer the fed started up again. ever since that may jobs report was weaker than expected. now the bond king chiming in. he says should prepare for the fed to combat a slowing economy. bill gross joins us this morning. a lot of talk about so many things. it's the total return funds birthday today. i am curious how the jpm news is playing out west. >> well, probably the same way it's playing out around the world. jp morgan is one of the best-run banks in the world. it's got 120 billion of tier 1 capital, that's 10.5% which is higher than the 9% u.s. average. it's a well-run bank and decently capitalized bank. i think we should ask the question and we have or should banks in general be doing these types of trades? i'm with paul volcker here.

but if it can't separate trading from the traditional banking activities, which is really what it wants it to do to release bank equity and bank capital. you asked, you know, coyou trust jp morgan, do you trust the regulators what pimco trusts is capital. >> so you think it's not so much a volcker rule issue as a buffer requirement issue? >> i think it's both. but let's be honest. volcker has for several years now tried to make end roads in terms of reversing the glass stiegel egg aggregation in the 1990s. so let's at least go in the direction of the higher capital. so if banks are forced to increase capital from 10, 11, 12, 13%, than these trades which

are probably going to be a part of banking going forward because their margins are so narrow, we'll at least be protected by more equity. >> just as an aside, where are you on money markets and the on going discussion about those funds and the buffers they should have in order to protect their clients and, indeed, the taxpayer further down the line. >> i think they should, too. the buffers have been in terms of quality lines. but we've seen and we cernly saw in 2008, that those quality guidelines can go by the board and that credit can move quickly from triple a to double and lower. stow i think that's an attractive idea, whether or not that's possible within the context of their profits, which are nonexist tent. the money market funds are shrinking because the ability to earn money relative to their expenses has disappeared. one of these days, we're going

to see a very much smaller money market base. >> hey, bill, what's your time frame in terms of qe 3. >> we've investing mortgages because they're safe. if the fed comes in and buys them, which they have been doing by the way, over the past 12, months, mortgages basically are, you know, a one percent, 1.5% higher yielding alternative than treasuries. that's been the benefit to us. what is the possibility of qe 3? i think it's increasing. you know, as the economy doesn't do well, that is move above 2% then the fed has to be concerned not only in terms of economic growth. one little bump in the road was

announced several days ago in the u.k. they eave been doing qe as well. and they have halted their qe process at least for the moment. and so if the u.s. follows the leader in terms of the uk, than perhaps the wait at the end of june. >> i don't know. a lot of people use that bank of england example bill as a reason why the fed would not embark. if u.k. and all of their troubles, why wouldn't we be. and then there's the whole politically sensible argument. you don't seem moved by that. >> well, i think that's true. ewe know, that would be four months or five months away from the election and probably about as close as you want to get to the fire. but ultimately, it becomes a question as to -- you know, qe is basically check writing.

they write checks, they buy treasury bonds. the recipients of those checks are theoretically supposed to take those funds and employ them in the broader co conmy. we're beginning to see an exhaustion of the benefits and the qe. from this point forward, qes can twist the treasury by 30, 40, 50 basis points. probably not. i think monetary agents, central banks are increasingly frustrated going forward. that they're not being assisted in terms of fiscal policies. >> isn't the danger that you're on the wrong side of this trade? >> increasingly, that's what people are talking about. as carl says, they're moving away from qe. >> well, i think they are.

there's a divided fed. and a divided fed is obviously having some impact. so to the extent that you have increasing the sense it's now at $3 trillion. they're twisting. they're basically trying to add duration without adding assets. but other fed governors and fed officials are increasingly vocal. i think the benefits have been limited. and so the possibility of qe, i think the chairman believes in it. he's a person that has expounded on and advanced the theory of helicopter money and so we may continue to see it. but there will be increasing conflict. >> happy birthday to pttrx.

i'm sure you remember what you were doing 25 years ago. >> i do. and i remember real well. >> he said with a smile. congratulations, we'll see you next time. thanks for coming on. >> news and video reporting first quarter results that beat the street's estimate on both the top and the bottom lines. this after barrens yesterday said texas instruments is poised for nearly 30% up sight. so should you be betting on the chips? we're talking semis after the break. a body at rest tends to stay at rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation.

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take a look at shares of microsoft. the stock is now up by about 2.5%. analyst meeting yesterday, and according to meating, they were talking about enterprise demand being good, although not fantastic. but they did make it seem comments about weak enterprise was a cisco-spefk problem.

>> net flix is trieding higher because of a big boost by insider. coming out with a note saying that one of the earliest investors in net flix bought 200,000 shares of an average price of about 72.55. so they've already made a little money on that trade. >> here to prick down the strayeds, furlong also joins us. he's a senior analyst. gentlemen, thank you both for being here. let me kick off with you, robert.

we should note that expectations going into this were really beaten down. nvidia has not done well so far this year. it's lost a third of its market cap, specificationly on margins. why the bounce today? >> well, as you mentioned, expectations are really low going in. but they had a good quarter. margins were better. if you look at their business, they're essentially sold out on parts for graphics and mobile prosows sores that feed into things like pcs and smart phones. so we're seeing the revenue growth accelerate. the company generated a ton of cash and now you have a balance sheet that has north of 3 billion throwers in cash. that's about 40% of the market cap. so it's a very good quarter. >> brendan, you have an 18 billion throwers target that you see on the video. wowed you be willing to raise that from what you see today? >> i'd be happy to see 30%, right now. but i think 18 is definitely a target you can get to. it's one of these stocks that

people love to hate. and that's why the stock has been beaten down. just a lot of bears on the street when it comes to the hand sets and bears on the gpu. >> it's a new mobile offering. >> yes, so it's the application process. >> i would agree. it's a great business. >> i want to try and connect the dots here if they can be connected. there was an analyst from credit suites this morning. logistically, carriers are g getting more disciplined. they're going to start extending the time frame that's going to be good for some of the companies. but at the end of the day, does that mean that there are fewer smart phones out there? i think the real question is whether they will actually sell. today, they're really not

selling into samsung or apple. >> you're going to see a lot of new phones and tablets using the processor. >> the -- sorry. just one more thing. the ceo has said that there's exciting news to come on tuesday when he presents in san jose. do you think he'll move the stock? >> the processor has been sold which has been sold in europe, not in the u.s. so htc's phone sold here are going to use qualcom.

>> what he is au your projection? >> i like it. we just upgraded the stock. i think valuation here is really compelling. i think one times the sales company is basically trading at six or seven times. so valuation is really good. if you assume that the company could earn a dollar next year, i think you could argue for a stock that's worth $1617 a share. >> thank you, brendan. thank you for coming as well. >> all right, guys, we want to remind you, take a look at the market turn around that we're seeing on our hands. take a look at the nasdaq. it was up by .7 of 1%. it's higher by about 2% right now. chip is a very strong sector. intel having its second quarter there. that's helping with the philadelphia semiconductor. and we are seeing strength in some of the retailers out there

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despite the fact that jp morgan has an almost 8% las, we've managed to pull higher on the markets. led by tech, intel. and also the likes of a at&t doing reasonably well. as you see down here, it's almost even stevens. over at the nasdaq, there you go again. >> he's senior vice president of interest rate presidents at rj ah brian. let's talk about the moves we had on the bond market.

>> there is a lot going on in the world. now we're starting to see signs of slower growth in asia. it just feels like some of the positive news we've seen isn't coming to fruition. bond yields may have some ways to go to the downside, es specially if you add in more possible qe, which we should find out next month. >> so how low do you think rates can go? and what would that mean for equities? i think right now, there's a disconnect. as you saw back below 2% and s&p still hovers around 400. that's before this week's sell off. >> it's all going to be

contingent here on the banking products. but it's a little bit more downside. >> thank you. >> let's now get a check on the moves. hey, sharon. >> hey, melissa, it is day by day, minute by minute. as stocks look right now, we are looking at gold prices which hit a four-month low. we were as low as 15.72 for gold. gold still has posted its worst week since mid december here. it will look like most of the gains for 2012 have been given up. we are watching what happens in greece and spain. but the bullish data certainly helping. oil prices have repaired their losses as well. again, we've been telling you about this key technical level. 96.30.

it's going to come into play again for today. that is the number to watch as we trade throughout this session. sharon over at the imax. of course a very busy morning as we continue to watch that stock. want to bring in gregor gregory zuckerman. was one of the ah liegeal articles broken. >> talk to me about how -- is this how you thought it would resolve itself? >> i thaulgt there would be losses. i didn't think it would be this bigme big. people within the group thought 1 to $2 billion of losses. frankly, jp morgan underplaying when we first reported the story. now we're saying $2.3 billion and it could reach another billion on to have of that qh is

quite sizable around significant. >> i wonder if you could share anymore clarity about this hedge and whether you call it a hedge in london. obviously, they can only tell us so much without exposing themselves to parties that don't have their best interest at heart. >> yeah, i mean, it speaks to the grey line between what's a hedge, what isn't a hedge minus they were betting on corporate credit. historically, they've been a bear itch group, the cio group and became much more bullish and that turned asround and hurt thm and they tried to hedge that and adjust that and it just didn't work. >> greg, your latest story online, essentially, indicates and points fingers to hedge funds that are making money off of jp morgan's loss. can you give us a little detail on that? what they have been doing and whether or not this will continue as jp morgan works to unwind these positions the rest of the year? >> yeah, that's exactly right.

we reported in the last half hour that dozens of hedge funds and other trading firms have made money from this trade taking the other side. and they've made not remarkable amount of money. maybe 20, 30, $50 million each. blue crest is one hedge fund, blue mountain is another one. these are credit, focused hedge funds. in that world, the trade became very well known. people were buzzing about it which is why we reported about a month or so ago. people stepped up thinking that jp morgan either couldn't hold onto this position, would have to get out or just that they created such an average in the market that they would take advantage of it. >> greg, can i just double back on the work that you did on the initial story? what was the mood of the people that you spoke to. was there a feeling of communication in which jp morgan was broken? perhaps these two very powerful people on both sides of the atlantic. the whale and his boss here perhaps not feeding stuff back.

what was the internally discussion like? >> at the time, they were very kvt. >> and that goes from your sources as well, from whom you sourced the story. >> yeah, they said worst case scenario, we lose between 1 and $2 billion. i've got to go on a flight. bye. >> greg, thanks so much for your time. >> thank you. >> again, we said earlier today, on the call, dimon was asked what would you have paid more attention to if you could do this over again. and his answer was the newspapers because the journal story really did move the ball on that front. >> yeah, let's go back to brian sullivan for another quick market flash here. >> yeah, i want to talk about apple if i can very quickly. apple, interesting story and i'm

going to hedge it out. it's coming from the china daily. and the china daily is reporting that fox con founder and ceo has said that they are making frappe rations for the apple itv, although according to a report, he said that manufacturing and development had not begun. those comments getting picked up and they're beginning to trickle out here. i'm sure we're going to talk to apple, as well. this kind of coming across. some blogs are starting to notice it. something to watch if you're interested in apple because i know nobody is. but if you just happen to, this is a story that you might be interested in. >> did they get the copyright from that from the u.k.? >> i call it apple tv because i already use it at home. it's a small black device about

$99. that's why i'm a little confused by the whole big apple tv thing. they already do sell, basically, their own sort of mini set top box. >> i don't believe that they've named it. although many analysts have been calling it certain things in their report. >> i-tv is the main forecast and they would have to buy it off of them. it's not a great business at the moment. but you know, the bbci player is called i player. >> i think it's interesting that a supplier would speak out of school about apple. which is not done. >> bingo, carl. that's sort of the point. efts not there. but he was opening a new building. if he said this, maybe he meant it optimistically, like we hope we're going to get the business. we're building a building so that if apple is generous enough to give us the business, we will

be ready for it. but you know apple, anything like this is going to pluck a medline. they've got a couple of employees. >> maybe it's worth sending you to beijing. >> do i get one of those smog masks? >> it's not that bad. come on. >> aren't they in shen sin? where are they? they're not in beijing? >> they are right outed of shen gin, yeah. a lot of the dorms are there. anyway, brian, thanks. >> i might be working there if my tv career keeps going this way. >> oh, it's going great. >> a lot more on market moves. dow up 34 points. back in a couple minutes don't go away. [ male announcer ] you are a business pro. executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and you...rent from national. because only national lets you choose any car in the aisle...and go.

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>> all right. well congresswoman back. some break qh news from congressman barney frank. he is out slamming what else? jp morgan chase. barney frank saying that jp morgan chase was complaining about the cost of regulation under dod frank with the volcker rule and barne frank saying he finds it interesting that in one transaction, they have been able to lose about five times the amount that they complained about this costing them, ie, regulation. so barney out slamming jp morgan chase. and as we suspected, saying this is exactly the reason why we need more financial regulation. we should know along with the broader markets, the nasdaq specifically is up by about 9/10 of one percent right now. the count down is onto facebook's ipo.

expected today boo next friday in an offer that could value the company in as much as $96 billion. everything from the road show to pricing and the feds probe into their instagrahm deal. i want to ask you about the vulnerability and directly to the valuation of question. there's so many reports out there as to whether or not the aufring is over subscribed or whether or not there is, in fact, not enough demand for this. what are you hearing right now? >> well, i think we're a little bit in that stage right now where there's a lot of guessing a bitty about what's going on because obviously, none of us really know what's going on we're not inside those meetings. so my sense is there are some investors who are concerned about mobile. but i have to say the majority of the investors that i speak to are just so excited a bitty this ipo that it's very hard to talk reason with them.

it is a really big weakness for facebook. yesterday, we had that made note that facebook had to say that this trend that they saw already in the first quarter seemed to be continuing into the second quarter, which is that their mobile growth is going faster than the pace of their ad growth. so basically means that they are not keeping up. and that is what they need to be doing in order to grow into that valuation. so right now they definitely have a mobile problem. doesn't seem to me, from what i'm hearing, like that's going to impact this ipo. what it will probably impact is the stock price once it starts trading and once some of the heat and the excitement and federal reserver dies down. >> the fact they were not able to keep up with the projected growth of mobile, seems like they were flat-footed when it comes to the areas of growth, which they are devoting a lot of

time and resources to. do you come away with that take-away as well? >> you know, their attitude towards mobile has always sort of confused me. i remember when i first came on this beat covering facebook a year ago. everybody said mark zuckerberg doesn't care about mobile. he doesn't see it as the future. he thinks it is sort of a fad, so his belief was always that you would access mobile through the web, that your smartphone would essentially become a mini computer. so he didn't really focus on building apps or making the website specially structured for mobile. now i think what everybody is realizing is that was a mistake. could be that mark zuckerberg was ultimately right, but for now that's the concern as mobile is one of the hottest things out there. >> he obviously wasn't right. let me ask you about the instagram deal, where are we on

the feds investigation there? and if the feds are nfling, investigating, and therefore a billion-dollar transaction is in question, presumably, potentially, can they still ipo next friday, a week from today? >> yeah. this report was really odd to me. because, first of all, it's kind of procedure that the ftc or doj would review the deal. it didn't seem like there was anything out of the ordinary. our sources at the journal told us that they haven't decided whether to do a second investigation or not. and so, as far as i understand it, there's not really an issue here. not only that, instagram has no revenue. i don't really see how there could be an athe anti-trust issue because there's not a big competitor they are dealing with. so i'm a big skeptical there's going to be any stumbling. >> hang on. if zuckerberg is willing to pay so much money for a start-up, it obviously has some market power that might attract the

regulators interest. come on. >> no, that's true. that's true. there could be regulatory interest. and so it could be that they are going to have a second round of questions. we don't know that for sure yet, but certainly it won't impact the ipo. there's no reason why it should impact the ipo because the deal was going to close after the ipo. so it sort of is irrelevant. >> shainey, thank you for your time. >> thank you. when we come back this morning, legendary filmmaker george lucas. we'll talk to him in the 11:00 a.m. hour. giving a keynote on managing chaos. and if you have some other questions, we'll take those as well. back in a moment. ost everday i walk into the office and somebody asks me a question about the volt. what really blows them away is when i tell them i almost never go to the gas station, despite the fact that they see me driving to work every day. i fill the volt up once every -- maybe once every couple of months. and that feels absolutely wonderful. i'm hardly using gas, but it's there when i need it.

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we are a little over half an hour away from the european close. we'll send it over to michelle can russo cabrera. good morning. >> good morning. spain announced a two-step bank reform plan this morning, just more than an hour ago. this is the second reform plan in just the last three months. the news announced by the finance minister and the deputy prime minister. there you see him in the center,

the finance minister on the left. the first step in the plan, the independent audit across the entire banking system. this is in clear result of the banks when it comes to real estate. second, spain ordered the banks to add $30 billion in euros to cushion against ban loans related to real estate. the spanish market fell on the news initially. here the intraday. the ibex, you can see the details announce. the market participants told me they announced between $30 to $50 billion. this raises the question as to whether they are doing too little. spain's ten-year yield rising to 6% fearing they have to pump taxpayer money in them to shore them up. the spanish banks are falling as well. i want to point out, simon, the finance minister went through great pains to explain that they are only if a bank can't raise money in the markets, they can borrow from the spanish

government. but they will not be giving them money. and they went through great plains to explain vertical contingent bonds, which in good times act like a bond, but new bad times can be converted to capital. back to you. >> kind of an off balance sheet. it is important, because the commission today is forecasting that the deficit is going to be 6% this year for next. >> it is politically important for optics. they don't want to say they are lending them money. >> thank you, michelle. final thoughts on the turn-around right after this. [ male announcer ] the inspiring story

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welcome to hour three of "squawk on the street." here's what's happened so far. >> if you look over the years, the banks have generated an enormous amount of profits from their trading. and yes, every once in a while, like last night, they do report losses from it. well, we have always seen on the trading side that you can't be perfect every day and that you do make mistakes. you do misunderstand correlations and relationships you think you understand and put a trade on and it goes wrong. it sounds like that's what happened here. down, down 2/10.

headline, ppi. if i'm a regulator, i should have picked up the phone after the whale story. if they actually buffaloed regulators, then i think there should be action. everyone is going to get away with everything here, and it is all going to be business as usual, except that the senate is going to pass the toughest local rule. we are in a crux moment where jamie diamond, i'm not saying he's got no close, i'm saying all the bankers have no close, he's wearing the same outfit. this is a major blow to confidence. again, i reiterate, i got this wrong. i trusted jpmorgan. there it is for a friday morning. the opening bell on the s&p 500 at the cnbc exchange. >> jpmorgan has been the large-cap bank you can go to sleep with the last few years. last night didn't sleep so well, but you expect them to do well and jamie diamond is still the gentleman to be running that firm. man, some compelling sound on jpmorgan this morning.

welcome to the third hour of "squawk on the street." we'll check on the markets, which even though they have had cisco to deal with this week, other high-profile dow disappoints, exxon, mcdonald's, the dow is up 33 points. the s&p has a gain of four and the nasdaq is up more than 20. tale of two retailers, nordstrom falling after reporting disappointing earnings for the first quarter. retail rival dillard's did top estimates. chesapeake falling after the company drew a dead outlook comment from moody's. phillips 66 and marathon petroleum in the red. a busy road map for a friday. the talk of wall street, of course, jpmorgan's $2 billion blunder. could it actually be a buying opportunity? somebody likes this stock near 37. we'll talk about that. and the executive chairman of estee lauder is here with the

company's third quarter results and his view on the consumer. then european markets take a hit over concerns over spain's lenders. is that inevitable? we'll get that when the markets close in 27 minutes. and he's a film legend and talking to wall street about managing chaos. george lucas will join us live with his take on big business and the future of hollywood. that's coming up in the next hour. first, we'll start the day with the story of the day, that is jpmorgan and the $2 billion loss. kelly evans is live at jpmorgans headquarters in london with the latest from there. this really is the eye of the storm where you are, kelly. good morning. >> reporter: karl, good morning. the best of times turned out to be the worst of times for jpmorgan and the timing couldn't be worse. a hedge that was supposed to protect the bank against worsening credit markets went bad when credit markets didn't worsen, in fact they improved during the first quarter. here in london it's built as the road trader.

and the truth, as ever, is a little more new answer than that. the decision responsible for the losses is a new york-based division, and it is not clear there's anything rogue going on, so much as a bet, a very big bet gone wrong. as jamie diamond indicated last night, it was not just -- i apologize, it is windy here on this bridge. it was not just the publicity of the trade, carl, there was a problem. the wall street is reporting several hedge funds took the other side of this trade and have profited as a result. but certainly the timing didn't help. the reason this is weighing on financial stairs shares given it is a jpmorgan issue, is the concern of what it does to the reputation of banks, specifically those trying to water down or push-back the reform measures in the weeks and months ahead. also concerns continue to swirl about the downgrade coming from the likes of moody's to the debt of jpmorgan and several other banks. keep an eye on that going forward, the case for watering down financial reform will be harder to make now.

and that as i'm told from several people, among jpmorgan's competitors, banks are not pleased about that as a result. we'll see if this continues to weigh on shares into next week or is a knee-jerk reaction. >> here in this country it is being talked about as a turning point in the debate about regulation, specifically about dod frank. but i wonder in london, is this playing more in the debate about bossle and broader global capital requirements? >> reporter: well, if you look at the -- take jpmorgan's bozzle ratio, for example, that's not where the probably really is. if you look at it from the pure capital point of view, there's not a whole lot more to say. it comes down to this question about the u.s., what's a hedge,what's a prop trade, with something they are hedging in this manner, it is not clear why this was so hard to exit and why it is still a position that's being held right now. so i'm not so sure when you talk

about global regulatory arbitrage, the fallout here in london from all of this, people will have a field day with headlines over the weekend, but the $1 billion narrative already taking place, i don't know if we'll continue to have many legs. >> we'll see what the weekend brings and the next weeks and months from now. kelly, thank you for that. looking good in london, even with the wind. kelly evans in london. thanks. >> i'm a mess over here. thanks. what does all this mean for the stock? and could this be a buying opportunity? paul miller is a managing director head of the financial research institution at market capital. he took the price from 50 to 37. that's no joke. >> no, it's not a joke. and i think the big issue here is jpmorgan had a great reputation on the risk management side and right now looks like that's been tarnished. so i think this is dead money for the time being until we get further clarification on exactly what they lost and exactly what happened. remember, just a month ago jamie was telling us how this is

completely under control. and within five weeks it kind of really got out of hand. so what really happened there? did they really have risk controls off this trader in london? what type of positions did they understand when they put it on there? this is all very important for us as analysts to know. until we know those things, i'm telling investors to go to the sidelines. >> i'm sure you have seen the report in "the times" regulators have been talking to them. in new york and london for a month, you hear about this last night, was there a moment during the call that, i don't know, that took your breath away? where you realized just how much you didn't snow in. >> i think when they came out with the $2.3 billion loss in the first six weeks of the quarter took my breath away. then to have him say that, when did you know there was a problem when there was loss in this portfolio. that moves that the models they were using of this portfolio doesn't work. changing the risk model, this was twice as risky as it was in the beginning of april. all that type of stuff, it shouldn't happen that quickly

and shouldn't be that big of a surprise to the senior manager of the company. for that to be such a big surprise concerns me how much did they really know what this trader was putting on overseas. >> yeah. you think this is systemic? is this all one big prop trade cover-up as somebody wrote this morning, is it about more than just jpmorgan? >> i don't think so, but do we really snow in no. i put that at a low probability. i think jpmorgan made a hedging bet that became very ill liquid and it turned against them because they are so big. but then it goes into what we have said all along, are these too big for one person or one team to manage? and to manage all that risk and in and out of the portfolio, that's the real question here. are these things too big? i've said all along citi is too big, bank of america is too big, but now which is coming into the conversation at this point. >> some people are going to say, you're being a little harsh on them, there's a big buy-back

program that just got easier with the stock at 37. obviously, the balance sheet is resilient, that was the whole point, right? so you can make hedges like this. >> well, you know, jpmorgan is still a great company, it is just now what type of company are they? they are going to have a much more volatile earning streak than we thought a month ago, but the other issue of the buy-back, the stock fell to $28 by the end of the year, so buy-backs is not a great instrument to support the stock price in these type of situations. i'm not really that confident the buy-back will support this stock. i don't think the stock is going back to $30, don't get me wrong, but i don't think it is going forward any time soon. >> let's do regular a regulatory implications on dodd frank. is this a too-big-to-fail issue, a capital requirements issue? somebody wrote today that dimon calls for this will be preposterous. >> the media is having a field

day with this. but the volker role is now in the hand of the regulator who is are having a very difficult time defining what a prop trade is and there are a lot of regulators trying to determine what the rule is going to be. we don't think it will have a meaningful impact on the rule and regulations. it may have a lot to do with the fed and other regulators in-house a lot more, asking a lot more questions, but we don't think it is going to have any impact on the role as that's going to take a couple more years to really implement and to put in place. >> all right. before we let you go, it doesn't sound like you're exiting financials altogether, right? do you graduate to a usb or a pnc, what happens? >> what we said is go to the more simpler names that don't have the prop types at best. wells fargo has a big mortgage bank out there. they are doing very well. that's where we would be. usb, pnc is another one.

a little smaller fit there. >> paul, appreciate your time. always good to talk to you, what a crazy week. paul miller at fbr, thank you very much. let's go to rick santelli with the santelli exchange. i love this, getting messy to get results. >> absolutely, carl. there was a guest on yesterday who was a smart guy. he said something on our channel like, they absolutely have to hold on to greece to make sure it doesn't break out of the union or go to the dropma because it would be too messy. more bad decisions, in my opinion, made to avoid messy. sometimes messy is better. think about the credit crisis. i personally think they shouldn't have bailed anybody out and should have guaranteed deposits and should have let my institutions fail. it might have been messier, but it might have been better than a decade of financial repression. everything is relative to something else. also think about it this way, carl, when was the last time you were at a bachelor party or wedding reception where you and your buddy got inebriated.

who felt better fast her? sometimes the messy route is the better route and you feel better faster. simple is always better. all this talk about dodd frank, seriously, i try to read it when this stuff was passed. oh, my god, it made boilerplates on things like credit card look like abc's in crayon. who could read this? our last guest nailed it, maybe it passed the senate but they didn't pass anything, they passed the job to somebody else. regulators, do you think they trieded madoff differently than other client? do you think they treated jamie dimon different? hmm, let me think about that. look how simple it could be. don't let some of these entities act as agents and principals. there's a guy on the floor ronnie madison that's been saying that for years, that's the way the exchanges work. only exchange products on the menu of some of these entity in terms of the volker rule.

they tried to get cds a, but speculators want it. imagine instead of a handful of people trading these things you have thousands of speculators assuming the risk with stan dollar standardized contracts. >> you got me thinking about bachelor parties i have attended, rick. thank you very much. let's go to brian sullivan for a market flash with the dow up 52. >> all i can think about is sony is the chicago cubs of companies. every year there's optimism for a turn-around that seems to get worse. no offense, cubs fans. sony, fourth straight annual loss to the tune of $5.7 billion. sales in many of their units like mobile, music, consumer products continue to fall. guys, this stock is at a 33-year low. sony really just a shell of what it used to be.

>> amazing. even if they do see profits come for the first time in four years. when we come back, the executive chairman of estee lauder is here. talking everything from the consumer to mother's day to a china slowdown to global business. back in a moment. trainin.. schools flourish and students blossom. that's why programs like... ...the mickelson exxonmobil teachers academy... ...and astronaut sally ride's science academy are helping our educators improve student success in math and science. let's shoot for the stars. let's invest in our teachers and inspire our students. let's solve this.

let's get a check of the markets this morning. at&t and verizon doing quite

well in the telecom spot. of course, financials doing the worst right now. take a look at the top-performing sector doing today, with the dow holding on to gains despite everything that it has been handed this week from cisco to jpmorgan, up 48 points on the dow. mother's day is coming up this sunday. taking a closer look at estee lauder which recently gave a profit forecast that did disappoint the street. shares of estee lauder up 5% this year, but under the discretionary index here, first on cnbc this morning is william lauder, executive chairman of estee lauder, also served as ceo from 2004 to 2009. william joining us from paris, good to talk to you this morning. the stock has done so well that people are sensitive to a slowdown around the world. we got disappointing retail sales out of china. the company itself is cautious of a slowdown there. how high is it on your radar? >> well, we are always concerned

about a consumer confidence in what would appear to be a weakening consumer confidence. right now the sales takeaway, the sales we takeaway we see at retail and in the key markets of the world, north america, asia, europe and travel retail still continue to show us that the consumer has a level of confidence. however, we are concerned primarily around europe and the lack of confidence the consumer has there. we are not seeing the slowdowns in asia. certainly this is in asia and travel retail, predominantly an asian consumer. also seem to be showing great strength in confidence. continued confidence by the consumer. >> how would you characterize the slowdown and is it something that advertising can make easier or not? >> well, we have a pretty heavy advertising schedule right now. and we are seeing pretty strong retail takeaway, but if you look at the leading indicators of what we are seeing from a consumer confidence standpoint,

when you hear about greece, it is not a big contributor to the economy, seems to be influencing what's going on elsewhere, but we see strong retails in germany, the largest market for us on the continent itself. frank continues to be okay. spain and italy are not as good as we like. and the u.k. continues to be strong. so the largest markets we have in the region still continue to show relative strength. but if you will, the wind are blowing for a coming slowdown. we are just not seeing it yet in the prestige sector. >> obviously an important weekend. i've done my mother's day shopping, but i know there's a bunch of people yet to do it. seasonally, how important is this holiday and are there upcoming holidays in the year that are equally a contributor to sales? >> you know, mother's day is fairly important in north america, but not really very influential in the rest of the world. and in total it really isn't as important as the holiday period of time between thanksgiving and

christmas, which is extraordinarily influn usual. we have holidays in asia that follow in january, which are also very strong. so we are not saying we make or break anything on mother's day, if we are successful on mother's day, we have strong programming in place in the stores, from all the indications we see, the sell-through is healthy and strong with good confidence. store traffic in north america continues to be healthy. and consumer takeaway is also strong in north america. so we are confident that those programs in place are pretty good. in asia we continue to see overall broad strength. and we just hope that it continues and all the indications that. advertising is a driver. we are putting more money into national advertising, tv advertising, and our key markets are driving demand from exiting existing consumers to new and younger consumers entering the category and entering the brand for the first time because of our advertising directly to

them. television, social media, other digital forms, we are really touching on these consumers in a way they have not been touched before by our brands. >> they are getting in now, one they day might be part of the prestige part of the market, but you have to start somewhere. william, looking forward to seeing you when you are stateside. >> well, thank you very much, carl. glad to be with you. >> william lauder of estee lauder. we'll get you down to a countdown in europe with seven minutes and change to go. the dow up 52. don't go away.

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taking a look at the dow holding on to a gain of 50 points, but the volume on jpmorgan chase today, over 110 million shares as of 11:00 a.m. this morning. it is about 10% of the total volume. it is four times its ten-day average daily volume of 27.6

million shares. if this trend continues throughout the day, probably looking at the highest volume since the financial crisis for jpmorgan. closing bell is about to sound across europe. we'll get that in about four minutes as "squawk on the street" continues. coming up, we are heading overseas to europe. no, we are not sightseeing. the markets are closing. and we want details. 'squawk on the street." ht-visn , like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.

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well, the day has been centered mostly on jpmorgan. we can't ignore this, simon hobbs, we are a minute away now. >> this has been quite a good rally given the loss we have on jpmorgan. as a result, the major markets in europe have moved higher during the course of the session. now, there's no great gainers within that. check out what i mean here. as you see, wall street is rising. so is london, frankfurt as well. this is just a general broadbased inching higher of the bulk of the market, the weight of the market. and obviously from a position under which they have been under a lot of pressure. relatively flat for most of them just finishing slightly negative for the week overall, which is still dominated by the events we have in greece and spain. we'll look at the spanish market at the moment. i'll show you the ipex in a

moment. some of the spanish banks are lower, but michelle ran you through the bank provisions. will et me break off here, the bells are coming. >> the european markets are closing now. >> so a bit of a mixed picture. a bit of a mixed picture. no great momentum coming through uh. as i mentioned earlier, we have cut loss in some cases and have increased gains. we'll talk to you about madrid and the bank reform. another stab at it, which clearly is not enough to sort the whole thing out. disappointing amounts of money, they will ask the banks to provision for. we thought it would be $45 billion. it is about 39. they have to move the profits into other institutions other new shells, if you like, that can be sold off further down the line. ubs has a sell on all the banks at the bottom today because it thought to have the equity dive in and so forth.

poplar is in negative territory, for sure. they are walking a tight rope as the european union is concerned about its overall public finances. still saying there will be a deficit above 6% this year and next. let me just show you where we are on the spread between the spanish bonds and the german bonds. this is important. because we keep saying that the yields have jumped above 6% in spain. of course, overriding what's happening, there's a general move into the bond market, so it actually flatters the impression that you get as to how serious people might see the situation. but when you look at that move up in that spread, the difference between what investors demand in spain as opposed to germany, you can see that obviously there's mortgageation. i just wanted to leave you finally with a move at the bottom of the london market, which is quite interesting. let's not forget overnight we had dispointing economic news out of china. and still you see the big global miners here, xstrata in negative

territory and the big blanks, the royal bank of scotland. and barclays is suffering from the jpmorgan effect. that's probably why we are in negative territory. here's the scene in greece, they are still trying to form a government. they have until thursday, and if they don't do, that it goes to a general election. the real worrying thing as the unemployment ticks higher in greece again is the polls. that's the worrying thing, i'm not making a judgment, yes, i am, for market stability, the worrying thing is that the socialists, the far left, could increase their share of the vote at the next election. so that just reinforces the potential standoff between greece and the rest of the european union. certainly the likes of the germans over what will happen next, and that's not good for market stability. >> this week unemployment, 21%. a year ago, 15%. you're talking about swings in the economic picture that are going to drive human emotion. it's going to get emotional. >> how long have they been in

recession? four or five years? >> i think it is their fourth year. good weekend, simon hobbs. let's go to rick santelli talking about credit swaps in the otc market. >> our guest is tim. he understands this market well and is with capital context. tim, the best way to start out is, you know, this exchange and many regulated exchanges have a fluid margening process. and that always made sure they can get their hands on enough money so that there's never a deficit, a debit or a surprise with regard to customers position and money for those. how is the cds market different than that? >> the cds market is modestly different. it is marginalized and collateralized, but they can cover a ton of things. and these are made to market and not model. there's a lot of room for maneuvering in there. >> so basically what you're saying is down here where everybody is trading the exact same contract, it is not

bilateral, in other words, you against another entity in and otc-type of transaction. since everybody is the same, there's a lot of liquidity. margening takes on a significance because we have a lot of liquidity missing in the cds markets. >> yes, it is missing especially in the kind of positions that jpmorgan had on, in this case, in these more complex positions. it is very much missing. >> all right. now, regulatory changes, is this a difficult one to correct? if you were in charge of writing, i don't think you can give me 1800 pages, how do we correct this? have an idea? >> it would be simple. coming from a credit guy it is hard to say, but you can put so much of the credit market on exchange within a few days. it already trades electronically for the most liquid indices. of course, there are complex and otc positions that would be very hard to do. but they can be managed in a different way.

but certainly in a sentence, regulatory control of cds would be the case. >> believe me, the banks can absorb this. the whole issue last night was is this going to be a canary in a coal mine of other positions. markets don't seem to think so, but the stress test didn't give us any real information. why do you think that is? >> well, i think there's a couple of reasons. first of all, it seems that many people believe bank balance sheets are all just sort of immediately a way to alleviate the housing market, in a way. there's a lot less transparency in there, but the bottom line is that the credit market never really bought into how the stocks did. in fact, the cds market for jpmorgan indicated considerabliless excitement from the beginning of the stress test. >> many financial company

commentators and analysts have recommended with very compelling arguments that financials are solid, their statements are solid, what would you now say to that premise? >> well, i think there's three things to sort of get out of this. first of all, that the banks, the regulators and the fed are relatively come police it in this benefit of the dow approach, not just the jpmorgan but for the big banks not to take advantage of what is a bottomless pit of capital, basically. the second thing is far value at risk. we got shown last night this measure of risk that is so harolded. it is basically meaningless, so we wonder how long before the other banks admit their risks or how they measure their risks are a little tricky. the last one is we hear so often about the old school way of looking at banks and how they are judged and what we really know is that the banks are incredibly opaque. we really have no idea what that

book value is. and so anybody trying to say there's value in these based on a price to book or whatever it might be, is missing a very big picture. and in this case, a two 2, 3, 4 or 5 billion hole in the picture. as we saw today with jpmorgan and some of these positions, it is going against hem in a hurry. nobody knows how big this hole is and too big to unwind for jpmorgan. >> thank you, tim. we'll have you back as we get more details unwrapping and we get our arms around this derivative construct jpmorgan is stuck on. >> it won't be done today, rick, but you did a good job there in chicago. bob and i have been chatting what a difficult day this is, too. explain. >> sometimes i get it. i have been doing this a long time. i no e what the markets are doing, but other days you want to scratch your head. this is one of those days. we have gone straight up from the bottom.

120 points in the dow jones industrial average. now let me get this straight. greece has a major bond offering coming to 436 million euro bond coming. this is one of these london offerings. we've got spanish authorities going higher on loan loss provisions against bad debts. and we have jpmorgan. and this is what we've got, straight up here today. i know, you would think we are oversold. you want to use that as an excuse? i think that's a poor excuse. oh, the ppi was better than expected. why? we had lower energy costs. i don't think that was terribly -- is anyone that worried about inflation right now? i don't think so. this is one of those days where you scratch your head. jpmorgan, i can't believe the number of people messaging me. it is not a problem, bob. it is a company-specific issue. it is just a bad hedge. that's all it is. folks, it is a lot more than that. they had the wrong risk strategy. and they are the best managed

guys out there, what does that tell you? let me tell you some of the points i saw obvious to me immediately on the fallout from jpmorgan. put up the board, elton. lower trading bond is going to result here. that's the biggest concern. these people are going to speed leverage and banks will do that as well. there'sless lick we did out there. these banks provide liquidity. more aggressive calls for the volcker rule. we heard that this morning from barney frank. and more momentum to end the whole "too big to fail" thing. looking at the downside, he had one of the best quotes i have seen all morning. jpmorgan just gave those who want the big banks broken up an incredibly strong reason for doing so. that's the bottom line here. there's also sort of ramifications, this is not a jpmorgan specific story. finally, on the week, and everybody who claims we are oversold, blah, blah, maybe we are oversold, but this is not a disaster for a week. take a look here, bottom line, we are down fractionally with markets down.

china is down, but germany and spain ended the week on the up side. i'm not into the oversold who bought today thing. >> your point is well taken on points regarding europe next weekend. >> watch what happens with greece in that ond. >> thank you. when we come back on "squawk on the street," george lucas will join us live. we'll talk about the movie business. and now we'll look at the trading day just now ending in europe. ♪ ♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world. together, the elements of science and the human element can solve anything.

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♪ all right, coming up on the "halftime report in a few, is boring better when it comes to buying banks? our traders are naming names. we'll talk jpmorgan as well. plus, at&t and verizon leading the market as they fight back on subsidies. should you be buyers? plus, is nordstrom raising the red flag on the consumer? i made it back from vegas, see you in the house. >> you survived. it was not "the hangover 3." >> and i lived to tell about it. he brought the galaxy into our homes and later this year lucas film will be released red

tales on dvd, a film set in world war ii. george loose cast is here with the chairman of lucas firms. thank you for being with us today. >> great to be here. >> we'll talk about red -- we'll talk about the fill new mexico a moment, but you're giving a speech on managing chaos, which i wanted to get to first, and i wondered if you could walk me through your premise and your experiences as a director that are helping to inform that. >> well, i think, i don't know whether i have a theory other than you persevered or what, but a lot of the examples are in the movie business where something really terrible happens every single day. and you have to overcome it and keep going to get through the end of the day. it's not unlike a sporting event. in terms of the dynamic of you have to win no matter what. and, at the same time, you have to overcome a lot of obstacles. you are never expecting them,

which is something that relates to the market hourly, i guess. >> i keep thinking of examples that i'm sure exist from, you're basically a young director, you're trying to shoot "star wars" in tunisia, the elements aren't cooperating, is it a matter of having enough cushion, having a plan b, c, d or e, or something else in your mindset? >> well, a lot of it is so unexpected that you ultimately have to think on your feet. yes, you always have -- i mean sh everybody has sort of abc plans, but they are vague because everything is changing all the time. it's, you know, movies, like the market, is something that's a work in progress. it changes from hour to hour. so it's very hard to predict where it is going to go. the market moves a little bit slower, but not always, as we have seen. so, you know, you just have to get up in the morning and say, well, what's going to be thrown

at me today and just sort of be able to have a mind that jumps the shark every once in a while. >> yeah. something else that seems to be changing every day is the distribution model when it comes to film or media in this country. have u.s. this week we heard from disney who said, look, we are not going to turn our back on digital platforms like netflix, that would be reckless, even if we are not sure about the degree to which it is cannibalizing our other platforms. when you think broadly about the future of distribution, what does it look like? >> well, i think it looks like, maybe not specifically in the netflix model, but it is definitely going to be digital transmission. that's going to be the biggest change. and, obviously, the hard part of movie business right now is we are going through a huge change. a huge technological change. and, again, it's like thinking on your feet. this is a little bit slower because you can kind of see trends coming, but, again, it is

like anything else. you have to be sure you don't jump too soon, but you have to be sure that you get there early enough to get in the game. >> "red tales," release date of the 22nd. it tells the story of the us the can tuskagee airmen. tell us about it. >> it was a project that started 23 years ago. i thought it would be a great inspirational movie for young people. and it's very much like "star wars," only in world war ii. action-packed, very old fashioned. it is kind of like "star wars." so it's, you know, it's a movie that's been to or meant to make kids realize some of the facts of history, especially black history. and, at the same time, know what is possible in their lives. >> we are looking at it right

now. you may be hearing some of the audio in your here. cuba gooding jr., terrence howard in the film. i solicited questions for you on twitter. i don't think there was a single one that didn't involve asking you about the future of the trilogy. one person said, does he have episodes 7 and 9 in him? why wouldn't you go to that first before trying to extend the indy franchise. what's the future? does it happen? >> well, the future is unclear. i am retiring. so that is playing into this. but, at the same time, steven and harrison want to do indy. now that i'm finished with "red tales" i can focus on coming up with stories for those movies and get all my stories in line so i can retire. >> well, not too soon, i hope.

george, it has been a pleasure having you. thank you for your time today. look forward to a lot more. >> okay, thank you. >> george lucas from washington, d.c. breaking news from kayla now on facebook. >> a lot of mess out there for the demand of facebook's ipo, which i'm told is already many times oversubscribed with institutional orders coming in thus far from the company's four days on the road. this oversubscription is not including what will likely be what one source called a standard retail allocation of 10% to 20%. now facebook has a wide $7 range, $28 to $35 a share. that will be updated before the order book closes next wednesday. and final decisions on that price range likely to come monday or tuesday as demand from west coast investors is assessed. but that update, i understand, could include raises the current price range and that's a move that could come as early as tuesday. now, of course, any changes of more than 20% of the current range will need to be filed with the sec before that order book closes on wednesday.

so we'll keep you updated throughout next week. we'll also have a little bit more from julia borstine from palo alto. but sources say the pricing and demand is remaining fluid. they are gauging that full picture of demand. it could change, but as of right now, changes include raising the price range. >> conflicting takes on the road show, but that adds clarity to the event coming up not too long from now next week. thank you very much, kayla. when we come back, a volatile weekend on wall street. we'll wrap up the moves and see what jpmorgan's big loss means for your money. right now the dow is up 26 points. we are back after the break. the cnbc real-time exchange market snapshot is sponsored by interactive brokers.

markets are trading higher despite the negative news this morning regarding jpmorgan. and for the week, join us for the weekly market wrap up. rod smith, chief investment strategist with riverfront investment group. interesting day, guys. back to sunday night, andrew, when we didn't know whether france was an unknown, cisco

with big disappointments on the dow, jpmorgan today. the market is resilient. >> resilient is a good word. we hid 1340 at the s&p 500, and i look back at we were there at the beginning of february. here we are 3 1/2 months late we are no progress, we are in a range of 1400 on the up side, 1340 on the downside. now we are on the lower range and we think the data is going to get better domestically through the soft patch and this is a buying opportunity. >> retail sales next week give us a better clue, do you think we stay range-bound through the summer? >> i do. i think we are staying range-bound, but we likely test the upper end of that range. retail sales next week, the ppi coming in was softer. consumer sentiment was at a four-year high, so there are signs there that the consumer certainly is still pretty resilient. >> rod, you still can't take your eye off the euro, though. >> no. i'm the strategist, so last

sunday's elections were very important to think about what the next phase, not weekly phase, but what the next phase for europe is. europe is clearly at an electoral level rejecting austerity. so the next logical plan would be to adopt the u.k./u.s. model, which is get your central bank to print money and drive down the interest rates of your government bonds. that is clearly what mr. allen believes europe should do. and i'm going to give the gentleman german response. i think everybody else in europe would love it if they would adopt the policy. the spanish would love to see this lower. the markets would like it. and there's going to be important dialogue between

merkle herself on that threat. and if the market is adopted, then i think the tone of the market con sister and brotherly driving us down can change. but i think that if they do, then the euro will weaken. so it is going to be hard for american investors to profit from that. the fist place to profit from it would be germany, who would be the biggest beneficiaries of a weaker euro. >> it will be interesting to see how that political fight shapes up and how it will affect us here. gentlemen, i hope you don't mind us to keep it short. thank you very much. don't forget to tweet us. jamie dimon says this violates the dimon trins billion. how would you define the dimon principle? let us know after this short break.

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