7.2%, but we'll see. >> scott walker, thank you for being here. we're finished. see you tomorrow. "squawk on the street" begins right now. ♪ good morning and welcome to "squawk on the street" on this monday morning. i'm melissa lee with jim cramer and david faber live from the new york stock exchange. carl quintanilla is off this morning. welcome back, guys. >> thank you. >> take a look at futures and how we're setting up after the worst friday since june 25th. we are looking at a lower open for the s&p and the dow. the nasdaq looking to eke out a gain here. our roadmap starts off with the markets. it was one of the worst weekly percent declines for the s&p and dow since june 22 pd. europe remains in focus, finance

ministers meet in brussels. japan machinery orders dropped 15%. and chinese's premier warns of downward pressure on the economy. >> and earnings season starts today. we've seen estimates for the quarter get slashed ahead of the report. what will aa say about global dae demand, especially with questions out there about europe and china smchlt ] and wellpoint buys amerigroup for $4.5 billion in cash as it looks to expand in the area that will see growth under the health care overall plan that was uphold. after friday's 124-point drop in the dow due to a weaker-than-expected jobs report, yields for the ten-year bond back above the 7% level. the italian ten-year is above 6% in terms of yield. eu finance chiefs meeting in

brussels to flesh out plans to reinforce the currency. we thought we were there. we might not be there. and we're back. you're back. i'm back. what else? we're talking about europe. >> it's so funny, you read the headlines when you're on the road and it looked like, well, this is great, they've reached on agreement. then you decide to shut it off because you have to get away when you're away. and you come back and it's worse than when you left. the euro's even weaker, spain is over 7%. it wasn't before. and it looks like -- it wasn't even a can-kicking. it's just bad. there's been no resolution and no major changes other than the fact that china is saying our growth is being crimped severely by europe. >> seems like any gains made in europe when it comes to agreements to do various things,

the impact on the markets gets shorter and shorter and shorter, the time frame in which we grasp that and accept that as good news goes from -- used to be weeks or months. now it's a matter of days or even hours at this point. >> the so-called marginal utility of saves. it's done. there isn't one any longer. you wonder whether the dynamic is changing and what they really will have to do or if there's anything that can be done to change the perception of investors for anything longer than a couple of minutes. >> we're now getting a lot of stories about what really went on in spain. there was a fabulous story about valencia. trying to rebuild hollywood, doing los angeles. there's all these stories about wind power. spain, it was like 14.92 in spain. where did that get them? >> jim, you've been gone for a week and reading the headlines. but europe's a huge story.

at the same time, we had a terrible jobs number on friday. are you more bearish given all these worries seemingly -- they continue to mount? >> i'm more bearish because the market -- our stock market didn't go down enough last week. and we are about to start earnings. i just expect bad earnings from tech, bad earnings from industrials, bad earnings from financials, bad earnings from oils. but other than that, things are fine. >> yeah, we should note that you mentioned ernlgs season that begins after the bell today. alcoa reports, the watch is on to see what impacts low earnings will have. cat last week. today, it's nomura cutting a bunch of software companies. so it's -- people are getting more and more concerned and the bar's getting lower and lower. >> alcoa tonight is actually

important. want to dismiss it because it's tended to be bad. the last alcoa quarter was an upside surprise. we are in that moment where he can't bring his workforce down enough in the end. he has a european presence, software, europe. now if we get a slowdown here, it says take a hard look at the health care plays ] which are working. take a hard look at the food plays which are working and look at the utilities which are working. >> but despite what has been downward momentum in estimates over the last quarter as we get ready for reporting season, the stock market actually has been performing fairly well. >> our stock market, yes. >> our stock market. to what extent do you believe we've incorporated expectation into many of the stock prices? in the end, when you have

earnings to cut, even though you think everyone's sold -- let's say hewlett-packard. is there anyone left to sell hewlett-packard? that same argument was used with research in motion at $15. it was used with nokia at $5. there's always some guy out there who is expecting better, goes into committee and realizes he can't justify owning hewlett-packard. so it goes lower. we saw it with dell. if numbers are cut, stocks go lower. >> as we often say, it may not be the numbers themselves as much as the commentary that surrounds it. >> what are you going to say? how do you put a positive spin on it if you're conoco? what part of conoco is better now than it was three months ago? that's a decent company, natural gas and oil. >> right. >> nothing. >> so visibility is going to be hard. >> visibility. >> remember that word? >> visibility used to be the key -- >> am i taking you back to the

'90s? >> used to play the ipo market like it was going out of style in 1999. >> brarbra streisand got friendy can joe kernen. >> i'm going to tweet that. it's a pleasure not to answer e-mails for a couple of days. on vacation, i try not to do e-mail. >> that's good. clear your head. >> i don't open the pc during vacation. >> what great epiphanies have you had as a result of not being connected -- >> i was in mexico. the epiphany i had is that the new president is going to drug l with the cartels like everybody else. and that's pretty much --

although he's a pretty boy, he seems like an entertaining fell fellow, nieto. disliked by everybody -- i don't want to get too far astream. but mexico is booming. it's the cheapest place on earth to build things, cheaper than china. >> does anyone go there, to mexico? >> if you want to build engines for general motors, yes. do the executives go down there? are you out of your mind? there are safe parts of mexico. >> back to the earnings, the conference calls we're going to be listening to, i would imagine that a lot of ceos would kitchen-sink this and say, we have a number of headwinds coming, the bad payroll numbers last week, to be able to say, we're not sure and throw it all out there at once. >> i don't think that's wrong.

i think they'll do this underpromise. a strategist at morgan stanley said the way you get to a bottom is you take estimates so low that they can finally be beaten. right now, estimates are too high. i used to talk with klaus kleinfeld at alcoa and i said, you're stuck with that truth model. but he's an honest guy. he can't do it. underpromise is the way -- >> you don't believe we're in a market like that right now? you don't think that's a possibility? >> i think as melissa said, i think they have to cut numbers. >> on the conference call. alcoa is an honest, good company that raised growth rates in a series of areas and where did it get them?

the stock is where the stock was. maybe a tad lower. and they are a really good company. >> and the estimates have been halved in the past month or so to consensus numbers. in that alcoa has been --'s always been the first one out of the gate but it's never been a bellwether truly in terms of the rest of earnings season, maybe it's the case because estimates have been slashed going into this quarter and maybe they are poised to beat at this point? >> i think the problem is we look at where alcoa does business and we think to ourselves, does it even matter? they trim some facilities in spain and italy. that was a terrific idea, but the actual core aluminum -- there's been a commodity collapse of epic proportions that we don't talk enough about because it's obscured by hot weather and the fact that corn and soy are hot. >> there's one commodity that's come down in price, which is oil. let's make an argument that will

say, that's beneficial that will start to bubble up that will lower prices at the gas pump. >> we always think of these companies has ingredients -- what's the ingredient? they have water -- no, it's getting the stuff to the supermarket. it's the actual packaging. that's where the cost is. when you look at a box of cereal, the corn flakes are the cheapest part of the cereal. it's the box, the plastic bag, the cardboard -- >> i don't need that. i'd be happy to go and fill up my own. maybe they could put it in big glass jars -- >> look at thomas jefferson like an agrarian farm in your spare

time -- i'll have my tomatoes in a few weeks. i have some jersey beefsteaks. you think scott's miracle gro would go better. but they have almost procter & gamble-like problems. >> oh, when cramer says p&g, it's not good. >> the eighth amendment says you can't keep electrifying people until their electrocuted. this is a truism. >> cruel and unusual punishment. >> got it. a lot of allusions there. i love it. >> stephen king. get busy living or get busy dying, right? >> great line. love him, morgan freeman. health insurer wellpoint agreeing to buy rival amerigroup, deal valued at $4.5

billion. $92 a share, all cash. the offer represents a premium of 43% to amerigroup's closing price on friday. the combination means wellpoint's medicaid footprint will cover 18 states. a little bit of a life of a heartbeat here in m&a. but this deal would seem as a result of the supreme court decision of a couple of weeks back -- or less than that. 11 days. there have been a lot of concern about medicaid, that's where amerigroup is focussed. >> could something be afoot here -- >> these are strategic. these make sense. you need broad ceo confidence for the deal market to really start to show great momentum. it's too late this year, many would say, for that to even happen. >> but the supreme court clearly supplied some confidence. >> well, they supplied a

strategic rationale to those companies where health care is so paramount and the law that they needed to do deals. it was clear there were deals on the drawing board, one way or the other, after we got the decision. >> for an insurer like wellpoint, they would have been challenged under these new rules. they can no longer turn people away. they can't be as selective in who they insure and how much they charge people for insurance. so therefore they would feel margin pressure. that's why there's a race on for medicaid insurers. in this group, you have to watch wellcare, that's up. molina, senteen. >> the fact that wellpoint shares were up, by the way, is the real positive. >> explain this to me. if the acquirer stocks have been going up, why the heck don't the investment banks pitch them and say, listen, we are in -- why

aren't they listening? >> because the ceos see something out there -- i'm not going to make a bet the company move. and i don't see what the benefit is for me at this point to do anything. >> because look at wellpoint -- >> agreed. you have billions of cash sitting on your balance sheet earning nothing. you have a market which seems to reward acquirer stock prices if they do the right deal. you have borrowing costs that have never been lower. not going to happen. they're not going there. >> they should wake up and smell the java. this is a great time to do deals. is anyone right? is anyone ever right? >> you are. >> thank you. if only that were the case. warren buffett's not right. he buys newspapers, housing stuff at the top of the cycle. he bought coal at the top of the cycle. it doesn't impress me as people are saying, now is the time.

but here's wellpoint making the right move. and my hat's off to them. >> the other thing for wellpoint in terms of the bonus of this deal is it gives them more exposure to dual eligibility. these are the people who fall into this category where they're both medicare and medicaid. that is much more profitable. angela braley was talking about in the press release. that's the goal there. 10:00 is the conference call for wellpoint. bertha coombs is listening in on that. >> when we first heard about obamacare, what stocks did people short most aggressively? >> right. >> wellpoint, united health. they came in with guns blazing. they were the guy that is gained it better than anyone. >> and hospital operators obviously benefits. >> a check from me and you to all the companies that were supposed to be hurt. >> that's because nobody guessed

what was going to happen. everybody got that wrong. >> justice roberts, by the way, didn't want to be the guy who denied health care for 30 million people. >> very interesting. >> interesting. >> his mind works in mysterious ways. >> smartest guy -- >> he's working the angles. he's playing so far down the field, you have no idea what he's doing. >> among the people in my year who went to harvard year, including him, people thought he was the smartest guy who went through during this whole period. identified it like the -- in 1983, he was the smartest guy. >> got to take a break. coming up, we'll go live to the air show in the uk. a "first on cbnc" interview to talk about the -- boeing.

much more "squawk on the street" straight ahead.

in this morning's "squawk on

the tweet," we asked you to tell us how you know it's earnings season. signs of summer are to ice trucks and beach balls, as signs of earnings season are to, blank. tweet us. we have your responses throughout this morning. signs of earnings season. >> shortfalls and bad guidance. >> important earnings season, we always say that. they're all important. but this one does -- i want to be on a lot of those conference calls or i'm going to rely to you to have been on a lot of them. tone, guidance, to the extent we get it or don't get it is going to figure prom innocently on what we're talking about the next morning. >> it's going to be the commodity fires, good story, commodity sellers, bad story, europe overweight, bad story, europe underweight, better story. >> wait, commodity buyers, good story? >> pepsi -- >> costs are coming down, good story. people selling the stuff, bad story. telling the stuff to china, bad story.

commodities for our companies -- >> bad story. i think you can look over your portfolio and decide, holy cow, i have a tremendous exposure to europe, more than i thought. i like intel very much. intel -- >> what's intel's p/e, do you know? >> 9, 10? it's got a good yield there. you have to accept the fact that you could get a point and a half hit. coming up next, now that cramer's back, it's mad dash time. is the stock he's about to mention worth your money or worth avoiding? let's take another look at futures. ten minutes till the big opening bell here on wall street. the dow looking to lose at the open. much more "squawk on the street" straight ahead. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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five minutes from the opening bell. time now for cramer's mad dash, ahead of the market open. let's take a look at sirius. >> 22 million subs. they added 600,000 net subs, revenues raised by $100 million. what companies have something good to say? how about this $2 stock? but what i'm most concerned about is does liberty have a call that takes the upside away? >> we don't get what liberty is fully planning to do other than try and take control of the

company. doesn't mean they're going up to 80% ownership, they're not. greg mafay has said that to us, over there a month ago. but we're still waiting. the company doesn't report until -- >> but should people chase this stock given what you just articulated, which it's possible their upside could be capped? >> it's going to trade as a public company, yes. liberty doesn't have to buy very much at all to get a majority control petition. it gets complicated. >> overvalued stock versus traditional cable valuations, undervalued versus the fact that this is a remarkable ability to be able to raise numbers at a time when we're worried about car sales slowing. looks like they're not. >> keep an eye on sirius.

we have the opening bell just a few minutes away. get ready for another big day of trading and a lot more right here on "squawk on the street." ♪

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♪ here we are off to the races. the opening bell sound on wall street on this monday morning. air lease corporation and boeing ringing the opening bell remotely from the fornborough air show. very big week. not just alcoa, but at the end of the week, we also have jpmorgan. financials were very, very weak last week. when it comes to jpmorgan and wells fargo, it's going to be important to listen to the guidance for very different reasons for each of them. >> i think the domestic banks will have almost nothing but good things to say. the housing market remains robust for them versus year over year. wells fargo, very positive notes out this very morning, talking

about the idea that perhaps -- this has jeffries note, cross-selling is going to be great for wells fargo. i want to emphasize that wells fargo is a bank. it is not a gun slinger. it's not trying to figure out how to manipulate libor. it is just making loans and making money on the loans. >> we always wondered, though, that golden west portfolio and what happened to wachovia, talking about the people who created golden west, very successful for years, sold to wachovia, wachovia sold to wells fargo. a lot of questionable mortgages. maybe that you review all run off. >> they've done a remarkable around of reworking. john stumpf says, i want this cleaned up. i think he has cleaned it up. i have faith, i do believe -- i've suggested this on "mad

money" that if the government wanted to figure out how to handle the housing program, they should just give it to wells, they already own 30% of the darn market. >> mortgage rates at all-time lows. refinancings not as strong as many might expect. >> because it's very difficult to get. the last program the government put through did allow a lot of people to be able to go to wells. wells is the go-to guy. i refinance. but i'm not a good example because i -- >> by the way, we'll talk a lot about stocks but that ten-year yield, 1.52%. can we show that. there's still a story in the bond market that is just -- look at that. >> 30-year -- what stood out for me when i was away of all the things was the 30-year and how our government still has not issued trillions of dollars in 30-year paper. i know the government will say, listen, we've got ben bernanke buying it, not fair for us to sell it. but a lot of other buyers want this. this is tim geithner.

he was the treasury secretary -- oh, still is. but this is his opportunity to be able to make it so we never have a liquidity problem. he doesn't want to take it because he thinks it's a little expensive. i think it's really time -- >> he thinks it's a little expensive to issue -- >> short term. it's no longer a good argument. but geithner will not listen to reason on this, even though i think he's a reasonable man. >> we don't want to think about the day when rates start trending up -- what that will mean for interest on the national debt. you don't want to start doing the math. >> come on. take advantage of this and solve our liquidity problem right now. once-in-a-lifetime opportunity. the rates are what they -- remember -- well, my father, happy birthday, pop -- >> today? >> yes, today. celebrated it this weekend. but, thank you. you have one of those g.i. bill rates and it was like, oh, that will never happen again. here they are. >> it happens.

facebook shares, by the way, up 1.5%. over $32 a share at this point on facebook. can you ever imagine back then -- >> against linkedin now, doing jobs board and a lot of stories about how investors are big mutual fund guys got into facebook -- >> facebook is not a european play. >> the mutual fund story is fascinating. this was holdings as of the end of may. presumable funds that got in at the ipo price and some of the funds were for instance, mutual fund dividends -- >> everybody was putting in for allocations. you knew something was wrong right there. they said it was well bid for. but come on. >> morgan stanley back on the griddle? >> no, no, no. enough with that. we haven't even talked about the libor scandal, by the way. >> that's true. >> we haven't even mentioned it. here we are, 37 minutes into our

broadcast. >> that great sign that everyone passed around this weekend. barclays, greatest fixed rate -- that was priceless. i should have brought that in. >> that will be interest on the jpmorgan call not only to get guidance on the loss, whether or not they've unwound it, but also what they say about the libor scandal. >> saturday, "the new york times" basically said, where's our prosecutors? where are we doing? where's the outrage? talking about outrage fatigue. it's like, yeah, move on. must have been like capone in the fourth year of capone, yeah, yeah -- maybe a tax thing. >> tax evasion. nobody's really gone to jail for it at all in the entire space of our crisis. >> do you ever look at the ninth amendment? banks don't get -- >> is that -- i was wondering what was in there. >> rarely used amendment, the ninth amendment. >> hamilton put that in there. . >> well, he was very -- they started the first national bank.

you always had a little preferential treatment. that's not the ninth amendment. i'm joking. i understand. but it seemed pertinent. >> let's check in with brian shactman who's here on the floor for bob this morning. >> thank you very much. a little better than futures. indicated tech was lagging. now the nasdaq is positive. the s&p was positive a few minutes ago. not a bad start. i'd call it flat across the board. earnings seasons kicks off today with alcoa. the eurozone finance ministers, draghi talking as we speak. the spanish yields back about 7%. and we're dealing with the jobs fallout from last friday. what's the next medicaid target? i won't take you through the wellpoint deal for amerigroup. but look at wellcare, molina, centene. the bigger names doing well. united health, humana, all pretty strong off the open here. when i comes to earnings, we have talked about jpm and wells

fargo, that upgrade at jeffries, good for wells fargo and jpm. everyone wants to know what the profits are and how they arrived at that number. take a look at marriott. how are they doing internationally? where are the pockets of strength and weakness? going to be interesting. "the wall street journal" talking about the jobs board on the way for facebook. also, the reports about a new mobile advertising. again, if you know the facebook faithful, if it's going to be sifted through their news feed, you could get a lot of backlash. it's a great example of something they would never have done if they were a private company. now they're forced to squeeze out revenues somewhere. also, the instagram deal should see approval this summer. linkedin, i want to report on how they're trading. the jobs board f it's successful, linkedin definitely feeling some pressure because some investors think if facebook

goes in big, linkedin could get hurt big. rick santelli is at the cme group in chicago. talking about the incredible low rates. rick, take over. >> indeed incredible low rates. but exactly how ten-year safe harbor bunds are stacking up to treasuries, well, the premium and the premium goes in favor of the u.s., seems to be getting wider. if you look at a chart from mid june, you could clearly see that rates in the u.s. are holding up a little bit more than the bund rates. but it wasn't like that at the beginning of the month where everybody was very, very nervous that bund rates were going to reverse and leave the only safe harbor here in the u.s. that difference is slightly more than 20 basis points f. we look at our ten-year specifically, part of that spread is us because we have broken out of a range. you see that left side of the chart, that was the last unemployment number. so it's almost as though it's pencilled in like bookends.

weak unemployment, 1.45 closing yield. we're moving close to the 1.40s now, currently at the yield just a bit above 1.50. that's the lowest yield should we close here on a closing basis since the 4th of june. the last chart, seems that every day we come in over the last week or so, there's a new lower handle on the euro versus the dollar. today that handle is 1.22. last time we saw it, pretty much exactly two years ago. jim cramer, back to you. and happy birthday to your dad. >> oh, thank you, rick. i know he's listening. it will mean a lot to him. let's check out the latest moves in energy and metals. let's go to sharon epperson at the nymex. sharon? >> jim, the big story, of course, in the commodities space is the rally that we've seen in ag commodities. but we're also seeing some movement in oil. we saw that big selloff on friday due to the jobs number and we have gotten some weak data from asia on japan's machine orders, also inflation

data from china that was below expectations. some of that weighing on the oil price perhaps, as well as the fact that as brian mentioned, spanish yields over 7%, ongoing concerns in europe. what's supporting oil prices is also occurring in europe. that's the ongoing strike in norway of oil service workers. those offshore oil workers could potentially because there's been no agreement reached, have a shutdown of oil production in norway has after midnight tonight if no agreement is reached. many believe something is going to occur to stem an oil shutdown. but if that occurs, that's 2 million days of production of north sea crude. and 50 companies from stat oil to total to conocophillips. we're keeping our eye on the gold price to see if we can get out of the range we have been in recently. they're looking at that 1,575 on the downside but seeing whether

gold will break above that 1,600 level again. back to you. >> air lease corp making a $7 billion debt on boeing as it rings the nyse opening bell. phil lebeau joins us from the air show with another "first on cbnc" interview. >> thank you, melissa. i'm joined by the ceo of air lease corp. if it's a little hard to hear us, that's because we have fighter jets flying behind us. a huge deal with boeing for the 737 max. 75 commitment to firm orders, 25 options. how big a deal is this for air lease? >> it's an important deal in our growth path. we already have 78 through 737s that we ordered from boeing two years ago. this is a follow-on order with the next generation of airplanes.

we'll take deliveries of these in 2018. these are fuel-efficient airplanes. it will make a huge difference in the airlines. >> this is a work-in-progress airplane. they were caught off guard by the success of this. >> boeing has put a lot of resources into optimizing the 737 max. they worked very well to get a new engine on the airplane. >> more fuel-efficient. >> exactly. 13% more fuel-efficient. improving reliability and maintenance costs. >> you've got a number of more fuel-efficient aircraft both from boeing and airbus on the way. what are you hearing back from your airlines in terms of how they're being squeezed by fuel right now? >> the airline industry is very competitive. and fuel prices have become the largest single cost component for the airline industry, as much as 35% to 40% of an airline's cost per dollar goes

to fuel. it's a very important part of the equation. >> but are you hearing from them that it's to the point where they have to perhaps push back on some orders or is it accelerating their demand? >> it's accelerating, both for replacement and through being competitive because aircraft have to become more efficient, ticket prices have been coming down over the last 20 years. they've been below the inflation rate. airline operating costs have gone up. fuel efficiency is really important. >> where are we in that whole mix -- early, mid -- >> we're in the middle of the cycle and it's accelerating. there's over 20,000 jets out there and typically these airplanes last about 25 years. every year, about 800 airplanes are going to be replaced. and boeing and airbusse only produce about 1,100 a year. this is the market we're addressing. >> the ceo of air lease corp on a big day, where they placed an

order totalling $7.2 billion, buying 75 with options for another 25 of the 737 max. back to you. >> thanks so much, phil lebeau, from the uk. it's that time of year, earnings season, complete the following analogy, signs of summer are to ice cream trucks and beach balls as signs of earnings season are to blank. tweet us. we've got your answers straight ahead. take a look at this morning's early movers on wall street. [ male announcer ] before you take it on your road trip... we take it on ours. this summer put your family in an exceptionally engineered mercedes-benz now for an exceptional price during the summer event. but hurry, this offer ends july 31st. laces? really?

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and so too is the summer event. now get an incredible offer on the powerful c250 sport sedan. but hurry before this opportunity...disappears. the mercedes-benz summer event ends july 31st. looknd take a and take a look at the dow 30 heat map. mostly in the red at this hour. but we do have verizon there in the positive. again, these telecom stocks continue to really -- >> domestic only. >> prove skeptics wrong. keep powering higher here. >> remember when it was supposed to be a terrible thing that they pulled back from international? what a brilliant move. >> it may be at some point not a

good thing to have any international exposure. it's not like we have a great deal of growth here in the u.s. but they have benefited. so has comcast, parent of our network. and most of these companies, as with all domestically related sources of revenue -- >> there will come a moment where if they want to own the world, they can. but they're pretty darn good at owning the united states. >> there may be some things on sale in europe. >> t-mobile. what an amazing move. att does this thing, pays them the money. the winners are att and verizon. they just got stronger. >> we should talk about your documentary premiering tonight. >> yes, "cyber espionage." having spoken to ex-members of the fbi, general hayden, the cia, representative rogers who

runs the house intelligence committee, and actual actors who have worked at corporations that have been breached, we try to bring you this story that's not been reported on, at least cohesively. you hear about certain parts of it here and there. you hear about data breaches, although they're not typically related to what is an advanced persistent threat by the chinese, meaning they get into a company's network and they just sit there and monitor everything and sift through everything they want and need and steal. virtual unlimited amounts of intellectual property. >> what is amazing is how they get in. and their tactics are so seemingly benign and yet it can cause such damage and such theft. for instance, they can e-mail a top executive. you can get e-mail addresses off the internet and say, we met at such-and-such conference. attached is a document or photo. they open it. it looks fine.

but it allows them to get into the system -- >> you did a broader piece on cyber crime. >> so what's the end result? they are able to copy something that they shouldn't be able to copy? >> they're able to steal blueprints or understand your strategic rationale, know your pricing. there are any number of different things that can be done. and the u.s. spies -- make no mistake about it. but we do so for military purposes. here it is clearly for economic purposes. and it's also due to the unique system in china where you have state-sponsored enterprises or many companies that have a direct link to the government. if the u.s. were stealing corporate secrets around the government, who would we give them to? we're going to give this one to apple but next week we go to google -- it doesn't work. >> but here's what i don't understand. we constantly hear about them dumping stuff. why aren't we more involved with china -- where is the defense

department? >> it's hard to prove at the end of the day. there could be a mountain of evidence that points to china. but it's not like a fingerprint. >> seems wrong to me. >> it's going to be a great documentary. 9:00 p.m. eastern time tonight. much more "squawk on the street" straight ahead. coming up, he's back. jim cramer has returned from vacation. will his relaxed state of mind impact his stock skills? doubtful. six stocks in 60 seconds is next, when "squawk on the street" returns. [ male announcer ] at scottrade,

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want to go over to simon hobbs, fresh from vacation. >> nice to be back. rick sherrilling is going to join us. we'll talk about software. he's getting more pessimistic about what's happening. but we're going to challenge some of the pessimism and talk about the possibility of a major rally in the second half of the year. to that end, we will have barry knapp from barclays also talking about where you can protect your wealth in the currency market. of course, the euro, bottoming out potentially. >> thanks, simon. time now for "six in 60," six stocks in 60 seconds. let's start off with disney.

>> bernstein comes out and says every single cylinder firing parts. next place to go, high. >> dollar tree downgraded to sell -- >> this is amazing. this company -- they put dollar general up, which is the better one. i think that's where you want to go is dollar general. >> okay. visa is downgraded to sell -- by the way, $98 billion market cap. >> you can't stop this company. these downgrades off a worldwide downgrade, forget about it. >> dover, below consensus -- >> europe, europe, and europe. that's what's causing this. >> campbell soups buying the green giant. >> about time they got growth. they're buying bolthouse brands that owns the jolly green giant. >> petsmart downgraded from hold. >> give me a break. people spend on pets. this is the least cyclical

retailer i know. >> you're not -- you're a believer in pets. >> i'm a believer in petsmart. yeah! take that. in the additional time, may i just point out i'm doing a home run derby tonight. you have to go to @jimcramer on twitter to vote. i'm going to give you the best five stocks of the first half. will they be the second half stars? home run derby starts tonight. one day of voting. >> and we get to pick the second half stars? >> yes, out of -- just like the home run derby that's going to be on another network. i forget what it is. but we will be analyzing it. go to @jimcramer to vote. >> and tonight on "mad money," you have the ceo of -- >> we talked about health care being a place to hide. it's a place to make money. and then china tonight at 9:00. and i can't wait. oil and gas, do they know what's going on because they're buying

oil and gas around the globe. >> yeah, the chinese are very aggressive in terms of securing natural resources. in their desire to understand what's going on, they will do what they need to do to get that information. >> the cost is billions of dollars to find out where the oil is. are they cribbing it? >> it's possible. >> that's outrageous! >> yeah. it's an issue. that's why we're spending a half hour tonight at 9:00 -- >> why are you the only guy talking about it? where's the secretary of defense and the secretary of state? or will they watch it tonight and take action tomorrow. >> they know. they know. see you tomorrow, jim. more "squawk on the street" right after this. [ male announcer ] summer is here. and so too is the summer event. now get an incredible offer on the powerful, efficient c250 sport sedan with an agility control sport-tuned suspension. but hurry before this opportunity...disappears.

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earnings season in six hours amid fears that global growth will bring some of those quarterly figures down. what's next for the market? barclays' head of u.s. strategy will join us for his take. >> and a deal out of the health care space as wellpoint is buying amerigroup in a bet on the expansion of medicaid. we'll sort through the deal and the consolidation amid the space, post-supreme court ruling. back to the big deal in the headline this is morning. that is wellpoint announcing it will buy managed care company amerigroup, $4.5 billion is the price tag. bertha coombs has the latest on this deal. bertha? >> hey, david. on an earlier call with analysts, wellpoint ceo angela braley said the expansion was part of the thinking in acquiring amerigroup. the key factor in the decision is really the opportunity and so-called dual eligible programs. these are plans that try to

combine coverage for the 9 million elderly and poor americans covered by both medicare and medicaid. states are in the process of taking bids from insurers to come up with plans to control their medical costs. many of these patients have multiple chronic conditions and right now, that group accounts for about $300 billion in annual combined spending. if the deal goes through, together, wellpoint and amerigroup would have a presence in 19 states, potentially covering roughly 60% of the medicaid population. they'd be in 13 states with these big dual eligible programs which would also mean covering up to 60% of that group. and the company estimates that would be $180 billion opportunity. the deal values amerigroup at $92 a share. you can see the shares are trading a little bit lower. a lot of the arbitragers are worried this deal could take a while to close, even though

wellcare is hoping the deal will close in the first quarter of 2012. take a look at how the insurers are trading overall. wellpoint expects the deal to be accretive in 2013. amerigroup's smaller rivals are also getting bid up as well. going to join the press call now. we'll be back later with any other news. >> that spread is time value money. nobody expected to come in and outbid wellpoint, another reason why their shares are trading a bit below the $92 price tag thanks, bertha. the slowing global economy in focus. nomura securities out this morning reducing estimates on the software sector. rick sherlund joins us now. rick, great to have you with us. >> good morning. >> concerns about europe, concerns about the slowing i.t. spend in north america are among the reasons why you've trimmed your estimates for a number of these companies. you cover a broad array of software companies.

who's feeling it the hardest? >> europe is softening. increasingly, we're starting to see weakness in the u.s. and china geographies. checkpoint software, a little nervous about. they've had a bit of a tougher quarter. i think vmware and si citrix are probably okay. the companies like cornerstone, salesforce.com, they have a lot of european business, not a lot of fundamental risk to europe. >> you also mention in your note that channel checks indicate that the companies are stretching to meet the numbers. have the channel checks gone through the quarter? are we getting any color as to the current quarter and what you

see there? >> no, the most important thing is going to be the guidance for this september quarter. the business is tougher, you've got more of a currency headwind. the currency is going to be about a 9% headwind versus expectations of about 7% that were set a couple of months ago. so you really need to reflect the currency headwind, tougher macroenvironment. i would expect companies to be fairly cautious with the guidance. that's the big issue. if they make the number, that's good news, stocks probably go up. the bar right now is, just can you make the numbers? but the guide is going to be very, very important. i think it's good if companies talk the numbers down at least for the currency to kind of de-risk numbers for what you know is going on, which is it's a tougher environment -- the cold that europe caught is kind of spreading to china and to the u.s. now as well. >> rick, people still have to put their money somewhere. they need to diversify somewhere. and it's difficult to find growth at the moment. so when you still have buy recommendations on microsoft,

oracle, s.a.p. and salesforce.com, could there be a furs bifurcation in the market that you would make more money on those that are presenting in other areas you cover? >> we're not changing stock ratings at this point. it's going to be kind of a rough couple of weeks getting through earnings season. you probably have to set the bar a little lower for what i think the market's been telling us for the last couple of months, which is business is going to be tougher. it's just not only tougher on europe, it's trying to get tougher in the u.s. and in china as well. i think if you get through this quarter and the guidance is a little more cautious that you'll de-risk the stocks. and the valuations are pretty reasonable. it's below the five-year average for the group right now. so i think you're going to have an opportunity in some of these stocks. i'm just not sure you want to step in ahead of the print. but i do think valuations are reasonably attractive for a lot of these names. microsoft has a lot of products coming up.

oracle is trimming. the s.a.s. companies are showing pretty good growth as well. >> when talking about stretching harder to get to their numbers, give us a sense what you're referring to and whether you're going to get any granularity when we see the numbers in terms of just how hard they had to stretch? >> sometimes what the channel will see is a lot of invoicing of deals in the first couple of days of the next quarter, which implies that the company's kind of held onto those deal, they didn't really need to show them to make their numbers. and they kind of pushed them into the next quarter. we're not hearing any of that this quarter. i think they took everything that they could get. they needed it, i think, to get to their numbers. we're hearing a little more discounting. we're hearing people weren't playing golf the last couple of weeks of the quarter at vmware, which we've heard before. you get the sense that people are working a lot hard tore get to the numbers -- >> how often in your long

experience does that, then, mean that you're taking from the future quarter or quarters and therefore result in what you seem to be pointing to, which is lower-than-expected earnings potentially? >> what you look for is how much discounting is taking place because if you're discounting, you're robbing next quarter because you're really trying to accelerate the closing of that deal. i haven't heard like extreme discounting that sometimes you'll hear about in a recession. so i don't think it's quite that bad. but i do think there are things being done to try to pull in business. so i think the guidance needs to come down to reflect the fact that the environment's gotten tougher, you might have pulled out some of the stops to make this quarter. but the key is, what about next quarter? >> and, rick, last question here, there's a general enthusiasm in the marketplace for companies that are less exposed to europe or less exposed to china, per se. when you say that you have concern in particular about a name like a checkpoint, for instance, is a big percent of the revenue, does that come from

europe? how can investors know what their exposure is? >> 39% of checkpoint's business comes from europe. they do invoice in u.s. dollars. you don't have the currency risk as much as you have just the fundamental risk. securities tends to be a relatively safer place to be because in good times or bad, you still need securities software. but you have palo alto networks going public. checkpoint is doing a much better job of working with the channel now. they're running spiffs and doing things to lock customers in to 18 months of maintenance versus 12 months. they seem to be finally reacting to palo alto's entry into the market a year ago where they were stealing a lot of business. i think they're probably doing a little better competitively now. >> rick, thanks for your time, we appreciate it. 39 minutes into trade. the dow down 60. let's get a market flush with brian sullivan. >> you've already got comments

coming out of analysts about apple's suggested rumored, whatever, new smaller ipad, specifically gene munster of piper jaffray thinking it could add to apple's sales and earnings and it could take 30% of the market share away from some of the android-based tablets. he expects the 16 gig version to be priced at $299. gene munster, the first analyst that i know of coming out and saying, this could add about 1% to sales and earnings for apple. but more importantly, maybe eat some of the tablet market share from any google android-powered devices. >> thanks very much, brian sullivan. a slew of negative preannouncements coming out ahead of tonight's earnings kickoff, this as spain's ten-year stays above that 7% mark. what's next for the markets? barry knapp will lay out his plays for us next.

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♪ global growth concerns weighing on the markets, this after a big slew of preannouncements, not good ones. what can we expect? as we get set for alcoa tonight after the bell, barry knapp is head of u.s. portfolio strategy at barclays and he joins us now.

barry frshgs your target at least of 1,330 at the end of this year, you're not looking for too much, are you? >> we're looking for a retest of that earlier early june low through the course of the summer and a rally back through the elections. no, we don't think the net effect will be all that much. but it could be pretty interesting between now and the end of the year. >> any particular area, then, that i might benefit from focusing on in the current period or as far as the rally that you're expecting prior to the election? >> well, the primary catalyst for expecting the correction going all the way back to early march was a deterioration in the growth outlook. another one of those summer recession scares seems reasonably probable. we've been underweight defensives through the entire -- this entire period. if we were to take the numbers and the stocks, not just the

numbers down, through the back half of earnings season and the growth numbers will start to stabilize somewhat, also we could get some optimism related to the election, this idea that maybe we're going to break the gridlock in congress, then you could probably look to move back into cyclical sectors. but for now, we'd avoid them. as per a conversation you had with your last guest i was listening to, i think the point here is that everyone's been focused on europe. everyone's been focused on global xwroegrowth. but the domestic situation is pretty soggy as well. in the first quarter, you heard from strils and tech company that is their u.s. business was pretty good. but that softened a lot. for us, the vulnerable spot is the domestic companies. >> but expectations are what they are, barry. i think the most -- you alluded to the possibility of this rally at year end. thomas leer at jpmorgan is talking about the possibility of a very powerful rally at the end of the year. it's interesting to lay that out as a possibility because, yes, the numbers were koidisappointi

on friday. but you could argue that we have stabilize at a below-trend growth in jobs. there's a lot of work around over the weekend that suggests the fall in the price of oil is more than enough to compensate for the deflationary forces coming out from europe. if you get one spark of good news out in the u.s. economy with this massive injection of liquidity that you have from the fed and this huge budget deficit, we could really be off to the races, couldn't we? >> well, i guess i would differ with your last two points. first of all, i don't think the fed stimulus is doing anything for the macroeconomy nor for the market. the p/e's been trending down since the recession ended. the budget deficit isn't stimulative either. we've increased spending. as milton friedman said, all government spending is a tax. i would break down those two issues. i do think a powerful rally at the end of the year is possible if it looks like we're going to be able to resolve all these big policy issues, much like we had

in 1980. but if you think about how things have progressed each of the last two summer, when we got that q2 gdp report along with the negative revisions, benchmark revisions, that was a real watershed event in terms of people's outlooks. so i'd be very reluctant to position for anything like that until we're through earnings season, through that gdp event and the market's discounted, something worse, which i don't think it's doing right now. >> barry, you're actually saying that a retest of 1,280 is likely? >> yeah, i think it could be worse than that. i think 1,280 is a minimum objective. if we get another recession scare into the august time period like we had each of the last two years, 1,200 is really much more likely. but we may avoid that. i'm going to call it 1,280. from there, you could start to look to get long. >> if you go into an inflation scare, you know the fed is going to be out in force promising -- resession scare, the fed will be out in force promising q.e. left, right and center.

that will lift the market, you know that. >> no, i don't really agree with y you, simon. i think the thing that lifted the market was a stabilization in the improvement in growth outlook. if you think about the sequencing here, in early august, on august 1, they're not going to be in a position to ease. going to be some level of disappointment. maybe at jackson hole, they pre-commit to something in september. but a lot of damage could be done from now until then. through all this fiscal uncertainty as well as the situation in europe, which is far from stable. >> when we come back to this idea that you said the market is not discounting all those factoring, for example, and the lack of growth that will occur, all i do is look at the bond market and the ten-year yield at 1.5% and wonder, maybe there's going to be a little bit of multiple expansion to make up for the lower numbers we're getting from corporate america because lord knows they're not going to the bond market to find any hope, are they? >> yeah, just the problem is it really -- history doesn't support that thesis, this

relative valuation argument. the fed drove real interest rates in 1947 to negative 17%. the p/e just kept going down until it went to 7% in 1951. and then the fed started normalizing policy. that's when the multiple started to go up. this whole relative valuation argument has no future predictive value for stocks. i don't think that that's going to help all that much. it hasn't helped thus far. one final point about the bond market is that real interest rates having going down but the break-even component has been eye. when you have the give-up on breakevens is when we made the low. we haven't had that yet. people keep thinking the fed is going to bail them out. it hasn't worked historically or through this cycle either. >> barry, we'll leave it there. thanks for joining us. the euro hitting a fresh two-year low against the u.s. dollar on friday on the back of yet another dose of weak jobs

data. what is next for the euro trade? we're talking currencies, that's next. now get an incredible offer on the powerful c250 sport sedan. but hurry before this opportunity...disappears. the mercedes-benz summer event ends july 31st. ♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world. together, the elements of science and the human element can solve anything. [ all ] shh! [ male announcer ] solutionism. the new optimism.

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♪ it's a beautiful day ♪ currency markets, the euro bouncing from its two-year low on friday. axle merc managing for currency mutual funds. good morning. >> good morning, simon. >> how do i make money here? how do i protect my portfolio? where do i go in the currency markets? >> very good question. let me draw a parallel here. some say go to mexico, brazil, opportunities are so great. that would be the same as dumping general motors and buying facebook instead. what you want to do is -- if you historically like the low volatility in the eurozone, like the reasonably prudent monetary policy, you can go to commodity currencies as everybody's hoping for the best but planning for the worst, printing money. but what we do is we have moved a lot of our money to singapore.

and singapore because over the years the singapore monetary policy has had a lot of swing -- you don't have the tailoring of the crisis. it's much better than you get in the scandinavian currencies. >> one of the biggest dangers of the moment is that a lot of investors assume that because of the fed printing that the dollar will fall and therefore commodities will rise, so on and so forth, when actually what we're faced with -- to pick up on your moment about slowing bri brics are that the dollar will strengthen from here? >> we're in the camp that we think the dollar is strengthen. the headwinds are there. if you look around as what central banks have been doing, you'll notice all the major central banks have been easing and the smaller central banks, including the ones of commodity countries, the expectations have

moved more towards tightening or at least neutral. what's happening, you have a weakening in the euro but other currencies plunge more because they're more volatile, the euro has been lagging. it's more than just of the crisis, it's the interest rate cut. what we're looking for is central banks that realize that this is going to come back on the printing press and it's not good on the inflationary front and will be more prudent and resilient. a diversified portfolio of currencies sfr more important. we don't think the dollar will come out on top at the end of this. but every market has its achilles heel. that's why a diversified approach is prudent. >> axel, having the euro hit against the u.s. dollar, 1.2266, within your funds, how are you playing the euro specifically? are you doing sing versus euro or are you doing euro against another -- >> in our flagship product, we

have eliminated the euro entirely. >> really? >> replaced it with a singapore dollar. we had, as you may know, we were euro bulls two years ago and said these issues are to be expressed in this current bond market. the reason the euro's been weakened the last nine months is because of a dysfunctional process. the latest summit is a bright light here. having said that, too many questions remain unanswered. to da today the finance ministers are meeting. we're looking for a revolutionary authority. it's a negative for the euro because it means we'll have the pencil-pushers in charge rather than somebody who's going to roll up their sleeves -- we're looking for process. not looking for money printing. we're not looking for interest rates. we're not looking for garn tees. we're looking for process. it's slowly coming into plays but way too slowly. >> axel, before we let you go.

steve barrow said that foreign exchange is now the best asset class. he does foreign exchange. but would you suggest that? >> certainly because you can directly play to many of the policy mccainers. jishgsz we love being in currencies. join me on twitter to find out more on that. >> says the man with four currency funds. >> but not leverage -- >> don't use leverage to make money. >> they get burned and run through. >> that's why you have tight stoploss stoplosses. >> thank you again, axel. let's check back with brian sullivan for another market flash. >> ubs is cutting s.a.m. to s.e.l.l., sell. boston beer sliced to a sell by ubs. they call it the innovator's

dilemma. a lot of new products that boston beer's been pushing out have been hot. but ubs says some of the newer products, according to their checks may not be trending as fast. it's hard to keep innovating with hot new products. they have a $103 price target. 13% prob drop from her for sam for ubs. back to you. >> thanks very much, brian sullivan. it is official. second-quarter earnings season kicks off tonight. we have alcoa after the bell. and we have europe and china. they are slowing. so the question, will corporate profits be negatively impacted? we'll talk alcoa and your earnings outlook next.

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the stories we are squawking about, 7:31 on the west coast, 10:31 here on wall street. juniper among the networks falling to new 52-week lows. it's lost more than half of its market value over the past 12 months. sirius xm is up 1%. raising its growth forecast to 1.6 million from 1.3 million. sirius boosting its revenue outlook for 2012. and nat gas futures rebounding from friday's selloff, up 3% on forecast of above temperatures in july. on that subject, an hour into trade, let's go to chicago for more on the market there is.

joining us, philip streeble. good morning to you. let's talk about corn. is the bad weather from that perspective, the dry weather, the drought s that now fully factored into this huge move that we've had on corn, or do you think there's further to go, sir? >> well, i still think that -- the big number comes out on wednesday. that's going to be our usda production report. the indications of the hot weather we've had, record temperatures in over 1,000 different counties across the midwest. what that's doing is it's going to cut down your production yield down to about 13.5 billion bushels down from last month's estimate of about 14.8 million. this should drive price up to $8 a bushel. if we come anything at over 13.8 million x we'll back off. there's a support in the sharp, you have to exit your long positions -- >> but you still think there's

the possibility of a major move from here, up to $8? >> absolutely. i think the reality is with the corn crop, they got this thing planted a couple of weeks ahead of schedule. this was back a few months ago. so corn is entered into this growing cycle where we're at a key pollination period. you need that rain in order to produce these kernels. without it, we got serious impact on the production. >> what about the other trades? what about soy, so on and so forth? boy seen soybeans? >> soybeans trading well into the $15. a lot of chances we might move up to $16, $17, $18. a lot of farmers are coming in and lightly selling some futures contract just to head some of their forward production, try to take advantage of these higher prices. but still your corn, your soybean, your wheat, your

soybean meal, these all are impacting prices across the board. >> philip, good to see you. thank you for joining us. >> thank you. president obama is set to call for an extension of the bush tax cuts for those earning less than $250,000 today. the president is set to speak on the subject later this morning. eamon javers has more on this. eamon? >> reporter: good morning. we'll hear from the president in about an hour over in the east room here at the white house. he is going to call for an extension to the bush tax cuts for those making less than $250,000. congress is set to ignore him and pass their own version in the republican-controlled house of representatives. there are so many plans out there, let's review the bidding for a minute of exactly which plans are floating around, starting with this graphic we've prepared, showing the president does in fact propose to extend the bush tax cuts for those under $250,000, as we've said. but nancy pelosi wants a

different thing. she wants a permanent extension of the bush tax cuts for those making less than $1 million a year. that's a little bit of a different position there, a little higher threshold. and mitt romney running for president, would like to extend all of the bush tax cuts permanently. melissa, that's what we're going to see, the republicans in the house of representatives voting on that later this week and throughout the summer they're going to try to make the point that they would extend all of these very popular tax cuts for everybody, not just for the rich. they want to see it top to bottom. back to you. >> eamon, quickly, what likelihood is it we get anything out of this congress not just before the election but before the end of the congress itself? >> reporter: well, that's the absolutely crucial question. we're totally frozen here in washington until the election. don't expect anything between now and then. after the election, though, we're going to enter this weird period where we've got a new president-elect, either a second-term obama or a first-term romney and all of washington is going to have to

deal with all this fiscal cliff stuff together. we have a whole bunch of elements. expect that this will be wrapped up into some overarching deal, if they can get it. but i'm talking to a lot of people here in town who expect we're going to go over that fiscal cliff in january. >> eamon, thank you. eamon javers from washington. back to this morning's monday merger, health insurer wellpoint planning to buy amerigroup. morgan stanley health care index having its best day in 3 1/2 years. anna gupta joins us on the newsline. this is accretive to earnings in about a year or so, this deal. but specifically for wellpoint, buzz this offset or counterbalance the problem that its margins will be -- >> wellpoint has reached a growth of stalling, if you will.

and bauftd health care overhaul, particularly in the commercial markets, the markets will be under a great deal of pressure. with this deal, they open themselves up to a new growth engine, both from obamacare, but in addition, the states are privatizing their medicaid programs and the dual eligib eligible -- the senior population that also are low income are also going through -- [ inaudible ] -- >> important about this deal is the groundwork that was laid prior to this deal. that was the acquisition of caremore, which focuses on seniors. that deal had already happened. and that helped them get into the dual eligibility or expand that area. i'm wondering if there are other insurers out there who can do a similar deal to get into both medicaid as well as this dual area. >> yes, absolutely.

there are a couple of other assets that are left in the public arena. one is centene and the other is wellcare group. i could see the other diversified players trying to capitalize on this growth than the dual eligible population as well as in the medicaid and the exchange population. [ inaudible ]. >> ana, why has amerigroup agreed for this to go through? it must be worth more as a business not attached to wellpoint. wellpoint is absolutely smashed under obamacare to an extent. it's not going to be able to reject people with pre-existing conditions which it does all the time. it will have to accept all patients and spend 80% of its collective premiums on patient care, which is not where it is at the moment. wouldn't it be worth more somewhere else?

>> in other words, the question that you have is, why would amerigroup sell themselves to wellpoint? at these multiples? >> yeah. >> amerigroup, again, faces some issues as well. medicaid as a segment is seeing a fair bit of synergies and overlap now with medicare with the senior population [ inaudible ] -- when you bring the capabilities of the two companies together, wellpoint along with amerigroup, there are synergies -- [ inaudible ]. >> ana, we're going to leave it there. thanks for joining us. ana gupta.

it is trading even still below the takeout price, which i would imagine would indicate there's probably not another buyer who would step to the plate and offer that -- >> there won't be another buyer that steps up here. it's an all-cash deal. it's not like you're getting an opportunity to participate in some company's future. you're getting cashed out. premium seems to be a fairly substantial one above its all-time high. >> estimates will be raised further down the line when people appreciate the additional -- >> you think for amerigroup potentially -- >> correct? it's a big day here on cnbc. david faber is working us through the threat that china now poses to american businesses as a result of cyber espionage. he will pick up that feed --

looking forward to this. major documentary. >> a major, yes. sure, they're all major. >> 9:00 tonight? >> yes, 9:00. s to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number. he was just focused on making sure we were gonna be successful. he would never give up on any of us. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal.

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let's solve this. experts at experts at the highest levels of government and across corporate america say that hackers have become much more sophisticated in their attempts to compromise corporate networks. in our documentary "cyber espionage," we spoke with a politician about this issue. he believes this issue should be the u.s. number one issue when it comes to china. >> what is the worst case

scenario here? >> we continue to bleed our intellectual property to the point where we just cannot compete with other countries, china specifically. now they can compete directly in, say, cars and consumer products and durable goods and nondurable goods, most of which are stolen from the united states that, research and development. we lose that, we lose that edge to future prosperity for the united states. it's that serious. >> joining me now to discuss the various efforts of private companies and policymakers is larry quentin. nice to have you with us. what we found in reporting out this documentary, larry, is that so few companies seem willing to come public, first of all, in admitting they've been breached. it makes it very difficult to coordinate any sort of policy response. has that been your experience and is there any hope that that will change? >> yeah, there is substantial hope it will change. congress rogers' bill would be a substantial aid in having more

communication between the government and between industries. we'd focus a little bit more on the need for information sharing between the industries and government rather than the public, necessarily, because we're mostly interested in trying to prevent these attacks from succeeding. public disclosure after the fact doesn't help us as much as stopping the attacks in process. >> of course, those attacks are coming in constantly. what is your experience in terms of at least that communication you're referring to and what happens the heightened awareness of u.s. corporations in terms of taking the steps they need to at least try to stem the tide? nobody from what we've learned can stop 100% of the attacks but at least try to stem it. >> absolutely. the good news is that there is a definite increase in the behavior on the part of many corporations to deal with these advanced threat, spending for cyber security in the private sector has doubled in the last

five years from $40 billion to $80 billion a year. there's a good deal of activity going on informally among companies. but the legal barriers that the rogers bill attempts to address really are standing in the way of a much more robust situation with regard to information security. so we really need that legislation passed. >> it's unclear. that's actually going to be able to see the light of day. when i talk to boards of directors and ceos, doesn't appear to have made its way onto their radar consistently. has that been your experience as well? it's not a board-level conversation taking place across the board as one would expect it might be? >> absolutely. we do see that there's some change happening in that area. but too many organizations, both government and industry, have been viewing this as an i.t. issue and it's not. it's an enterprise-wide risk management issue that needs the attention of senior management, boards of directors, et cetera. as i say, i think the studies

indicate that we are beginning to move in that direction. that's a good thing. but we need to pick up the pace very dramatically. >> of course, what also might help is if our government made this a significant issue with china. but that does not seem to have happened, at least not publicly. i don't know what's going on behind closed doors. >> yeah, i don't know necessarily going on behind closed door. but i would agree with your assessment, we have not put as much of a priority on this with respect to the entire matrix of issues we're dealing with. this is a trade issue. this is international development issue. it is certainly a national defense issue and it needs to be put center stage. >> appreciate your time. larry clinton joining us from the internet security alliance. be sure to watch "cyber espionage" tonight here on cnbc. >> presumably the chinese do know what's going on behind closed doors. that's the point of the documentary. >> they may know. >> we need to take more of a

chinaesque approach -- >> are you having trouble with your computer yet? >> there was a lot of support overnight. 300,000 computers said to be in jeopardy. did it affect you? >> no. >> you were totally switched on today -- >> not at all, simon. as you probably heard, alcoa set to take center stage. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade,

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cnbc's scott coen live to unknown parts. unveiling sixth annual exclusive study. scott, where the heck are you? >> i'm not going to tell you, melissa, but some visual clues. earlier on "squawk box" i was standing in front of barrels. everyone was trying to guess what they were? was it bourbon, beer? i think now it's orve it was wine. that tells you nothing about network's top state for wine. this is a serious topic at a time when jobs are so scares. it's a study we've done six

years in a row. it gets a lot of discussion around the country for a good reason. a look again at how we compile top states 2012. our top states among america's top state for business is five years in a row we've been counting them down. america's top state for business 2008. the states that put it all together. >> this year's version of the top state for business. >> reporter: winning the war for jobs. america's top state for business 2010 and now -- >> we have a winner. >> reporter: let's do it again. fifty states, 50 metrics, 10 categories of metrics, 20 possible points. who has the lowest cost for doing business, workforce, best quality of life. best infrastructure, top kmichlt we look at education, technology

and innovation. the legal and regulatory climate, cost of living. countdown the top five states for business from this undisclosed location tomorrow, then reveal where we are, then you'll be able to see where your state stacks up. we score all 50 states. we also want you to get in on the conversation. we're doing it all on twitter this year. #topstates. read all about our study, previews, more information @topstates@cnbc.com. >> got us guessing. thank you, scott. top thoughts in the markets coming up next. ♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology

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was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ breaking news from microsoft. got to get over to john at headquarters. >> microsoft is buying a company that makes an 82-inch touch wall. you can use your fingers or a

stylus. windows 8 the have general availability in october, release to manufacturers in august. that's important. they also talked about collaboration, skype, other equations along with per spent i have -- perceptive pixel. we don't know how much they paid but clearly about touch and hardware after the service announcement several days ago. >> john, thanks so much for that. time for "squawk on the street." as we mentioned the earnings season is upon us. we asked you to tell us, ice cream trucks and beachballs are signs of earnings season. josh tweets, outrage predictions, sobbing and cursing

are signs of earnings season. all i know in the morning we are pressed for time when they come across. >> they are, indeed. as we say going into earnings season it will be an interesting one. it will be an interesting one especially given all of our questions about europe, about china and about good old usa in terms of what we're going to see and what is going to be said about the future. so important. >> so many companies already, analysts skeptical about company's predictions and company estimates. for instance, we have ubs downgrade visa and mastercard to accelerating. they are down sharp, visa down 2.25, mastercard down. they say a slowing is inevitable. they cite slowing u.s. consumer data. slowdown overall in the united states, also exposure overseas. mastercard has more exposure overseas, visa more exposure to the united states. for stocks that have had nice runs, analysts at ubs

throwing -- >> also the question, how much of the stock price for what we may see in terms of lower guidance for companies for the third and/or fourth quarter of this year. >> all right, david. we look forward to your documentary tonight. again, that's at 9:00 p.m. eastern time. meantime let's get to it. here is what you might have missed if you're just tuning in. >> announcer: welcome to hour three of cnbc "squawk on the street." here is what's happening so farther. >> well point announcing it acquired ameri group. >> got the guts to take on the top issues. i believe he's got the background as an executive, somebody who turned the olympics around as the governor can do that. people view him not just as a republican but reformer. he can win. >> i think the united states is recovering better in my judgment

than is off portrayed. >> our stock market didn't go down enough last week. we are about to start earnings. i just expect bad earnings from tech, bad earnings from industrials, bad earnings from financials, bad earnings from oils. other than, that things are fine. >> here we are off to the races, opening bell sound on wall street this monday morning. >> you probably have to set the bar a little lower for what i think the market has been telling us for the last couple months, which is business is going to be tougher. not only tougher in europe but the u.s. and china as well. >> we are looking foor an extension or retask of that morning low through the course of the summer and rally back to the election. no, we don't think the net effect will be all that much. we do think it could be pretty interesting between now and the end of the year. >> good morning. if you just joined us, a welcome

to the third hour of "squawk on the street." the big day earnings season starts tonight, of course, in advance. we're lower on the major averages, s&p, nasdaq trending lower. importantly off their earlier lows. mastercard and visa two of the biggest losers today. mastercard the worst performer and visa down more than 2% after analysts at ubs cut their stocks to sell. as melissa was mentioning before that break. health care stocks getting a boost after wellpoint agreed to buy amerigroup for $5 billion. coventry health bucking, trending in positive territory. >> get to the road map. vivendi wants to sell its stake in the gamemaker and what it could mean for the stock. live at the air show with one of the execs that will give us the take on the pricing war with boeing and an update on the company's latest orders. earnings season kicking off with

alcoa after the bell. hopes not high for what the company will report. we'll tell you how to trade the stock ahead of the thenumbers. and president obama will make a statement on why the bush tax cuts need to be extended. we're live at the white house with a preview of what he will say in a speech. all that and much more coming up in the next hour on "squawk on the street." vivendi reported interest in selling its 60% stake in the video game making. julia borsten live with details. julia. >> melissa, vivendi shares down over last months. although it hand officially put it on the block, be starting talks with the giant, the $8 billion they are looking for to sell the stake in the gamemaker. they are kicking the tires. sources tell me there has not been a ton of interest, especially at that $8 billion price. major concerns the physical games business is going the way of dvds and 2011 may have been

the peak for video games industry. sources tell me because vivendi is reviewing what to do with all parts of its country, we will not necessarily see a sell. you can bet it will all come down to price. vivendi has a history of making deals at the conference starting this week. in 2009 it hatched a plan to sell its stake in nbc universal to comcast this very week at that conference. now activision ceo bob kotick heading to rub shoulders with potential buyers, microsoft, time-warner, tencent struck a deal with activision to bring it to china along with kkr, providence and blackstone. they have all attended in years past. slightly negative this morning on the heels of announcing first person shooter game based on "walking dead." over the past year the stock

pretty much flat. on the up side seen it go up on big hits like call of duty. on the downside it has been under pressure because of the rise of social and mobile games. >> zynga, thank you very much. the view from the west coast. now to our hero and rebel section of the program making a triumphant return. >> not gary. >> it is gary. >> hello, simon, hello, melissa. i'm still trying to get everything set up. you know when you're out of the office, try to get computers set up. >> most of us don't go out of the office for a month. >> oh, there we go, simon. bring it on. in fact, that's a good segue to what i want to talk about. i'm going it talk about euro bonds and what's happening in europe later in the hour. i do want to talk about the overall sentiment of the market. i heard so much over the last several weeks. a lot of the commentary was off the record unfortunately. i do want to read something and

apologies for the back. you like the back shot. i want to read mongolia here. this is from a weekly letter i get from a hedge fund manager, some of the best stuff every week. i've been up large twice this year, admitted one of europe's biggest portfolio managers. back to flat, cut risk to nothing, probably done for the summer. that's the sentiment out there across the marketplace. listen to this. markets need to go through these periods of not making sense, doing the opposite of what they normally do to keep guys honest, otherwise it would be easy. ig it's that simple. you see, nothing works all the time. never has, never will. protracted periods like this call the trading herd, natural, necessary. that's the sentiment out there. the fact is you can't put on too much risk, can't put on too little risk. you don't know what to do. it's confusing to the professionals. confusing to everybody out there. the fact of the matter is the summer is going to be a long drawnout period where we're going to have days where we get

earnings upside surprises. they will turn around the following day. i expect as we sit here labor day, s&p is essentially flat. no movement at all. >> are you saying, gary, this they are also sitting on the sidelines during earnings season? i'm wondering if there's bets made too high right now. >> melissa, they are trading around core positions. trading core positions means if you want to hold something next three to five years, concerned there may be negative commentary, trim the position, go short against the box. but you're not taking on newcomer positions. you're not taking on new positions right now. you're going to wait until september. let me read you the last line. investors pay me to take risks. investors aren't happy about my risk now. they pay me to swing. but we're setting up for a big move. come september when we break the range i'm going with it pulling out my louisville slugger, not pointing out whether that louisville slugger is going negative, shorter or long.

the point being until september no big bets across the board. >> i will give you until friday. >> yes. >> possibly monday. >> to keep the beard. >> to have that beard off. i spoke from experience because i returned after the christmas break with a moustache, of which i was proud. >> very hand some. magnificent, i wouldn't go that far. >> they don't say anything but nod and hin it's not the cnbc way. >> simon, this is a very distinguished european look. i've trimmed it several times. when i see you at the exchange tomorrow and see you in person, you'll tell me -- >> in person. i can't wait for that, gary. >> melissa, how are you? is everything good? >> everything peachy, even better now that you're back. >> i e-mailed you to say hi. >> my inbox is too full. >> i got that story. i have thoughts on euro bonds. i know simon is going to want to get into that later in the program.

>> we'll see you and your beard later on,on gary comiskey. >> rick santelli at the exchange. >> i have to ask the question i never thought i would live long enough to ask. kat u.s. treasuries breach a 1% yield? in the old days i get out the charts, the ruler, dust off dos and don't of trading and retracements and we'd come up with an answer and i'd feel confident about that answer. but it's hard to use the old-fashioned ways to handicap the markets, because the markets have this huge gorilla in the room known as the federal reserve. when you currently have 21 primary dealers in the u.s. several of them all over the wires in the last 24 hours saying something that's, well, a year more than the feds say. the fed is kind of on hold until 2014. these several primary blue blood dealers say maybe the fed will

be on hold until 2015. now, let's forget the fact that nobody can hold the treasury market. it does what it wants to do. it really is fighting with one and a half hands tied behind its back. but let's look at the facts. if you look at maybe second, third quarter of last year, primary dealers were flat to short. now current metrics show they are long to a tune of 100 to 120 billion, somewhere in there. and if you look at the buyback operation, known as the twist, we see that the tenders, the amount that these primary dealers are throwing back to the fed is getting a bid smaller and smaller. today we have a three-year note, tomorrow, a three-year note auction. if you look at the other auctions, not buybacks but other options, we see those bid to covers, aggressiveness is actually going up. so the scenario is this. even though dealers currently have a belly full of treasuries, they are definitely trying to vote for a bigger belly.

this isn't really good news. low interest rates are supposed to be something that push people to buy houses. but if there's absolutely zero, and i mean zero sense of urgency, complacency sits in. i know lots of people who want to buy houses and they are looking and they are looking because they have nothing to be in a hurry about. but the point of this is, i'm not sure if rates can go under 1%. i think there's at least a one in three shot they can. but the scary part is, if anything reverses, what's really driving this aren't fed statements, it's a slow global economy. if anything reverses, if you think ralph kramden is big, imagine ralph kramden the size of montreal trying to get out of a port hole this big. that's when interest rates go the other way. simon, back to you. >> the vigilantes we heard so much about two or three years ago but haven't materialized, rick. >> they haven't. they have been a rip van winkle.

but at some point they will rip again. >> scary. we'll get back to you. a market flash at hg. >> what's scarier papa comiskey's beard or bond vigilantes. 15.2, this stock under the radar name, absolutely on fire the past year. bring up a one-year chart of qcor. it's got one drug from 13 years ago. preliminary indications indicate it is selling more of the drug than maybe previously thought. so again a one-drug company which jim kramer would say is always risky. but that stock is on fire and it's soaring once again today. back to you. >> thank you very much. the dow down 54 points. next on the program alcoa stock losing 12% in the second quarter. analysts aren't too optimistic about what's around the corner. actually that's not strictly true.

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earnings season earnings season kicking off today. wall street anxiously awaiting results from alcoa after the bell. kat largest producer of aluminum surprise against or will weak aluminum prices in europe force disappointing results. we have a bull and bear.

senior equity analyst, our bear, president and minings analyst. great to have you with us. i will start with you bridget. so much smelting capacity out there, a lot of it in china. a lot is operating at unprofitable levels at this point. alcoa going up against a competitor with basically very deep pockets that can afford to keep producing at unprofitable levels. why are you bullish on alcoa. >> if you look at the price below 2,000 a ton, that's unsustainable. alcoa looks like a good buy because the stock has been killed with the middle price. $16, $40 in 2008. if you have a longer time horizon, three to five years, i think it's very likely alcoa stock price could double, even though in the next few months given where metal prices are, we could see further downside before it recovers.

>> but baked into that case, bridget, doesn't there have to be production curtailments. doesn't china have to say, you know what, we're going to eliminate some of this overcapacity? >> sure. but i think there is a lot more to the story here. i think the supply and demand balance is certainly important. but in the past we've seen production cuts and not a lot of movement in the lme price for aluminum. metal prices are determined by global economic sentiment. i think that's really what's weighing on the price. it's not too much supply. once we have more clarity on economic growth, i think we'll see a major rebound in the price on lmen next couple years. >> david, as a bear on alcoa, is the primary reason on aure bearish stance the uncertainty when it comes to global economic demand? >> i think it's that. but on the aluminum side of the equation structurally oversupplied. in the short-term, significant oversupply, 5 million tons of

inventory. in the first five months of the year, 6 million tons of oversupply. bet consentment and growth, go to copper, a tighter supply and demand story. >> when you say 5 million tons of inventory, how long does that take to work off? >> first have to go into a deficit. depends on the -- if we go 500,000 tons of deficit, we're talking 10 years. >> at the same time, david, analysts estimates have come down so far on alcoa. we've seen this story before where a lot of people worried about alcoa's quarter, up side because estimates have been slashed. are we at this upon set up for a scenario like that? >> earnings estimates have come down over the last 30 days. i think they started out 60 or 90 days ago at 12 cents, now down to 5 cents in line with my number. with u.s. slowing, europe not in great shape long-term, next quarter will ab lot weaker than

second quarter. even if they beat first quarter, second quarter jumped, now it's back. might get a jump if they do beat, which i don't think they will. even if they do, probably sell into the outperformance of tomorrow. >> and bridget, at what price would you buy alcoa. you say in the long run it could double in the next five years or so. is there a better entry point than where the stock is trading right now? >> absolutely. there's no question the second quarter is going to be pretty weak. june was the worst month for metal prices. there's a little bit of a delay when that hits alcoa's results. this is setting up for a pretty miserable adjustment there's plenty of room for consensus estimates on the third quarter to come down which could push the stock price closer to $8. so yeah, there's definitely further downside if you're looking at a three-month or sibs month time horizon. this is a company firing on all cylinders. if you look at the cost struck

you're, balance sheet, downstream businesses performing better than they ever did, even before the recession. all alcoa needs is a better metal price. i think current metal prices are unsustainable. >> bridget and david, we're going to leave it there. thanks for your time. >> thank you. coming up coo of airbus joins us with an update on the fleet and what's in store for the future. counting down to the close in europe nine minutes to go. we'll be right back. [ male announcer ] what if you had thermal night-vision goggles,

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at the air show in the united kingdom is airbus's decision to pump a $600 million factory in alabama. will demand for commercial planes ultimately hold up. phil lebeau talking now. >> i'm with phil lebeau with

airbus. you have this new plant starting in alabama. look at the global picture in terms of demand for aircraft. what do you see? >> well, it's softening. when you say cnbc, it's softening, oh, my gosh, what does that mean? we have a record backlog between boeing and airbus, 800,000 firm in the backlog. we're both building 1200 aircraft a year. do the math. if we sold no aircraft we're probably running production for seven years flat out at high levels. >> can you increase production as you've already scheduled. furthermore, can you go beyond that? >> well, we're taking it up to rate 42 on the single aisle and rate 10 on the 330, wide body to go to 11. we're looking at the single aisle to see if we can go higher to rate 44. as we examine the supply chain they are getting stretched. you don't want to overcommit. right now we're pausing at 42 to make sure they can observe it. the demand ittous there. we could go to 44.

if you have a seven-year backlog by definition people are taking airplanes later than they want to. >> you have some suppliers they bought in order to improve the supply chain. do you have to do more than that? >> i hope not. >> you don't have to spend that money. >> suppliers. you cannot have your supply chain, which is only as strong as its weakest link stumble. if you think somebody is getting into trouble, give them assistance. send them engineers. try to help them sort things out. in a worst case scenario, perhaps we buy them. >> last question, global economy. when you look at things for the next year, what do you see? >> it's softening. no two ways about it. last year was much stronger. last year we thought this year would be stronger than it is. aircraft is still growing because gdp is growing. they are leninked. >> a busy day at the air show, simon and melissa, back to you.

>> thanks phil lebeau for staying on top of that. just a few more minutes in europe's trading day. the close right after this. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade. and so too is the summer event. now get an incredible offer on the powerful, efficient c250 sport sedan with an agility control sport-tuned suspension. but hurry before this opportunity...disappears. ♪ the mercedes-benz summer event ends july 31st.

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all right. let's get to simon and the close in europe. simon. >> the two important questions, what will earnings season bring in europe as here. secondly and most importantly, can the politicians or ecb stop the contagion spreading in spain and prevent a major loss of confidence.

as i speak, the finance ministers from the euro group are meeting in brussels. it has become clear since we have the summit that, a, the spanish money for the banks will have to be guaranteed by the government, so the link isn't broken between the sovereign and banks and secondly there will not be a bank supervisor up and running to possibly the second half of next year. so the expectations coming out of the summit have obviously been hurt and you can see that large on the markets in europe. let me take you to where we are in spain for a moment and after. came out seven trading days ago as you came out of that summit, the expectations rose. huge rooiz ri huge rise on the market. as you realize the truth of what's happening moving in the other direction and trade above 7%. not huge across the markets in europe but spanish banks notably are down. interesting the two big guys there are in negative territory.

the move on the spanish yields also witnessed on the italians. can you see a very similar pattern to the way they rallied coming out of the summit. then you can see -- >> european markets are closing now. >> across europe at the close, on the screen, great moves overall. negative territory. wall street, they are catching up to the negative moves in part we had on friday session here in the united states in the wake of the employment report. let me just take you back to where we were on the italian yields and point out the way in which you're mirroring the patent you had on the spanish. the one that also sticks out in the other direction is what is happening in france at the moment where actually yields -- people are buying into the french market, for many counter-intuitive. it is a safe haven in the eurozone particularly if you regard germany as being overvalued or expensive.

there are huge questions where we go on the public finances in france. the last thing, at any moment a live video feed coming up from one of the parliamentary committees in the uk. this can be a major story in the end of the session where paul tucker, deputy governor of the bank of england is about to give testimony as to what exactly he said to bob diamond, the former ceo of barclays back in 2008 when it was revealed we now know in an e-mail from bob diamond at the time he was told that top officials top officials estimates on libor seemed higher than everybody else. diamond's deputy took that as a reason to fiddle with libor rates. at least that's what people are saying in the uk. we'll see exactly what paul tucker has to say and who the officials were. might not be so relevant in the u.s. markets. if you're saying the finance

minister of the last government was effectively saying libor should fiddle with rates, that's a huge deal, maybe in the uk. we don't know it was the finance minister. we have to find out who the top officials were assuming bob diamond's e-mail was correct. >> and barclays shares continue under pressure down 0.8%, near the dollar mark. interesting to see what happens. want to head to gary comiskey, capital markets editor. you want to talk about euro bonds. >> i do. i joined the program two weeks ago in the uk, having just been in the netherlands and france, northern europe as we like to say. i did have an opportunity to get the perspective of former colleagues, friends and many in the asset management business. the last two weeks i've been in southern europe or italy, to be specific. i'm not going to tell you neg you don't know looking at the maps in terms of what's happening across europe in terms of profit, business, employment. i'm going to tell you this. euro bonds will not happen.

it gets as simple as this. remember what a euro bond would really be. a euro bond would be taking the credits, various credits of the different countries who obviously if they were stand alone countries, different credit ratings, economic scenarios, growth scenarios. you have some that are, throw numbers out, spanish ten-year at 7%. you try to blend that. we're going to collateralize all these numbers together and come up with the best number ever. the best thing i heard from somebody who would be a potential buyer said essentially, didn't we try that experience before. didn't the genius at bear stearns tell us great credits in the housing market, so-so credits in the housing market, put it together, create a nice tranche, collateralized piece of paper, sell them to those institutions, part of that subprime tranche that wouldn't make it, but the overall yield on the overall piece of paper

would do it. guess what, we tried that experiment in 2008 and it didn't work of the reason we won't have euro bonds, no matter what these summits have, whatever the meetings are, 20 throughout the summer, the buys of those bonds aren't interested in buying them. do not forget the one thing i'll take away from the trip to europe, the buyers aren't interested. create the euro bond, institutions aren't going to buy them. it's as simple as that. >> yet, gary, when we get together all those currencies into the euro, there have been plenty of buyers of euro, notably asian central banks. >> currency is one thing as you know. there was a belief the currency would work. it was going to work as trade. it was going to work as a stand alone unit, currency unit. you and i know buyers of credits if they are not interested in euro bond, create whatever you want, put credits together, i not going to happen. talking about 1% ten-year, we're going sub1% in the u.s. unless

something dramatic changes. european institutions taking all the excess cash and put it in one thing and one thing only, u.s. treasury because they know they will get money back. as simple as that. don't make it complicated. no euro bonds, u.s. treasuries go down in yield. >> just before we let you go, a suggestion from one of the producers you could shave your bid for charity down here at the new york stock exchange. >> for charity? >> that gives awe good way out down here at the new york stock exchange. >> bring the razor in. let us know, gary. >> you're putting me in a very difficult position because for charity i'll do anything. melissa, should we do a charity thing? >> i'll bring the razor, you shave your beard. >> have you to shave him. >> no. >> put out a twitter thing. i'm not on twitter but you guys are. >> actually we're not. >> you're not on twitter either. >> tell the producers in the control room put something on twitter, if the twitter wants to

do it for charity we'll go for it. >> by friday. >> you put the charity thing in there. >> gave you a way out. let's bring in brian shactman. >> if he -- you look at the color of his beard, he should go goatee, great dark in the middle, gray on the outside. that's my take. heading back to the lows of the session, down 67 for the dow, down 75 is the lows. listen, we talked about europe just now. china is just a huge question mark. we have earnings which i'll get to in a minute. a lot of traders say what's the impetus to buy. only one segment of the market getting a huge bid, take a look at morgan stanley pairs' index, the best day in three and a half years. just for the heck of it, went back to october 13th of 2008. just to remember what memory lane brought us that day when it went up 13%, dow gained 900 points. on more of a regular market day, a very impressive pop in that

particular index. for profit education is something i followed quite a bit along with herb greenberg who owns this space. take a look at bridge point down 23%. the story basically denied accreditation. why down so big? if you don't have accreditation, you might not get federal money. it can hurt revenues by as much as 90%. take a look at the whole space. this obviously is a cautionary tale. an incredibly volatile segment. career education down 6%, apollo, 3%, devry almost 3%. we look at expectations for earnings, have they come down enough. three particular tech stories i want to point out, a little bit of a harbinger. the euro at 123 will cost $0.24 a share. lamb research downgraded because

of basically a general slowdown. seeing that across the board. that was a particular snapshot within technology. back to you. >> thank you very much, brian shactman. now to rick santelli in chicago with a very special guest to discuss the gravity of the eurozone crisis. rick, take it away. >> a very special guest, leader of the independence party in the uk. he's prone to a few rans every now and again. the best one i've seen was on the 13th of june. i'll do a setup. he was talking to a group of european leaders and the prime minister of spain was about 15 feet from him and here is what he said. having listened to spanish prime minister over the previous couple of weeks telling us there would not be a bailout, i got the feeling after all his twists and turns he's about the most incompetent leader in the whole of europe. that's saying something because there's pretty stiff competition. welcome, mr. franz. maybe you can expound on the

genius of mutual indebtedness. i hope everybody looks at the youtube. i happen to agree with most of what you say. what's going on in europe and is it really beyond getting fixed. >> it's a mess. no doubt about it. the trouble, it's a devil of complexity. the finnish and dutch prime ministers have a different interpretation to what was agreed with everybody else. indeed now in the last 48 hours angela merkel in germany having a row with her own party what she did agree to. it's a mess. what i tried to do in speeches in the european parliament, tried to make it simpler so people can understand bake facts. here is an example for you. the $100 billion tranche agreed to help the spanish banks, some of that money, 20% of it, actually comes from italy, which is a company teetering on the brink. under the terms of the deal, the

italians have to lend to spain at a rate of 3%, but it's costing them 7% to borrow that money on the open market. so actually this wonderful bailout mechanism designed to save the euro is actually driving countries like italy closer to needing a bailout themselves. they have constructed esm, european stability mechanism. again, the huge amount of money needed for that fund comes from countries already bailed out. actually what we're seeing is the same part of the money going round and round in circles, which is why i was tempted to say it's beginning to resemble a giant ponzi scheme. >> now, even in the u.s., there's money going around in circles between one part of the government issuing, the other part buying and stockpiling by business money that's supposed to be put to work. you also talked about the ecb and their exposure. their exposure is large and you seem concerned.

can you tell me about that? >> the thing is, you see, you've got countries like greece stuck inside this eurozone, a currency it was never suited to, a currency it should never have joined. what's been happening over the course of the last couple years is the european central bank has often been the only buyer of greek debt. so they have got a massive, massive exposure to greece and the other troubled countries, particularly those in the mediterranean. now, the day that greece leaves the euro, and believe me it will, the day greece leaves the euro and goes back to the drachma, ecb is sitting on a massive paper loss on its bonds it bought. at that point in time ecb is bust, it is illiquid. under the european treatise to capital eyes, it has to go and get fresh capital from other countries who themselves have already been bailed out and are in trouble. so the fact is actually you could argue now the medicine is

actually killing the patient. by the time we grow up, time we recognize spain, portugal italy, certainly greece and ireland, too, by the time we realize they need to leave the eurozone frankly is now. if that nettle is not grasped, my fear is the markets over the course of the summer could overwhelm the whole thing. >> i'm glad i had you on monday because i wasn't all that optimistic when i got out of bed this morning anyway. welcome, hopefully you'll come back at another point when we turn another chapter in the greek saga. back to you melissa lee. >> thank you. >> thank you very much, rick santelli. straight ahead on the program, it's one of the worst performers in the dow this year. as far as many are concerned, there's not much sign of an improvement, but a smart thing to buy caterpillar before it reports? we'll talk about that after the break. this man is about to be the millionth customer.

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that. top ways to play the comeback in coal. guys, see you in about 15 minutes. >> looking forward to it. dow caterpillar down more than 20% in the second quarter thanks to a lackluster u.s. economy and, of course, worries about china. the stock taken off wells fargo's priority list on friday. can cat bounce back. a senior research analyst has a buy rating. he believes caterpillar will bounce back. i see the price target here is $132. you think there's more than 50%, almost 60% upside from here. >> that's our long-term price target, caterpillar had a terrific three to five-year outlook, just have to navigate through difficult waters. >> talk me through that. what are people missing when they sell it down like this. >> it's a proxy for global growth. with problems in every region of the world, you become suspect

what kind of numbers caterpillar can put up. in this environment things will begin to flatten out a bit. the long-term is terrific. it hasn't changed. caterpillar has tremendous earning power. >> mid decade. let's talk about the next few quarters at least for now. what do you see channel checks. what wells fargo pointed out on friday, channel checks underlying demand, doesn't show signs of reacceleration since 2013, which is a few quarters from now. what are you seeing? >> 2012 should be okay. caterpillar is still in a replacement market for most of its equipment. even the mining business has long lead time. 2012 will be okay. currency is always an issue, but caterpillar is usually the opposite of what you expect. expect 2012 numbers to be fine. the guidance is what people will look at. if you look at consensus, numbers in the range this year but up in 2013 depending on the

environment, the numbers will probably be somewhat flat to up. again, depending how bad they get, could be down a bit. still should have $9 to $10 earnings power even though fargo said the same thing in a tough requirement. >> going out to not this year but next year when the estimates may start looking high. what geographies and lines of business are you concerned about at this point? >> key market for caterpillar is mining with the acquisitions they made. they are now almost a quarter mining. mining will be very strong over a number of years. mining companies are smart. they will flatten out. the mining business will probably be somewhat flat. coal in this country is soft also. that's another part we have to worry about. >> in a word eli is caterpillar your top pick? is that what you most favor? >> it's one of our top picks with a 5% yield.

a lot of very good, big industrial companies that are very inexpensive over the long-term. >> give me names. >> besides caterpillar, deer and eaton corporation. >> i thought you might say that. good to see you, sir. thank you very much for the advice. >> my pleasure. coming up, president obama set to deliver a statement in just a few moments on the need for congress to extend the bush era tax cuts. we'll get a preview of his speech right after this. stay tuned.

looking at a live shot of the east room of the white house where president obama will give a statement extending bush tax puts. in a few minutes live with a preview of what he might say. ammon. >> in just a couple of minutes, we'll hear from president obama himself. he's going to call on congress to extend tax cuts for those making under $250,000 a year. obviously in july of an election year everything the white house does is political, this one is no exception. the president really saw a bad jobs number come out on friday, not encouraging going into campaign scene the height of it. what they are doing is changing the subject, back to an issue of tax fairness. that's an area the white house thinks they can gain traction against the romney campaign. they have been portraying romney as out of touch, a candidate of the rich. this event designed to highlight the contrast. we'll hear the president himself make comments as we say in a few minutes. what we're not going to see here

is progress legislatively after the november election. nobody in washington expects anything to get done until the election, until they deal with fiscal cliff issues, end of this year, early next year. >> what this economy really needs is confidence. is there anything you're hearing from the white house and how they intend to put greater confidence in the american people and economy beyond tax cuts extended, which are not working at the moment in invigorating the economy. >> when your president of the united states, you travel the country, put your arms around people, feel their pain, tell them you're working every day to get the economy going again. that's what the president has done so far in the campaign. what the romney campaign is going to highlight is that it's just not working. almost every day we see e-mails coming out of romney camp saying obama economy not working. here we'll see the president trying to counter-act that a little bit. simon. >> thank you very much. keep those tweets coming

this morning. obviously we'll go back to the president as soon as he speaks. our tweet question this morning, earnings season is upon us. so we're asking you to tell us how you know it's earnings season by completing the following analogy. it's quite complicated but stay with us. signs of summer are to ice cream trucks and beachballs as signs of earnings season are to blank. or probably blank blank blank. tweet us. it's very important to understand

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

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we'll bring that to you when we have it. meantime, let's heat or squawk on the tweets. our question, earnings season is upon us. we asked you to tell us how you know it's earnings season by completing the analogy. ice cream trucks and beachballs are to summer as signs -- john twits layoffs, loss of 401(k), that repo man is towing away the ice cream truck. thanks so much for tweeting all those. >> let's bring a live shot of what's happening in the united

kingdom. we warned you earliler deputy governor paul tucker giving evidence on the libor question and whether or not they undull influenced barclays to fix the rates. he's suggesting the government was worried about whether the policy was wrong. the government was also asking whether it should be worried about barclays but did not encourage him to lean on barclays to lower libor. gary comiskey is following this story extremely closely. gary, what's your takeaway as we watch that testimony there. >> i actually wanted to touch on the diamond testimony which i saw last week. reflecting back to 2008, i don't want to venture to give an opinion in terms of the whole libor issue. this is what i want to talk about, the human aspect of it. i thought in 2008 we'd get chief executives to change their attitude, come to these testimonies, stop being arrogant. i must say on a personal level, it was disappointing to watch

this. as much as some things changed in 2008, many things have not changed. the arrogance, lack of humility. >> hang on, gary. the allegation here, barclays did wrong, were they lent on by the bank of england and g to do wrong. did they get a green light to manipulate the markets. that's what is at issue here. >> i don't want to venture an opinion as to what is happening, it's still developing. the attitude, the way he left. the changes that took place, merrill lynch, morgan stanley, go across every firm. the attitude executives continue to exhibit is worrisome to me for those that have an image of this industry, the image of wall street. what you saw with diamond isn't going to do anything in the public's mind to change