tom stemberg, thank you for being here. bringing us an interesting conversation today. join us tomorrow. "squawk on the street" begins right now. good tuesday morning. welcome to squawk t"squawk on t stree street". i'm melissa lee. carl quintanilla is off today. let's look at how futures are setting up the day after we posted the worst three-day losing streak in a month for both the dow and s&p. right now we are looking at a higher open for all three major indices. as for europe, a lot going on there across the board. we do have the euro trading down, though, this morning. green arrows. 1% gains for france as well as germany. our road map for this morning starts with what the markets, what may break the losing streaks here. alcoa beating the street and predicting a second half rebound. chip maker amd warning of a big revenue slowdown because of china and europe. which is the better tell on earnings season? >> spain's bailout is moving

closer to becoming a reality. it's data out of china causing concern this morning. import growth fell short of expectations. stoking fear the economy may be in for a bigger consumer-led slowdown. research in motion meets with shareholders today as the stock sits at eight-year lows. will the gathering be a catalyst for shares or is the competition for sales and investor dollars, ie apple, just too tough at this point? wall street is digesting this morning's earnings news. stocks try to avoid a four-session losing streak. shares of alcoa moving higher this morning. dow component posting second quarter operating profits of 6 cents a share. beats the street by a penny. alcoa says the fundamentals of the aluminum market remain sound. different story for amd. shares of the chip maker down sharply. it slashed second quarter revenue outlook citing disappointing shares in china and europe.

they see revenue falling 11% sequentially compared with its higher estimate between down 3% to up 3%. jim, i don't think anybody would either say either of those in a vacuum are bellwethers. there are certain interesting and important data you can glean from both reports. >> i think they're not bellwethers in terms of the actual earnings. although advanced my row clearly saying laptops slowing. notebooks slowing. the ceo of alcoa, perhaps the best exhibition of what supply and demand means. influence of financial markets over the actual market. it is a brilliant conference call. he raises a lot of guidance and talks positively about autos. talked positive about turbines. he's talking about the idea that the second half could be better. he's got credibility in my eyes. he's got cash flow coming up. there's been production cuts. eventually supply will actually be overwhelmed by demand.

indonesia, exports to a bulk site to china being cut back. that's very good for alcoa. because when aluminum is -- in the end nobody cares. >> nobody cares why? what do you mean? >> because in the end if there isn't -- >> in the end we're all dead. you know. >> if there isn't a price increase in aluminum he can't do anything. >> it's going to offset all these gains in demand. there's only so far they can cut costs. they brought operating costs down for the quarter. a great development. >> fabulous job. >> at the same time you can't keep cutting costs and hope everything falls in place if prices continue to drop. >> a good headline from jeffries. morgan stanley, inline earnings. stream still strong. remember, clouse kleinfeld has developed -- i'm talking about the ceo. he's one guy. but he's developed an -- he's made alcoa into what dustin hoffman was supposed to go into in "the graduate." >> plastics?

>> he's truck plastics. take a look at your ipad at home. you ever see that feel, that great feel on the back of it. that's alcoa. >> aluminum. >> new coke bottles. that's alcoa. the slim, sleek ones, the mae wests. he's come up with a lot of -- industrial turbines, gas turbines for natural gas. that's his. the amount of alum num in planes. >> going into cars. >> going into cars. will it matter? it'll matter when the supply is cut back enough and the demand is stabilized and china decides not to flood the world. and until then -- >> when is that going to be, then? >> december 27th. >> oh, it is? >> december 27th. >> i thought you would bring it to at least three days, maybe. >> the morning of december 27th. i don't want to be too facetious. i'm saying if you actually read the call which i know very few people are going to do. by the way, clouse kleinfeld may

be one of the understated, east german, tremendous sense of humor. >> you just like saying clouse kleinfeld. >> it's fun to say. >> i do want to absolutely point out that you don't get down when you read the alcoa conference call, as down as you might be about the world. >> shouldn't one feel a little bit down? i mean, he is very positive. i think that's good in terms of demand. at the same time, i mean, you can't fight these price declines. and you certainly can't fight china. >> right. there's a slowing. >> there is no way. >> he's talking about slowing. i'm just saying there's a lot of other ways to get down including applied materials. including amd. that i don't need to pile on and say alcoa is another -- alcoa is not doing well. but it's not alcoa's fault. >> right. it does show the strength that we have seen in u.s. auto sales as well as all of those orders from the farm bureau air show. this is helping alcoa. at the same time, should we

continue to be concerned about technology given the data points we are starting to amass from the chip sector at this point with amd yesterday. 11% sequential decline in revenues? that's -- the magnitude, on the street the magnitude is a surprise. >> you see at the bottom of your screen. it's worth discussing. i'm reading the press release here. they are saying that display and -- revised its fiscal year outlook due to weaker than expect eed -- primarily amongst foundry customers. >> there's intel taking bigger stake in asml. that's one off. but yes. melissa, technology, finance, industrials. these, i think, by and large, are going to report disappointing numbers. we had one from dover yesterday. i was surprised the stock wasn't that down. downgrade ingersoll rand.

people say what's the market doing so high? the answer is the last three days have been very telling. we are trying to digest the idea that numbers are coming down. >> numbers are coming down. demand is coming down. it's coming down all over the place. amd, china, europe. we're seeing it right here. amat cutting at least 15 cents to 20 cents from full year nongap bps as a result of this weekness. they are not going to be meeting the $9.1 billion to $9.5 billion previous sales. >> amd and amat, a couple of a's, are going to hurt the market today. it's so funny. what we've been able to do is have good u.s. news trump a lot of times bad european news. today there's just a lot of bad american news. i think that technology remains a sale, just a sale with apple being perhaps the sole

exception. david einhorn with good comments on "squawk" this morning. >> undervalued. remains undervalued when you take out the cash. in the premarket my guess would be you would see hewlett-packard, dell trade lower off of the back of the amd plus amat news this morning. those two stocks certainly have issues of their own with hewlett-packard close to 52-week lows even today. >> i do not see a case to own hewlett-packard. i just don't see one. >> you haven't seen it for a long time. listen, the turnaround there, it's funny you like to talk about hewlett-packard. >> i like procter & gamble and hewlett-packard. >> do you put them together? hewlett-packard is going to be a long-term turnaround story. i don't know when you buy it if you buy it. certainly you don't believe the time is now. >> why do i mention hue let and proctor? when i was in a formative stage at a hedge fund manager, you're talking about the single greatest tech company and the sing isle greatest consumer product goods company. they are clearly not that anymore. just not. >> that's true. but it doesn't mean thatnecessa

to buy. >> i can't value companies where the numbers keep coming down. it's very, very hard to catch that particular fall. do i look like a butcher block to you? is there anything about this makeup that makes me look like a butcher block? >> not at all. very sharp top. >> i could cut steak on your chest. >> a cut co knife is -- >> shall we move on to europe? >> whatever you say, partner. >> feeling like a little europe? >> i always like to talk about europe. >> butcher block chest man. eurozone finance miners are giving spain an extra year to achieve deficit targets. under terms of an agreement reached this morning spain will have until 2014 to achieve a deficit or budget deficit of 3% of its gdp.

all part of the deal to bail out spain's banks. as for china, that country's trade surplus jumped significantly in june. but it was largely because imports rose at only half the pace that was expected. the data stoking anxiety about the strength of domestic demand in what is the world's second biggest economy. we've had a couple of china strategists on, jim. i put this question to them recently which is aren't we -- i hear from the ground a couple of people i speak to in china the turmoil at the top of the communist party, one of the communist party leader's wife is accused of murder, their instinct is to save. and when something happens, it changes in their daily life in any way, they will go back to cha their instikts are. the same way perhaps ours is to consume. that seems to be happening in china despite the fact we've had strategists sitting there saying, no, that's not it. everything is fine. i'm not a buyer or believer of that. these numbers seem to bear that out. >> my favorite strategist who does the eye on the market at

jpmorgan talked about -- refreshed our memory about the communist party which influences every aspect of life. we tend to think they're such great capitalists that the communist party no longer plays a role. i agree with you. there's a crisis of confidence in china. i see growth slowing to 6%. i don't want anything to do -- >> 6%? >> 6%, i think. inflation's come down. maybe they can do something. without some turn in europe where they sell a lot of stuff, i just don't see it happening. they can dunk the heck out of stuff here. it's just not influential enough. europe, that's a big market for them. 20% of their exports. >> if we're in the low 8% in gdp in china at this point, we're just seeing more data points about the consumer pulling in, if you extrapolate that with your belief that growth will be 6%, that means we're going to be in a world of hurt when it comes to corporate earnings that are reliant on demand from china. >> we will not be in a world of hurt when it comes to coca-cola.

or pepsi. we will be when it comes to caterpillar or cummins. >> or how about yum? or starbucks? >> honestly, i think starbucks is still in an opening phase. yum has got a lot of saturation over there. people do get married at kfcs. kfc is also a good housekeeping seal of approval in terms of food. china's slowing. it's not going to -- the world is slowing. brazil is slowing. india is slowing. russia is slowing less. turkey is slowing less. i think when you -- the world is slowing. the world is not collapsing. the world is slowing. >> if china is slowed markedly and it is the world's second largest economy, if most of europe? a recession and we are certainly not moving along quickly, aren't we going to be a bit more concerned even than we have been about growth overall? >> who's we, tonto? i'm in con ed, okay? i'm recommending -- i'm recommending -- wow, look at

that. a & e agrees to redeem nbc news 15% filing. close to home thing. any time nbc is always mentioned i immediately refer to david. he seems to like to talk about the mother ship. >> i'll tell you, valuing a & e at close to $20 billion or whatever that may be, $3 billion for 16% is an enormous amount of money. especially given the te tonic changes taking place in cable networks overall as viewers do seem to be moving away, watching on other devices that are not measured perhaps as well. that valuation would not -- that's a '90s valuation. >> that's an american company. when you have american companies -- look. >> i say hit that -- >> all i can tell you is if it's made in america -- >> i don't know what the multiple of ebida is there. i'd want to find out. go all the way. take your $3 billion and run. >> look, american companies that sell into america that don't have foreign exposure, i mean, i would rather buy duke.

and the duke story just gets deeper and deeper. this is jim rogers, the guy who used to have the tv show. i got to tell you, it's a utility that's doing incredibly well. i don't think there's anything wrong with telling people to baybuy utilities. >> are you afraid there's going to be an investigation into what happened in the board room? this guy is going to be testifying in front of the north carolina utilities commission. >> you always hear investigations. in the end people turn the lights on. >> they do. they do turn the lights on. >> they don't switch to cables because there's an investigation. they don't say, boy, i'm going to swelter here because rogers may be -- >> nobody believes the utility commission will overturn the deal. but they could add some onerous restrictions of some kind. certainly something i think shareholders should be aware of. this story has yet to play out fully. >> excuse me. they should be aware of it? what is that? >> why recommend duke when there are plenty of other utilities that supply electricity that

people don't have to use candles or whale blubber? jim, come on. >> what i'm saying is -- >> don't knock whale blubber. great burning properties. >> i'm saying i'd rather recommend the worst, most turmoiled utility than i would recommend a company that's a big supplier to china. i'm using it -- i know comparisons are odious. my mom taught me that. a utility that's based in america is going to do a lot better than a company that spent a fortune trying to sell into china. that's what i'm saying. >> got it. >> it's better to be in the worst house in that rather kind of rodeo drive, beverly hills region than it is to be the best house in a neighborhood you may not want to live in. >> all right. let's talk about another bad house out there. beleaguers blackberry maker research in motion. rim has been beset by weak financial results, delay of the blackberry 10 and a stock that

has plummeted almost 75% in just the past 12 months. but the company is not in a death spiral, jim. >> that's what thorson heins says. >> i feel much better. this company is a close architecture -- once they start losing money -- are you going to -- no. >> he's going to defend. i can tell. >> i can tell. >> here it is. would you really be shocked to walk in one monday morning and find that some company out there paid a 30% premium to buy rim because, a, it's got a good amount of cash still on its balance sheet. i know it's going away quickly. and the value of the ip, why i don't what it is, there are others who believe it is significant. google bought motorola mobility. this is not something we have not seen before. we've seen it. >> i think microsoft should. 70 million subscribers. that keyboard everybody loves. the nokia microsoft combination has not worked.

>> in fact, that number might be that -- might be down at three. then somebody pays four. which, by the way, is a 33% premium. still. that day could come. i don't know when. that's the only question if you're an investor, i think. >> sony, look at the death spiral in sony. nokia under $2. still too early to buy nokia. once they start losing money -- >> i know. this is a $4 billion market cap. >> a lot of cash still. at the same time, you have indicated, david, that management's not willing at this point at least to entertain the possibilities. >> the conversations i've had with their bankers have indicated at least there is still -- they are stubbornly clinging to the idea of a turnaround and other restructuring moves they can make. not selling the company. that can change pretty quickly. >> the company is not located in auschwitz. it's located in waterloo. moscow would be worse.

napoleonic references are in keeping. >> on that note, coming up a live interview with general mills ceo ken powell ahead of the company's investor meeting today. what the future holds for the home of brands including pillsbury and green giant. good day for the bulls. dow looking to add about 66 at the hope. more "squawk on the street" straight ahead.

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hedge fund manager david einhorn remains bullish on apple. he explained why earlier this morning on "squawk box." >> i think the stock is very, very substantial i undervalued. i think it's the -- you know, it's the best big growth company we have. it is the dominating brand in the area that it is. and it trades at a multiple below the average in the s&p 500. i think that's extraordinary. >> he also said it's destined to be a $1 trillion market cap. >> extraordinary interview. i think einhorn does incredibly high quality work. i know he would have done higher quality work at the mets. they don't seem to need him. >> very close to getting. it fell apart. >> i do want to point out, one of the great things about what einhorn is talking about, if you just kind of open up what he's thinking, apple is a destructive technology. only the paranoid survive.

he talks about these 10x tsunami companies. one of the things that's incredible, apple keeps coming up with it. i still see them dominating on ipad. i still think we're going to have itv. i know there could be a gap with the iphone. i think that you can look through it because of the low valuation. >> all right. coming up next, it is cramer's mad dash ahead of the opening bell. you want to hear about the stock that is on his radar. and let's take a look at futures one more time on this tuesday morning. preparing for an up day here in the markets. stay tuned. tdd# 1-800-345-2550 the spx is on my radar.

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five minutes before the opening bell. time for cramer's mad dash ahead of that market open. we're going to talk mako. >> not a three for two split. this is an actual stock down a tremendous amount. don't go mako. it looks like shark week here. shark day. one of the biggest tisdisappoin i've ever seen. a lot of people think intuitive surgical. they have a robotic arm for the knees. always a great baby boomer play. hips. resurfacing. david, this is embarrassing. they had already missed the previous quarter. yet everyone stuck with it. >> all the analysts stuck with it only to get crushed now. >> and yet some -- i mean, goldman sachs. i don't know. maybe this is a value added call. goldman going from -- to neutral from buy right here with lowered

guidance. they lowered the price target from 36 to 17. >> no help whatsoever. goldman coming out and saying since they added this to the buy list -- by the way, they had a good price. added over a year ago, 14 months ago, up 4.7%. they downgrade the stock after the market closed. there's no way you or i could sell that stock. they're going to say there was a gain. you're going to be a seller at 15. of course, they recommended it when it was 23. >> we'mako -- >> i'm sure they're doing all their numbers. absolutely no use. >> you were the first one on tv to ever say it. it was remarkable. introduced the concept of the penguins. the question is, do sharks eat pengui penguins? this shark is eating portfolios. i have rarely seen a company miss once and the cockroach theory which is what we call learned, misses twice and the analysts stick by it. because they want so much to be

in the next intuitive surgical. you want the next intuitive surgical? it's intuitive surgical. >> there you go. >> da vinci. they thought this was matise. no. it was actually a picture postcard. all right. three minutes away from the hoping bell. stay with us. [ male announcer ] what if you had thermal night-vision goggles,

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and the tuesday trading session has begun here at the big board. ishares celebrating the tenth anniversary of the first fixed income exchange traded funds. we'll be speaking to the head of ishares fixed income strategy in about 50 minutes. as the nasdaq, staples declares today as official first day of the 2012 back to school shopping season. time to buy backpacks, protractors and things like that. >> can't we have a couple of days off? school just ended. >> yeah. well, no, sorry. i first went to the tech sector to see how it was trading given amd as well as amat. if you're taking a look at the

stocks, for instance, the stocks is actually trading lower by .5%. we are seeing some softness amongst chip makers. amat is down -- >> 4%. >> about 4%. 3.5%. >> intel was supposed to be -- intel has that fabulous yield. does have a product hole. they've got new plants. a bunch of new plants. when they first opened those plants initially the yield was very bad on semis. this may not be a breakout quarter for intel. i certainly don't expect it. you would have thought intel would be down more. >> definitely. crude oil trading lower. energy stocks are catching a bid today. we are seeing some gains here for exxon mobil, conoco phillips. if we take a look at some of the other oil service companies, schlumberger higher as well. a slight bid. a little break there between crude and brent. brent is down much more than wti and energy stocks. >> i don't -- a lot of people try to call the bottom constantly now in natural gas.

let's see what the companies have to say. a lot of reversals this morning from early morning action. wolverine worldwide down very badly. now it switches. yum down a buck. now yum going up. i like a market where there are a lot of people trying to short stocks ahead of time. anticipating that you're going to see weakness in a yum. then they get slammed upside the head. it's just -- kind of it shows you every time you get too negative you tend to not profit as much as you should. after a couple days down. >> right. you know, we're at the very earliest part of earnings season. of course, we've heard from hardly any companies. a couple warnings. one in particular this morning from amat. in terms of multiples, in terms of where this market is having kind of hung in there, do you think it's overvalued given on what you're saying or bifurcated domestic versus international? >> if we don't find growth, a jobs program, put more people to work, we're going to continue to

get weak employment numbers which makes it really hard for me to think the second half is going to be that great. >> and a fiscal cliff. if there is no resolution on the fiscal cliff, don't you think corporations are going to further pull back or restrain from spending and/or hiring at this point? if there's no clarity on that? that's going to be a drag on gdp in the second half. >> there's not going to be any clarity on that. it's hard to imagine at least before the election. then whoever is president, whether it's obama again or romney, they're going to have their work cut out for them for that six-week period. or whatever -- i mean, obama -- well, obama's still going to be president regardless even if he loses. the question is, can you do anything with a lame duck congress? the whole thing is hard to imagine they're going to get anything done. >> very frozen. at the same time here we go. techs leading the market. financials leading the market. the counterintuitive nature of what happens in this market is confounding a lot of people. people take their cue from apple h is, of course, as i mentioned the great destroyer of everybody else. rather than their cue from amd. that's positive.

amd is a never do well. nvidia up five cents. everyone wants to be optimistic after three days worth of decline. that's a great thought. but the imper cal nature of what we're hearing from companies makes me feel like i want to pull back, not get excited. >> yeah. apple, for one, we should note. b mrk o out with a research report today lowering its revenue forecast for the next two quarters but raising it for 2013 saying the drag before the iphone 5 is going to be greater than what they had anticipated but it will pick up, hence the raising of 2013 eps and revenues. a couple lean quarters ahead. >> the incredible defense of the rails almost immediately on top of patriot coals. >> they are trading higher today. i was looking at csx. csx is actually the sixth largest creditor named in the patriot coal bankruptcy filing. jeffries came out with a defense this morning saying it's not

concerned. it's of minimal impact. we are seeing the rails trade as if nothing happened. >> this union pacific is having a remarkable year. remember, the rails do matter. ups has been doing very well. fedex, remember the big disappoint with fedex? the stock is higher. i'm pointing these out because to stay negative has not been a great bet. not been a great bet. >> short coal stocks has probably been a good bet. >> it has been. >> if it continues, i don't know what the coal situations look like in china. i bet they've got plenty of it. >> one of the great ironies this year, we try to shut down coal plants which then causes too expensive maybe to continue to build some things in our country. so then the chinese threw globalization, they pick up these jobs. they can pollute. whatever they want. that's okay. we're worrying about greenhouse g gases. they can't produce enough. there was a manufacturing survey came out about one of the fed reserve divisions last week.

they talked about the loss of jobs. sewing and cutting was the biggest decline over the last 20 years. these are jobs that went to china. >> right. >> where they can pollute the heck out of the world. >> they can. it's not as though they're not concerned about environmental issues in china. there's growing concern. particularly when they wake up on days and the sky is completely orange. that'll freak you out a little bit. >> it just hasn't impacted the communist party's attempt to try to put as many people to work as possible. here's caterpillar up a dollar. despite the fact that china's slowing. these are very hard to compute, people. very hard. >> all right. let's head over to brian shactman who's here on the floor in for bob this morning. >> good morning, melissa. fascinating conversation you're having. with the railroads, they're trying to replace their loss in coal traffic with a lot of intermodal. it's working for some of those rails. up 92 here. strong open. everything up in terms of sectors. maybe a lack of strong negative headlines. i wanted to quickly recap some of the earnings related news here at the nyse. alcoa obviously not necessarily the broader snapshot of the market. but applied materials coming up

this morning with that profit warning net sales could be down double digits. the cautionary overseas tale is amd as we've been talking about, they were supposed to be up 3% on revenues. going to be down 11. china and europe late in the quarter, that's the key, late in the quarter which means maybe the second half of 2012 could be a problem there. finally, wd-40 which we haven't talked about a lot this morning, they saw a slowdown in the u.s. they had an earnings miss. their full year will be impacted as well. talk about the impact of some other things. how about corn? you know, i'm a former print guy. i love headlines. the ed headline of the day from ken goldman at jpmorgan. children of the corn, scary times in proteinville. he downgraded tyson, lowered estimates on smithfield and sanderson farms. in the month since he last chimed in with a note, corn is up 40%. how can that not have an impact on their bottom lines? gold is up. gold stocks are up even more today. take a quick look at some of the names there that are doing well. anglo gold, armny, barrick doing

well. airlines, southwest gets a nice upgrade. oil upgraded to buy at stern ajy. us airways looking closely at a four-year high. sorkin riding about their tussle with amr. back to you. >> us airways one of the home run derby stocks we're doing on "mad money." trying to figure out which of the best stocks for the second half of the year. you can still vote until 11:00. u.s. air one of the most remarkable performers. head to the bond pits. rick santelli at the cme in chicago. >> hi, jim. i'll tell you, it's a day to pay attention to for sure. now, if you look at a one-year chart of 5-year note rates year to date, the reason i picked 5s is because that maturity yesterday was flirting with a fresh, historic low yield close around 62 basis points. it's hovering at 63 right now. if you look towards 10-year since june 1st, you can see that we also came close.

we're testing 1.50 on an intraday basis yesterday. still a handful of basis points away. it does underscore all the variables, whether it's a hangover from weak employment report, whether it's what's going on in europe. let's get to europe. if you look at a 2-day of spanish 10-year yields see yesterday zip over 7%. today zipping back down a bit. a lot of this has to do with the bailout funding. you know, that $100 billion euros. about 123, 125 billion in dollars. they'll speed up $30 billion of that maybe by the end of the month. my last story, financial times pointed out the highest court in germany is set to rule on the european stability mechanism. whether it's constitutional. whether it's legal for germans to participate in the bailouts through that process. so we want to keep our eyes glued to another big supreme type court decision. jim, back to you. commodity features, trading commission holding a vote today that will have a big impact on the over the counter derivatives

market. big banks that trade these contracts. mary thompson is here with the latest. >> this morning's vote a big step toward greater regulation of the over the counter derivatives market whose domestic notional value estimated at $300 trillion. also lead to lower profits for the big banks that rate and trade contracts. by defining a swap regulators paved the way for 19 new rules govern b otc derivatives to be put in place, most by year end. it's easier to say what regulators decided is not a swap, including insurance products issued by entities passing a provider test. security forwards are contract promising the physical delivery of an asset and consumer transactions like interest rate locks, earned mortgages and commercial transactions like fixed or variable rate loans. broadly defined a swap is a krot exchanging cash flow from one security for another. the most common being interest rate swaps. these are standard contracts. otc swaps are custom, though. negotiated between two parties. and they aren't cleared an an exchange. regulators want to change this

to bring greater transparency to what is considered a very opaque market. in defining a swap, the firms, mostly banks that trade more than a billion of these swaps a year now will soon be reporting on all of their otc swap activity to regulators, keeping daily records and registering with regulators. for the major players in the business including jpmorgan, goldman and bank of america the greater regulation and reporting requirements mean smaller profits in this very big business. when these contracts are eventually cleared on exchanges, sanford bernstein analyst thinks hurting a very healthy 35% pretax margin the banks currently earn on these contracts. back to you. >> thank you. great. tough issue we have to understand. the latest news in energy and metals of which there are a lot. sharon epperson at the nymex. >> a lot of the global macro traders were following what rick was talking about. that is how spanish yields have come down overnight.

that impacting some of the risk appetite out there, taking a little of that risk off the table. we are looking, though, at lower oil prices and significantly lower brent crude prices. a lot of that has to do with the fact that the strike in norway that had been going on since june 24th has ended. and that production shutdown was averted. a lot of traders said this was bound to happen. it did happen at the 11th hour. in fact, we are looking at brent crude prices that have topped $100 a barrel now below that level down more than $1. we're also watching what's happening between the spread between brent and wti. that has come in. traders are saying could come in more significantly. it's already down about $2 from where it was yesterday. we're also watching gold prices because gold had topped the 1600 level. some traders said it was a bit of short covering. others said that perhaps a little bit of better sentiment about what is going on in europe and what is going on in spain. the thought that perhaps they will not have to liquidate gold to help prop up some of the banks there. that may be helping the gold sector. but other traders saying, hey,

until we see gold prices above that 1640 level, not going to be bullish gold right now. we're still waiting to see if we're going to break out of the range that gold has been stuck in, guys, for the last two months. back to you. >> thank you very much. research in motion is reportedly putting one of its corporate jets up for sale, bringing us to this morning's squawk on the tweet. what exactly would be the unique features of a blackberry airplane? tweet us @cnbcsquawkst. we'll have your responses throughout the morning. black track ball as a controller. >> i'm sure our viewers will be extremely clever and nasty. >> call it the microsoft? >> we look forward to getting all of your responses out there. coming up next, general mims chairman and ceo ken powell. what is he saying about the economy and rising grain prices before his company's investor meeting? he is talking to us here at "squawk on the street."

first as we head to break, take a look at this morning's early movers on wall street.

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♪ first on cnbc, let's welcome ken powell. chairman and ceo of one of my favorite companies. food giant general mills. he's at the nyse today to present his company's fiscal 2013 plan to investors. ken, first, great to have you. >> fwogood to be here. >> do we address the fact the usda says corn problems continue to deteriorate to levels not seen since 1988. does that have to be addressed right up front? >> we always hedge our positions going into our year. and so -- we're in what we call the too too season. too wet, too dry, too hot. we're going to wait until later in the summer. we'll see how things go.

we are watching those prices. the other thing i'll tell you, jim, grains are 10% of our overall ingredient basket. we're a light user of corn. buying energy, buying oil, buying packaging. we've got a lot of costs. this is a relatively small part. so far we're going to just stay calm here. >> let's talk about that. because i think people don't understand your true costs. which is more important? paper board for the boxes you use? the plastic containers? or the shipment costs based on oil? >> it's a big market basket. there's resin based, packaging, paper packaging. we're spending half a billion dollars a year just to move our products around. so energy prices are crucial for us. so we're watching them all. we're buying billions of dollars worth of all these things. there's the labor in our plants. so it's a big basket. we think it's going to be 2% or 3% this year. i think the key, jim, is that last year it was a little over 10%. very, very high inflation. we're very confident that it will be much more moderate level

of inflation this year. >> ken, i want to ask you about your game plan for the u.s. yogurt business. are there analysts out there who say 40 new yogurt products in the full year 2014. at the same time pepsi announced a joint venture which will put yogurt immediately on store shelves. is there enough store shelves? are you worried you're coming late to market and crowded out? >> it's a great category. growing 5% to 10% in the u.s. it's exciting for us. it's very exciting for retailers. and so what they are doing because they see it as a growth opportunity is they're expanding the space in their grocery store. and so there's more space available. we're coming in with new products. they like that. because it's such high growth, we're seeing other competitors enter. you know, i would say the fact that there are new competitors coming in, lots of innovation, expanding shelf space, this is an indication of an exciting, high growth category people want to participate in. it's a good thing. >> the 40 new yogurt products, what's the most interesting in your view? what will be the biggest

catalyst for this category? a lot of analysts out there say your future, general mills's future depends on the yogurt business. >> yeah. it's a big company. yogurt's important. but we've got a gigantic cereal business and snack bars and soup and a huge international. so we're very diverse. i think the most interesting product we're going to launch is a product called yoplait greek 100. the light segment of the yogurt category. yogurts with fewer than 100 calories is the largest segment on a unit basis. there really isn't a light yogurt in the greek segment. general mills is launching a terrific tasting product with all the protein you want in greek but 40 or 50 fewer calories than other brands. we think that's a good play. consumers are going to like that. this product will be endorsed by weight watchers. we think that's going to be a very, very good addition to that greek category. >> mr. powell, cereal partners worldwide, very large joint venture with nestle in place for many, many years. >> over 20 years. >> what are you seeing in the

international markets, particularly in europe in terms of consumer demand? >> so the cereal category in europe has slowed a little bit. and so we're seeing, you know, in those developed european markets, we're seeing a little bit of the same consumer sentiment that we see here in the u.s. they're pretty cautious. you get outside of europe, you get into china, south asia, south -- brazil, and we have high single digit, low double digit growth in the cereal category. so you see the food business playing out in cereal much as you would see it play out in other categories globally. slow in europe for the reasons that we understand. faster elsewhere. i will say that our business in europe, the general mills wholly owned business which would be products like haggan daz ice cream, old el paso products, we are enjoying very strong growth in europe. we had a terrific year last year. we're bucking that trend.

it was all on the back of innovation. terrific new haggan daz products last year. in a climate where consumers are a little bit cautious, if you bring good, new, innovative products they respond. we get the growth and dynamism we're looking for. >> is it your sense that people are trading down in europe in the cereal business or they're simply buying less cereal? >> the market is still growing in europe. but they're buying a little bit less. let's keep it in context. we've got growth in the cereal category. we've got growth in the cereal category around the world. we have 2% growth in the cereal category in the u.s. last year which is about average for the last ten years. so we're still seeing these categories grow. you asked me what's our view of the consumer? you know, still cautious. still cautious. looking for a slow recovery. >> china. we're hearing about slowing in china. you're accelerating in china. how is it going? >> it's going well. we had another very strong year there last year. strong double digit growth. our core grands there are, again, hassen daz ice cream

where we have a wonderful business. we have a very large -- >> keep saying haggan daz over and over. >> these are good things. we have a wonderful frozen food business in china called wanchai fairy. dim sum. egg noodles. this sort of thing. market leading wherever we've launched it. very high quality but hard to make. chinese consumers are convenience oriented. mom and dad both typically working. they don't have time to come home and make these things by hand. so we're making that convenience play in china just the way we've made it all over the world. business is great for us there. >> one quick question. cheerios are eaten in my house. they do not have high fructose corn syrup in them, i believe. have you made a concerted effort to remove that given there seems to be growing consumer concern, perhaps, about that ingredient? >> that is an ingredient we're watching. we're a marketing company. we get paid to listen to consumers. there are consumers who want to avoid that.

selectively over time, we're reducing or removing that ingredient from some of our products. >> thank you, ken powell. chairman. you've got your big meeting today. chairman and ceo of general mills which just inkrooesed its dividend. you've done 12 times in the last 8 years. >> never missed a beat in 113 yoors on our dividend, as you know. thank you, guys. appreciate the time. thanks a lot. much more "squawk on the street" straight ahead. up next, we let cramer loose. what can we expect from the unchained market maestro? six stocks in 60 seconds, when "squawk on the street" returns. r instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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time for six in 60. let's start off with sony. why downgrade it now. >> pathetic. no value whatsoever. stick with it at this point. i don't like sony one bit. >> american express an upgrade at nomura. >> this stock is red hot. hard to imagine how bad the economy can be if this stock is on fire. >> southwestern energy gets a bottom call. >> everyone wants to call the bottom in natural gas. until you see a u.s. government official really endorse it or romney, an oil guy, forget it. it's a trade. >> yahoo!.

bernstein says it could report stronger than expected earnings. >> it looks like they're talking about breaking and unlocking agent value. >> keep talking. black and decker. morgan stanley says getting a tractor. >> this is a dangerous call. they have a lot of europe. >> southwest air upgraded. >> boy, i have -- one of my stocks in the home run derby tonight for "mad money" is u.s. air. along with a couple others. polls close at 11:00. @jimcramer twitter. you've got to vote. right now i think the winner, i'm looking at maybe, if you don't like it, vote now, arena pharma. >> really? >> people like this arena far may. >> what we got coming up on "mad" tonight including home run derby? >> globe. they make silicone. >> "mad money," 6:00 and 11:00.

mr. cramer, see you back here tomorrow morning 9:00 a.m. a lot more "squawk on the street" coming up including coverage of the rim annual meeting. they've got their pitch forks out. we'll have that 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. ♪ the mercedes-benz summer event ends july 31st. ♪ what ? customers didn't like it. so why do banks do it ?

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let's get to it. road map for the hour. judgment day for research in motion. ceo thorsen heins comes face to face with shareholders at the company's annual meeting. shares trade near a nine-year low. has the blackberry maker run out of time and hopes of a turn jrn around? sfwl staying in tech, piper jaffray addressing the ipad rumor. saying the new small ipad could clear the way for any and all android differentiation. what does that mean? who knows. we'll sit down with the man behind what could be a big call on apple, gene money stunster. we'll speak with a key player behind a launch.

blackrock's head of fixed income strategy for his take on u.s. bond markets. let's talk about what's happening with rim. thorsen heins coming face to face with shareholders for the first time at the company's meeting. jon fortt with more on that. >> i'll try to figure out what this all means. he's got a tough job facing shareholders this morning. no doubt. that meeting getting kicked off just now at this hour. i tried to break down numbers to get a look at how deep the hole is rim's got to try to dig itself out of. look at how the stock has done. you mentioned the nine-year low. let's take a look at how many blackberries they're selling. just a year and a half ago, they were just about even with apple as far as just volume of phones. then last quarter, rim sold just 7.8 million units where apple sold 35.1 million units. i mean, you're looking at more

than four x from even just a year and a half ago, just for a sense. it's actually worse than that. take a look at these in your opinio opinions. year and a half ago average price was $317. last quarter $212. apple sells iphones for over 600 bucks each. blackberry asp's dropping by a third over that period of time. that just gives a sense not only are they selling fewer blackberries over that period of time, but they're having to heavily discount in order to sell the ones that they are. of course, they've got to get this blackberry 10 operating system ready. that's what has slipped. it was supposed to be ready late this year. that would have perhaps been ready in time for the holiday season. now saying it won't be ready until early next year. even trying to spin that, make it sound like a good thing. like the carriers didn't want it to compete with all the other phones. you want to be out there competing with all the other phones if yours is really better so people buy yours and not your

competition's. so that's just going to make it all the tougher for them. he's got to get up there and give some kind of reason why shareholders should stick with him. >> jon, i would imagine he and a lot of other blackberry managers will face a lot of questions as to why stick with the strategy? last week thorsten made a comment we are not in a death spiral and there's nothing wrong with the company. you're mentioned they're trying to spin the delay of blackberry 10. we've been getting calls from the carriers, we want the delay because we don't want to flood the markets with all these phones come christmas time. this seeps soms sort of off -- >> crazy. >> i'll say it. >> i'm on with you all the time on "fast money" on these calls. you know that analysts and investors absolutely hate double talk. they like for management to be straight with them. to tell a consistent story. heins has had a tough time doing that. when he came in he said this isn't a turnaround story.

a couple quarters later he says now that i've gotten a look at it we've got some big issues. now he's coming back after doing layoffs saying now that we're planning to layoff 5,000 people, now the company's fine. nothing wrong with it. there's even talk they could face lawsuits at rim just because of the vacillating -- some investors feel like they're just not telling the truth. we'll see what comes of that. that's just what some people feel. surely, you know, they have their own reasons for optimism or they wouldn't be trying to run the company. >> that said, from very low expectations, it might be time to cover the shorts if you think that amazon or facebook need their intellectual property, jon. because we had a bounce thursday, friday and into monday morning. from a very low base. but we had a bounce. that might have been one of the reasons why. >> it could be. you know, every time rim falls a bit more, there are more rumors about potential acquirers. you've got to keep in mind, this is a company that's off by itself up in waterloo.

morale is not that great. a lot of the intellectual property it does have while it might be valuable is locked up in last generation technology, having to do with key boards, having to do with wireless radios. not exactly the stuff people are really battling over right now, h is touch interfaces and apps. so, you know, it's still kind of risky territory. you think about, yeah, i mean, it's -- i think in $4 billion market cap territory now. people look at hps by palm spent $1.2 million on that. >> that's for sure. obviously going to be a busy morning for you. stay with us. we'll talk to you in a wee while. jon fortt on rim. nokia shares hitting a new low. actually down about 2%. you should see that chart. back to rick santelli now. he's in chicago, of course. he's got the latest job openings data. rick? >> job openings and labor turnovers always two months in arrears. this is may. came out better than expected. 3.642 million. but what really matters is that

is 195,000 more jobs created than destroyed. it's always a balance between hiring and firing. but there's a fly in the ointment. last month originally 3.42 million was upgraded to almost 3.45. the previous month was 3.74. so last month's drop was dubbed the worst in four years. it is no longer. but this current number, 3.64 million, is still below two months ago, 3.74. last month revised up. we created 195,000 jobs. but we still haven't gotten back up to the february, march areas. but we're getting closer. back to you. >> thank you very much, rick santelli. back to rim here. dig a little deeper as the shareholder meeting gets under way. bring in the analyst at jmp securities who just a couple weeks ago upgraded rim to a market perform. alex, great to see you. your primary justification for that upgrade is valuation is trading one times, i think, tangible book. at the same time its business

seems to be in decline. what are you seeging to offset the decline in business? jon had mentioned, for instance, declines in average selling prices we've seen and the delay of blackberry 10. >> melissa, not necessarily anything to offset the decline. jon did a great job of laying out the hole research in motion is in. i would just add that that hole is getting deeper because of the competition it faced from apple, samsung and others. what i think is also a part of this is simon also laid out is that there are other potential technology partners out there. and the company is now, it appears, open to strategic alternativ alternatives. whether an outright sale of the company or changing of the business model -- >> i'm sorry, alex. what makes you believe the company is open when just, i think, last week the ceo said there's nothing wrong with the company and we're in the midst of a turnaround and the chief marketing officer is saying that the blackberry 10 delay is actually a good thing because it gives carriers more time to market the thing? >> what else is mr. heins going to say at this juncture? >> we're open to all options.

>> i think they have said that. they have said that. they've hired outside advisers. there are potential strategic bidders. look, for example, what intel did yesterday. intel put a $4 billion stake in advancing the next generation of process technology. that's research in motion's market cap right there. there are technology bellwethers out there that could come in and try to make something of the ip research in motion still has. that's why we're at a neutral rating on the stock. we're not saying buy it here. we think there are strategic alternatives. >> let's be clear. one of them -- the last ceo was said to make was when he suggested one of the consumer lk tronices divisions was up for sale and therefore there was this whole discussion about the unit -- that is not what you say, alex, necessarily, is it? >> exactly. he's in a tough position right now. he was dealt a very difficult hand to play right now. and i think that he's acquitted himself reasonably well. he's certainly made some

missteps. but i think that research in motion has got to press forward with developing blackberry 10. there's no doubt about that. at the same time they need to be open to strategic alternatives. i guess i've seen nothing in the company to suggest they're not open to those alternatives. >> alex, i'm trying to think of a company recently within consumer electronics that has come back from something like this. is there an example that we can cling to? because it would be a fantastic way to make money. >> it's so funny. dave and i looked at each other and we said apple. >> that's exactly -- >> decades ago apple came back from the brink. >> apple was on the verge of bankruptcy. >> that's what i was going to say as well. i don't think it's much discussed. i think microsoft saved apple long ago when it made word compatible with maces. that saved the company right there. >> the currency, and i've met him, is no steve jobs. let me put it politely. he is no steve jobs. >> i think that's fair. i'm not trying to say that this is the next apple computer either. >> right. that's a good point there.

ibm also has had a tremendous turnaround. >> i've been wondering and asking hedge fund managers, some of them short, some long years ago. this idea some day we wake up on a monday morning and see somebody come in. put a little behind that for me. ip value there. cash on the balance sheet still going fast but they've still got some. what would be a realistic number if we were to come in one morning and say, okay, it is being bought. by whom and at what number? >> right here in this range. i think it's difficult to put an exact figure to it. let's not forget fwoogle stepped in and saved motorola from a similar fate to the tune of $12 billion. let's not forget the stake that microsoft has put into nokia. they certainly aren't finished trying to make inroads into the mobile phone market. let's not forget that google is out there and what they just did, announcing the nexus tablet. they're in the hardware game as well. they might be interested in some of those assets that research in motion has, for example, push mail. i think there are potential partners out there. >> i obviously demonstrate my

roots from europe here. my long time affection for nokia when it was doing so well, does nokia get bought before rim? if you pick over the carcasses of these two companies, which is the most tasty? >> i don't know that i would be picking between the two right now. i know that there are ample players with ambitions in the smartphone space. there is no larger technology market out there right now. and i can look abroad to a linovo that could be interested in a research in motion. i think that microsoft could be interested in bolstering the move it's done with nokia. could use both. it has the financing capability to do both. i look at google with ambition in the space. i think there are a number of potential playplayers. all of them face one common threat. that's apple and the momentum they've got behind them. >> alex, thanks for your time. next on the program, semiconductors. applied materials coming out with another profit warning.

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take a look at the euro

against the u.s. dollar. just recently hitting 1.22. here we go. 1.2259. the lowest level at least since july 2010. its previous low was 1.2266 intraday. we've reached that level with the euro trading down by just about almost .5% at this point, simon. >> when i last looked at the european stock markets, actually, they were doing reasonably well today. it's a kind of an interesting middle ground. you've got the disappointment from the summit and the reality of what we saw actually bleeding through. people realizing they hadn't done a deal and they're squabbling amongst themselves. it's interesting we're this low. some would say why haven't we broken lower. that's another conversation. ten years ago the world's first fixed income etf was launched here on the new york stock exchange. fresh off ringing the opening bell today is one of the men who helped develop it and still develops one of the fastest growing parts of financial services industry. matt tucker, head of ishares

fixed income strategy at blackrock. good mornmorning. >> good morning. >> big day for you. >> big day for us. >> ten years ago you launched the first etf. you're coming out today with another big call that over the next ten years etfs, fixed income instruments, will accelerate. they will be six-fold. the volume will be six-fold what it is now. $2 trillion. why do you see that growth ahead? >> look at the last decade. we've seen tremendous growth in fixed income etf usage. what it's done is allow all investors to go and access fixed income market in a way they couldn't before. they can see the fixed income market on the exchange. trade the exposure they want. think about where this is going. etfs are taking their place alongside individual bonds, alongside different derivative instruments, alongside funds. another way to invest in the fixed income markets. >> you're going further and further afield to mop up other parts of fixed income around the world? >> that's part of it. there's a global expansion story. it's also about access.

think about the challenge every investor has in the fixed income market. for most people they can't actually see the fixed income market realtime. they can't get a good sense of a two-sided market on individual bonds. this is a way for everybody and a much more democratic way on the exchange to access fixed income. access the bond market. >> more controversial, i see you say here you also believe there's likely to be a shift in investors holding to a greater proportion of debt. does that mean you think that people will hold less equities and more debt? if so, why are you saying that? >> i think it's the story of demographics. look at the population. this is the story in the u.s. this is the story abroad. you're seeing many more investors who are ageing and who have more of a need for income. as part of that source for income you're going to see -- >> in a low interest rate environment from fixed income? >> i think they're going to need the safety, need the income in some form. there's definitely the case we may see rates rise at some point. we're going to break out of the low range. that's more i think of kind of a cyclical trend. the long-term trend, kind of the structural change going on here is investors needing more income

because they're more of an income generating portion of their life. >> i want to ask you about rates. 10-year treasury yield. could it breach 1%? >> i think it's possible if you start to see some sort of dislocation. you know, why rates are low. you kind of think of what is driving it. you definitely have a challenge with u.s. growth. challenge with inflation. that's keeping rates low. you also have these two significant forces. europe, i know you guys talked a lot about. causing concerns for investors. you're also seeing the federal reserve obviously stepping in and buying treasuries. if one of those things changes, you could see rates actually start to rise. but if the conditions fwet worse, whether it's in europe, whether it's the u.s., you could see rates even go lower. >> what flavor of bond etf right now is most popular seeing rates could even go lower from where they are now? is high yield still seeing a lot of inflows? what part of the structure are we seeing the most flows into? >> generally an income story this year. high yield part of it. hyg high yield ishare. taken over $3 billion in year.

the fund taking in the most, fastest growing is -- >> blackrock itself, within the organization, your growth as passive investors has been it shall -- you are the product of the takeovers. that's been the flip side of some would say the demise of the actively managed part of the business. $40 billion of outflows last year. i think the u.s. mutual funds are now trailing 54% of their peers year on year. with so many big departures, three of the original eight founders remaining in management, do you think the divergence will continue or do you think fresh flood, fresh structure will turn it around. >> it was really about helping to adapt the firm to the new market. any firm like blackrock has been around for over 24 years has had to adapt to changing markets. >> passive, not active. active is dying in your view.

>> i don't know if active is dying. investors get caught up in this idea that it's indexed or active. passive or active. in reality there's a role for both. what are you trying to achieve? what's the goal for your investment? there's a role for index and active depending on what you are as an investor and trying to achieve as an investor. >> in terms of competition, the marketplace for fixed income etfs may grow. how do you differentiate not becoming just a commodity that's competing on price? >> i think it's a lot of things. one, if you look at who the manager is and how they run the fund. investors are becoming more aware of things like tracking error. a passive fund has a performance track record. investors need to look at the track record and ascertain whether that manager is doing a good job. look at liquidity. we have funds that are trading tlt, one of our other funds, 20 plus treasuries. trades over $1.3 billion a day. a lot of that liquidity is supported by the provider. we do a lot out in the market to help create the liquidity. i think you'll see aspects of the product like that, qualities that investors care about to differentiate them going forward. >> i'm going to think how you

guys have a party for the tenth anniversary of the launch of the first fixed income etf. >> a cake. >> alcohol? a dance? >> i'm starting to celebrate on cnbc, personally. everyone has their own way of celebrating. >> good answer. >> matt tucker joining us there from blackrock. we have news here that coca-cola has announced a two for one stock split. ko splitting two for one here. the stock trading higher by .5%. this, of course, has been a stock that has been doing quite well this year. its 52-week high is 79.36. just a buck off of that 52-week high. one of these internationally diversified consumer product companies. two for one split july 27th. okay. apple rumor mill, meantime, heating up with talk of a sleeker and smaller ipad set to hit the market later this year. find out why piper jaffray says the so-called mini ipad could grab more than 30% of the fourth quarter tablet sales from android. he's next. we take it on ours.

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all right. all right. welcome back to "squawk on the street." i'm brian sullivan with a market flash. keep your eye on viacom. downgraded from buy to neutral at ubs on growth concerns. that stock is down about 2.2%. ubs saying the stock is cheap at about 9.9 times earnings. they don't expect the stock to go up any time soon because of concerns about growth. they say they're going to try and lower versus their peers in terms of ad sales. there's also pressure on the kids category as well. ubs cutting viacom to a neutral from a buy. back to you. we should also mention on viacom, by the way, it has announced its affiliate greenwood tv set to expire tonight at midnight. we're talking about 20 million subscribers there. at risk of losing their 26 viacom channels. viacom argues its networks

account for nearly 20% of all viewing on directv. all though less than 5% of its programming expense. while we have a ubs downgrade, we also should note this does seem to be pressuring viacom shares right now. you see them down 2.2%. of course, another one of those potential battles between the carrier and the content provider. we saw it most recently with tish and amc networks. this a bigger deal, though. directv, more subscribers. viacom much more popular channels. we'll see how this -- whether they go to the brink as we we've often seen and it stays on or whether it actually goes off directv. >> it's not hitting directv, though. interestingly. >> yeah. >> i didn't mean to interrupt you. >> in terms of the ubs downgrade, in keeping with the theme of the penguins in the first hour, you pointed out before kids watch dora and some of the other properties on youtube. >> on your ipad.

there's been some studies of that. back and forth in terms of whether they're really losing nickelodeon viewership to the likes of netflix. nickelodeon ratings have been down for quite some time. it was interesting ubs chose now as the time to step in and say sell the stock. trading about ten times. not a bad multiple. we'll see where it goes. this is probably right now a near term concern for viacom. >> we're losing ground on the market overall. now up 32 points on the dow. we'll come back to what's driving the market in particular today. importantly, talk about apple. next on the program, gene munster will be with us to talk on his predictions about the much hyped new mini ipad. will it be the real deal kindle killer? we're talking tablet wars, next. stay with us. sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend.

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one hour into trading. here are the storying we are squawking about. 7:30 on the west coast. shares of walmart rising to new all-time highs up 33% in the past 12 months. jc penney slump continues. the the president store chain is one of today's biggest losers on the s&p 500. down about 5% to new 52-week lows. jc penney shares have fallen more than 40% so far this year. coca-cola says its shareholders have approved the company's two for one stock split. this will be the 11th split since coke's common stock began trading back in 1919. david? as we are one hour into trading, let's head out to chicago and get more on the market's latest moves. for that we're joined by ceo

jack berugian. this market seems to be taking hits and kind of hanging in there. how long is that going to keep going on? >> you know, david, it's been the teflon market. you and i know that. it tells you something. it tells you people are finding value in this market. throw the european crisis at it. throw the china slowdown at it. yet you still see it resilient. it's got to tell you something. the market gives you a message. does that mean we can't see some kind of foolishness come out of europe again that drives the market down one full standard deviation? of course not. i would always advocate putting positions on. we are in the beginning of an earnings season that's going to surprise people, especially with these lower expectations. more importantly we're going to start getting talk coming out of the fed. this is what i expect. that's going to push that inflation target out to 4%. more importantly, do something to force capital into the marketplace. you and i know that a zero interest rate policy is no good unless we actually see that capital put to work. i think we're going to start

seeing hints of that other the course of the next couple of months. >> what would give you perhaps optimism in terms of the earnings season, jack? >> another couple reports like alcoa that beat these lower than expected expectations. >> alcoa stock is down by more than 2% even on the beat expectations. the bar may be set lower. even for a company that ends up beating, it's not doing anything for the stock or the market for that matter. >> one of the things, melissa, to keep in mind you buy the story and sell the news. it's what we do as professionals all the time. i would expect to see alcoa significantly higher by the end of the summer. having said that, pay attention to multinationals, tech stocks. jpmorgan, apple are going to surprise people to the upside. this is the type of market that is sleeping. we have a saying on the floor of the exchange. you never sell a sleeping market. i think we're going to be seeing some surprises over the course of the next couple of months. >> all right. as always, appreciate it. thank you. >> thank you. smaller versions of the ipad may be coming to a store near you sooner than you thought.

our next analyst says apple will be tackling the two biggest unique features of the android makers with the debut in its of course prize and size. gene munster is with piper jaffray. he reiterated his overweight rating on the stock yesterday. gene, great to have you with us. another highlight from the report is that it could probably grab the smaller ipad, that is, could probably grab about 30% of android tablet sales in the fourth quarter. that's about 4 million to 6 million units. who's going to hurt the most if apple is successful in doing that? >> it's amazon. we love amazon stock. but i would say this. if i'm the people who are running their kindle division, i'm basically bracing for an atomic event as soon as this comes out. because they really have the primary market share with those smaller tablets. they're the ones that are going to get really sideswiped by this. >> david einhorn was on squawk box this morning. he made a good point about amazon. that is that amazon is willing to spend and be unprofitable in order to win a market category. are you concerned because we might see amazon's margins come

down as it engages in this, you know, head to head fight with apple? >> yeah. you know, this is a smart part. as far as amazons margins are concerned, if you look at kindle it's just a small part. less than about 5% of the overall impact to margin. if they get into a price war it's probably not going to have a major impact. investors are generally aware of that. i think if i'm amazon, the number i'm looking at is that right now apple's market share is 75% of the tablets. if they replicate their market share with these smaller form factors, their market share overall is going to go to 90%. and so how you compete with that from amazon's perspective is going to get -- you've got to do more than just price. >> gene, i'm sorry. could you just -- for those of us that are catching up on the back, could you just explain what this device will look like? didn't steve jobs say that a small tablet would never work before he died? >> he did say that. actually, i had a chance to ask him that. he said -- i took it home for a night and didn't like it. i think that --

>> why will this one work? what will this do? what would it look like? why would i buy it? >> we've surveyed people about this in the past. suhr risingly about a third of the people we survey say that they would actually like a smaller tablet. women tend to score higher on that. to answer your questions what it looks like, it's going to be basically the exact same thing as your current ipad but a little bit smaller. for whatever reason people have preferences about which tablet size they prefer. that's the feature. >> can i ask you a second stupid question? why do i care about the kindle? can we have a look at the one-year chart of apple here? why do i care about the kindle or the success of the android when both of those have done very well and yet apple has been able to rise 71%? are they really a threat to the future of apple and its market cap? >> i think it's a story that's good and it could get even better. as far as apple's threat to your point, exactly, they have 75% share today. this market's about 100 million units. it's going to be about 400

million units in the next four years. explosive growth on tablets. they've got a great share. easily concede. >> therefore is it about emerging markets? is it about somewhere else we may not be focused on and taking lower price points as nokia did for so long? i just had to put that in there? >> i think it's about having 75% share today and wanting to get to 90% share in the future. so, you know, it's good. it can get even better for apple as soon as they get into the smaller tablet market. >> gene, i also want to ask you about cannibalization which you did address in your note. could cannibalize about 10% of regular ipad sales. some other on the street have the rate as high as 20%. topeka's brian white. i'm curious whether or not you think in the longer run the cannibalization will be even greater if it is going to be essentially the same device but at a much lower price point? what's the advantage? what's going to keep people spending twice as much money for a screen that's three inches bigger? >> people do. i mean, i think that reality is

that small features cause -- can have significant impact on asps. so i think the reality is, is that yes, there's going to be some cannibalization. but the net impact is going to be significantly positive for apple to be in this market. so different people have different preferences. at the end of the day is that they need to be in that market to really shut that door against android. >> one last question, gene. where are we on the tv operation, apple tv? the new apple tv, not the existing one. >> i was in asia a couple weeks ago. i had met with a couple people who are close to the situation. the bottom line is we continue to believe that the tv is going to get announced at the end of this year and probably won't be out until middle to late next year. it's definitely real. the question is just the timing of it. i think that i wouldn't buy a new tv. that's for sure. you're going to have to wait a year. >> why wouldn't you buy a tv? what do you think it will do that existing ones don't?

>> solve the remote control problem. go to a friend's house. you've got a few remote controls. no one can understand the interface of the tv. the basic core, it's going to be the first tv with a really intuitive interface against -- across multiple verse kls like games, for example. >> do you know how many times we have analyst on that say it doesn't have the environment. that is the core. that's what steve jobs cracked. that's why people will upgrade. people keep saying something else. >> i've never seen simon so excited. >> you jumped out of your seat. >> do you know how many remotes i have? >> four, at least. >> in two rooms, yes. gene, thank you very much. 910 is the price target. >> thank you. >> he's very excited. it was a big issue. the remote control is a big issue. which one do you use? where is it? >> that is a big upgrade. >> i've got about seven of them. that thing broke that had the universal. >> are you willing to pay five times the regular tv, four times, whatever it is? a multiple in order to solve your remote control problem.

>> i actually paid $500 to have a logitech twice put in and it broke. >> i did that, too. terrible modern dilemma. >> it is. the problems we have. personal accusations in his press report. david faber sorting through those fiery share holer activists after the break with 13-d activist fund founder, kenneth squire. stay tuned. the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. ♪ i want to go

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♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection. ♪ all right. i'm brian sullivan. welcome back. here's a market flash. jc penney, you heard you talk about it earlier. hit the headlines. did a little more digging. credit suisse piling on jcp. they said second quarter sales

look to be tracking, according to them, even worse than the drop in the they've also doubled their loss estimate to 38 cents a share for jcp. credit suisse blaming in part poor messaging on the part of the management. also noting, guys, apparently some venders are getting ticked off at jc penney for either ordering late or canceling orders. this stock now down 43% in just three months. you know, at some point ron johnson may turn this thing around. but right now stocks getting whacked. it looks like the company is in disarray, at least according to credit suisse. david faber. >> thanks very much. very interesting you mention jc penney. a big position of perching square. carl icahn on the offensive against forest labs.

the, quote, die nastick nature of his succession plan. soloman fighting back with a detailed rebuttal of his own and his own qualms with mr. icahn. ken squire joins us to talk about what's rarely boring activism. you follow it as closely as anybody. let's start off with forest labs. people may recall last year icahn lost. here we are again. he's after it again. where are we? what's going to happen? >> icahn lost last year primarily because he got -- the company got iss's recommendation. even though they recommended with the company, they kind of railed against their corporate governance and against their performance. the company replaced three directors right before the proxy fight last year. and made some promises about corporate governance improvements they'd be making. a year later now, performance is still underperforming their peers. they haven't followed through on any of those corporate governance promises. so i think it's going to be very

different this year. >> you do? you think icahn's got a decent chance going into this meeting, it's an august meeting, correct? >> it's an august meeting. i think icahn has a very good chance of winning a couple seats at the meeting. >> icahn's had a pretty good year in a couple ways. clorox, 2011, beaten down pretty badly. he's had big wins including sales, the likes of an amalyn, huge. >> he also bought cbr. >> does he really want to own that thing? >> they have a 60 day period to sell it. that's going to end by the end of the month. i don't think there's going to be a buyer out there. i think he's going to own it. a $2.5 billion purchase nobody else could have done. one thing interesting about that, he made a tender offer based on public information. he never got the due diligence of seeing what a lot of buyers get to see before they make offers. >> right. of course, chesapeake he's been busy along with dan lobe now actually has a position. southeastern has been the biggest activist, so to speak.

not a typical activist like an icahn or lobe. >> chesapeake situation is interesting. similar to the forest labs situation because when you can make the credible claim above bad business judgment but breach of loyalty to stockholders, you know, everything going on with chesapeake, i think icahn made some of those claims. even though there was no board meeting and they couldn't call a special meeting, they quickly settled with him. because i think some of those claims really scared them a little bit. now he's trying that strategy with forest labs that they are being loyal to the soloman family and not loyal to the stockholders. we'll see how those claims go. >> we heard brian sullivan reporting on jc penney. i am curious to get your take here. a big position for akman. they put in the new ceo, ron johnson. performance so far, of course, has been very weak. do we have any sense as to where this thing may go? how long is the patience of an activist typically when they put in their management team? >> he'll be very patient. he's on the board. he'll be here for the long term. right now it's kind of in no

man's land, that company. they basically tried to upgrade their brands. in order to do that, they have to no longer be a discount store. so they changed their marketing plan. they got rid of the coupons. they alienated their old customers. marketing to new customers. but their stores are filled with the old product. not only have they alienated their old customers, they're not getting their new customers. they think they'll work through this as they get out of the old product and into the new product. >> it's a $20 stock. $20 stock. ackman and -- both down pretty significantly on their positions. >> ackman is up on the year. great year with beam. with howard hughes. with general growth and alexandra baldwin just split. it's his most high-profile position. but he's still doing well. >> give me the broader take on activism again. in annual meeting season now. soon we'll move into proxies. 13ds getting filed. then we'll see if they file with proxy. where are we just in terms of

volume? you track this very closely. >> there's about $5 billion of new activist money put in this quarter into activist activist situations. basically on track with last quarter and on track with last year and on track to double 2010. >> double 2010. it has become at least dollar volume wise much more significant. >> activist has. >> and as you know, you track, better performance, even when you follow after announcement typically you do out perform the s&p. >> absolutely. on average close to 1% a month. >> ken squier, thank you as always. >> thank you. >> send it back to you guys. >> thank you very much. still to come on the program we'll revisit what's happening in the shareholders meeting and continuing the search to find america's top states for business in 2012. we'll be talking live to number four on the list right after this. first, as we head to break, take a look at the five states with the largest amount of s&p 500

companies per capita, per head of population in the states.

breaking news desk, some developments in the situation

with pfg best, the brokerage house is now being investigated by the fbi. you will recall over night the nfa froze the company's assets saying they had $225 million in assets in the bank. they found only $5 million. jeffries & co. says it does have a relationship with the group and had conducted trades with them. however, none of its customers will be losing any money on this situation. it is not the first time that the company has been in trouble. earlier this year they were find $700,000 for not properly doing business with small independent brokers. we'll have more as the story develops. back to you over at the nyc. >> thank you very much. right now another big reveal in america's top stagts for business. all day today we're counting down the sixth annual exclusive study ranking all 50 states for competitiveness. senior core spornd ent scott

cone is live in the top state. he is not revealing that. he has another in the meantime. scott. >> earlier this morning when we revealed north dakota as the number five state, it was raining here in the top state, and a lot of people were guessing a lot of things about that, and, yes, we have moved inside but i just want to tell you that was the plan all along. don't make too much out of this. anyway, let's continue with the countdown and state number 4. >> north carolina, the tar heel state comes in at number 4 this year, slipping from number 3 last year. north carolina scores 1,548 out of 2,500 points. north carolina's best category is its workforce, tied with florida for number 3. its worst, economy, ranked 31st. both are the result of north carolina's high unemployment at

9.4% among the worst in the country. while that hurts growth, it means north carolina has lots of available workers. the top individual income tax rate is 7.75%. the corporate rate, 6.9%. the state sales tax 4.75%. north carolina's largest private employer is walmart, its largest industries health care and financial services. one thing north carolina has going for it really every year that we do this is consistency. it hasn't been in the top five every year, but always seems to be right up there and a lot of it has to do with that workforce. as we said, the economy has suffered there a little bit. we'll see if they can claw their way back. coming up on power lunch we'll have state number 4 and -- state number 3 that is and first another hint as as to where we are. . the first hit was grape expectations and the second hint was legendary lights and the

this time around you've got the power. think about that again, number 3 state on power lunch and we'll reveal where i am, america's top state for business coming up on the closing bell around 4:00 eastern time and then you will be able to go online, top states.cnbc.com and see where your state stacks up. the hashtag on twitter is top states. >> looking forward to that. let's get back to the markets and have a look at where we traded during the session. we're falling rapidly. we were up over 90 points earlier on and now down 25. one of the reasons for that is the italian prime minister in a speech suggested maybe italy will tap the long-term bailout fund in europe and you know the implications of that. we'll have more on that after the break. stay with us. ♪ [ male announcer ] this is our beach.

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welcome to hour three of "squawk on the street." here is what's happening so far. >> if you had a conversation with ben bernanke you would kel him what now?

>> begin to raise the interest rates up to reasonable level, 2, 3%, something like that. >> these tax increases he is proposing are for more spending. it is not for debt reduction. all of these tax increases he is proposing don't pay for a fifth of the proposed deficit spendings. >> there is a lot of other ways to get down including applied materials, am d, that i don't need to pile on and say alcoa and others, alcoa is not doing well, but it is not alcoa's fault. without some turn in europe, where they sell a lot of stuff, i just don't see it happening. they can dump the heck out of stuff here and it is not influential enough. europe, that's a big market for them, 20% of their exports. >> trading fatigue, jim, is last year it was a little over 10%, very, very high inflation, very confident that it will be more moderate level of inflation this year. >> there are technology

bellwethers that could come in and try to make something of the ip that research in motion still has. that's why we're at a new trau rating on the stock. we are we're saying buy it. we do they there are strategic alternatives. >> if i am the people running the kindle division, i am bracing for an atomic event as soon as this comes out. they really have the primary market share with the smul ler tablets. they'll the ones that will be sideswiped by this. >> good morning. welcome to the third hour of "squawk on the street." let's get a check on the markets and as we stand here, we are trending towards session lows. markets have turned. the dow is down by just about 27 points here, the s&p down by 2.6 points. that we have seen is a turn lower in technology. we just saw apple flirting with red in a turn in energy stocks as well with wti and brent trading lower this morning. share owners of coca-cola approving a two for one stock split. this is the 11th split in the

stock's 92 year history. southwest airlines the biggest gainer after an upgrade to a buyer from new stall at stern agee and advanced microa loser with weakness in europe and china. >> this is the road map for the next hour. executives at research in motion are facing tough questions from shareholders as we speak. we'll get an update on exactly what's happening at the shareholder meeting and how you should play the stock now. then the outlook for this earnings season of course has not been especially rosy. newspapers full of doom and glam and investors might be in for a surprise. see why this earnings season might not be as disappointing as everyone expects. and the boss of all segments is back on cnbc. our expert network will weigh in on the new management at rim. can the corner office really turn around the struggling electronics manufacturer? of course everybody loves a comeback. how the l.a. dodgers went from worst to first in the playing record and game attendance and what it means for the team's

bottom line. ignoring of course the fact they lost the last three games. all of that and more in the next hour. >> didn't know you were such a fan. >> always. >> we start off with the rim shareholder meeting. facing shaurds in waterloo, canada. >> just finished listening in. i will go back and listen in some more. i would say the top headline thus for is that even though all ten directors at rim were re-elected, there were clear signs of shaken confidence from shareholders. tor sten heinz had 14.8% of shares withheld on his re-election, mike, one of the founders and vick al banny of jaguar came up to the mic and said clearly shareholders are telling you they want new leadership at the board level and steinmetz did say they're

looking for other board members to change the composition there. then heinz got up and talked about the changes that he has been making over time and where rim stands, making the case as he has in the earnings calls that they still have a significant global footprint, they're not going away and that they're not in a death spiral. he said that again carriers, some carriers preferred that they not launch blackberry 10 in the holiday period but rather later which is actually a little bit ridiculous. sure, carriers may feel that way because of course they have iphone and new android phones coming out. if you're rim, you want your best phones out there competing with theirs. he said he is not satisfied with performance over the past year but determined to continue competing especially in markets like latin america and emee awhere they still have growth potential. >> cutting through that and knowing what you know, if i am a share hold inner blackberry, in rim, forgive me, should i feel

better from what you just witnessed or not? >> no. he hasn't really said anything new and the key here is is there anything they can do to move existing blackberry devices better than they have been? any kind of developer effort? anything to get the average selling prices and profitibility up and is there any hope that blackberry 10 could move earlier? clearly there is not. they're trying to spin it as positive. >> we'll let you get back to the shareholder meeting which is being webcast for the moment. collin guinness joins us on the floor of the new york stock exchange. can i continue to short this stock? >> simon, rim is becomes a distressed asset. it is getting close to the price target. the problem is the sharp declines this company is undergoing, they're still accelerating. the pain still lies in front of us. you can maybe have some hope that somebody wants to step into this and acquire them for their patents and that's not likely

anything we see happening in the near term. >> why is it not likely? >> there is two reasons. one is to go out and to acquire the entire company for their patents, only really two suit ors who want to do that, companies that are not in the smartphone market already, and that's facebook and amazon. we know a.m. zonl bought them and gave them a pop because people said clearly amazon will be chasing them to the smartphone market but if they're at the stage buying a mapping company already, they're probably well down the road to rolling out a phone. >> are we thinking too narrowly? couldn't the company simply buy just the patents or a former jf and could the company be an overseas company such as a chinese competitor we're not thinking of? >> could it wind up being a $2 billion arrangement? not enough to move the needle for this name. if you split the businesses apart, you have two core businesses, the handset business which is 1.6 billion. you have the services business which is 1 billion. the handset business is in sharp decline. the services business will smooth out longer. the reality is both are

declining assets. >> can't blackberry 10, the new operating system save the handset business? >> no. >> why? >> by the time it rolls out, the ecosystem will be so far ahead you will have apple with the iphone 5 and the fruit of the google motorola products rolling out and a nice roll of handsets. >> it doesn't seem like the iphone 5 will be that incremental killer. the iphone 4s exists and it is a pressure on the stock but do you think an iphone 5 is going to put additional pressure because more and more rim users will actually switch at this point? how much at some point doesn't the bleeding sort of just stem? >> i don't think so. that's the problem. i think we'll see the cap at the subscriber base max outlast quarter, that 78 million number and will only get smaller and the other concern is you may not see 10 get released. this company may wind up being carved up before the end of the year. >> on the basis its cash runs

out? why? >> because of the fact they're already talking with bankers undergoing strategic options and they may realize there is very little viability for them going forward because it is going to be difficult to build an ecosystem. >> there is still a rump of people that actually like their blackberrys and might still have them in a corporate environment and there are still people in -- you know, blackberry use i learned on my holidays is widespread in south africa, for example. they put huge amounts of effort into emerging market from which there is a possibility we are blind here in the states because we're so inward looking. >> we tend to know the whole emerging market story and what usually happens is that lower cost competitors will continue to come in and attack those marketplaces and you are seeing that with obviously the nokia and microsoft strategy. >> from a trading perspective with the stock at $7 and change, if they engage in any strategic alternatives, doesn't that lift the stock? as a trade, isn't there a trade here? you really believe they're going to do something? >> i understand the problem is

that i don't see any premium being taken in this name. we have a $7 target and really close to it and it was just a month ago we did bull bear on rim at $10 and now back at seven. while the fundamentals are eroding so sharply, you still can't get positive. if you want a turn around name and a special situation turn around name, buy yahoo!. >> price target there is? >> $20. >> we have to leave it there. we're out of time. cnbc has a strategic partnership with yahoo. colin, great to see you. thank you very much. collin gill less. >> let's check in with the bearded capital markets in person and doesn't look better. no offense. i am not saying it looks worse. you said it looks better in person. it doesn't look better. >> you like it. you know you like it. guys, talking yesterday at the end of the program about arrogance, reputational wall street.

>> bob diamond at barclays. >> and the way the testimony continues to unfold four years post 2008 and we continue to see executives not doing the industry any good in terms of trying to change public sentiment. i wake up this morning and i see this survey. reuters reported on it. many wall street executives say wrongdoing is necessary. now, this survey was conducted by a whistle blower law firm labaton released early this morning and spoke to 500 financial industry executives in the u.k. and the united states. this is what they said. 26% of respondents say they observed or had firsthand knowledge of wrongdoing in the workplace. 24% they believe financial services professionals may need to engage in unethical or illegal conduct to be successful. what stood out to me most having been in the industry and having experience was 30% said that their compensation plans were directly tied to pressure to compromise ethical standards that violate the law which gets

into the whole issue of callbacks and while bob diamond came out and said he is not going to take his bonus and going to fore fit some kmengs, this is one example, one executive who made millions during a period of time where, again, there was questionable behavior. i say questionable behavior. this is a survey. it is one survey. this is a sentiment in a lot of the public world about what goes on in financial services that takes me to the news of the day. i was coming down to the set and berta had had new news about today's latest commodity firm, and this is more like a law and order show than it is news. you have the attempted ceo by the ceo, the missing money. apparently pfg best, commodities firm as you know, millions of dollars missing, attempted suicide by the ceo. this is my question. the cftc was apparently in at this firm. the cftc went into this firm earlier this year and conducted a check of all future commission

merchants including pfg best and found no material breaches. i am going to say here -- >> when were they in there? >> they were in there earlier this year. we have said last time i was down here on the set and i talked about the chesapeake board. i now want to bring up the cftc. this has become a joke, the cftc. gary gensler likes to come on tv and we have had him on cnbc and he will come on whenever he wants. good guy on tv. if we can bring up his picture. the fact this is coming out and we have once again a lack of confidence in the financial capital markets as a result of this type of stuff, when is the cftc going to be more than a figure head? >> i think that's an extraordinary thing to say. on the one hand you have a sur ray and i wouldn't necessarily believe because it is commissioned by people that want that answer that says it is a fundamental problem with attitude in the industry and then you blame the regulator. >> the root of the problem is something else. >> it is not the regulator, the cftc.

>> the regulator's job on, their jobs are not to be on the panels and get the appointments like ambassadors to countries, they're there to protect the public. >> they don't have the funds to do what they have to do. >> i think the truth is somewhere in between. >> exactly. my point with the survey is simple. there is an embedded philosophy within these firms that they have to push the limits. therefore the regulators have a responsibility to try to attack pushing the limits. >> they should attack the compensation plans on wall street. >> absolutely. >> you and i have been talking about this for years. if everything was going to be clawed back and you knew all along the actions you took three years ago you would get clawed back, all issues aside. >> you have worked in this industry for many years. if i take you back 25, 30 years to the start of your career, are things better now or worse? what did you see when you were an insider? was that the attitude? >> things are worse. >> things are worse now.

>> did you fall into the category of percentage that saw wrongdoing happen? >> i would say if i was questioned on that survey, i would not be able to say -- i would not be able to say i personally saw wrongdoing. what i would say is there is tremendous pressure on the compensation structures to push the envelope so i would have absolutely been in the 30% melissa who said they pushed the limits and when you have things like you have with this commodities firm and the cftc in there earlier this year. shame on the cftc. >> let's go to rick santelli and camp up with the santelli exchange. >> we're going to continue along this vain and we just had breaking news. looks as though the cftc is going to sue pfg for the seg funds that have disappeared. don't hold me to the number. the number that seems to be in question is around 245 million which brings me to the santelli exchange. regs, rules and rubs, and i tell you, it really makes me sad that

we have another potential blemish on the industry. let's be real here. anybody out there individuals, small companies, large companies, you go to set up a line of credit. you go to the bank. you want a mortgage. you go to the bank. they say give us your banking information, your credit card numbers, your checking account numbers, your savings account number and bank and phone number and representative. why? they don't trust you. should they trust you? of course not. you say i have x amount in the bank. they need to check it out. think about the currents in our yield with pfg and other where is all of the money is missing. i don't have all the facts. it seems as though this money has been missing for a while which where is me to dsro, the designated self regulatory organization. in this case, the nfa. it is the same as many ways with the cftc. do they take that mr. watson and pfg and have all the money in

the bank? do they take their word for it? maybe you can get away with it for one or two why ares. in this industry you have audits going on call the i'm. does anybody call? i know the pendulum is going to swing and i know they will come down on hard on more regs. seriously, let's have common sense. as gary point out, politics and regulations don't mix but we're in a political environment and woe be to all the good businesses that are overweight with regs and there is always good and evil. we just need simple rules to filter out the latter that far group. back to you. >> rick santelli, thanks so much. fiery today. we're all fiery about this. >> i think rick and i are both speaking about this. they need people in there that have traded in chicago, worked in the industry, that know how to do an audit. if you have to do an audit, you better know what you're looking for. that's why that survey although it may be a slanted question to basically go after people.

>> it brings up interesting points. >> back to where -- i mean, we just keep going back to these places where the confidence of the capital markets are going to continue to be eroded. >> up next, why investors expecting a lack lust earnings season may be pleasantly surprised. back after a short break.

second quarter earnings season has begun. with growing concerns about china, europe, and the labor market here at home, what can investors expect and for the rest of the year? we're joined by steven whiting,

u.s. economist at citi. you say no euphoric results but you are expecting beats like we saw with alcoa. >> the second quarter in the united states was a quarter in which industrial production rose 5% over the past year. we wish it could end that and we also law large commodity price declines, external economic weakness and we think that eps will rise about 6.5% for the broad s&p 500 and once again for 12th consecutive quarter with all the estimate cuts it will be above consensus. >> in terms of your expectations for earnings in the second half of the year, what point do you start putting those projections out and sweeking them? what kind in earnings season. i am curious because from the stock investors stand points we're all concerned about the second half with the fiscal cliff and the signs of slowing in china and europe. when do you expect to get enough data aggregated to make that call. >> anything that would result in a large change in the estimates is seemingly shock depend ent. if we knew the u.s. was putting

in place severe fiscal tightening for sure in 2013 or a terrible credit event that reaches a critical threshold in europe, that would change things. the economy the way it is isn't going to produce consensus like earnings. there is a pretty big gap, 14% eps growth is a consensus estimate and it is more or less the fourth quarter will not be in line with consensus, but i think investors largely know that. >> is a bigger concern for you when it comes to earnings of u.s. companies europe or china at this point? >> i think in terms of actual sort of severe breakdown, i think it would be the europe issue. certainly china's slow down is consistent with the lower commodity price environment which is a fairly big deal for a couple sectors. it has some mild benefits for a few inside the united states or more than a few, but i think that europe is a more critical concern. i think china probably is a bit more control of its outlook. >> and do you expect that the

fiscal cliff will be sort of one of the items in the kitchen sink that companies will be throwing out this quarter? >> i doubt it. i think that companies will really focus on what they see in the near term. you can take a look at the business confidence measures, a large firm confidence measures for the second quarter which are released ahead of results and showed a mild deterioration. if they were really, really worried about the shocks, i think behavior would have changed. i don't think it changed already. i don't think they can tell us much about any of these shocks that we will see these things in markets before we see it in earnings or company statements. >> we have to leave it there. we're counting down to the close in europe, about eight minutes to go. we'll bring you all the closing action live when it happens. live after a quick break. slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] get the mileage card with special perks on united, like a free checked bag, united club passes, and priority boarding.

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simon. >> it is quite an upbeat view that's come through with europe over night. a view that perhaps or clearly spain will get a better deal on its debt and extra time to come down and hit its debt targets and there is an indication the ecb might be willing to do more. quite a broad based rally at the beginning of the association and that has been sustained with

some profit taking built into it. as we count you out on the pails and take a look at the map of europe, we were higher than this. >> the european markets are closing now. >> in fact, it was a cyclicals that did particularly well at the open. i don't know if that had anything to do with curren and the likes. you notice through the day we have seen or through the session rather we have seen some profit taking on that, particularly in spain and italy. now, we are on day two, of course, of the finance minister's meeting and that is a key focus for everybody. will the ecb or the finance ministers be able to do more to calm the situation? importantly, the italian prime minister did a news conference and there were various comments coming out of that that were conflicting. on the one hand he was suggesting i am not going to seek a second term as prime minister and he always said that would be the case. i think more importantly he is saying to reporters a deal is a deal as far as accessing the

bailout money to support our bond markets, we will not have to go through some sort of inspection, some country specific requirements in the event that it has to happen. that's actually quite positive because in essence just coming through, what it basically means is they can access the cash without having to resej the debt. they're separating it as two distinct things. if i take you back to where we are on the bond markets, the italian bond market has done well. yesterday there was concern about whether the spanish may are to seek out bailout out of the weekend as we re-examine what had come out of the previous one and you can see they form slightly in italy. 5.95 is where they're closing out and have a look at spain and we have also fallen on the yields there, down to 6.8%, importantly of course below the 7% level. still extremely elevated and still a huge concern and huge amount of stuff to work through. >> simon, thanks for that. to brooip from the floor of the

new york stock exchange. we have seen the markets fight between positive and negative at this point. >> and the montana city headlines about italy and what they might need in the future seem to really move us here and a lot of people were like why were we up 94 points in the first place with the cautiousness out of china is one thing and the earnings warnings were definite headwinds and a lot of people were very nervous about it. you see a defensive turn in the market. i want to take a look at for instance in the terms of this reversal in the last 90 minutes a look at the it sector versus the entire s&p and you see when the markets started to turn the s&p tech sector started to under perform quickly. we can flip the chart and take a look and it shows tech had a reversal. when you look at a bunch of different sectors, utilities were actually negative earlier in the day and have become the top performer out of all sectors. i will point out staples and telecom are the only sectors positive for the month of july. have you a defensive tone and

keeping with that theme the staples are hold up okay and some hitting all-time highs here. walmart as we talk about ad nauseam, it is down since the bribery scandal in mexico that, dates back to ipo in 1970. our volume still rather light although a little stronger than yesterday. the dow back in positive territory. the s&p and the nasdaq still in negative territory. melissa, back to you. >> i think we to want go to brian back at headquarters with details on decline in the nbia today. >> you have a developing story on nbia and the stock is down more than 8%. basically here is the story. it put out an 8 k earlier today and i went into it very legal ease type stuff about the state department of finance, bond payment, et cetera, talking to many people and here is the concern. there is concern in the market right now about a debt payment because the 8k essentially says

that this is a little bit complex so stay with me that they have what's called surplus notes. it is a type of bond. those bonds have to have approval from the new york state department of finance to be paid. in other words, nbi says can we pay it? the department says yes, you may. nbia is saying the department of finance will not, has not, has not made the approval for mbia to make the payment. i am trying to find out why. of been making all kinds of phone calls. a reuters story just crossed about this. still, there is concern in the market about this possibility of a tlad or non-payment on debt. it is very important to note, guys, on the surplus noelts and i will wrap in a second and this is important to know. the so-called surplus notes because they require approval a non-payment would not be viewed as a default if it was because they did not receive approval and they could still receive approval for the payment of that

debt. that's the reason the stock is down. it is complex. thanks for giving me the extra time. >> all the time you like, the more you do, the less we have to. i don't care. pleading, pleading for time. >> if it were up to you, would you have given him that time? >> really, it is all down to karl. where is karl? >> he is on vacation. he'll be back. >> what are your thoughts in this stage? >> thanks for the time. >> you're welcome. >> it is not our time. >> now to gary kaminski. >> let's finish up. let's go back to what we were talking about earlier. the cftc was reportedly in at ppg best earlier this year. the cftc much like many of these regulatory bodies has become a joke within the industry going back to your question, melissa, that the inside regulatory, the

compliance departments are supposed to be scared of of these people. when you get an internal audit you are supposed to be concerned. what has happened going back, you asked me 20 years ago in the last decade. you said i don't think the fear is there, whether it not stanley cup or the cftc, these annual regulatory exams have become a joke. 20 years ago when there was an audit, when you knew the regulators were coming in, there was a much greater fear within the firms. that's the biggest change. >> i am not disagreeing with you or agreeing with you but at this point let's clarify this. wrongdoing if there was wrongdoing or if the money disappeared, whatever, whatever happened to the money, it could have happened after the cft krmplt was in there. >> absolutely. we don't know t what i am saying and an answer to simon's question in terms of 20 years ago or ten years ago, i can tell you categorically that the interactions between the regulatory bodies and the broker-dealer firms and the

investment adds vise orz is a joke compared to 20 years ago. >> the other issue you brought up before was compensation and pushing the envelope in order to maximize compensation, and that rests solely on the shoulders of the shareholders. as the shareholder, you vote in a board of directors, a compensation committee and every company has the ability to change the compensation schema. >> or through regulation. >> or through regulations. >> in this case the shaeds should support the regulatory body saying if in fact you have a restatement of earnings as an example or something that comes out and there was compensation paid three years prior to as a result of reported earnings, you see, then that gets caught back. >> i think its huge asymmetry. you have an industry that screams about red tape and then as soon as something goes wrong, it is the regulator, nothing to

do with us, fdc's fault, it is a joke. have you ever spoken out against red tape and the moves you have? >> in favor of red tape although this point? >> my experience is that in a more regulated environment you can feel safer about your assets. my responsibility as an asset manager for 20 years was to basically protect and make money for my clients. i was not a prop trader and an investment banker. i came from a different side of the industry. >> you're saying and the investors should ask for tighter riglation. >> apply clients wanted to know that their money was in that account and sach every day and every night. that's the most important thing. >> i know rick in chicago wants to get in on this dfrgs, rick. >> absolutely. today we don't care about that. what was your job before you

were an economist. >> going way back, an auditor for the national futures association. >> you can't make this up. you just heard the conversation that i want to know my money is safe every day. when you did audits, what did you tell me? >> the very first dhing we checked the customer segregated funds. how much money did you have and we went to the outside banks and independently verified it was at the bank account. >> nobody wants industries to be safe for invest ors more than i do. do we need to right a new reg. >> no. we just need to follow the reg. we used to have firms ensure every day how much they had in customer seg gad funds, every day. >> this is fluid with pfg. the word seems to be that money has been missing maybe going back to 2010. i can't tell you that's a fact. i think the last regulator from the nfa that was there has explaining to do. >> exactly.

if they had an audit earlier this year and the money was missing, i would have to ask them why didn't you double check with the outside bank where the money was. if they said they had 245 million, i want to see bank statements that say 245 million in customer segregated funds. it is the very first thing you do in an audit. >> back in audits in the 80s not to make you seem old but the internet, computers, they weren't up to speed that they are now. this should be much easier and more efficient to accomplish. >> yeah. we were doing it by mail and then we had a few thing called the fax machine and we were able to verify it within two or three days back then. >> if in your opinion charge could you give us insight as to other things besides checking the monies as gary said every day. what else may be missing that we need to address here? >> the investments the money was in to make sure the customer segregated funds there is tight rules about what you could put the money in. there are capital requirements. the firm is supposed to have

capital in relation to the amount of customer segregated funds and whether or not that was properly audited and verified by the regularitiors >> for investors that felt ever since i heard about this story about 4:00 eastern yesterday, do you have any words for them? are all of these industries hopelessly corrupt or is this something that's not only fixable and we really need to say it is not about regulations, it is about the regulators. am i off base? >> no. we don't need new rules. we have the rules in place. to me this is uncon shanable after enough global with a customer segregated fund problem that we're having another fund problem in this industry. >> thank you. back to you. thank you very much. >> i on note i hear john corzine was spotted in the hamp tons over the weekend. straight ahead, our experts are saying on research in motion. what are the ceo's chancing of

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financials after upgrade and we'll talk to the analyst behind that call and buy netflix. our traders battle it out as the exclusive back from the brink series continues. back to you along with gary and the thing on his face. >> oh, come on. >> it is his own creature at this point, i think. >> see, now, he likes. >> scotty told me yesterday. >> defend yourself. >> i was never quoted as saying that. >> see. >> all righty. >> i don't know. that is a mountain thing. >> how was the charity? have you raised a lot of money for charity? i was having dinner last night and a woman came over to the table and says if hobbs raises money for charity. she interrupted me and said i am sorry to interrupt, sorry to indulge, but if hobbs raises the money for charity will you shave it. >> she didn't. she said are you going to shave your bird off for charity. the onus is on you.

>> rim's ceo is in the hot seat. what do investors and customers want to hear from toss thors sten heinz? who better to ask than robert cap lan and jeffly sonfield, senior associate dean and contributor. robert, what should they do? >> well, they have to do two things. first, the ceo has got to continue to operate the company, cut costs, hired a new marketing director, and come up with a viable plan to go it alone. while he is doing that he needs to be aggressively pursuing other options. it may not be possible to go it alone. he has to be doing both things in parallel. >> isn't he already doing that with the higher of the bankers? don't we assume? >> yeah. he is. there will be a moment of truth that's going to come up in the next number of weeks where he

and the board are going to have to assess how realistic it is that this operating plan is working and they're going to have to compare that to the strategic options and that moment is coming i think fairly soon in the next several weeks. >> jeffrey, what do you stand on this? >> of course i agree with robert on this. i knew him back in his classroom days and ahead of corporate finance and he has lived this space so well. it is a difficult juggling act to walk that high wire between managing the spirit and internal expectations and also having confidential discussions on the outside without doing what hb did one ceo back by of course simon you pointed out earlier today is destroying morale and confusing markets and customers by putting for sale signs everywhere on units you might keep. that said, this is a ceo who i think is an honest and probably technically competent person who has gotten ahead of himself consistently in the taking charge process and i say

probably technically competent. his claim to fame before coming here was chief technology officers at siemens at the exact same that kleinfeld when head of siemens was throwing cell phones into water glasses complaining they couldn't keep up. they wound up selling at the time that thostenhines was head of technology and he came here and not as a success, and it is a shame that they have gone to someone who never served as a ceo and nobody on the board who has ever been a ceo of a company. >> i want to get to the question of the word. i posed this question to you. if i am a shareholder, i am mad at the board of directors because they allowed things to happen at the company which in the end put the company behind technologically and they had co-ceos they didn't get rid of until recently and they may be in the way of the company ever adopting those strategic alternatives. you take a look at the composition. all of the board members are

canadian when most of the customers are outside of north america. should we be concerned about the board and the makeup of the board at this point? isn't that the root of the problem? >> well, i am sure -- >> sorry, robert. >> i am sure shareholders are annoyed in the way you say the problem is if this were two-year runway to potentially turn around the company, i think shareholders may be making moves to replace the board, but i think shareholders are keenly aware now and the time frame to make decisions is much shorter. ironically in that situation i think they may not go after the board as aggressively right now. >> rob, it is gary. good morning. in addition to the board that melissa brings up, as you and i both know and i know some of the bankers and you probably know the same bankers who said two years ago microsoft had a very serious interest in doing a deal with rim. two years ago rim was in a different position. what does it tell you about a board and especially a technology company, they have the window of opportunity to

monetize. if they don't do it when they have the opportunity, what happens? >> what happens? unfortunately i am sure they regret it. then you've got the emotional issue. do you want to sell at the 52-week low and one of the emotional issues to your point the board has to get over here, it still may not right thing to do to take action now even though you say i wish we had done it at 33 and not seven. >> he took over exactly one year ago. you look at the benchmarks and where things have been since he has been there instead of wringing your hands at a high water mark and 90% loss of value since 2008. just since he has been ceo we have seen it fall from 35 and the board, it is filled with five accountants, two finance ears, nobody who has ever been a ceo of a publicly held company. >> the most interesting thing i think you said in that exchange to your students is that you basically said they were wrong to recruit a man who had a bad experience at siemens and who

would effectively accused him of failing. isn't the whole point of teaching business and strategy that from failure you can create success and actually the guy should have been given a chance and was given a chance at blackberry and in a very difficult situation could do much good? >> if he had had a board to back him up, when rich took over as insider at harley-davidson weeks away from insolvency, he was an insider but he had a great board to back him up. at one point at raytheon they had a fast co-john phillips, ceo, had adams to back him up and a great legend and to give support as chairman and former ceo. as we have seen at citi bank, we have had a chairman and until recently an outside chairman able to give tremendous backup with experience and washington savvy and in that case you need somebody on this board who can provide oversight if you're going to go with an insider. you could have gotten to an

outsider to turn it around and there are technology turn around that is have worked but this was want an ideal choice. a good person, but they needed somebody more than a physicist or engineer. >> we are out of time. it is an honor to have you both on the program. thank you very much. >> coming up next, the baseball team that went from worst to first, how the l.a. dodgers got their record attendance and ticket sales back on track after a terrible start to the season. be right back. you know, i've helped a lot of people save a lot of money. but today...( sfx: loud noise of large metal object hitting the ground) things have been a little strange. (sfx: sound of piano smashing) roadrunner: meep meep. meep meep?

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good good comeback story and the dodgers are in the midst of a huge one. >> melissa, dodgers used to have some of the highest attendance in baseball, especially in a huge stadium like this this holds 56,000, much larger than normal. a year ago during home gamtz they looked like this. there was divorce court and the dodgers headed towards bankruptcy and brian stone nearly beaten to death and the team was losing. sales plummeted 17%, down 7,000 tickets per game and the angels outsold the dodgers for the first time. >> it was difficult to see people struggle to decide if they wanted to come out or

didn't want to come out because you like to see as many people as possible. i think teams as i said earlier feed off it. players feed off it. >> it was tough as a player. you want to go out and do well and play well and if you play well, the fans will come out and we weren't doing what we should have to put more butts in the seats. >> this year the dodgers have had quite a roller coaster season. they're seeing ticket sales not only rise but accelerate. you can really start to see the difference in the stands. fans so far seem to approve of new management which includes magic johnson and clearly the dodgers average near 41,000 tickets per game, sixth in the league, up 13% from a year ago and 7% below the 44,000 per game in 2010 and way down from earlier in the decade. >> how often do you come to games? >> usually at least seven to ten times a year. >> did you come last year? >> once. then i boycotted because of the

mccourts. >> this year we made it a point to start coming back. >> it is a lot better now that we got new ownership. >> how does it compare in your opinion? >> night and day. i think obviously when you win ball games and you're competitive people want to spend money and come watch you play. >> listen to this. forbes estimates that operating income last year was 1.2 million, will be north of 20 million this year. later on power lunch with who is selling the most tickets in baseball and squawk on the street will be back after this. ♪ ♪ i want to go

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