it's not economic valolatility, >> it's only been six months. >> that's a lifetime in this it's political volatility as business. >> a quarter is a way to judge a well. >> okay, thank you. ceo. >> a lot of people think that's and make sure you join us the problem with u.s. markets. >> i'm not a believer in j tomorrow, "squawk on the street" jc penney. starts right now. good morning and welcome to macy's, which is doing well, squawk on the street, i'm their stock is not going up. melissaly with jim cramer and david faber. following data showing a drop in the highest paid lawyer i know housing starts, a boost in is representing macy's and i permits. the dow jones looking to add think that jc penney will not about 42 points. get martha stewart. and the spanish auction >> we should do a "squawk on the outweighing the german data. street" road trip. >> the man must visit 20 retail the dax is up about half a locations a da. percent. we basically finished unchanged >> i do. >> i'm a retailaholic. after the big rally last week.

so where do we go next? >> have you been to a walgreens fed ex trading lower, and lately? >> yeah, two days ago. they're soothing concerns about >> walgreens has purchased a 45% slowing it spending. >> did microsoft live up to the stake in alliance boots. hype? did it come close to competing walgreens ceo was a guest on with the apple ipad or the "squawk box" this morning. >> we're bringing together two kindle. >> the jc pen ney's shock is iconic brands. walgreens and alliance boots. we think thousand is the time because this is creating an dropping. >> and wall greens buys alliance international health care platform. >> they're going to be one of boots and it has an option to the largest buyers in the world. buy the rest of the company in it's an interesting deal in a lot of ways. we won't be able to talk about all of the details of it you, three acquiyears. but walgreen stock is down.

they're paying for from people >> fed ex reporting. and there are increasing employee related costs. that helped engineer the deal. oracle reporting better earning their paying 6.7 now, but they last night three days ahead of will be paying in two in a half schedule. they're authorizing an addition years on stock and cash. than in $10 million in stock buy the overall value is $16 billion backs. the early release is alleviating in equity. concern that keith block has left the company. alliance boots is a private that's an interesting back company. he will become a 16% holder in story, because a famed tech analyst said yesterday he expected this was happening. the stock traded down because wall gre walgreens. they were concerned about it. they're paying ten times, and investors seem to be saying north america is important for oracle, and it's true, but oracle said we're going to come what's the rationale? out, beat, and show you all. >> they should be thrilled about >> it's put together because of rick's note. you will see the stock trading jc penney being down because up. trading up in part because they shock people. this was like a couple guys in their comp scores went doubt the locker room just high fiving

9.9% because of a dispute with each other. i want to take this away from express scripts. >> that's the question if it will give them leverage since both fed ex and oracle. they will be buying a lot of they're seeing good results from drugs. they want to get prices as low as possible. is it possible that walgreens foreign business. could say together with alliance suddenly here you have spain boots we have a lot more power and we can provide a price that trading okay, ups, socgen coming is equal to if not lower than what you're getting from express, i don't know, but -- up with software. >> people are looking for why they would have done the deal. >> and spain is trading well you heard greg lawson say we because of the yields. >> donald trump talking about could not grow any more in the u.s., we have to grow somewhere. buying property in greece. >> now you're really grasping at >> a good opportunity to buy straws, aren't you? cvs. >> it is trading a little >> i'm grasping at those very higher. >> coming up, more on mall red straws. microsoft's entry into the tablet wars. find out if our panelist are sold on the surface. i am saying it's not total

and let's look at the futures. negativity about europe. >> and that is predicated the dow looking up about 464 primarily on oracle. points at the open. >> fed ex is saying that, but a stay tuned. company making an investment in europe. skblp how about express shipping volumes have lessened in the u.s. and asia. so there are still signs of softness. the stock is trading lower in the premarket. >> fedexhas been a history of disappointment. they did lower their guidance. yesterday was a rally led by the transports. >> that was curious. that was telling you something, it wanted to tell you something that maybe things are okay. this is a good sign that the rails are doing so well yesterday. >> it was so strange that we got

forecast after forecast that coal is doing badly. union possession of cocaine has been the leader in the rails, so i was thinking the rails were signaling something the fed could do, because the business itself, up and repricing and repricing, it's just okay. will fedex start that rally. >> that will be the question, and can oracle stop the doubt? there are so many concerns about it spending, goldman had that note saying it spending is slowing. there are effected head winds, you know what, maybe things are not so bad. >> intel has by saying this big data solution. oracle they portrayed very positively. minimized the problem with sun

micro. what i would point out is big data, people confuse at home what this that is. when you order something on amazon, it goes to gigantic data farms. >> it is a truly organic crop. >> you don't need the department of agriculture to give you that report. it's just a phenomenal business, and oracle is deep in it, and congratulations to larry olson, great execution, i know he wants to hear that. but this is -- he would $32.50 he could facebook me. i do believe this quarter will put to rest some of these concerns. ♪ as we mentioned earlier, >> we spoke about it last night

on "fast money," and he thinks they will get growth by november microsoft unveiled a new tablet and that data will be a hard with a cover that acts as a quarter for hardware, and keyboard. the price for the new tab let is because they hired to many sales set to be similar to the ipad and will go on sale in the fall. people recently, that will payoff. so we'll start seeing increased the new surface is in need of a sales of hardware. >> i want to go back on my new slogon, so send us your europe comments. when europe does not blow up on a given day, it allows us to look at america. responses. i have a feeling we're going to get a lot of "it's not the people use that term risk on and risk off. ipad." i always want to sound market, just a guess. coming up next, it's cramer's but i'm looking at america on and america off. mad dash for the opening bell. i'm a little america on today, let's look at futures, looks and that means like i oracle, like a update so far. i'm interested in the research, more "squawk on the street" straight head. es squeal, engine revs ] and vidia. ♪ and it gives us a chance to look at dollar tree and -- >> yes, one headline is all it ♪

takes to divert our focus back ♪ to europe and away from our country. spanish yields, we're still [ male announcer ] not everything powerful has to guzzle fuel. watching them, they did do a bond auction, they did sell at the 2012 e-class bluetec from mercedes-benz. the shorter end, but at a lot higher yield than they had not see your authorized mercedes-benz dealer for exceptional offers very long ago. >> that's between housing through mercedes-benz financial services. permits in our country and spanish tenure. >> i'm just saying. i'm just saying, it's still there and it will still there be there -- >> you're saying as a country. the new projection still has spain. >> but it also looms large for those that make investments every single day. that being said let's go back to america and microsoft, they go together, right? microsoft joined the tablet wars taking on the apple ipad by

introducing surface. and a magnetic cover that can be used as a keyboard. it will be around the time windows 8 is available, sometime in the second half. >> they didn't take on apple, they took on hewlett-packard. >> they're taking on products that don't exist yet. >> meg witman on the show talked about having to have a tablet. they're taking on their two best customers. maybe steve bomber has something up his sleeve. the lumia was a dud.

they don't have cloud, social, mobile, and suddenly they have a product that's a relacement for your laptop or notebook. >> he said he wanted a hardware ♪ ♪ companion. >> a bomber, always a fired up we're about four minutes before the opening bell, time guy. when you're fired up against now for the mad dash. >> number 23 by the brother's your largest customers -- look, johnson. i think it goes to a 70 year. apple is taking on samsung, so yes, j and j is a good call. maybe this is the new frenemy. >> how about zynga. >> merrill lynch cuts numbers, they say it's too early to buy. their saying hewlett-packard, we have to do something. i bit mark in words with >> but you have to have a tablet friends. >> is that a good sign or a bad? offering at this point? everything is becoming mobile. >> i'm king. >> google is doing it. okay, here is what i worry about

with sin za, it was just up big in the last few days, i see and anvidia is the guts of the profit taken. >> we have the opening bell just about three minutes away. mack book pro and will be the guts of this tap let and the google tablet, and it's the right about three minutes. more "squawk on the street" just ahead after this. trading win ther morniis mornin. >> it's up a percent in the sleep train has your ticket to tempur-pedic. premarket, but if they're really taking on their two biggest experience the pressure-relieving comfort customers, i would say long term of tempur-pedic, and sleep risk-free with sleep train's stst not a good move. 100-day money back guarantee. >> i was with someone at my get 36 months interest-free financing: college reunion who had the no down, and no interest for 3 years. plus, get free same-day delivery. sleep train's 100-day money back guarantee, interest-free financing, and free delivery? lumia. i said look, this is a good that's the ticket! sleep train's ticket to tempur-pedic is on now. phone too, steve. ♪ sleep train >> what did he say to that? ♪ your ticket to a better night's sleep ♪ >> he didn't acknowledge it, but he didn't grab it and throw it

away. he could crush me like a bug on a windshield. let's talk about jc penney here. michael francis is going to be stepping down. he had been lured from target, and johnson will now assume direct responsibility for marketing and merchandising functions as if he didn't have enough to do. >> my take is i have been working for ron. i feel bad for him. he doesn't live where jc penney is located. this is a fabulous estate. a coy upon, this is a $7 million property. >> in plano. i thought this could be good for ron johnson. >> i think you have to be there.

there are a lot of notes this morning that are comical how how it's somewhat of a set back or a speed bump -- >> it's unraveling. >> let's help macy's -- >> the key thing is whether steve and bill believe the stories. he is their man. on december 21st he is in there for what they see polar shifts will reverse the earth's gravitational pull is the long term. they are controlling this and hurtle us all into space. company along with mr. johnson which would render retirement planning unnecessary. running it, and that's that. but say the sun rises on december 22nd, all right, so 22.66 i think they and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. are confident he will be able to we'll even throw in up to $600 turn it around after that incredible run up when he was when you open a new account or roll over an old 401(k). announced. >> which he sold half his grant. so who's in control now, mayans? >> but he had a really long-term grant. he could become a billionaire

with these tenure options, and he put up $50 million. it was an interesting way to ♪ ♪ >> looking at the big board now. incentivize him. >> you have two shareholders in there right now. they control 25 mkt, their man ♪ is in there, and everything is and jum, it looks like a higher going south. open across the board, technology for once is trading >> he can't fire himself, i higher as well, helped no doubt understand they have ag day in part by oracle. tors, i would go and shop, pick >> i think they're viewed as a a couple stores -- company that can bring tech up >> buy your way to better comps. or down. it is interesting because it has >> buy a lot of slacks. >> i have never seen -- when you wide enough tentacles to do get double digit comp store -- that. oracle is a company that it reminds me of merry-go-round. expectations were so low here. >> at the same time, crm sales

an old store. it's hard to pull yous out -- are higher. sap is higher. >> they trashed -- they trashed yourself out of that vortex. s.a.p. on that conference call, it's like zynga. it's interesting that it's not i'm rooting for penney, but i sticking. i don't know how big of a wind don't want to own the stock. >> it's down 50% since february. sock salesforce was, but that if you looked at that chart and was a conference call saying all is well. you didn't know what it was, you would say that's a terrible so it's riesing tide. looking chart. >> he's just getting started, >> microsoft is up, and i'm johnson. he is the man that created the wondering if it's because of oracle or the surface. >> i think people like the new apple retail store concept. now you can buy the stock at more aggressive microsoft, and i'm told bill gates is there 22.80. >> i don't really think that ron doing a lot of work. he is back. johnson, they claim the genius i'm not kidding, i had a source bar, i'm questioning the whole indicate that. there is a sense of urgency. pedigree -- >> so he ruined his legacy by i don't like to take on my large customers, it's never been a

trying to prove himself? he ruined his reputation? good strategy. >> i don't think we draw too much from oracle, europe is not okay. that continues to be the case, the economy is not good, the banging system is even worse, and a lot of concerns lately about india. i don't know if you have been hearing them. there are a lot of worries with people who follow closely and are very concerned about india in terms of a real lack of growth there. >> half of oracles because is economic sales. there were concerns here at home about it spending in general. that's what gardener has been lacking. even during a year with the window's 8 refresh, they're saying perhaps a corporate refresh cycle has peaked. those are troubling signs. we have this positive and i think people are grasping on to the positives today.

>> technology you typically don't want to buy at this time. you don't want to get toot excited about oracle at all. those are all good points. people are saying a more aggressive microsoft is a welcome situation. i fin that all of this tech is churning because of europe. i want to go back to brick, brazil doing poorly, india doing poorly, china decelerating. russia is like at war. they were not giving each other the fist and high fiving the president and putin. >> he is trying to get protestors to stay home -- >> if russia is your hope, when pepsi is your best bet. >> you say grasping at straws.

>> and the bricks are all slowing the main three big ones, how much of an impact should that have? >> it should send you back to veriz verizon and home depot. the stock for barnes and noble is down. what they said about nook sales, even though content sells were up, the device is down 11% because of lower asp and volumes, that's a terrible combination. >> yes, and steve bomber was not talking about a barnes and noble product. it's been a tough stock. some have succeeded in this.

rock burkel not so much, liberty is a light holder as well. >> the book business is very interesting. i don't know if people have been watching amazon, they have been a remarkably well performer. fedex not that good, and to get in front of amazon is dangerous. >> let's check in with courtney reagan. >> there is optimism ahead of the fed press conference tomorrow pm there it is extending operation twist or changing the language for those interest rates beyond 2014. in the u.k. their looking for easing out of the bank of england. so it's a world-wide theme

today, and we have to talk about spain. another auction this morning, very success. a very good bid. hour, the yields were very high, twice as high. they were 5.07% yield. another auction on thursday up to $2 billion will be auctions off in bonds for atureties in 2014, 2015, and 2017. we could see funding get pulled. we're going to continue to watch that as it's above seven for the second day in a row. we have to talk about jc penney sales. he was poached from target by ron johnson who was now assuming his merchandise responsibilities. a lot of chatter about what

exactly happened here. there was speculation there was disagreement about the execution of the merchandising of that marketing message which we now know really has been missed by a lot of those core consumers. some are wonder fg this is a sign of ron's way or the highway. you mentioned barnes and possible, the one possible positive is sales up 4.5% for barnes and nobles. >> and jc penney is an annuity plan for sellers. they may not make their quarter, but short-sellers have been making their quarter off this. other retailers headed down, but i think that's a mistake. jc penney is the gift that keeps giving. >> kohls, i have their socks on today and they feel great. >> tell you what, something

fascinating occurred about 37 minutes ago, and it started really with the euro currency. as you look at this 24 chart, pay particularly close attention to the time. you see clearly on this chart a little before 9:00 eastern, it started to climb a bit. as you move into the fixed income arena welcome look at our ten year, and the ger man ten injury started to move higher in rates just after that. it could be the time zone shift, it could be issues in europe that were just not privy too yet. you know there is a plan or interpretation every ten minutes it seems. also, the first day of a two-day fed meeting. maybe the fixed income market has a hunch on regard for the

statement tomorrow. no matter how you slice it, it is something to pay attention to because the credit markets have been very calm throughout much of the last week considering some of the volatility in the marketplace. >> the banks trading up. they're all up. let's see how oil prices are doing this morning. >> oil is talking a hit from the equities market as well. the euro is higher and the dollar is weaker, that is causing a bounce here in oil prices. you look at spain, but you also have to look at denmark, keeping their eye on greece, traders are watching all of that and paying attention to the headlines coming out of moscow that show no breakthrough in the talks in the western countries. all of that may somewhat supportive of oil prices, but also keep in mind there are a number of traders that need to cover shorts here, and that may be guiding what we're seeing.

they're pointing that out and they could be sorely mistaken. we're also keeping our eye on the wti spread because yesterday after the close, they are speeding up expansion of the key pipeline taking crude from the middle of the country to the texas-gulf coast. they're now going to have 400,000 barrels aday for the capacity of that pipeline by the end of the year. that's a quarter earlier than they previously said. gold, a lot of traders seeing a monetary easing, david, but right now they're cautious and don't want to do much of anything. >> thank you, look at insures of walgreens this morning, one of the bigger deals we have seen this year, one that crosses borders and has a lot of implications for not just walgreens but others that sell pharmaceuticals in general. the stock falling to close to

new lows. their around $30 a sale after unveiling a huge deal, potentially bigger in three years when they complete it, but you get $6.7 billion for an investment in alliance boots. their the largest pharmacy player in the u.k. 75% of the sales in the u.s. it has an option, and we heard the two principals this morning, it sounds highly hikely and speaking to people close to the situation, very likely they will exercise this option to buy the remaining 55% in three years time. once complete i'd by the way, that deal is going to be a $27 billion deal. why didn't they do it all today? because of the size, because it is so large. alliance boots was taken private a number of years ago and a deal

taken by kkr and once completed this is a $27 billion deal. by the way, it does appear walgreens is paying ten to 11 times for this company, and trades at a multiple far below that. some shareholders saying why are you paying this multiple that you're currently trading at at a time when investors are not paying for any domestic companies, and not those with international exposure. >> you just described a situation to me that sounds desperate. >> that is a fair question that perhaps other walgreens shareholders are asking. for kkr, a publicly traded company, a nice wind for them. they had this investment at

about 2.7 billion. that is at the end of march, they are now because they earned about a third of it, now it's $5.5 billion or so dollars for that company. they did do this deal a number of years ago, but it looks like it will be a 2 to 3 cover. >> as for walgreens. >> cheap shot! >> thank you, the guys that put this company together, alliance boots, will be the largest sungle shareholder of walgreens when the deal is completed in three years time. he he will be a director immediately of the company. he is taking everything in stock. >> and he is getting a very big dividend. that's a very high growth dividend. a very big dividend for a grower. >> and we should look at something in the past, they not going the right way, that is due

to the continuing dispute of express scripts. you cannot get your drugs at a walgreen if you're a express scripts customer. they're going to be one of the largest buyers of pharmaceuticals in the world, this deal between alliance boots and walgreens. >> cvs at a 52 week high today. >> look, i feel walgreens, they had this major initiative to make these stores great. some of them are beautiful. it just seems like they seem to be unhappy with everything they tried. >> it's a huge international deal for them. i can't say it enough, and in a market, of course, that has been typified by no serious strategic

merger and acquisition activity. >> microsoft's new tablet, the surface, needs a new tag line. we will have some of your answers coming ahead off the break. look a some of the early movers, led by telecom up by almost 7%. signed signed by the "squawk on the street" gang. here is a hint, the winning price is $25.52. find out later if you're the lucky winner.

what a gain for microsoft. there was so much negative

commentary yesterday. they're getting a lift possibly in part by the unveiling of the surface, but also what oracle was saying about it spending. >> talking now for squawk on the tweet. microsoft unveiled a new tablet called surface. it attaching to a cover that acts as a keyboard. so we're asking you, the new surface is in need of a slogan, complete the new tagline. this one says if comes with control, alt, delete. >> it has no depth to it's shallowness. >> people are so negative. >> and micro soft surface, it's not as bad as the saname sugges.

>> you would think they have never done anything right -- >> when it comes to hardware, what have they done right? >> what would -- >> it's lazy it departments deeply embedded with that operating system. >> so in the enterprise you're saying -- the enterprise -- the same reason research in motion has a big enterprise -- >> you buy a desk top pc, so why wouldn't you buy their tablet as opposed to a microsoft operating system. intel will say we have a giant portion of the market, it's not dominated by apple, but listen, the other guys dropped the ball, you have to get ahold of m

meg whitman. >> okay, i'm on it. >> he's on the phone, look -- >> ask ron johnson if he will carry the tablet while your at it. >> you have a phone there. >> i do, i will try to get an answer for that. you can call ron johnson. >> i'll stop by the store, get a new pair of slacks later today. >> i think think it's like slach like goldman sachs. >> as we continue here, we have more "squawk on the street" straight ahead. >> coming up, you know what today is, right? it's eat an oreo day. what does that have to do with jim cramer and six stocks in 60 seconds? nothing.

all right, let's check with simon hobbs for the next hour of "squawk on the street." >> i'm very excited about the next hour of "squawk on the street," analyst on the program will tell you you can make a 258% return on fedex. is it a buying opportunity in the stock is down 36%, and a conversation with a greek shipping magnet whose stock is up about 25% this year, but they don't pay any tax in greece. that will be an entertaining conversation, back to you. >> i can't stand losing is the theme song of everyone going up against -- all right. >> let's go to six in 60. >> what does it tell you the industrials are on fire today and the numbers are coming down. >> expedia is downgraded.

>> i think there's a lot of travel going on. >> situation in motion, getting ready for a disappointment. >> yes, they preannouncing does appointment. it's the jc penney of handouts. fedex the stock is going higher. >> and dell, the microsoft announcement. who is michael dell going to switch to you you have microsoft betting against you. >> and monster beverage. listen, they may be peaking, but this energy drink category is not peaking. okay, i'm going with some noneconomically sensitive names. biomarin, a rumored take over

name. i like bio tech because it's not economically sensitive. >> and in fact, we may be thinking about spain later today. >> as soon as someone recognizes that it's more important than the united states, then i think we come back to terafera. >> we'll see you tomorrow. >> who is on the mound tonight? santana. >> another win. of course, we lost three in a row before that, we're talking new york mets here. coming up we have microsoft coming into the tablet wars, duh sam zon or apple have anything to worry about? powerful and secure cloud.

♪ welcome back, let's get to the road map for this hour, fedex-saying a combination of higher costs will hurt the earning results over the next year. and the tablet wars are

heating up. will microsoft take on the likes of apple? >> and jc penney opening up on new lows, so are the re tailers turn around efforts done for good? let's kick off with fedex. they are weaker than many were expecting. let's get an airline analyst for standard and poors. he has a $22 price target and thinks you can make 35 to 40%. donald, you have have $110 price target. what did you think of the results? above expectations but clearly disappointed on the outlook. >> they will be conservative for two basic reasons. there's still more restructuring

to be done at express, and to understand that the next layer will include head count reduction. it's just poor form to be talking about how much more money you're going to make right before you announce a restructure that includes head count reduction. >> let me make it clear. the cost savings are not included in the full guidance. so that's why the stock is trading high sner. >> absolutely, people are looking at the current amount of leverage available and calculating how much additional leverage will be available and we'll fin out about that in the october meeting in mem sis, and putting that on top of the current guidance and saying in that case, there's a lot of potential rays to be had in this name. >> and that is the point for you, jim, outline what you believe is about to happen and why you're suggesting the stock could rise 35 to 40% from here. >> it's not a big surprise we're in a environment of slowing asian growth, turmoil in europe,

and bouncing on the bottom in the u.s. fedex unveiled good earnings in 2012, and that's likely to continue next year despite the restructuring program or not. it's not a surprise, and fedex is showing the power. >> even here, the volume is down 5%, but the headline metrics are good. >> yeah, on that volume decline. and they have not crashed the surface, and they're already seeing significant operating expansion. so when they announce that in the fall, we're very positive on what that might cane tan. >> i'm curious what your take is. one verses the other, given that ups is trade ere higher. >> if you look at the pattern

established last quarter and again this quarter, ups is focused on saving market share. fedex to dove tail with my co-person's comment, while volume was down 5%, the yield was up 6%. ups's volume was up, but their yield was down. >> jim, it troubles me, if you're right and we're getting a strong rally on fedex later in the year, that should support a higher move on the dow jones because it will feed into stronger transports, what can be done on cutting costs? >> absolutely, don't forget we have ground posting record operating profit over 20%.

fraigt almost doubled. so while express is going through it's issues, the other two silos are firing on all cylinders. >>. >> certainly, we're favorable on transports, we think fedex is the best of breed and they're leading the way right now. >> thank you for joining us. thank you. >> microsoft unveiling it's much speculated window's 8 surface tablet. but the question remains will it even come close to being a so-called ipad killer. jc penn y

. welcome back to "squawk on the street," keep an eye on pandora shares. there is no news, but there is spidify news. they're going to launch a web radio service. pandora is a web radio service, but this will be stepping right on pandora's toes and the market doesn't like it. pandora down 2.5%. now you can create your own duran duran stations. >> i'm sure you already have a

duran duran station. >> i like forward to the next try brian sullivan. the tablet war is no longer between apple and google, microsoft unveiling a new tablet that comes with a new removeable keyboard. will microsoft be the tablet winner? gentleman, great to have you both. scott,ly start wi i will start e the surface lead up to all of the hype about the secrecy. >> we heard about tablets with windows eight, but the design

esthetic. if you take away the keyboard, what else do we have? the question till, i think, is what is the price going to be, the apps, and they have a political product. can they make it clear and create pricing that makes sense. >> at the same time it doesn't have to be the ipad killer, it could be the kindle or nook killer. does it have that capability? because if it's able to make in roads on the ipad competitors, it could be a win. >> they really do need an ipad killer, because what's happening is the entire personal computing market is being completely reinvented. the ipad has two thirds of that market, and nothing has come even close to scratching the

surface. microsoft is making an incredible gamble. i think we should give them very high marks for creating the buzz and the hype around this yesterday. the whole secrecy and the build up, and the speculation was really pretty clever. i think the hard way here is pretty nice. and what they're showing, the entire pc world, is this is what you've got to go, and if you're not going to do it, we're going to do it because somebody has to step up and put innovation and design pzazz into the machines. does it matter and it's not ultimately about the hardware. >> scott, to that point, is it a lot of sound signifying nothing in we don't know price yet, and that would be something that might differentiate in the market, but what will motivate

someone to go out and buy this instead of a kindle or ipad. >> i think productivitproductiv. there is still a divide to what you can do on an ipad verses a laptop. what's interesting here is micro soft is trying to fuse it completely. there have been windows 7 tablets. and i think they're trying to do what google and blackberry and others have failed at, which is create something clean and interesting to go against apple. >> you can argue this is the tablet that blackberry should have come out with. it has the keyboard, and it will use word and excel. they're learning from the mistakes, are they not? >> yes, and they have to lev rage their software. that office suite is one of the

cards they can play. we have not seen anyone use this one for the tablet, how good is feels will be a huge different maker. >> despite that they have party with their third party manufacturers, it's about leading that industry on that transition from the laptop to the tablet. >> absolutely, i think the thing here is they felt they needed to get out in front. they're scared because although they have productivity apps and corporate applications already on the pc platform that can move across, the real problem is that developers creating the most exciting new apps are not doing it for pcs. >> what is the outcome?

and i'm thinking particularly now about mobile, where they're locked out by android and by what apple has done, do they need to buy nokia? >> they have to spend billions of dollars to get into hardware. whether nokia is right to do that is debatable. they have a huge problem. when will micro soft get into smart phones. that's the biggest market. and let's face it, it put billions of dollars behind nokia's own push and it failing. so it either buys the hand set business, or it goes it alone, but it has to do something. >> will the surface cause people to go in the stores and check things out?

we're watching microsoft shares pop, and best buy is going up as well. is this enough to cause traffic at stores. >> i think there will. there was a lot of interest in the press about how it worked, i think people will be curious to check out that keyboard cover, and that is a part play. so this is as much to consumers as it is to those app developers to say we're really showing an interesting platform, and not the oems and tablets. >> thank you, guys, for your time. >> jc penney getting hit hard on news that one of the high flying executives is getting kicked out

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all right, all right, melissa, you heard brian sullivan say that pandora shares are slipping. julia boorstin will explain what it's all about. >> they have rebounded a bit, but they're down because of new competition from spodify. before it was only available on computers if you were not paying for the subscription option. now you can access it as a free a for use on ipads and iphones. the model is very similar to pandora. they can create stations that are pre and ad supported. now their advantage here is it has consent deals with all of the bug four labels. it mean it's will be able to expand overseas paying a court

of it's revenue to the music labels, but pandora is limited to the u.s. pandora has many more users right now. they have 50 million to spotify's 10 million. and people really want to be able to listen to music on their iphones and smart phones and this will move spotify in that direction. >> apple shares have moved in the last month. less familiar are the foreign markets, could we get a big boat for emerging markets? we're trading the globe with tim seymour. we saw this show up last time around with the iphone sales in china. >> yeah, iphone has certainly

been hampered by their network issues. they are really the player that needs to adopt the iphone, and you said, have the structure to give apple the boost. and what credit swiss is saying, they call it emerging aing, there is probably $20 billion in sales from 2011 to 2015. you will have effectively another 111 billion people that go into this emerging class profile that is exactly the profile that apple is appealing to. so if you think about their growth right now, they're roughly about 28% of their sales. that puts them in the bottom third of other major multinationals from the component their getting from the e.m. consumer. we think they have not really

reaped the benefits of this demographic story. >> when someone does tells you -- how do you know that apple will capture the market? emerging market stocks are down very heavily this year. >> that's fair, and when you look at credit swiss's analysis, they're saying the average income north of $30,000, spending about $400 per household on apple products. i don't think you can make a straight linear relationship, but you have to be careful. apple has about five stores. there is plenty of room for growth for these guys. and when i look at the guys with

the most exposure to benefit from apple, take a look at china mobile. this is a took that has not had any benefit, and they have the biggest beneficiary group. >> are there any indications that china mobile will offer subsidies? the one draw back of offering an apple product is sometimes it doesn't help profitability. >> the big issue is the government relied upon them to guild out their version of 3 g which has been scuttled. they had to subsidize the next and that's been their biggest issue. i think 4 g will take place in china, and i don't think the hand sets are something they will have to play a major part in. there are $15 million users

there. there is wealth and income. >> you can catch more of time's global trades every week night on fast might with melissa, and tuesdays here on "squawk on the street." >> we have a 100 point rally on the dow here, we're seeing big gains. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. in every way, shape, and form.

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>> just about one hour into trading just about one hour into trading here. it is 10:27 here on wall street. bank of smerkt biggest rise so far. shared are up 47% this year. and walt disney hitting all time highs. and the vix down 19% in the past week. >> the biggest event for people around here is the two-day fed meeting. a growing number of watchers say we will see easing this time around based on the softening economic conditions and to support the market. steve leisman is looking at what we can expect. >> good morning. simon, take out a pencil we will have an exam on this, the market

leaning towards the fed. there is a debate if they will do anything at all, here. let's look at what those extensions are. the fed sells sort term securities like four years and shorter, and long-term securities. they're scheduled to expire in june. the downside of that is they don't have all that many sort term securities, and then there is the bigger program. quantitative easing. with more off setting sale, and changing the amount the banged have to len out. it's an option that could come with all of these things. the fed is forecasting it will keep it exceptional. some believe it could extend that tomorrow into 2015.

some are saying none at all. here is what they're saying, more qe, goldman sachs is saying that. jpmorgan is also saying that and extend the guidance. no? ups is saying nothing at all. our snap cnbc survey conducted in june show 58% expecting qe. that's up 33%. they differently going to take market expectations into account when considering policy, david. the level of the stock market is one of the main economic indicators they have going their way right now. >> yes it southbound with thank you steve leisman. let's ahead to the chicago merck. they have been strongly higher. we have the chief market strategist and founder of

itrader.com. we had a nice rally last weekend and it seems we're building on that. >> yes, the market is factoring in an extension of operation twist. but if you go to statistics, a week after quadruple winching, the market is down. the do yw jones has been down traditionally after that week. you'll probably get a little pob with the farkt gets what it wants, but you will take that opportunity to sell into that rally. so they will die down to play the counter trend. >> all right, let's talk quickly about commodities. in terms of global growth, copper plays a roll there, lack of growth, india, china, what are you seeing? >> i think copper is not a bad

trade here if you take a look at seasonals again. june is the second best month to start buying copper. you get about an 80% gain on that trade. so this is the time to start thinking about it. if you think the equities start going, copper might be your play. >> rich, i want to ask you what's going on with coffee, the stocks got a nice boost, starbucks, petes, carabou, how are traders positioning and is there a possible switch back? >> i would stay out of coffee at this point, it's too volatile on the downside. seasonally you want to hold off, in august you want to start buying. look at your chart pattern, you don't buy coffee quite yet.

>> all right, richard, we'll leave it there, thank you for joining us. >> after just around a year on the job, vk penny james francis is stepping down. he was lured from target, but the first quarter sales were down 20%. joining us now is paul lejuez who lowered his price target. how much longer does ron johnson have to prove his strategy is working? >> i think he has a fair amount of time. i don't think anybody is giving up on ron johnson yet. for no other reason, there are not many better alternatives. jc penney was in need of a change, and ron johnson provides that change. that opportunity mean things are going smoothly, but no one is

throwing in the towel yet. >> how did you read the departure of francis? do you think johnson got rid of him or francis was behind some of the pricing strategies that did not gain traction by consumers. >> bottom line this is ron johnson's frat gi. and i think you know, there's no candy coating this right now. things are not going well. and i think because of that, serve probably a little bit frush straited, and there is probably a lot of talk around the table in those rooms saying what do we do next? and there is probably disagreement. so i don't know if he is the full guy or lost faith in the strategy. it's tough to tell at this point. but i think it's probably fair to say there was disagreement in what next steps were and it lead to them parting ways. >> paul, what should they be

focused on to get a sense of things moving in the right direction? is there any way to figure that out? >> i think they realized a mistake they made early on, and they focused way too much on the marketing campaign to make it more of a branding campaign as opposed to the pricing aspect of what was happening at jc penney, i think that was a mistake. they were trying to attract people to the stores, got overly excited with the message that was ultimately going to be out there, and they tried to put it out there before the store had changed and the brands within the store were any different, and i think they need to focus on the pricing changes that occurred to make the existing customer understand they're still getting a deal. they're still getting a good price, and as the bronds get layers into the store, that's when they need to focus more on

jc penney the brand. >> you're very forgiving of what's going on president the guy is clearly getting kicked out. it's not just adisagreement or decision that he wants to move on if he's getting paid off. the stock is down, what, 30% so far this year. and now it looks like you will have to double down on johnson to sort it out. is the man up to the job? >> yeah, well, tough to tell i think if, in fact, that is true. just to be clear we're neutral on the stock. we're not recommending jc penney is bringing something great to

the landscape. we're not believers at this stage in the game, and that's why we stay on the sidelines. i think they were in need of a change and what he brings to the table is something that puts them in that position to win. >> paul, great speaking with you. >> all right, let's get a market flash now, let's go back to brian sullivan. >> keep your eye on sxci, not a name that we talk a lot about, but david loves his dealing. they're buying catalyst health. bank of america is out with notes today basically saying they're raising their estimates on the combined deal because they believe it's going to really -- what they consider a

pump up in cash sflou and that will get the benefits of being a larger company. so positive comments on the soon to be combined sxc health solutions, and can i just difficult name so say, sxci health solutions. >> the dow up triple digits. we're going greek next on the program, which what i think means everybody pays for themselves. >> that's dutch. >> what does going greek then men? we're going to talk about the greek checking industry and if they pay taxes or not. ♪ ♪

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the baltic july index is down 6% this year. so what is the shipping industry telling us? joining us now is john kustis. a leader international own of container ships. your stock price is up so far this year about 25%, so i assume your business is doing very well. >> well, we're involved in container shipping, and container shipping has been the only sector that let's say has been on a recovery mode. although our business relates to chartering vessels to the major

liner operators, our business relates to the health of these companies, and through better discipline, and through better supply demand dynamics, they have managed more than double the box rates on most trades in the world, and that has really given a positive -- >> it's reflected in the stock price. >> i was trying to work out why greek shipping makes up more than 6% of the greek tonnage. and then i read you guys don't have to pay any tax on your international earnings, and at the election we had on sunday, there was a big issue on the fact that you brought in $175 billion over the past ten years over which you have paid no tax to the greek government. in other words, if you paid tax,

greece might not be in the situation it's in now. >> well, that's not exactly like that. because the actual tax stages of ship owners is not that much different than the tax stated, for example, of some of our other european counter parts. shipping is taxed through tonnage tax, and the fact that maybe we would have had that constitutionally secured gave us the ability, i mean, so expand greece into the largest shipping hub today. but in terms of actual taxes, we're not really far off from most of our other european counter parts. >> but was it not the case that it was an effective blackmail of the people when we said we'll make your industry pay tax, and you say oak, we will withdrawal

200,000 jobs. >> no, first of all what we said, these people, the only thing we asked to make us competitive in light of all of the other european counter parts, if they wanted to go beyond that, we would check our options. don't forget that a lot of greekship owners are paraded out of london for a very long period of time under very favorable tax status welcome the same as what we have in greece, so either the, you know, the british government did not change that kind of tax status in order to preserve jobs. >> the last question you have here, you have a birds eye view of what's going on globally, what are you seeing for willingness to lock in rates and rates you're seeing locked in now verses other tough periods

in the global economy? >> well, we're now practically very near historical lows. in all sectors of shipping. specially about container shipping. the charter rates are, you know, way below historical averages. of course, we are seeing them on the way up. but it needs, really, a much more solid world recovery to see these rates going up again to the highs that we had in maybe 2005 or 2006. >> just to return, finally to the question of greece and paying it's taxes and paying it's way, if there was a deal at the g 20 where they say okay, rather than bailing out greece, we'll have a treaty where they said it could not land any where, do you think that would make the situation better enough

for this? because what you seem to be saying is you will go anywhere in the world where you don't pay tax. >> for us the important thing is really to be competitive verses the rest of the other shipping companies. so, what we would not like, is let's say, to penalize specifically greek shipping. what we ask is really to keep us on the same footing with our competitors. so we don't mind if we are at the same footing as the others. so it's not a question of specifically greek shipping, and what we've asked always successive greek governments, is to keep greek shipping competitive. >> thank you much, good luck on your business. john coustas joining us.

and is the surface the next microsoft zune? >> today is the first day of a two day fed meeting and we have residual issues going on in europe, and today i'm talking about fear. there is also a title of a great book in 2004, and why decision making when anxiety rules the day doesn't always end up working out very well. all at the top of the hour, and our special guest today started and discovered greenpeace. >> did you face the number? if you were the first person to guess how low facebook stock would trade in it's first month, you won this cnbc hoody.

here is a hint, the winning here is a hint, the winning price is $25.52. fun o fun o a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way

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welcome back. we're in rally mode. can you say that after last week's significant movup in the s&p? we're seeing it again, 1% move higher. there is the dow which i never like to refer to given the statistical -- >> irrelevant. >> thank you for finishing that sentence. this is having a very, very strong move today, above the 50-week moving average and also nasdaq above 1% move up. we have a move up in the yield on the ten-year as you see it there. financials helping lead the take higher, bank america up almost 5%. we see it often, of course, the trade in financials, typically reflects the risk on and risk off nature of people's perception of the situation in europe and the financials are strong. we should point out lazard as well after yesterday, the 13f from trion, and the stock moved up 5% on that, led by nelson pelts, a guess earlier and

another 4% gain today to that, so pelts is already up 9%. >> we rally thursday, friday, triple digits on the dow and again today triple digits on the dow and each time a fed focus. >> i think there is a definite expectation leading to the fed meeting that something will happen more on more on the street, the probability of some sort of extension of twists or stimulus as very high, so there is an expectation. the question is when it is finally announced, what happens to the gains we have seen fueled on expectations of liquidity by central bankers, be it the fed or others around the world. >> sell into the rally. >> always the case. >> and what form will it take. what do you think, simon? >> there is so little. >> there is so little so what securities they focus on. >> it is self fulfilling. if you see the fed will act we

rally and the fed acts and we rally. >> the asset values up and that's successful already given the move up in the stock market. >> a quick couple of stock checks here, apple, flat, shares are flat. why do you bring apple up then, david so aptly asks me? because it is flawed and the nasdaq is higher by 1%. despite the tech out performance in the market today we're seeing apple shares trade flat. there was a note from pacific crest saying in anticipation of iphone 4 launch the slowdown in iphone 4 are greater than expected. everybody expects people onto hold off but the slowdown seems to be bigger than expected. that could be hitting the stock. >> it is not about the microsoft launch last night, though. in fear when they saw the product they should have dooifd at the opening. >> i think there is so many analysts out there, including brian marshall who we will speak to shortly that say the surface will not make a dent, no competition, no threat to the ipad.

based on what i read, i don't know that many investors buy into that scenario although certainly it could be. >> when the shoe was on the other foot and the iphone 4s was announced, they were also down saying it is not a full upgrade. >> could be a winner for microsoft but not necessarily mean a threat to apple, at the same time, right? >> zero sum game. >> yes. >> so well put, david. >> thank you, melissa. >> let's get to it, shall we? time to announce the winner of the face the number sweepstakes. you tweeted in your guess on where you thought facebook would bottom out and we got so many responses, several of you actually correctly guessed the bottom as it was happening, but only one of you, of course, got it in first, 25.52 a share was the magic number. the winner of the very awesome hoodie autographed by us here at

"squawk on the street" is also one of our most active followers. congratulations to ivan the k, asked to remain anonymous. we'll get that to him. >> could you tweet him at ivan the k? >> yes. >> he does tweet me occasionally. >> at the polite. >> he has e-mailed me in the past. >> presumably if we mail the hoodie to him unless he has given us a po box as well. >> as it hits another low everybody came in so he was the guy that got in first when it hit that level. >> they were gaming it. >> flooding the system the producer said. >> flooded the system. high frequency trading and facebook, yes. >> tweet time, about that, the tablet, will attach to a removable rubberized keyboard that acts like a book cover and

it will work on microsoft's upcoming windows 8.0 pro operating system released in the second half of the year and the voice is said to be similar to the ipad yet to be announced and will go on sale somewhere in the fall. since they're in need of a new slogan we're asking you to complete the following tag line, the microsoft surface, it's blank or will blank. tweet us at cnbc. we're back in a moment. [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next? [ zapping ] [ clang ] this is the next level of performance. the next level of innovation. the next rx. the all-new f sport. this is the pursuit of perfection. who have used androgel 1%,

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tomorrow on tomorrow on "squawk box" our guest host is jack welch. >> awesome, straight from the gut. >> straight from the gut and winning. >> winning. >> he could tell us about the private equity about is and what they're seeing in the extended line. that's tomorrow on "squawk box." microsoft getting in on the tablet war, unveiling a new tablet called surface that attaches to a removable keyboard and works on the next generation of the windows operating system. it is in need of a slogan. put your hat on and complete the following tag line, the microsoft surface, it's blank. nathan tweets surface, it wants to be an ipad. m.j. tweets the microsoft surface, the blue screen of death you can take anywhere. and kevin, it was the best we could do with only three years notice.

very harsh. you know, it is a barometer of consumer sentiment potentially. >> the surface, the tablet that blackberry should have announced. >> glass half full there, simon. >> let's get to it. here is what you may have missed if you just tuned in. good morning. >> welcome to hour three of "squawk on the street." here is what's happening so far. >> we're bringing together two iconic brands of similar heritage and culture, walgreen's and alliance boots to create the first global pharmacy led health and well-being enterprise. >> i think anyone who is looking to either blame america for what's happening right now or look at america for some kind of solution is living in could you could land right now. >> we know this is a company, microsoft, felt didn't have clout, didn't have social, right, i think they should go buy twitter. they haven't had mobile. some day they come out with a

product i think is a replacement for the laptop, the notebook, and they happen to be the software company for notebooks. >> it is just poor form to be talking about how much more money you're going to make right before you announce a restructuring that includes head count reduction. >> we have a split product, the pro line like a laptop and the ipad like ones that run wynn doughs rt, and just apps, and can they make that clearer and create pricing that makes sense? >> the bottom line is ron johnson is a very smart guy. i think what he is bringing to the retail landscape is something very refreshing and different and is it going to work? i think the jury is still out. >> good morning, welcome to the third hour of "squawk on the street" this tuesday. let's check on the markets and see where we stand at the moment. it is a triple digit gain on the dow and moving higher, industrials, materials, financials leading the rally so far today and strong rally thursday, friday, flat yesterday and off we go again today.

there you see the financials adding to the gains on better than expected results from a spanish debt auction. really? bank of america certainly leading the dow, j.p. morgan and american express seeing gains. not sure about the better than expected spanish result. j.c. penney one of the biggest losers right now, down nearly 10% following the news that president michael francis is leaving the company. >> they sold $3.04 billion worth of bonds and the maximum was 3 billion. from that perspective it was successful in that they sold everything they wanted to sell but at a much higher borrowing cost than the previous option, so take it for what it is. >> well, there may have been a manipulation of the market as well. leave that for the european close. >> yes, we look forward to that. time for the road map. microsoft unveiling the super secret new tablet calling it surface. will it stand up to the hype and more importantly can it compete with apple? environmental groups are calling

the nath gas industry dirty and dangerous. the co-founder of green peace will give us his take and ethan harris joins us live to give us his take on the global economy and what we'll see out of the fed meeting that starts today and facebook, trying to come back following substantial losses after it went public and why one analyst says they're on the way to fixing the ad problems and why investors may want to get in now. all of that and more coming up in the next hour. we start in the nation's capitol where jamie dimon is set to take the stand in front of the house financial services committee in about an hour's time. mary is live in d.c. with the latest. >> reporter: ahead of mr. dimon of course we have a number of regulators including those from the sec and the fdic testifying, and with more than 40 members on the house committee, it took almost 30 minutes just to get through the opening statements. now, predictably the rhetoric broke down along party lines with republicans taking not j.p. morgan and losses but at

dodd-frank criticizing the legislation as cumbersome, inefficient and inadequate in preventing the losses experienced by j.p. morgan and missed by regulators. >> perhaps the complexity of the trades of the regulatory structure and of the rules itself makes it impossible for any individual regulator to adequately do their job. >> democrats defending the law co-authorized by ranking member barney frank, he claims the blame shouldn't be placed on new regulation but a lack of it over the complex securities behind j.p. morgan's losses. >> j.p. morgan chase is considered to be a well-run bank. if in a very well run bank you can get this loss of several billion dollars, three and counting we're told in a fairly short period of time it is an indication of the problems with derivatives. >> reporter: summing up the split personality for the five regulators testifying today. >> you can say that we're not quite ready to break into a

kumbaya moment. welcome to the serenity of the financial services committee. >> reporter: speaking to the financial services committee, this is what some of the regulators have had to say from the federal reserve's general counsel, mr. alvarez, finds that risk breakdowns so far are not appearing in other units of j.p. morgan. they're concentrated in the chief investment office. from the office of the comptroller of the currency, mr. curry seeing better disclosure could have flagged the losses earlier for regulators and management and from the cftc gary gensler he says new rules would have increased transparency about the derivatives behind the losses. as for jamie dimon, he is in the building and expected to start testifying at 11:30 today. outside of the hearing room there are said to be protesters that have been kept fairly quiet. we'll bring you all the details when mr. dimon starts testifying later today. back to you. >> we think 25 minutes but

presumably that could move back, mary. >> reporter: about 25 minutes or so and the hearing is expected to go sometime between 2 and 2:30. >> thank you very much for that, mary thompson live as we prepare to tap into what jamie dimon has to say. break back to microsoft's launch last night, julia bore steen was there for the unveiling of the surface and she joins us now. julia, let me ask you a very simple question. would you buy it? >> i want to know how much it costs, simon. i can't tell you if i would buy it until i know how much it costs and how much the data plan would be. the real question is whether or not it plays my macbook. i have a macbook and ipad and this to me seems like more of a competitor to a macbook than it does an ipad and the thing that people are really interested in last night once we could touch the product and play with it is the keyboard which is really small, snaps into a cool magnetic snap and that's the thing people were focused on once we got our hands on it so

makes me think it is more of a competitive laptop. >> interesting. so what happens now? what is the timetable? probably released in the second half of the year. when do we get pricing or is everything dependent on windows 8.0? >> it is all about windows 8. what they said last night, there is a regular version and a pro version. the regular version will launch at the same time as windows 8.0 and the pro version three months after that. seems like we can expect pricing as we get closer to the launch of windows 8.0 but for now we're waiting and probably have a couple more months before we get details on pricing. it is all about the windows 8 launch in the fall and they made a big deal it is hardware to go along with the windows 8.0 software. they want the hardware to fade into the background and let the windows software be front and center and let this be a piece of hardware to showcase the software. >> julia, at the same time in the presentation do they make

much of other features aside from it being the hardware come pan yan to windows 8.0 which doesn't sound very exciting on the surface? is it perhaps more suitable for gaming or resolution that other tablets may not have out there? >> they said it is really designed for entertainment. you can use it to use microsoft office. you can use microsoft word and all of those different pieces of office software, but they said it is designed for entertainment and they made a big deal out of the fact the 10.6-inch screen is wide enough that it won't need to letter box movies. if you watch a movie on the ipad you get the letter box bars on the top and bottom. this is big enough you can watch them in the full for mass which is better if you're doing gaming and watching tv shows and just a bigger screen. they talked a lot about the quality of the screen and they also talked about the case and the kickstand so it is easier to sit back and watch with the kickstand. >> thank you very much. the view from the west coast, julia boorstin joining us. let's bring in an it hardware

analyst. good morning, brian. the stock of microsoft is one of the top gainers in the dow, second highest gainer, up almost 4%. are we seeing something here? does the industry know this is a major break through for microsoft in a way that consumers may not appreciate at this stage? >> thanks, simon. i should point out i don't formally cover microsoft but obviously i do apple and it has big implications there. i think the reaction obviously from the investment community is optimistic about the microsoft's chances there. i recall they do have a partnership with barnes & noble and perhaps they can do content there from a consumer penetration standpoint, but obviously microsoft is the dominant software vendor out there from an operating perspective for pcs, so they have a tremendous install base they can probably get some of the mobile guys that want productivity applications like office, word, powerpoint, excel, on the road and something smaller than a notebook, so i think that's what we're seeing today. >> brian, does microsoft's announcement getting into the

tablet business, does that ruffle the felters of a hewlett-packard or del who will essentially be competing with microsoft at this point? >> definitely. i think from my perspective i think that this surface tablet will not impact the ios portion of the tablet market, the 70, 80% of the market, but the other market, you know, the samsungs, the rims, the hps down the road once again as well as the dells, i think it will. so clearly when you rely on microsoft for operating systems and software you wouldn't want them to be a hardware competitor on your own platform. that's what we're seeing today. i think it will have negative repercussions from a relationship standpoint. >> if you're meg whitman, what do you do? you don't really -- do you have any leverage to say steve balmer, what are you doing, connell peting against us, one of our biggest customers. >> i think it is what it is for those guys. maybe they'll try to work something from a pricing

perspective, maybe a timing, have preferential treatment from os release standpoint, but at the end of the day the late great steve jobs put it aptly, software is the soul of the product, and so obviously that's what these companies are getting from microsoft. >> why, brian, are they doing it? why ruffle the feathers? why go down the line? what is the gain for microsoft in getting into hardware like this? it doesn't think that everybody else is leading the move from pcs to tablets sufficiently well in order to demonstrate what they've got. what is the end game? >> sure. at the end of the day the real beauty of the apple business model is the eek he system and the software so they obviously sell hardware products to monetize that. i think microsoft obviously doesn't have a tremendous amount of hardware footprint, and so i think they want to chase some of that profit pool as well as control some of the hardware dynamics of the business model, so sometimes that works. sometimes it doesn't.

obviously when they try to go after the ipod with the zoom product offering that failed for microsoft. when they tried to go after the gaming console market in the sony playstation, obviously xbox worked well, so i think it remains to be seen what will happen in the tablet space. i think that's kind of the thought process there in my opinion. >> we're out of time. i just want to ask you one last question. is it a logical conclusion from what they're doing now they have to buy nokia in order to secure the place in mobile? >> i don't think so. >> thank you very much, sir. brian marshall joining us from isi. >> let's get to the cme. hey, rick. >> hi, melissa. thank you. a famous chicago an wrote a book i like to read every now and then, state of fear, i believe written in 2004. really what the premise of the book is fear is a great motivator, and out of fear we have done more damage to things like running rough shod over the

constitution, and not only in this country but many countries. fear is a great motivator. to that end i want to read a quote in the book and we can show it on the screen. thises from state of fear, michael crichton. nobody dares to solve the problems because the solution may contradict your philosophy and for most people clinging to believes is more important than succeeding in the world. put those two dynamics together and we really can explain a lot. let's start out with maybe the biggest issue, the credit crisis. now, i come from the side that derivatives and enron exemption, lame duck, 1999 second term of the clinton administration, many things were either dealt with badly or things liremoved and lt a void and major modifications in the mid-90s created an incentive and then you add the derivatives around to create the spiral that ultimately caused

the credit crisis and started out in housing. think entitlements as well. when we talk about entitlements, think about this quote. we need to address entitlements. every politician understands it. the act of solving it bears people's ideologies so really goes nowhere very quickly and last but not least think of the federal reserve. federal reserve has always had mantras and some of the mantras are pretty obvious, they talk about tools in the toolbox and really the biggest tool and the only tool i ever see in one form or another is printing and accommodation. the second tool is a derivative of the boogie man and that is deflation, deplace, you have to do everything at all costs to fight deplace. in the current climate we live in deleveraging is somewhat synonymous with did he place and the act of the fed to put things like housing prices back where they were in the bubble doesn't make much sense. all of this does make sense on a day the fed starts the two-day meeting because at this point

stopping programs that might be just idling the car, it would show that there really isn't anything else they can do. make sure you come back in 15 minutes for our guest and we'll carry on the theme of fear and decision making back to you. >> we'll be there. 108 points on the dow within the midst of a pretty solid broad base rally here on wall street. we'll have more after the break. stay with us. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.

let's get a market flash, brian sullivan, let's do it. >> so far we have been working all week. hopefully made a dime from the money. i know you guys talked a lot about the surface. i love the tweets by the way. a little cold but i liked them. in video shares moving higher by 6.5% and going into one of the surface. there is two, one will be the pro and one more for the consumer and in video going into the consumer version stifle nicklaus out with a note saying this win may help i know individual aget into the other non-microsoft tablets running windows 8.0. zoom eez which brought an austrian company for $100 million and also raised the forecast for the second quarter, the company is called blue tomato. i wanted to take blue tomato. >> that sounds completely

unappetizing but i guess a good deal and arm holdings another benefitting from the surface. that stock is up by 3% and supplying one of the processor that is goes into that tablet and in the meantime coming up next rick santelli goes head to head with the co-founder of green peace on gnat gas and fossil fuels and will you not want to miss. we're about 10 minutes away from the close in europe. back after a short break. back after a short break.

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talking nat gas and green energy with the co-founder of green peace. >> before i welcome mr. moore, i would like to do a little bit of a lead-in to this. 1971 is when he was co-founder of green peace, and at that time i was a fresh man in high school and we all wanted to take care of the planet. i read an article written by pat moore called why i left green peace. welcome and maybe you can tell the viewers from 1971 to 1986

you were there. what made you leave? >> rick, i had to leave because it just turned out that none of my fellow directors had any formal science. i had a ph.d. in ecology going into green peace and they didn't seem to think that mattered and started adopting positions i just couldn't defend from a science or technical point of view so i went off to develop my own brand of environmentalism based on science and ecology rather than sensationalism and fear. >> and fear is my theme today. in your paper you eloquently have many different quotes about fear, but the one that sticks in my mind and impair aphrasing is you said this notion of fear makes the average person get off the track to see the issue that is affect the environment. can you expound upon that a bit? >> i don't think it makes much sense to just keep telling people that the world is going to come to an end, that it is all a catastrophe that we're going to die from a heat wave next month and when in fact

there is no evidence that is actually happening and we're allowing in particular our energy policy and our technology policies to be determined by people who don't have a clue and have this so-called green fantasy using the word green which actually has no technical definition to make it seem as though we can run the whole planet on wind and solar when this is going to turn out to be a bubble because it is too expensive and it doesn't work most of the time. we need to focus on energy technologies that actually work like nuclear energy which can replace fossil fuels like hydroelectric energy which can replace fossil fuels, like geo thermal or ground source heat pump that is can replace fossil fuels in buildings and at the same time we have to recognize we need to keep using fossil fuels at least until we invent things that don't need them. >> on the latter point i totally agree with you and if you don't know, you're going to know now, i believe in natural gas. back in the early 70s when you were founding green peace, in

our world in the suburbs of chicago natural gas was a panacea of clean energy and the sierra club i read an article they wrote the same day i read your article why you left green peace and the article went on to say the sierra club for the most part were big advocates of natural gas and all of a sudden as the price started to come down and the activity for natural gas started to permeate the economy and create jobs, all of a sudden they did an about face. the long and short of it is no matter what you believe about the sierra club there is definitely a veteran debt aagainst all fossil fuels. i really like the last statement, we need to use these until we find something better that works in the marketplace. i want to give you the last 40 seconds to address that notion. >> the fact is that when we have built out all of the solar energy and wind energy, all it is doing is increasing the price of everything in our whole lives. it is economically unsustainable to go this route. we really do have to focus on

technologies that actually work and the greens are taking us in a direction that will bankrupt the economy which is what is happening in spain to a certain extent. germany has built $130 billion worth of solar energy and they get less than one third of 1% of their electricity from it and the electricity prices are three times higher than ours. >> i tell you what, mr. moore, it is a pleasure having you, and when the person who is co-founder of green peace tells me that the biggest part of green is the green with dead president's pictures on it, i think i need to stop and listen. thank you. me lis lee, back to you. >> fascinating interview there. a rally in europe with the german up by 2% and the euro trading higher by 1% and just a few minutes left in the trading there. we have the closing action live straight ahead.

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let's get to simon and a countdown to the close in the u.k. and across continental europe, simon. >> what a fantastic close for the moment today as everybody anticipates the fed will announce some sort of easing tomorrow. you can see we're up triple digits here at the new york stock exchange and across europe also the strong rallies coming right into the final minutes of trading and broad based rallies and yes, the banking stocks are doing well and a lot of the big industrials, the cyclicals, also

rallying today. it is a trade if nothing else and it is being felt on both sides of the atlantic. here we go. >> the european markets are closing now. >> you will notice in southern europe, italy, spain, you have decent rallies coming through there and the expectation not just the feds but perhaps other central banks and by that i mean the ecb will ultimately be moving maybe to cut interest rates up more importantly structurally with other areas and the g 20 is meeting and discussing those plans, and we should have an announcement from the ecb on some sort of banking union over the next few days. not that it will get through but whip everybody into a frenzy. this is where we are in the major three markets during the course of the session. london, frankfurt and paris and you can see how we made steady gains throughout the session and whipped higher as wall street opened and you got the good gains you can see here and everybody is moving in the same direction and asia will catch that as well and somebody mentioned that we had a good spanish auction today. well, really?

certainly there was a lot of demands at the spanish auction and this was at 12 and 18-month paper and they actually sold it at interest rates they have not experienced since 1997. what is interesting is the degree to which they pumped up the yield or the interest rates in advance of that or at least it was moved higher. you can see how after we came through with the auction today so the yields have moved down. it is partly because the spanish of course announced their review of the spanish banking system, half of it is going to be delayed way past the end of the month which is not what we expected, so you have the yield shooting up and also the spanish banks may very well have suppressed the market so shoot up the yields and of course lock in at a higher rate, so they call it accommodating. there was a lot of that potentially going on today. you can see that we have had a rally in the wake of that. let's get back to the major story. market is ignoring difficulty that is spain may be having and it is the broad based rally and look at the banks today.

proxies for europe's sentiment, you often see them shifting around and the by italian bank is also higher, up almost 5%. >> that is a compliment, simon. >> indeed it is. >> it is. >> let's bring in courtney reagan on the floor of the new york stock exchange. >> one trader described what's going on with optimism coupled with a little bit of concern as we have been talking about the fed expectation for the fed tomorrow is that further easing will be announced of some kind, whether it is an expansion of qe 3 or expansion of operation twist, remains to be seen and if we don't get it, we could see a sell off and that's where that concern comes in. we are also getting some headlines and i just want to note it looks like the greek new democracy in the democratic left party representatives are meeting now to discuss policy details. we'll see if we see any movement

or headlines out of those discussions. moving back onto fed ex, we got earnings today, they were lower. however, better than expectations, looks as if the shipper is going to cut costs in order to sort of prop up that sluggish global growth and while these shares were down premarket pulling down competitor ups, now the third best performer in the transport group so once again today transports are out performing the dow industrial group. take a look at the sectors. we see equities gaining across the board going into the european close simon detailed, seeing the risk on trade again today, materials financials part of the groups leading the way higher and all three major indices are above the 50-day moving average, the first time they moved together in that direction since may 2nd. definite bullish momentum going on here. if you take a look you see goldman higher and bank of america higher and citi and morgan financial after reporting a disappointing drop in earnings also moving higher and last but

not least take a look at the housing names beyond just the home builders. looks like some that make products that go into the home whether it not lumber itself or the appliances all boosted today on the back of some of that data from the housing and the starts and some of those april numbers better than what we had previously been reported to multi-year highs. melissa, back over to you. >> thank you very much, courtney reagan. >> markets clearly on fed watch and you have seen it with the price action and seen it in europe, the fmoc meeting wrapping up tomorrow. we'll bring in ethan harris, co-head of global economics research at b of a merrill lynch research. welcome to the program. nice to have you on. what do you think the fed will do tomorrow? >> our expectation is they just give us very dovish language and mark down the forecast and say they're watching closely and ready to move as needed and we don't think they're quite there yet in an actual easing policy. we think they need to see confirming evidence that this weakness we saw in the data this

spring wasn't just a payback for unusual strength in the winter. they to want have a strong case to move given it is an election year. >> there is a bit of gaming going on in the markets as to what the fed will do and when. there is a thought if they do anything because of the timing of the election they will do it at this meeting or saving stimulus measures for later on when there is a fiscal cliff. do you see any validity to either of that he is scenarios? >> i think the idea the fed can't move during elections is a myth. the fed moved during the 2010 election and they can't put themselves on hold through the election. the reof washington is frozen in place. the fed can't be frozen in place also. the way the election affects the fed is it makes it more imperative they make it clear we're moving because of the economy, not because of politics, and they need to be able to point to the economy and say, look, we have to go here. i think that's the reason they wait a little bit longer.

>> yet when bernanke was last on capitol hill he didn't say that. he was very careful not to allow republicans to pick a fight with him because you can quite clearly argue, ethan, that what the fed is engaged in is not actually helping the employment situation and the language is more about attempting to support the stock market. >> well, i think that the critics of bernanke are wrong. i think if the fed hadn't been doing these various qe policies, if they hadn't promised to keep interest rates low for a long period of time we would be in even worse shape, and particularly it is dangerous for the if he had to present themselves as being out of ammunition or not doing anything when the rest of washington is completely frozen in place so from a confidence point of view we have to -- the fed has to be ready to act. >> if we take, for example, the flattening of the curve, the interest rate curve, which has clearly happened, that surely is much more reaction to the pessimism in the treasury market

than it is anything to do really with operation twist. >> no, i think it is a combination of two things. one is the markets have already priced in a high probability of qe 3, so that's helping lower the long end of the curve. the markets have some anticipatory behavior, and the other of course is the european crisis causing a big safe haven run, but i think it makes sense for the fed to follow through once they have the clear evidence and the data and do qe, and that will give a little boost to the stock market and send a message to the world that while the rest of washington is asleep at the wheel, the fed isn't, and so i think that they really have no choice but to act as we go into year end. >> you don't think it will scare people that -- i mean, when you say qe, do you mean an extension to twist or do you mean a lot more cash being forced into the economy? >> yeah. the problem with extended twist is it is kind of like shooting a squirt gun at the economy. it is just too small a policy

and only lasts for a few months and the fed has a bigger challenge and that is to nurse the economy through the fiscal cliff which is going to create a lot of anxiety and negative confidence effects in the economy and they need an aggressive policy that carries us through the cliff and that's why we think a 500 to 800 billion asset buying program is likely, probably at the august or september meeting. >> 500 to 600 did you say? >> 500 to 800 billion. >> so what do you think that will do for the stock market? the first quarter we have this fantastic arc higher on risk assets as a result of what the ecb was doing. if the fed does what you suggest, how will the stock market rise? >> well, i think the stock market this week may be a little disappointed the fed isn't ready to move yet. i think when they do move it will give the market a boost for a few weeks and it will give the economy a little bit of confidence, but i don't think

the fed can solve our problems. it is up to fiscal policy makers in europe and the u.s. to get their act together. there is only so much that central banks can do. they have to try, but i don't think it is going to be particularly successful. >> ethan, thank you for your time. we'll watch with interest. ethan harris joining us from b of a merrill lynch. >> it is worth pointing out we're still maintaining our gains. it is key to remember the s&p first moved above the 50 day moving average last week when there was the expectation about coordinated central bank action and that pushed them higher above the key technical mark for the first time since may 4th and basically able to maintain that level and not to be too glass half full, but why not here? we have stayed there. that's very important. >> i suppose immediately then you think about europe and you say what have we sorted out there? i suppose can kicking at the moment is enough for the market if they believe the fed is going

to basically inflate asset prices. >> at the very least a trade here. >> yes. what is ethan saying? we're saying the u.s. economy on the data we had last week is slowing down. it is decelerating and growing and growing less quickly and therefore you get central bank injections. this rally cannot be optimism about anything else. >> right. we should note here we're watching jamie dimon, the ceo of j.p. morgan entering the financial house services committee hearing where he will give testimony. it is prepared testimony, the same testimony he gave last week to the senate banking committee. he will be answering questions from house representatives, though, so we'll be listening in on this hearing very carefully to see what sort of tone the house takes. >> likely to be more boyce us are. >> and hopefully build on what was learned from what we got into the senate hearing last week and delve deeper into the issues such as how do you create regulation if you can't define

what prop trading is for instance. >> let's bring in tom hagerman, a financial services analyst. he has a mutual rating on j.p. morgan and a $50 price target. good morning to you. what are you watching now, todd, as you see dimon up there? as an analyst, what are you most sensitive to? >> i think today with the most sensitive topic is really what i expect to see the difference between the hearing today relative to last week with the senate. clearly as i watched a little testimony this morning, with respect to the various regulatory agencies, i think that just serves as a precursor today that the testimony, the q&a, is going to be a lot more challenging today and much more probing than what we saw last week from the senate. >> we should point out we're not bringing you exactly what jamie dimon is saying at the moment because we already got it and know it is almost identical as was delivered last week. what is the achilles heel here

in your view, todd? >> i think the achilles heel is really as we heard a little bit this morning from the committee, there is a lot more focus on the spirit of dodd-frank, what its intended to address, and how it is actually being applied as well as considered by the various regulatory agencies and the speed in which it is being addressed. i think what we're likely to hear more is are respect to jamie dimon's previous comments as it relates to some of his criticism of certain aspects of the regulation, how in effect that could have either prevented what occurred at his organization but more importantly as some of the congressmen pointed out today who else might it affect? who else is possibly vulnerable relative to the regulation if it weren't for the so-called balance sheet if you will. >> todd n terms of the questions you mentioned, you are expecting them to be more probing.

will anything that is said be specifically only at j.p. morgan problem or will it essentially be an industry problem in that it goes to the idea of tightening regulation and that sort of thing? will there be any j.p. morgan specific issues that will surface? >> i think one of the issues likely to surface today, one of the common themes is the fact while the reviews are on going, each one of the agencies sighted the fact they have found certain deficiencies within the risk management process, want necessarily in the cio unit itself but broadly in terms of various units across the enterprise itself. the investigations and the reviews are on going and certainly suggests there is going to be more direct questioning along the lines of this was not necessarily isolated to cio but possibly other areas >> just before we let you go, the call for $50 price on j.p.

morgan is $15 higher than we are now, about 30%. what is the catalyst to get that return for shareholders in your view? >> in all fairness, simon, the price target is actually 36, not 50. >> forgive me, actually at 35. we made a mistake on the way in there. >> treading water. we're going to tread water, todd. >> exactly right. there is a lot more to come out, not only as part of the hearings if you will but the on going reviews from the various regulatory agencies and it is going to be a matter of months before we really learn the outcome of these reviews and what changes are likely to take place not only as far as j.p. morgan but the rest of the industry. >> out of the coverage universe what has the most upside at this point? >> i think while the brokers are getting alot of attention these days, perhaps simply for the valuation reasons but i think the names that stand out are citigroup in particular and a beaten down name that's been profitable and a great deal liquidity on the balance sheet

and i think that's a tremendous value today. if i had a basket of the higher beta names, certainly one that i want to consider as well as balancing it with some of the higher quality regions, regionals such as wells fargo or p & c bank. >> better than wells fargo? >> that's right, in terms of breaker dealer space citi the stand out and wells fargo in the regional space. >> thank you for joining us. >> much more as we await the q&a portion of jamie dimon's testimony but meantime i think we're going to take a break here. stay tuned. [ male announcer ] we began with the rx. ♪ then we turned the page, creating the rx hybrid. ♪ now we've turned the page again with the all-new rx f sport.

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great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice. jamie dimon right now in the house financial services committee, looks like he just completed his prepared testimony. he will be answering question from house representatives shortly. in the meantime we're seeing j.p. morgan shares trade higher by almost 2% and financials broadly really a market leader. the xlf up by 1.7%. real standouts, bank of america up 4.5%, citi, todd's favorite pick in this space, the highest beta name up by more than 3% and a lot of this can be attributed back to the sort of i hate to say risk on mode but when you you see bond yields move higher, the financials tend to trade higher as well.

there is a strong correlation. >> this will be an interesting session we get. it will be more boisterous and more direct questions and arguably some of the questions less informed than we actually had at the end of last week and in terms of hurdles to get through for jamie dimon as chairman and ceo this perhaps is the more tricky i would argue. >> and just a quick update. just because we're taking this doesn't mean we don't have our eyes on the overall markets. we're pretty much sitting on session highs right now with the s&p up by more than 1% at this point and the nasdaq the market leader with technology shares powering higher, up by 1.2%. we're seeing nice big gains biotechnology big cap stocks here as we continue this momentum we have seen from last week. >> and it is of course very focused on washington again because it is about the feds and what the fed is going to come up with tomorrow and they have to say something that is going to move the market higher at this stage or else the market will

fall and they have a problem. it is almost a virtue us on irk he will or unvirtue us on circle depending on your point of view. >> you have to wonder what the market reaction will be after this meeting, if they suppose say what the consensus on the street which is some extension of twist and on that news what happens to the rally we have seen and the s&p 500 sticking above the 50-day moving average at this point? >> let's ask gordan who joins us here. >> what do you make of the rally? >> i think the tape is telling you that they're anticipating qe. >> i am sorry to interrupt you. mr. dimon started talking. forgive us. >> no worries. >> europe is a significant event. i am more worried about europe than i am about this trading position and i hope the legislators over there can overcome their complications and keep the eurozone alive. >> can you give us a reading in your opinion as to the impact, for example, on the u.s. economy

should the greeks decide to get out of the eurozone and go back to the drama or should the entire eurozone itself collapse? >> unfortunately as a bank we have to prepare for all event althoughs, so we're not guessing what might happen. i want to make sure we have come forward to the shareholders and the communities saying whatever happens we can survive and thrive going forward. europe, greece defaulting a loan is not the issue. it is grease leaving the euro and the fallout affect may be a bank run in italy and spain. we see as they're trying to put firewalls in place to stop that from happening. if i had to i would guess at the outcome, i think that might work. i think it is important they do that and hold back a crisis and then they have to go about having a real fiscal treelty among the 17 nations of the euro. short-term solutions may stop a crisis but they won't stop -- they have to fix the underlying

problems. >> italy has an economy that's 2.5 times that of ireland and portugal, and greece combined. the italian banks don't have a liquidity problem. they have a big problem with debt. could you address the impact of debt on nations as it relates to the ability of -- as it relates to liquidity and more importantly the overall economy? >> italy surprisingly is actually a very wealthy nation, and they have the wherewithal to meet their debt, but they're having a crisis of confidence which is damaging that. the banks there own a lot of the sovereign debt. banking systems don't function very well if the sovereign system is not functioning. they actually go hand-in-hand, so you need to fix both to make the whole financial system stronger there. >> and the reason i ask that is

that as you know that the eu is our largest trading partner, and your bank is obviously involved in international finance and it is always important for members to be able to glean from people who are on the inside of seeing that happening. can you give -- i am not looking for a forecast. how do you see the eurozone issue as being resolved? >> in europe what we see is that the politicians have the will. they want to fix it. they talk about no plan b. there is only one plan which is to keep the euro alive. i think the way is very hard because you have 17 nations and 17 parliaments and so what our economists think and a lot of smart people i listen to that there will be a firewall for italy and spain, that you will have growth and austerity plans for the southern nations, and that the 17 nations that come to

the fiscal treaty which has more carrots and sticks in it and that is believable by the world and will show long-term progress at getting down the debt of europe. >> thank you. mr. fein for five minutes. >> mr. dimon, you said you want it particularly to be smart regulation as opposed to more. the commodities future trading commission budget was 200 million for the year. it has been proposed to cut and president proposed to raise 308, not to be a huge sum. do you think at the level of 180 million you can get smart regulation out of the cftc. >> i have never looked at the cftc budget. i don't know what they need. it would be almost impossible for me to comment on it. >> i am disappointed. by the way, the appropriations committee voted 27-19 not to give them additional funds. i am surprised because it did seem to me you are well informed

about other aspects of what the federal government does or doesn't do and to talk about smart regulation and to in effect give them a pass on the substantial reduction of the cftc seems to me to be mistaken. that's your answer. next question is the legislation that would remove any application, i didn't say there was a volcker rule debate but over and above the volcker rule there are requirements you put on derivative trading which you have spoken of favorably. there is legislation that would exempt the transactions in question at any other transactions conducted overseas not in this country from the rules about clearing where possible and transparency and do you believe that we should enact that and exempt the kinds of activities talked about here even when conducted by an american institution from these regulations? >> these trades are not exempt from regulations. >> i am talking about the regulation, you know what i

mean, the specific rules enacted in the financial reform bill about to be adopted regarding derivatives, transparency, et cetera. there is a bill as you know that would exempt derivative trades overseas and over and above the volcker rule, whether in a bangor not. there are two sets of rules here. are you supportive of that bill that would exempt these trades from the rules on derivatives we hope to have in place? >> yes. >> why do you think that they are adequately regulated elsewhere? why would you not want the american regulators to have an ability to, for instance, transparency and clearing where possible? i thought you were approving of those. why would we want to exempt these kinds of activities from those rules? >> these trades are visible and regulated by occ and the fed. 60% of these trades were in fact cleared. all of them were fully collateralized, so not against rules that caused those things. >> if they were cleared, mr.

dimon, excuse me, they would have met the rule, but it does seem to me there was problems with this in terms of your knows about when they happen, about your being uninformed about them or under informed, but are you in favor of exempting these kinds of trades from my american derivative regulation. >> not any. prudential, they should have transparency. >> regulation derivatives, the transparency is part of the thing you would be exempted from. theres no legal requirements for transparency other than that. once again, i am disappointed. let me ask you because we have a time issue, you said because you have a fortress balance sheet, these are not a threat. what about institutions whose balance sheets are less impregnable, a chain link, maybe a picket fence or two, should we have -- is there a sdak this kind of activity in a financial institution and insured institution with less of a

strong balance sheet might cause problems? >> i don't know, but i think you should all take comfort in the fact that all american banks are better capitalized and the system is far stronger today. >> i appreciate that. that wasn't the question i asked. the question and we can't assume that will be that way forever and there are some who are resisting the capitalization. if you were not as well capitalized would this have problems in it that we didn't have because of your balance sheet? i mean, you said you have a fortress balance sheet. that assumes something special about the way are you that made us to worry less but we can't assume that will not case for every institution. >> and i also said we would be solidly profitable this quarter. >> that's not the question. mr. dimon, please don't filibuster. i am sorry, i asked specific questions and mr. dimon knows what we're talking about. let me ask, you did say finally there will be callbacks for compensation. we have also taken some responsibility here. will the callbacks for compensation, is your compensation on the table for

consideration of callbacks. >> all of the whole action being reviewed by the board. >> yours specifically, just the specific question. >> my compensation is 100% up to my board. >> mr. dimon, you said there will be callbacks for people responsible. is your compensation in the pot that's going to be considered for that? >> they will do what they see is appropriate. i can't tell my board what to do. >> thank you. mr. bigger, five minutes. >> thank you, mr. chairman. >> mr. dimon. >> let me explain to the witness because it is unusual procedure. the republican side elected to go in order and not to come back up to the top to allow all the members to ask questions and the democratic members are starting over. >> not entirely, with modifications for people here and not here. >> that's