berkshire this year. i'm a bull on america. i think we have to run it right. that's all. i don't want anybody to get discouraged how this world will turn out because it can to be done. you got people like this working on it. >> gentlemen, we can't thank the three of you enough for joining us this morning and you two gentlemen for all your hard work. mr. buffet, mr. simpson, mr. bowles, thank you very, very much for your time and we hope to check in with you again soon. back to you in studio. >> great hour and a half of television. come on back we miss you. come back from vacation. we'll see you tomorrow. make sure you join us. "squawk on the street" begins right now. ♪ good thursday morning. welcome to "squawk on the street". i'm melissa lee with jim cramer and david faber. futures falling despite jobless claims posting the biggest drop.

dow and s&p 500 are in the mid-of a five session losing streak. right now we're looking to lose 75 on the dow, nine on the s&p 500. as for the picture in europe, we're seeing red arrows across the board with ftse down the most, down 1%. let's get to our road map for this morning and we start off with questions about whether or not there's another round of easing. risk assets lower around the world. euro break below 1.22. oil trading lower. all ahead of the release of china gdp overnight. warren buffett is seeing signs of a slow down too. no surprise. cnbc exclusive the legendary investor who runs berkshire hathaway says in the past two months the economy has been flat although a pickup in housing. >> shares of supervalu in a free fall. is withdrawing it's forecast for the year, suspending its dividend and considering selling all or parts of the company. is this the latest victim of

walmart and dollar stores? we have to get to the markets. the futures are moving lower on fears of a global growth slow down one day after the dow and s&p 500 fell for a fifth consecutive session after fed minutes offered no since of more easing near term. we got the euro falling to fresh two year lows below the dollar. crude oil trending below $85 a barrel. jim, this seems to be sort of the culmination of a lot of different growth concerns around the world and also some earnings warnings that are trickling in about lowering the bar. >> i think that there's a wholesale shift going on in the market right now. i'll say it's represented by the buying in merck. a drug that could or could not be imported versus the selling, endless selling in the cummins name. the money isn't leaving the market it's just going to another place and the place it's going is recession proof stocks

and that i regard always as worrisome but it's happening and happening quickly. >> it's going to other safe hey convenience, the treasury market, david, we're still seeing record low yields in europe. seeing essentially negative yields. >> german bund, france is able to sell paper extraordinarily cheap, 1.45% even on the ten year is pretty shocking when you see it day after day of a ring around there. i still think one of the more amazing stories in many ways. jim, i talked to a number of investors in the last 24 hours and there does seem to be concern more so than there was a few days ago in terms of earnings season and where we are and this idea of deceleration. multiples are fairly low but desoleration in terms of earnings is not a good thing for the market. >> what we're getting is a dramatic slow down in spending in the month of june. i'm seeing it with little companies that give you great

tells. altran, incredible story out of levi strauss about jean spending. asia down, jean spending. supervalu is a metaphor for the moment. when the ceo of a supermarket chain say people aren't spending that must we used to hide in supermarket chains. there's something very wrong that happened in the country in june and what happened is spilling over right now in our earnings season and leading to, again, a buying of these safe hey convenience, utilities too. >> the immediate reaction was a snap lower in the markets and a snap to unchange on the s&p 500. how many times does that happen on the s&p. but the gist from the fed minutes is how big the program can get before it impacts the market, and there was a lot of dissension which means the

prospects for qe3 was dimming which means the markets were getting a little bit more wary about its own prospects. at the same time we had the data point and the june report, more data points from corporate america. they are feeling the impacts of slow downs from europe and china. do you think we put the immediate minutes into the context of yes that was then and since then we've gotten more data points which will fuel the expectation that we get more easing. >> i think that's exactly what happened. the last half hour, 45 minutes of trading been rather incredible of late. what we saw yesterday was initially, wow, it looks like things are going to be bad. and then this amazing, listen, forget europe. we've got some things going here, although it's almost as if there's a put under the market. it's almost as if buyers come in no matter what. buyers in proctor and gamble come in. >> what's the put? is it still a bernanke put.

maybe a central bank put? we saw brazil cut as expected 50 basis points. south korea come in unexpected 25 basis points on top of a round of energy bank easing last month. is there a central bank put in the stock market? >> that's part of it. something that david and i talked about before the show which is this kind of remarkable undervaluation of the oracles, undervaluition of the intels, microsoft, s&p should be shelved. they reported good numbers. when i look at this portion of the dow, remember dow still being a good mirror of the s&p i see good things happening from individual stocks that are selling at nine to 11 times earnings valuation, central bank put makes it so this darn thing can't be killed. it's a steven segal hard to gill market. >> we were talking about google, for example, which has been having a rough go of it over the

last week, 11 times next year's numbers if you believe those numbers to be correct. >> 11 times. >> as you can see down in the last few days because of concern about europe where it does derived a decent amount of its business, concern about currency. we'll hear from google next week so we'll get some answers. those are things playing out despite what is potentially very cheap valuations. >> companies did not hedge correctly. >> 15% to 20% growth. >> expensive. there's also -- there's a terrible story in reuters about johnson & johnson and more horrible recall company. a lot of my friends call johnson & johnson. what do they do? they are a recall company. j and j may be the tell of this game. this darn stock will not go down. it's a dow stock. it's central to why my thesis of don't give up on the market give up on sectors. the industrials were trashed yesterday. it was just hideous. there goes the money.

you let loose. >> so if that's the case you can throw money at health care, you can throw money at the dividend paying sectors and you should be all right. you're in the zombie unkillables space of the market and you'll be a-okay. >> provide the companies have the money to pay the dividend which is the superval uconn nun drum. here's a fat yield of a supermarket company, safety, safety, safety. it turns out to be danger, danger, danger. it does. we want to talk a bit about warren buffett this morning. you saw, of course, if you were tuned in at all in the 8:00 hour, becky quick having a long interview with simpson and bowles and warren buffett, speaking out about the economy. the billionaire investor said growth has slowed in the u.s. in the past six weeks. he would have a good view of that given all of his holdings. >> general economy of the united

states has been more or less flat and the growth has tempered down but the residential housing we're seeing a pick up. it's noticeable, from a very low base and it doesn't amount to a whole lot yet, but it's getting better. >> pretty interesting. >> yeah. >> i mean here you got a guy, an optimist talking about the last two months being tough, until believing the housing thesis and hedging back a little and saying housing may not be the engine that we thought it was. look, there's the general belief in america and the problem with that is that america -- it doesn't translate into buying necessarily usg. i mention that because it's a quintessential buffet name. you end up with this cross current of an optimistic guy that fits the s&p although bank of america and merrill lynch cut the forecast and puts you smack

in the middle of the cross mayors do you invest or adopt the buffet attitude. if you're a billionaire that's a good attitude. >> it's a good one. a sign at least of some optimism, again, coming off the low base as he points out. it is what it is. you got to start somewhere. >> leon black started somewhere. he purchased $120 million for "the scream." "the scream" is a good metaphor for the market. >> don't know where he'll put that painting. >> under his bed. >> he made his billions. >> ex-mcdonald ceo skinner as non-executive chairman. >> fantastic addition to the walgreen board. >> the reason i do frankly is they opened next to dwayne reid.

>> walgreen across the street in times square. >> union square next to each other are best performing. all green is a company's stock going down. you thought about the idea maybe the acquisition was too much. the stock hung in there. is it because of the dividend. do you have to give these guys the benefit of doubt? >> hangs in there. it was down sharply day after day, right after they announced the deal. has come back a little bit. i wouldn't call it a major rally. >> pershing square taking a position. >> we'll find out about pershing square and proctor. i've asked our executive producer but he's been of no help to me. >> you could clarify that. >> just kidding. he's always great. >> the best i can find is an ftc filing that indicates sometimes how they are allowed to delay their g 13 filings.

buffet can do this. it indicates perhaps pershing is taking a stake in p and g. i want to find out before we say too much. >> a dow stock like merck that will mask the weakness and i find this in chevron last night. chevron with a very good mid-quarter update people weren't looking. you have these pockets that work and then you have this overall gloom that is so hard combat. >> let's talk about shares of supervalu. plummeting in the pre-market nation's third largest supermarket change announce being its suspending its dividend and evaluating strategic alternatives involving a possible sale of the company. they reported quarterly profits that were half of what analysts expected 11 months ago here on "squawk on the street". cramer spoke with supervalu ceo about the company's dividend. >> you have one of the largest dividends in the s&p and on your conference call, "mad money," you talked about the difference of right place for us to be

given the return to the shareholder at this time. in other words, are your saying because the shareholder is suffering one of the worst performers last year and this year you feel it's important to reward them while you wait for your return. >> that's true. we're very comfortable with the dividend where we have it today. >> i mean, okay, when you take a look at the dividend, that was 11 months ago and now it's nothing. 6.6% or something like that. >> stock has been cut in half. dividend eliminated last night. this was a company that a lot of people owned because of the dividend and a lot of people shop at their store. this is a gigantic chain. a lot of the analysts were hinting that the dollar stores were coming for svu. on the conference call, why did they suspend it? he said it was a holistic list of things that the board and management talked about. holistic. i never thought of that -- it's

like we sat back and we looked at things holistically. i don't want holistic, i want earnings, i want growth. i want something to hang my hat on. people at home you see those fat dividends don't think that they are a given. >> it's double edge sword, high dividend yield, double edge sword. you have to watch why. it's a function of stock price as well so the stock price goes down the dividend goes higher. there may be a reason why there's a high dividend yelled. >> this is a red flag. >> people in this country have to recognize when stocks go down yields get bigger, this is a mom and pop stock that today you wake up and you realize wow what a terrible things. >> there are companies that are in more precarious position than others. one suspects at&t is one that won't have to cut their dividend. or walmart, for example which is very much connected to this story we would expect because walmart already and for a long time now has been the largest

single grocery store operator so to speak. >> target too. listen to what you just said. are those needles in the haystack. you just mentioned three of the largest companies on earth. >> largely. verizon. >> this is a conundrum that people face. you got tremendous momentum in walmart, in verizon, and then suddenly you come in and say wow europe so bad, maybe i should sell my stocks. what your selling? what your selling? >> s&p? >> can we bring up a one or two month walmart? it's not just up. >> it's gone -- broken out. >> so has target. targets a string of 52 weeks highs. this is part of this lower end trade that's going on and seeing the beneficiaries in walmart and target. target is cheaper remember the target is cheaper than walmart and on the same break out pattern of walmart so you have

to wonder whether or not there's going to be some trading, rotating out of walmart. >> these are huge caps that are trading as if they are small caps. i want to throw in costco too. 52 week high. the last month wasn't even that good in costco. this is, i think, close your eyes, buy domestic. >> yea. >> take your aye off the spanish coin. this is a fed up trade. people are fed up with the spanish coal miners, fed up with chairs being thrown at greek banks. they don't want to hear about french yields. they want to buy american and this is what get. you get target on a rampage and walmart unstoppable and it is i'm fed up with europe and i'm going to make money. >> amen. . >> coming up the dow appears to be on track for a sixth session losing streak. worries on the forefront. but economists say u.s. economy may be healthier than you think. we'll join to us explain. let's take another look at futures on this thursday morning as we're looking to extend the

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♪ ♪ welcome back to "squawk on the street". this just coming in. apple is being taken off of

citi's champion's list this morning. so the champions list, all sorts of list out that goldman has a conviction buy list. >> they are all marketing. >> it's great. >> fantastic. >> we should come up with a list. >> which is no bed of roses. no pleasure cruise. no time for losses. we're no longer champions. queen. >> there you go. >> right? >> that was quick. >> fabulous call here. it captures the momentum of negativity. all i can say is no time for losers. >> look at the stock been going nothing basically since may. >> doing nothing is pretty good. >> nothing is the new up, i guess. >> nothing is the new up. >> captures the negativity in this market. >> like that. speak being of negativity, supervalu shares are down. competition heats up. supervalu says it will step up efforts to get its every day

pricing as low as it competitors. short of slashing prices when a could your local supermarket do to draw you into shop. tweet us at "squawk". do you shop at a supermarket. >> i like to shop at whole foods. teach a man to fish and he'll go bankrupt at whole foods. whole foods on the high end, dollar stores, target, walmart on the low end are places to shop. >> nothing in the middle as evidenced by supervalu. >> try to never shop in a supermarket. >> you try to never shop. >> you have a delivery service where it costs a fortune for wonder bread. >> yes. sometimes. got a fairway. >> fairway is fabulous. brilliant group of people. i will point out that this grain spike is causing havoc, lots of people downgrading tyson foods.

>> the meat stocks. >> yes. this is what goes in having at one point owned, david you'll hate this, having owned steers and cow, they can eat you out of house and home. ambush. rodeo provide a year's worth of food. designee tried to own something in every asset class. >> what did you do with the steer? >> i auth it for heaven's sake. rodeo went to heaven and in the meantime she also went to my refrigerator. >> got a lot of meat. >> at that point i was still a meat earth. >> you didn't butcher it yourself, did you? >> no. it wasn't butchered it was more put to sleep. >> oh. >> you want to hear cramer say on the next stock he'll talk about, next steer. his mad dash super. take a look tractor-trailer futures one more time. see how it pans out. much more "squawk on the street" straight ahead.

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♪ ♪ >> i like that song. five minutes from the opening bell of course time for the mad dash. we'll go to -- there's one on every corner, one of these. >> these are two household names, dunkin brands. the recent lift off of burger king. two very well considered reports going overweight on both.

again you got a theme. burger king, this stock is up 53%. >> it was listed in london. special purpose acquisition. longest shareholder along with guys from 3 g and martin frank -- >> executive chairman. this is talk about a re-acceleration of growth. that plays out well in this market and duncan are just moving to california. one fifth of the country. dollar general and duncan both just notifying california. think about san bernardino. think about stockton. i think about consumers going to dunkin. >> one think that could stop this story from being true. >> what would it be? >> what would something that stop dunkin to continue to grow. >> a story that coffee gives you a heart attack? i don't know. i go dunkin every saturday and sunday. they know my name and drink just like starbucks. these guys know i'm an extra

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>> thursday's session begins here at the big board. wikipedia holding a conference. at the nasdaq the health solutions corporation a pharmacy benefit management provider celebrating its merger with catalyst health solutions. here we are, no surprise, sea of red with initial losses across the board when it comes to the financials. bank of america down by 1.7%, citi down 1%. you know, it's interesting, there was a note out overnight previewing the jpmorgan earnings and in the context of the libor investigation saying obviously the next spot is whose next. bank of america, citi and jpmorgan have been underperforming on the broader

markets since the barclays settlement. that's where the concern lies at this point. >> there's bt and t, u.s. bank corp. very highly valued. >> names you've liked. >> wells fargo. >> you know what these companies do. they bank. they lend to you. >> they make deposits. >> take your deposit and pay you almost nothing and then lend to you and then you pay it back. it's a phenomenal -- >> pretty good business. >> one that goldman doesn't do or morgan stanley. it tends to make a lot of money and that's what's happening at u.s. bank which has double digit group and what's happening at wells fargo and bt and t and so many other good banks. >> tomorrow we'll hear from jpmorgan. a great deal of focus on the cio, on the size of the trading loss, on how much of it, perhaps all of it at this point is covered, so to speak. there will be other questions when it comes to jpmorgan about

the broader economy because we can typically get some sort of sense in terms of credit card delinquencies, mortgage delinquencies or lack thereof and jamie dimon is forthcoming in his view of the economy. his last conference call before the whole blow up said things are getting better slowly. be interesting to see if he don't say that. >> warren buffett said things were getting better and then stopped getting better. that's going to be a very good theme. becky quick's fabulous interview this morning and we saw a bit of it earlier. that's a theme of earns in stockton. >> we're seeing a continuation of what we saw yesterday higher end more european internationally exposed retailers trading much lower compared to the lower end of the chain, the target, the walmarts, the dollar trees of the world. coach down, tiffany down,

burberry, cartier. so those shares are trading lower. no surprise we're seeing -- >> carrefour competes with the likes of walmart and so many places outside the u.s. also had some negative things to say. >> this is a new trend. people thought it was a bar bell. let's go with the dollar stores on one hand and let's go with trafl lawyerens on the other and that strategy is not working. on the high end at all. there was a kind of a classic note we saw today. this is what has really bothered me about research during this period which is that credit suisse comes out on coach. they cut the price target. why? the stock has come down so much. i don't want to go in there on ralph lauren. they reported good numbers in

europe but nobody cares because they feel the last four weeks carrefour, things changed in the world and china we saw some automobile numbers last night that were very discouraging and china is obviously not the luxury goods dumping place it once was and i think that we're, that strategy is not as good as j and j merck, proctor strategy, proctor a terribly run company and stock is doing well. >> cbs shares down almost 3%. this is not about -- well this is related in some way to distribution of programming. barry diller, this new venture he had got a favorable court ruling essentially saying it could go forward and it would disadvantage to a certain extent or prevent the likes of the broadcast networks from collecting fees for the rebroadcast of their signal, that's what they were claiming at least. >> it was an odd decision. >> the injunction was denied, and that is why shares cbs are

down, i would assume. >> right. a preliminary injunction in which he did say listen there's definite harm here. judges are unwilling to give preliminary injunction because it shuts a company down. the flip side, disney, positive note from wells fargo, espn, and this is what i want to talk to you about, david. espn is a must carry. i won't let my espn go away. i'll get angry. i'm not that angry any more about losing viacom. >> you're not? >> because they put it all on the web. >> not any more. >> i know. that's kind of an interesting thing nuclear weapon can get it when you talk about the web you can get it on netflix or amazon because they license so much of their content. rating declines at nickolodeon, number one cable network out there. >> worth a great deal after the a & e number. the cable companies have bean fabulous flibs. we work for comcast.

again why? because they are domestic. this domestic security theme is not going away. even in light of the fact that we have a horrible market today or at least the opening. i'm seeing some hi-teches holding well. this is best of times/worst of times scenario between s&p and in infosis. they own the golden state warriors. this is a great time fours but a lot of companies it's the worst of times. >> on that heat map not a lot of green. almost all of the s&p 500 is down. >> we're down 11.5 points on the s&p. bob pisani is back. bob, we did miss you. >> thank you very much. 12 days in italy. i also was in asia working on a special in the diamond industry. the italian economy is a disaster. bureaucracy is frightful. don't even rent a car in italy it's that difficult. nobody, but nobody knows how to have more fun than the italian

dose. it's a wonderful country, wonderful people and the fact that i'm italian had nothing do with it. the fact i had a great time has nothing to do with it. i talked to three dozen people, as many people as what do they think about monti? the support very thin. all we see is more tax. they are furious about the tax. that's all they want to talk about. if they can find an american to complain. stop the taxation. monti announced we won't do more higher taxes we'll cut more government expenses but now the italian bureaucrats, the government workers are in a state of revolt. did you see what happened? the head of the italian statistics agency, the guy who does all of the statistics for the country announced he was going shut it down. we're not producing any more statistics because we had so many cuts in our budget, so many personnel cuts we can't gather statistics to tell italy what's going on. if we don't get more people we're out. he threatened to shut the whole

thing down. 70% is generated for the european union not italy. one thing they are worried about italian wine crop are in trouble they have the same problems that we have here. like the midwest, the crops are withering under the drought going on. italy is extremely hot for months now. no rain in central italy. and the wine is threatening, the grapes are threatening to harvest early. second week in august, a disaster, means they are too sugary, not a well balanced wine, wine sales are way down in italy because italians aren't spending as much on the higher quality wines. they are hoping better quality wine can be sold to the americans and chinese who are now buying but if you don't have a great wine crop you can't do it. that's a big topic in italy. let me talk about burberry and slow down in china. when i got up this morning, i saw sales in hong continue down

1%. this is the largest retail julier in the world to trade over in hong kong. chow tai down 1%. all the rich chinese gong to hong kong to buy jewelry. you talked about earnings. i've been away for a few days. q2 is not supposed to be a good number and hasn't been for months. nobody is surprised the number is weak. what everybody seems to be worried this morning and i only had a limited time to talk to everybody qe 4 numbers and qe4. 14% growth at qe4. the entire year is hinging on q4. banks are expected to do extremely well beginning in q3 and q4. that's a little more worrisome than hearing about sort of weakish numbers in q2. we'll talk about that more later. guys great to be back.

>> welcome back. how terrific to hear something positive about italy even though it means time to visit. great to see you. all about u.s., french and swiss interest rates. >> lots and lots of things to talk about. look at 24 hour two day chart. we're under 1.50. under 1.50 yesterday. our only close under 1.50 was on june 1st after our last employment report and that's the historic low. but, think about this. let's look at some french and swiss yields. if you look at france they are at historic loss. their two year, about 12 basis points. we talked yesterday how you have negative yields in switzerland out to the five year. there's their two year minus 31 basis points. also the french are having negative t-bill yields, this isn't surprising, many countries have moved there, many countries have changed so you can do it at auction. here's the weird thing.

think flight to safety is strange. look what's going on in france. contrast that with the biggest story, peugeot, axing 6,500 jobs. could be as high as 14,000. what's important is they haven't done anything like this in 30 years. a socialist country basically. everybody is freaking out. the only thing i can say is think gm and 500 million shares stock. the connection is a little closer than you think. the last chart euro currency 1.21 handle fresh loss going back two years to june two years ago. jim, back to you. >> good to see you this morning. check out the latest news in energy. >> it is the euro, it is the dollar and that's what implements commodities at this moment. the fact we're seeing euro at a fresh two year low and the dollar very strong is pressuring not only gold but a host of other commodities as well. the gold extending here in this

session and we're look at a bearish trend here in the gold market. keep in mind we have a big data point coming out tonight with china's gdp data and that could change everything. we'll wait to see what happens there. keep in mind as we look at the price of crude oil we got that report on jobless claims better than expected but a lot of folks in the marketplace slugged it off because of the abnormality with the auto plant shutdowns in the summer months. we're continuing to look at demand concerns that are impacting the oil market and the international energy agency pointed out today when they trend their demand forecast for 2012 and said there will be mutted growth in 2013, all of this pressure price below the $85 level more significantly for the wti market and well below the $100 level for the brent crude market but continuing to watch what is happening in terms much what the international energy agency is saying, they are saying that there are still risks that we could see nasty

supply surprises. that's a veiled reference to keep your eye on iran. back to you. >> thanks very much, sharon. couple of things to hit here this morning. not a lot of m and a activity to troirnt u.s. but a large deal overseas that attracted some attention of media related investors here in the u.s. and i'm talking about dentssu a japanese giant. the japanese have been very aggressive of late and i continue to hear this from bankers in reaching out across the sea, so to speak and trying to buy companies in other countries both here in the u.s. and in this case, aegis a large advertising based company in the uk. this is a very large deal, $5 billion. take a look at the premium, about 48%. one of the largest deals done in the advertising industry. of course, it is a bit of a different dynamic there in terms of what you have to do and the way you offer things but at the end. day a very large premium, very large deal for a japanese

company acquiring aegis which, well dentssu has 21,000 employees in 29 counts and aegis has 12,000 employees in 80 countries. we're not talking about church change. >> we saw this in 1988, 1989 when the tokyo stock exchange was larger than others. this is an interesting new trend. we need some m and a. >> they have been aggressive. those that can in japan are trying to find growth elsewhere. let's move on quickly. karl icahn comes out with a letter talking about howard solomon. he's been so dismissive of my request to talk to him, to get something going. has his own agenda. however given the stark lack of

shareholder representation on the board, the dire need for better strategic direction at the company and my track record with biopharma companies, i cannot fathom any legitimate reasons why you would dismimi request so offhandedly. >> he's been very patient on forest labs. >> he has been. the letters going back and forth you got to love karl aslers. but slow monday is a feisty gentlemen when it comes back to his response to karl equally as fiery when responding to the charges of well timed insider sales. let's put it that way. the dynastic nature of the succession plan and giving his son the nod as his successor. fascinating battle. >> at the end of the day, forest is not straight biotech company at all but has been quite good. i did want to hit viacom. you've been following another

one of these battles. there are a couple of interesting parts here. we mentioned earlier viacom removed its programming online. you can't watch spongebob. there's a look at directv to punish a little or down with the overall market. viacom is also down. this hits day two, day three that point. one thing to keep in mind if they don't go up a lot, if they do settle with directv they have almost a favored nation status such as with our parents company comcast. if you get a lower rate than comcast is paying, comcast can come down to that rate. something to watch. although they can load a lot of different fees and digital rights and make sure it stays up there. we'll see how it gets resolved. >> usually we have these things stopped. >> that's true. right now we're down on a full percentage of the s&p 500. supervalu shares trading lower down by 46%.

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> > take a look at the dow heat map. four dow stocks in the green including proctor and gamble and there's some interesting news out on p and g, david. >> the noted activist purrer cleared the sec cleared it of antitrust if he wants to buy above $15 million, won't buy 5% or more. $170 billion market value. some conjecture that having filed to clear he may embark on some sort of activist campaign i guess. but that would be an interesting

one. if you're going to go after p and g there's no threat of take over or anything like that. you simply need to come with something that can agitate a lot of shareholders to say let's move, let's change things and, you know, i don't know if ackman is right guy to do it or not. >> you wonder if the board is staggered, if there's an opportunity to replace a couple of members where they are incorporated. i imagine delaware. a lot of other questions also that we will get into. >> there's a lot of people who like you criticize the ceo. he's tactical but not strategic and not focused on the long term and flight guy. >> that's why mr. mcdonald is on the wall of shame and stay there until he decides to bring in more value by spending time with his family. >> proctor and gamble 3.5%. if ackman can get in there, given the size of the company,

something could happen here? >> in this kind of a market i'm a seller of a company that has declining earnings. it's up $2. i'm not a buyer. >> very hard activist. got so many big funds in there. big slugs. you never know. may be relational. hard to imagine. >> the break up value of this company is immense but they said over and over again they won't break it up. if mcdonald were to leave right now the stock would be correctly valued. that's how important it is that get a change in the executive suite. >> we're down more than a percent on the s&p 500, 14 points is the loss. much more "squawk on the street" straight ahead. ♪ >> coming up we're jumping into the stock pool and inviting you along. let's get soaking wet. six stocks in 60 seconds when "squawk on the street" returns. between listening to the numbers... ...and listening to your instinct.

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take a look at the dow down 88 points or .7%. this major index is the smallest loss at this point and s&p down 1% and nasdaq down 1.3%.

ibm down 1.5% weighing on the s&p. >> we'll head over to mr. hobbs. >> is that big moment for a lot of people. bitter disappointment that the fed hasn't reacted or chosen to further stimulate the economy. we got talk about the fed, we got to talk about commodities. we'll have somebody on the program who thinks the u.s. economy isn't as bad as people are saying. we will also talk about warren buffett's exclusive appearance on cnbc, one much his investors will be on the show and we'll talk about groupon oon as well. big hour ahead. >> six stocks in 60 seconds. mr. cramer let's start off with family dollar. >> weakest of dollar stores in terms of management. it's the easiest one to take off the list.

>> autozone. citi group says do it yourself. >> remember we had o'reilly blow up and took the whole group down. this is a great well run company. >> red hat. >> people hate tech. is that company that's cloud. cloud is getting cloudy. >> goldman sachs raises the price target. >> if mr. mcdonald leaves proctor, you would see this going oranges j and j survive. >> united continental. sell? >> has bottomed and you want to take profits. >> finally marriott not a good day. >> no. they take it down, international has been the star of all hotels. >> thank you. >> i need to ask you something is it too early yet for groupon, too early to buy groupon? is it too early to buy zynga?

>> yeah. both of those are not looking particularly good. >> we used to talk in the old days. >> yes, it was. what have we got coming up on "mad money". >> real estate. one of the things -- again i'm looking for domestic plays. this is a real estate investment trust company that has held up very well. david real estate investment trust utilities, the merck, the j and js, the proctor, the walmart, if it's made in the u.s., doesn't touch europe has nothing to do with spanish coal miners it's working. >> 6:00 and 11:00 tonight "mad money". a lot more "squawk on the street" ahead including a look at groupon shares which are down again. we're back after this. 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,

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over the last two days. we'll talk to citi group who is slashing his price target but keeping the buy right on stock. >> china in focus ahead of tomorrow's second quarter gdp number. let's get right to it then. the markets, of course, stocks starting a sixth session of losses this morning. does this signal more trouble ahead for equities? dan greenhouse joins us. good morning to you, dan. >> how are you, sir. i'm concerned. there's disappointment that the fed chose not to further stimulate the u.s. economy after so many central banks have done that over the last six or seven sessions. the fear is this will be a very rough summer. is that fear correct? >> i'll say two things. first of which is we do think this is a rough summer, something we've been talking about with clients and we've talked on air several times. the summer is always a difficult time for equities and

effectively we're saying we don't see why this time would be different. to your former point i would remind people these are just the minutes, the discussions surrounding the last meeting at which the fed did do something. they extended operation twist. obviously not enough for equities or market participants but they did do something. >> before we dive further into what the fed may or may not do can i get a comment from you on this real strong push into treasuries we saw a huge direct bid coming through on yesterday's auction. if you look at europe overnight and rick santelli has done a lot of work on this, a lot of those yields are negative in europe. what does that tell us? >> with respect to the treasury auction this is something that was brought up to me. a year ago the treasury changed the way that china can participate in treasury auctions and you saw a huge boost in the direct bidder category as a result. so there's speculation among some clients and on our desk that perhaps there was another change that another country was able to participate in a

different way. even if we get past this technical under the headline reasons, the idea that somehow there's a huge amount of demand for treasuries shouldn't come as a surprise tomb. we're in a low growth, low inflation environment that looks like it will become lower growth, lower inflation at which point 1.5% on the ten year is better than zero or even negative returns. >> is it significant that you have this big buy yesterday from the chinese? we know that big buy anyway but the way in which it happened yesterday is that perhaps a form of intervention on their part to ensure u.s. rates remain low? >> i doubt that the chinese have our best interest at heart any more than we have their best interest at heart. again the larger point, the demand for safe haven assets. i think this is an underreported story. a lot of people are talking about who would lend treasury or u.s. government money for ten years at 1.5%. there's a separate story about

the dirth of safe haven assets. you're really left with on i bund, gilts and treasuries for lack of a better term as safe haven assets. when everybody is fleeing to safety that's where they go. >> dan, i want to get back to the fmoc minutes. in read your notes after the minutes were released. it made me come away with a picture that perhaps you're of the belief that the fed was more like tloiz than not ease which seemed to be very different from what the consensus took away from those minutes. why is that? is it because of the data points we got since that want meeting took place? >> i think the consensus is wrong and i'm right almost by definition. obviously. no. in all seriousness one meeting ago there was nobody willing to ease, this meeting there were a few people that were willing to ease and indeed if you read all the way down the minutes but which nobody but us nerds do, you see two fed members went so far to say that their current

forecast, their current outlook incorporates an addition aa aaa quantitative easing or bond buying. my takeaway again this was another incremental step for a fellow reserve that's looking at missing on both of their mandates. this is another incremental step towards additional easing. there's a lot of other beneath the headline debate going on here. the fed is not sure that quantitative easing is the solution, that it's even going to help without hurting more than it will and indeed there was a really important point in the minutes that nobody reported on, where the fellow reserve said a few membersing talked about trying to come up with other policy tools, other ways to ease. and that effectively means that a couple of people are not happy with quantitative easing. >> we're running out of time. this is david faber. your idea about the dirth of

safe haven asset, do you believe we'll see the yield decline from the ten year treasury in there points if it does qe3 i don't know how you go about doing it when you have a rate throat. >> first point, you could easily make a case that the yield falls further. i saw the rate strategist at merrill lynch was talking about 125 or even lower. our forecast was for 150. we talked about this to start the year. we're there and stay there for now. let's be clear. if we roll over into another recession and policy doesn't respond you can easily get down closer to 1%. i would remind been ten year jgb is around 10.7%. >> not a great comparison >> it's a realistic comparison. it exists. we can look at a developed economy with its own currency. >> thanks for the update that japan is here on earth. >> a comparison to something on earth versus -- >> geography and everything

else. >> up -- you never know who is watching. >> dan greenhouse. have a great day. >> shares of gloupon hitting new lows falling more than 60% since going public last november. next guest maintains a buy right and $19 price target on this company. let's bring in internet analyst at citi group research. mark, good to see you. $19. are you rethinking about it all given where the stock is? that's a difficult target to achieve. >> no. no, we're not. look, we upgraded this stock about two months ago. we thought we were able to call the bottom. we clearly didn't. but where the stock is here, you're buying it or considering buying it at ten times earnings. we recently lowered our numbers down that level. for this kind of growth and given the skepticism on the stock if they can deliver that

kind of earns, if they can deliver 70 to 80 cents earnings we'll stick about weekend the buy right. the traffic trends on this stock have been very hard to interprert. there's not a heck of a lot of data to track. they have been soft intraquarter. what they didn't pick up that last quarter was 33% accelerating north american revenue growth. the softening this quarter i'll be skeptical. if there's a falloff in user demand the stock won't work. we're not sensing that in checks but that third-party data is a question mark. >> let me ask you, if traffic trends are very difficult to interpret on such a young company from comscore, you write in your note we would not expect to confidentially infer for several more quarters how do you come up with $19 a share and why do you stand by it even when the

stock is here? >> well, you first have to figure out what you think are reasonable earnings. i would lay out three quick pounts. first we did have that accelerating revenue growth in the march quarter and there were good reasons behind that. you had introduction of groupon goods and groupon vacation packages. they are making a push into the mobile platform. secondly, you had two quarters in a row of 50% incremental margins. the big bearish skepticism which was accurate in the past on groupon which we were part of is that groupon would never get to 30% operating margins. they did 50% two quarters in a row. we think they've addressed accounting issues. if those recur the stock won't work but we don't think it will recur. >> why that's it come under such pressure. >> you've mentioned at the very beginning. show, falloff in high risk assets. if you were to ask me what's the highest risk, most controversial

risk in a sector that's already controversial i would give you groupon and netflix. you'll see those stocks trade off because of that and european exposure. >> don't you feel nervous? your call, it's a great call, $19 from 7 possible'7". more than double my money in the stock. don't you look at that and go, that's just not right. that just -- from the practical standpoint seems a very high bar. i know, i understand the arithmetic. i understand the argument. in the environment in which you described isn't that a real tough call to make? >> look, when you have stocks that correct this much off of -- this stock was at $30 now $7. highly volatile stock. if the earnings they can do 70 to 80 cents in earnings next year and this stock is trading at ten times those earnings, we've seen sthoings space trade at 30, 40 times earnings and if there's upside and they execute better than we think they k-you

can have that kind of upside in this stock or we wouldn't have a buy interest. >> mark, good to speak with you. all right. dow component boeing just getting a 14.7 billion dollar order from the country's largest airline, phil lebeau has that story and joins us from chicago. >> this is a massive order and one being announced as we speak at united headquarters in chicago. united ceo along with boeing ceo and other officials from both boeing and uniteed. here's how the order breaks down. 150 737 are being porpd two-thirds of authors the 737 max new plane in development at boeing. other 50 are the current generation of the 737s. all together totals $14.7 billion. those deliveries begin next year with the current generation of 737s and extend to 2022.

you look at shares of boeing or united neither stock is moving higher but this is clearly a huge order and a significant one for boeing. could not afford to lose united to airbus. they were both in the competition like they always are. in this case boeing gets a big win for the 737 program. >> that is for sure. thank you very much for joining us. a live news conference under way. up next, warren buffett among the heavy hitters in sun valley this morning. what did you make of what the billionaire investor told us on cnbc. we'll ask berkshire hathaway shareholder when "squawk on the street" returns. ♪ dad, i think he's dead. probably just playin' possum.

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welcome back to "squawk on the street". gold getting hit today with hopes for more quantitative easing from the fed. gold index at a two month low. david? >> thanks very much. media moguls are back at the annual conference in sun valley, idaho. what have they been talking about today and over the last couple of days? we go the conference and run down those moguls. kayla? >> david the second full day

kicked off this morning and even though we're several time zones away from englewood cliffs, new jersey guess what the buzz from the moguls was this morning. >> i was just listening to the panel on cnbc, and, you know, bowles said he thinks we're going over the cliff. and i.e. we'll go to ten. year without any comprehensive deal. that's very bad for the economy because people like me get very conservative, right? i mean we go cash. that's why you see the ten year now under 1.5% this morning. just so much money running for safety because there's so much indecision about where the future is going. >> now, of course, that was liberty media's john malone voicing support later in the conversation for the simpson bowles tax plan and on cnbc we have a story about houma lone is gunning for a spinoff, tax-free

spinoff of sirius xm. has an application in front of the sec to get control in the case that he doesn't reach a peaceful agreement with the current chiefs at sirius xm. the other big story in the media world today, yesterday a federal judge striking down a request from u.s. broadcasters to block barry dillers new venture and diller spoke out for the first time this morning about what that means and what the next step is. this is diller. >> the next step is we now offer the service to consumers which is what we wanted to do. we wanted to offer consumers an alternative. if you have a vested interest then you're probably not going to like this. if you're a consumer and like an alternative to paying for cable or for paying for satellite and you want to receive free broadcast signals which is your kind of native american right. >> all the moguls flooding in to the sun valley for a morning panel on china, a lot of other

events throughout the day and we'll have them life for you here on cnbc. >> two of my favorite guys, there happy to see them, of course. wish i was there too. kayla tausche reporting from idaho. >> the oracle speaking to becky quick this morning. he struck a more pessimistic tone on the economic but said there were signs of improvement. >> general economy of the united states has been more or less flat and so the growth has tempered down. the residential housing, we're seeing a pickup and it's noticeable. from a very low base and, you know, it doesn't amount to a whole lot yet, but it's getting better. >> jeff matthews is the author of a book on warren buffett.

>> i don't think anything he said is anything that we don't already know. companies from cummins engine to tiffany has been reporting weaker business mainly the short fallout from europe and china. that wasn't totally unexpected. interesting to hear buffet say it because he has been talking about a recovery for a long time. >> also did talk about that recovery, he said, again, off a low base in housing. i'm curious as a berkshire hathaway shareholder do you take any comfort from that? they do, obviously have a lot of different connections into potentially what would be a rebound in housing. >> sure. it's important to berkshire. they have a lot of businesses that relate to housing. it's more comforting for the economy as a whole because housing drives an enormous amount of economic activity in this country and in order to recover we have to have a

healthy housing market. that sounds like it's starting to happen. >> it's interesting, jeff, when you look at the stock chart and pair it up against the time frame in which mr. buffet is starting to see this slow down, berkshire shares have lifted since the end of may. earlier this month they've done pretty. at the same time that's the time frame where mr. buffet said we're seeing things slow down. your concerned at all as a shareholder about what he's saying in relationship to earnings for berkshire hathaway? >> well, you know, the stock has never really depended on earnings. it's really more dependent on the health of the company itself, the assets they own and what he's been able to do with the cash. the earnings fluctuate widely because of the insurance businesses that have a lot of ups and downs on a quarterly basis. the fact that the stock has done better as the economy seems to have stalled out is absolutely ration enamel because berkshire hathaway is a run for cover type

of company. it's going to survive no matter what happens. and i also think it's no coincidence that companies like walmart and heinz and hershey have hit all-time record highs in the last couple of weeks, those are also sort of run for cover conservative investments. >> those conservative investments, aside, jeff, there's then a split there between the house sector, domestic sector we spoke about and those international companies many of whom are pragt in emerging marks where there's trouble against a higher dollar which leads the repatriation of profits abroad doesn't look rosie. what would you say about those two other parts of berkshire hathaway. >> berkshire's businesses are focused on the u.s.. the railroads. the energy businesses. and the housing businesses. byd, that investment is, of course, a dog. that's a chinese automaker and they just reported lousy sales.

you want a healthy economy around the world for all of berkshire in order to help all of berkshire's businesses because the world is tied together. but i think berkshire is mainly a u.s. focused enterprise at the moment. >> i was thinking more of investments like coke when i said that. >> okay. well, you know, i don't know where coke stock is today but that's a relatively safe haven type of company. the type of businesses you don't want to own in this type of environment and i'm not saying anything that everybody doesn't already know or hasn't shown up in the stock price are price like caterpillar or cummins engine that have done huge business with the growth of emerging economies and where those economies are starting to hit wall. jim cramer mentioned the levi call the other night. their asian business, their china and india business went from up 5% to down 9% in one quarter. that's a huge shift. >> it certainly is. one that the market seems to

have started to focus on this week. jeff, thank you for your time. >> any time. >> all right. coming up a glass half full on the american recovery. "the economist"s if and why the american economy may be healthier than you think. "squawk on the street" will be right back. home protector plus, from liberty mutual insurance, where the costs to both repair your home and replace your possessions are covered. and we don't just cut a check for the depreciated value -- we can actually replace your stuff with an exact or near match. plus, if your home is unfit to live in after an incident,

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take a look at the dow heat map. four members are in the green including proctor and gamble. ibm one of the biggest drags is down by $3. or 1.7%. >> let's get to it. thursday morning "money in motion". todd gordon joins us to talk currency and how to make money. good morning. >> good morning. >> there are so many big moves on the currency markets at the moment. i'm looking at australia that has huge difficulty, australian dollar pounded again today because of china and what's happening domestically. why turn back to the eur euro/dollar. >> right now we are approaching some significant levels. so you're right, australia is

breaking down. chinese slow down. europe is the best responding to this risk off trade. you want to be aware of the most of the trade that's reflecting the risk off situation and the s&p and the central banks right now are fumbgling so to speak. they need to start acting rather than paying the market lip service. there's see central banks dropping the ball. yesterday with the fed, obviously the minutes didn't show the kind of urgency the markets wanted to see for quantitative easing. the bank of japan last night expected to increase their asset purchases. it was a wash. obviously china and, i think that without central bank support, you know, market will continue to fall. >> okay. so 1.2185 is the level. >> trade will be short euro. we're looking at a long term trend line. should be broken around 1.20. i want to sell down to that

level. stop out about 1.23. take profit. euro around 1.1850. one other point. last night ecb governing council member said they had no intentions to narrow the rate between don't rate and the man rate. without central bank support markets have nowhere to go but down. >> thank you very much. todd gordon joining us there with a bearish view inevitably on the euro. more currency trades catch "money in motion" tomorrow at 5:30 eastern with melissa lee. if you want more education about currency go to currency class at money moneyinmotion.cnbc.com. >> you're a force majeure. >> we have breaking news.

>> we'll see another week with a lighter than expected build in expectations or lighter than we've seen normally for this time of year. chalk it up to 100 degree temperatures that we saw a week ago. the increase in storage natural gas last week was up 33 billion cubic feet. slightly more than what analysts were expecting. a range of 18 to 33 that endless survey. that still about a third of the injection we normally see for this time of year. normally around 90 for the five year average but, again, we've seen very, very hot temperatures particularly along the northeast and that's expected to return next week where we'll see 100 degree temperatures in the middle of the week according to pilot forecasters at wsi. whether or not we see a return to the $3 level we saw last week

for natural gas remains to be seen. that's a technical level. above that level a lot of traders say that makes the coal and gas switching not as economical. not likely to see those price reach those ranges. >> thank you very much. coming up views on china's slow down fears across the pacific. we'll talk to jpmorgan's equity strategist when we return. stay tuned.

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we are one hour into trading and here are some of the stories that we're squawking about. jobless claims falling sharply lowest level they've seen in fouraries. state unemployment dropped by 26,000. shares of progressive corp falling over 4%. progressive is also amongst many financials that are lower this morning. and karl icahn increased his stake in navistar. >> dow is down 83 points. oil is getting hit badly. gold in negative territory. yield on the ten year at 1.49. let's head over to chicago and see what people are talking about there. kevin ferry joins us. chief market strategist. where do you want to start? it's a very interesting picture

this morning. >> you bet. good morning, simon. let's start with the rate structure, the term structure, the ecb now has got the rate down to zero into the overnight session and so you're seeing a massive push down in the past week in dollar based borrowing too. so that positive effect, what we would call a better financial condition or less stress in the system is no longer providing any uplift to the equity market and i think that's the big signal that i would be having your viewers keep an eye on today. >> so, where does that analysis take us then? >> well, prior to this, you could play the game up and down and simon, which is as central banks acted to mitigate it, risk markets would come back. now what you're seeing is that although we're seeing a significant improvement in those metrics, equity markets are clearly focused on the slow down and the potential for earnings

to come in in the future worse than expected. >> is there a disconnect between the equity market what it's doing and obviously both are moving but it appears to me that the move the short end in europe are major and actually the equity market although down for six or seven days is still hanging in there. >> you bet. people forget we made a move from 1305 to 1365. significant. i would like to see it hold in around this 1321.50 level on the futures today. the disconnect is in multiple asset classes and you've mentioned that when you talked about oil and gold also. so old correlations are breaking down. what's the reason? the reason is competitive devaluation of developed world countries conferenurrencies, us yen and now the euro. >> thank you. >> china set to release second

quarter gdp numbers late tonight. so is the hard landing here? what's the early read. adrian mowt chief asian and emerging market equity strategist. we hear from burberry and cartier and cummins engine, nike, we get the picture there's a pull back when it comes to the chinese consumer and therefore growth. what's the truth here because somewhere it's out there. >> we are seeing a significant slow down. probably more on the capital goods side than on the consumer side. we had excavated sales out for june, down 19%. although that was better than the 26% we had in may. construction start down as are nationwide residential property sales. what china is dealing with at

the moment is the over investment that happened during its stimulus in 2008 and 2009. but also remember that in china there's major demographic issues which means that the labor market at the moment is very tight. wages are going up. and you have that plus the fact that inflation came in at a nice low figure at the beginning of this week. you probably should give the chinese government an a plus at the moment. they got full employment and relatively low inflation and the market is naive in expecting an inflation. but we are advising clients don't worry about these chinese

gdp numbers. you got to look at the detail. the detail suggests an economy that is significantly weaker than the headline gdp numbers. >> right. 6.6 is a full percentage point below the consensus estimate on the street at this point. i'm wondering when does the slow down baton gets passed to the chinese consumer. is it only a matter of time or is wage growth so strong and steady that that could really save the consumer? >> well, i think there's two things on the consumer. high end consumer is being hit as we begin to see property prices come off. the co-efficient thing getting stretched in china with big disparities and those that had money to go to cartier and burberry probably owns property. it's the guy with the construction job, manufacturing job that's getting the wage increases and is benefiting from cheaper food prices and playing

that type of consumer is very difficult. you know there are limited number of stocks internationally that fit within that and there are very few listed stocks in china. most of the china plays that people have been investing in are the high end names that you've already mentioned. >> where are you, adrian? >> where am i? i'm in hong kong. >> i thought so. you actually got a bird's eye view. we should make that clear you're in a sense in on the action at the head of it. for ordinary investors, for regular investors that don't particularly want to get involved perhaps with china but they understand how important it is, do we need to be worried sitting here in u.s. stocks about what might be happening in china or are we okay for now? >> well, i think there are good and bad news coming out of china. you know, it's very bad news if you're long material and energy stock. and it's quite possible that

construction activity in china declines over a number of years. but that's the trend we saw in japan, taiwan and also reunification in germany and so i'm very nervous that people have too high expectations for china's demand for material and energy. as material and energy prices fall, that has benefits of providing consumer with more discretionary income, particularly in the united states as the gasoline price comes off. so, you know, i think you should be very wary of china plays material energy, high end luxury place and start to think about how the consumer in the western world will benefit from the decline in material and energy prices. even manufacturing company that starts to have slightly better margins because their input prices are falling. >> adrian, we'll leave it. thanks so much for phoning in. we appreciate it. adrian mowat of jpmorgan.

>> we have a stockpile of companies warning on global slow down fears while the u.s. unemployment rate sits about 8.2%. as the weak data piles up why is one columnist claiming the u.s. is far healthier than you think. we'll talk to the man behind that claim next. ccontemporariy.

the dow is down 106 points. very much the materials and the industrials that are leading us. steels are down, dow chemical is down. not restricted to cyclicalal stocks. >> s&p 500, ibm is one of the biggest drags as well. this is the story of the markets today. big cap technology, very, very weak in today's session. you take a look at apple down

1.8%. hewlett-packard down. that along with financials really huge headwinds. >> s&p down about 3% so far for the week. a weaker than expected june jobs report has made it probably hard to feel optimistic about the economic picture right here at home but acdorgd tcording to tht issue of the economist the u.s. economy is healthier than you think. greg i read your piece but i probably agree pretty much with everything. one of the key points you make is about the fiscal cliff which in some ways you can write it and say hey let's just deal with it but in reality and we heard john malone earlier talk about this from sun valley it does appear to be more complex than that and there's a lot of people who think politically we'll be able to deal with these issues

such as deficit reduction and get everything in line. >> this thing is a big threat and i worry as the end. year approaches more businesses pulling in their horns because they are worried about how that thing will unfold. but i believe we'll fix it for two reasons. one, last year every one. slow downs whether shutting down the government or debt ceiling we managed to fix it. >> at the end of the bay, boehner and obama could not come to a grand bargain and kicked the can down the road when it comes to this key issue so we'll have a cutting that just takes effect as you well know. what gives the confidence that our political leaders can reach a real agreement? >> they always have in the past. and i think that one of the reasons it will be different this time is let's take a scenario that obama is re-elected. ep has more leverage. boehner goes back to his caucus

and says this is a president that's going to basically extract more from us than the last time. i think that crates a dynamic for cooperation. i don't want to minimize this threat. the economy this year faces a lot of headwinds. the main point we're trying to make is if you look beneath the surface great stuff is going on. ten years from now you can be very bullish about the american economy because of the great reforms and changes going on with the private-sector not the problems here in washington. >> you make a key point. and one we made oftentimes. jim cramer makes it a lot. the natural gas explosion which essentially is a technology story. you think it's a seminal change. >> absolutely. the more i think about it, the more i think of how similar it is to the internet boom ten years ago. why did the internet boom happen in the united states first and not somewhere else. we had the seed money from the federal government. we had risk taking folks to

commercialize it. we had sort of business and customers that wanted to exploit once the price came down. all those things are present with shale gas. folks like george mitchell exploit technology that federal government helped finance. you had entrepreneurs. isn't that what america has in abundance, risk takers. i agree with a lot of other folks there's probably we've tilted too far in the form of regulation. but europe, the regulatory approach is more enlightened. >> there's some key differences. we're flood the stuff right now. nobody will commercialize to a large scale beyond commercial free-throw shooter, engines for nat gas. there are a lot of step that need to take place in order to realize the full potential of the savings of nat gas. >> absolutely. >> many years out too. many environmentalists need to be fought. >> that's true. let's look back to the internet boom of ten years ago.

dew point to invest in companies that were laying the fiber optic cable? no. because they went bust because of price of the broadband width fell cable? no, because they went bust. you wanted to invest in amazons and the netflixs and those that will exploit the availability of cheap bandwidth. this will be bullish for petrochemicals and basic commodities. eventually not this year, but five to ten years for liquefied natural gas and exports of natural gas. i think we are at the beginning, not the middle or the end of the potential for natural gas. >> i understand being bullish on america is good box office. i understand it's what people want to hear and with reticence let me say what i'm saying now. something has gone wrong. we have massive stimulus, $800 billion more than we have had at the height of the financial crisis. we are running a budget deficit

of 7% of gdp. that is a massive stimulus that's coming into the u.s. economy and still we're stalling. can you explain why that is happening before you go on to the ten-year view? you have to understand that first of all. if america is going to get itself out of here and we're going to get more people back to work. >> sure. well, look, i am not at all disputing the fact that times are tough now. the last years have been disappointing, especially given the fiscal monetary stimulus thrown at it. first of all, the growth that the united states has had has been better than what britain and europe has had. second of all, we've made enormous progress in getting rid of the imbalances that led to the crisis. i mean, remember the work that shows, you know, in the wake of a crisis you almost always got sluggish growth. we are making progress in terms of getting household debts down. >> let me ask you this. is there not a big problem here that we have major structural unemployment, it's not cyclical,

people don't have the skills, they're in the wrong part of the country, we don't have the industry, that's a much bigger issues than making comparison what's happening in europe. if you get this economy back, because you can be as entrepreneurial as you like, but if you can't move, because you're under water on the mortgage those are huge things with getting america back to work. >> i think the structural unemployment story is vastly overplayed. i don't think the evidence is there that a lot of people are not moving to get better jobs because they're weighed down by the houses. i think the main problem with unemployment is the weakness of overall demand. i think, yes, we do have a long-term unemployment problem. the longer the situation goes on. the immigration system needs reformed. i would love to see barack obama and mitt romney focus on that instead of did what, whether running a private equity firm or whatever. but again, look at what the private sector is doing, look at what's happening with the exports. i could not find another recovery period when exports

have made as big a contribution as they're making now. that's america's private sector responding to overseas. >> thanks for your time. >> thank you. >> greg of "the economist." as we mentioned before yahoo! meeting with shareholders in a matter of moments. but first, rick santelli, what are you working on for next big hour? >> we'll talk about safety, low yields. you know, socialism, what's going on with peugeot. we'll talk about scandals. i like sour patch, but i li the commercials. think of your tax dollars, what they do to these banks. sometimes they're really nice and they give them all the tax money and sometimes they're really mean and may blow our tax money. we're going to talk all that at the top of the hour. untries tooa science test. the top academic performers surprised some people. so did the country that came in 17th place.

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brokerage fund pfe filing for bankruptcy after the firm misstated over $200 million in accounts. scott cohn is live outside the headquarters in cedar falls, iowa. what's the latest? >> well, simon, reports this morning not officially confirmed

that the 40-year futures industry veteran who attempted suicide earlier this week is alert. and perhaps that means that he will now be able to explain a story that gets more bizarre can every day. wassendorf hastily married his fiancee and then in june signed over the affairs to his son on july 3. then on july 6, we have obtained this e-mail to the employees of pfg suggesting that everything was just fine and that the crisis has passed. talking about a temporary 10% salary cut that the board had authorized back in may saying that that was going to be able to rolled back. that the second salary cut that was due to go into effect this

month would not be done because due to cost cuts and increases in income particularly initially that they would now be breaking even. three days after this, of course, the firm blows up. wasendorf, sr., attempts suicide and 300 employees are out of work. we're trying to figure out what is going on with this firm and why it is that $200 million in customer funds are unaccounted for. take a look now at the time line with all of that other stuff in mind. in february, the national futures association which is the self-regulatory agency files a complaint with -- for pfg not properly supervising the introducing brokers. july 6, the e-mail we have obtained saying that the second round is cancelled and the first will be rolled back.

then emergency action, the attempted suicide and pfg files for bankruptcy. there are also questions now surrounding the auditor for this company which it turns out was a single practitioner operating out of her house outside of chicago which is not what you would expect in a worldwide futures firm. again, we are continuing to investigate this and we'll keep you posted throughout the day. back to you, david. >> extraordinary. scott, thank you very much. all right. we'll have some final thoughts amid the sell-off at this hour. next, we'll be talking about p & g and whether it's bill actman's target. ♪ i want to win [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky [ male announcer ] even the planet has an olympic dream. dow is proud to support that dream

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hey. crab cakes, what are you looking at? geico. fifteen minutes could save you fifteen percent or more on car insurance. good morning. good morning. welcome to the third hour on "squawk on the street." we're climbing back from earlier losses. still down 84 points on the dow. huge disappointment overnight, of course. that the fed didn't see fit to order or talk about more stimulus. but we seem to be as i say cutting the earlier losses. shares of supervalu losing a quarter of the value after they reported first quarter dismal reports. they announced they're suspending the dividend in hopes of funding aggressive price cuts

in order to win back shoppers. turning to tech this morning, apple's next generation iphone 5 hasn't even been released yet, but sellers on china's largest e commerce platform are accepting orders. it's widely expected to be released between august and october. all right. so let's get to the road map for this hour. simon mentioned the fed hangover weighing on market sentiment as risk assets slide lower. the moves amongst the currencies and the equities. that's next. plus, yahoo! had recent management turmoil. we'll talk about the bid to stay relevant. and the collapse of pfg best, we'll sit down with one man whose money was invested in the now defunct firm. we have to look at proctor & gamble, one of the rare hot spots today. >> yes, bucking the trend, p&g

up 3%. this on news we shared with you earl their the ftc has given pershing square, led by bill ackman, a huge bid. saying that that's the next target of course is speculation on the market. that's why the shares are up and especially if we were to compare it to the likes of colgate palmoli palmolive, you'd see underperformance in p&g. it's something our own jim cramer has talked about time and again. this is taking place from the current ceo, and some real questions about the company. but a larger question is can you really mount a successful activist campaign on a $170 billion market value company? you can't build a stake as you might typically do 5% or 6%.

talking about $8 billion or $9 billion, but you could agitate for change that may be willing to listen if you come with a cogent argument. we'll see whether mr. ackman even chooses to follow through. that's the reason p&g shares are up rather sharply in an otherwise down day. >> what was the last biggest activist battle, target? >> that's a very good question. i mean, i can remember home depot had a large market cap when relational investors made a move on them. that's ralph whitworth. you won't be able to obtain an economic position that's large enough to threaten the company or even get enough votes. if you're respected and your plan is respected and you're attacking a company that has restive shareholders you may get traction. >> thanks. let's head over to gary kaminsky

who is looking at -- oh, wait a minute. wait a minute. that beard is gone. wow gary. finally got the hint, huh? >> i don't know who was behind it, but i received a phone call. you know? i received the phone call from the -- the phone call from management. management. ♪ hallelujah >> yeah, management. >> you sold out, gary kaminsky. >> i thought you were a rebel. >> hobbs, you were behind it, we all know it. the worldwide viewing public knew you were behind this. >> i had a magnificent mustache at the beginning of the year, similar to brad pitt. under pressure from management, i managed to hang on to that for at least a week of programming. you did three days and you sold out. >> i think when men grow facial hair, something happens to their brain and their ability to objectively assess their appearance. >> women love it. >> no, no.

stop. >> melissa, i'm going to put this issue to bed knowing that you told everybody you didn't like it, but you did. let's talk about investment guys. >> all right. get on topic, gary. >> guys, listen -- >> never liked it. >> let's talk about investing here. obviously the sentiment is very negative. going back to when i visited you with the beard in london three weeks ago. i was at dinner last night. of course, the only conversation that anybody wants to have in terms of investing right now is about how bad things are in europe. with that being said, a retired investment banker who i think has got a great vision in terms of the overall world, even though he's retired right now, recently retired, talks about what may happen, what may not happen. when you think of investing, it's important to say if you've got a lot of cash, got a lot of bonds, not exposed to the equity markets, what happens in the event that the likelihood of the disaster that everybody expects doesn't happen? that being said, take a look at an etf. an etf for everything.

i have to tell you, i have not followed this etf. look at fez, which is a yield of 4.7%. santa fe, siemens, and the point being very simple. if you have been cautious, if you have been holding a lot of cash, if you've taken the approach that i do expect severe dislocation to happen in europe at some point, but you do -- excuse me, you do want the exposure, this is a nice way to do it. because you're getting paid a current dividend yield here. we talked about this in the past of being active managements within your own portfolio, but also saying what if i'm wrong? this is an interesting way. i will say this. when you know that you're having these conversations with people that were in the financial services business and those who weren't, there's another gentleman who was there and he was an advertising executive and

if you continue to hear how people do business in europe it's bad. there's a difference between what's happening with the pieces of paper, that being the stocks and the etfs and the businesses themselves. i say take into consideration, if you have been playing it cautious, take a look at this etf. might be a good hedge of the portfolio. >> all right. thank you very much, gary kaminsky. >> see you in a bit. >> see you. i think it's such a relief. >> he sold out. >> it's such a relief he shaved that. let's talk about technology. yahoo! share holders -- let me rephrase that. yesterday, the board met, today you have the shareholder meeting and we're waiting for news to see who the next ceo will be. and do we know if we have got confirmation yet on who the ceo will be? >> no. there's been no announcement yet about a ceo. simon, i'm here outside the marriott, across the street from

the headquarters. behind me is the shareholder meeting. though the board is expected to be in there, including activists shareholders. we'll hear comments from the chairman, the interim ceo and after we get the results, approving the board of directors, only three of the 11 nominated were on the board last year. also approving executive compensation. the big question is whether yahoo will announce its permanent ceo and who will the board will pick. and the uncertainty has certainly been hanging over yahoo! stock. now, the front-runner is interim ceo ross levinson, and just a week after he started in the role, struck a $7 billion deal to unlock yahoo! investment in ali baba. investigators were hoping to hear some news today. though at this point it's not

looking that likely. the fact that we haven't heard anything indicates it may not come until next week before yahoo!'s earnings on tuesday or further out after that. now, the real power player behind today's meeting, they actually would be activist shareholder dan loeb. he has a 5.8% in the company and yahoo! ended loeb's proxy battle in may giving him and two of the allies seats on the board. extinguishing the fireworks we would have seen here otherwise at today's meeting. today's meeting comes as they face two negative headlines. one, the yahoo! search market share falling behind microsoft to third place in search market share. and some reports that hackers are claiming they have posted 450,000 yahoo! accounts and passwords. yahoo! is looking into it. i heard one yahoo! spokesperson saying they're addressing the issues. we don't have an official

statement just yet. we'll be back if there are any headlines. we expect there to be some interesting comments during the q&a period later this hour. >> julia, thank you very much. >> let's bring in colin gillis. you upgraded the stock in may. what's notable about the time of the upgrade, in the time period the stock has gone nowhere. >> that's right. >> it's not for lack of potential catalysts that have transpired during that time. we had the resolution with the proxy battle with dan loeb, we had the 40% stake in ali baba and the settlement of the patent litigation with facebook. still, nothing happened with the stock. so what is going to be the catalyst, colin? >> so, in fact, it's tracked pretty nicely with the spx. the catalysts have not pushed the stock forward. so we need a couple of things to happen. first, end the instability at the ceo position. that needs to be done right now.

when we come in monday morning we want this situation resolved. ideally it's ross. >> why is it taking so long? why does this go on and on? >> we don't know. they're just at the point where they should be finalizing a decision. >> let's say it's ross. that's the consensus on the street, it's ross. that's not a catalyst it's baked into the stock, so what's the next catalyst? >> so the next catalyst, two things will happen. two, continue to reduce the operating expenses. reality it's about a $5 billion company when you strip out the assets. so he's got to run this like it's a $5 billion company, make sure he's got the cost structure geared to being a $5 billion company. the june quarter should be the first quarter we should return to growth. very small. 1%, 2% growth on a year over year basis. you have the olympics coming up, the elections. the back half of the year tends to be big.

this is not a growth name, but a special situations name. i'm only advising this to investors who want to take a bet on a company down on its luck and has a chance of starting to drive more value. it's going to do $2 billion in ebitda in 2012. >> in terms of growth, as a result of turn around efforts at the same time it's sort of -- i feel like it's on manual speed at this point. it is sort of going. >> it's dull. it's dull. it's a dull stock, yet, you're calling it 30% higher. >> what is the turn around? >> sure. >> it's not an organic turn around. what is ross going to do at this point he hasn't already done? >> we're talking $20, so it's 20%. $5 billion buy back, that's giving you a floor on the stock. some cost reductions that will help drive earnings. a return to growth.

that should help propel us further. >> isn't the most important thing whether or not they get visibility on selling the stakes in japan and is that the point at which you actually buy in? because some timetable it's coming, presumably the stock will jump on that. will that be kind of fed out as a specific dividend? >> right. a great point. when you get close to liquidating the assets. we should get more of a pop. we didn't get much of a pop on the ali baba news. they should be surprised that the stock has not moved much. because the reason is that ali baba has not gotten financing yet. until they get the cash yahoo! won't get the cash. they'll get that deal done. once that deal is done, they will turn and they'll monetize yahoo! japan relatively quickly. half the board is brand new. dan loeb he's got $1 billion riding on this. my money is with him. >> always great to see you. colin gillis making the case for yahoo! shares.

we should note that cnbc and yahoo! share and produce in editorial content. we'll bring in rick santelli and the santelli exchange. >> thank you, melissa lee. we'll talk about safety, socialism and scandals. start off with safety. boy, i'll tell you it's like living in a credit market twilight zone episode. now, we can understand when you look at treasury yields, and then look at the swiss yields out to five-year negative start to scratch your head. then look at the french two-year in the low teens. you think oh, my god, the world is upside down. consider, peugeot has been considered junk, they're burning through cash. they have to lay off a huge amount of the work force. i think the number is close to 7%. depending who they reshuffle, 6,500 to maybe as high as 14,000. here's what's crazy about it. we see they have gone socialist

and we see a country like france shouldn't be emulated. these are fabric structural issues, but yet we see the yields go down. i think we need to pay attention to this. at some point this isn't going to end well. what's going on with peugeot, seriously, there's going to be so much union confrontation, it will be bad. just like gm. we hear 500 million shares. government still owns 500 million shares. now, let's go to the next issue. let's go to scandal. listen, front page of the business section of the journal, talk about the clock is ticking on crisis charges. they have a window of five years. we're four years past the crisis. aren't you sick of the politics? then you add in the libor scandal. like with sour patch, you shouldn't bail them out, because taxpayer money is in there, you should have cleaned up the mess and whose money is going to

pressure when the shares move down? ours. all the structure deals in california, all excuses because nobody cleans up their mess anymore. especially government. back to you. >> thank you, rick santelli. still to come an inside perspective on the pfg best collapse. [ male announcer ] it would be easy for u.s. olympian meb keflezighi

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after suspending the dividend and saying it's going to explore restructuring. it's creating a lot of collateral damage for supermarket rivals sending safeway to the ten-month low. take a look at the other rivals also down on the day as well. "squawk on the street" will be right back. stay with us. . zagat just gave hertz its top rating in 15 categories, including best overall car rental. so elevate your next car rental experience with the best. it's just another way you'll be traveling at the speed of hertz. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity. mine was earned off vietnam in 1968.

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welcome back to welcome back to "squawk on the street." third hour, rick santelli here with my special guest. bob mauer and we worked together in the early '90s. he worked for peregrine

financial group. he's with mandue ka trading. welcome, bob. let's go through a chronology of what happened. you have maybe a little less than $3 million of funds through a couple hundred plus customers. >> that's correct. >> and you're pretty much aware of what was -- what has happened. but you told me off camera you didn't really sense anything was really wrong until monday. >> exactly. monday was when we got the first sense. i went home friday afternoon, business as usual. everything just fine with the business. and then monday morning everything just started to unfold. >> right around 11:00, you're still trading. and pfg best had an order entry system electronically. they provide you with the keyboard and you put in the orders for the clients. up until 11:00, cranking away. and then at 2:00 something happened. >> we started to get calls from our peers and they said are you having issues with placing their orders? we can only go, you know, liquidation only. >> okay. liquidation only. you thought you could have positions and then at 3:00, a series of press releases came

out. this is quite simply tried to commit suicide, liquidation only. you're still in a process where you can sell five. >> exactly. you could get out. that was the impression given. you know, we had customers who had positions where if they sit on it they're fine. and everything seemed calm. >> then we come to tuesday and everything starts to change. another e-mail. forced liquidation. tell our viewers what that meant. >> it's out of the hands of the actual customer. it means that the actual clearing firm, not pfg -- >> or you. >> or me. cannot actually do the liquidation. it's the -- >> so they're going through all the statements of, you know, different customers. this guy -- they're just doing it. you're not involved in the process. >> correct. >> that brings us to yesterday and today. they're both synonymous. now the question is is your money going to come out and do you have any information regarding the money? i'm trying to think mf versus pfg. you have some thoughts. >> we can't get any money out.

>> you have made requests and they have been ignored. >> correct. i know only half the positions that they say should have been liquidated are showing as being liquidated on the statements. there's uncertainty as -- >> so the forced liquidation process, you're uninvolved. they haven't kept you up to date on the paperwork. the issues versus mf, a lot of the money is coming back. people think it's in the pockets it shouldn't be, no matter who you think the pocket is in. but you're not really optimistic are you? >> we're just hearing rumors it could be on a percentage basis worse than mf global. >> melissa lee, back to you. >> rick santelli, thanks for that. meantime, the bells are about to sound across europe. wow. the impact here in the u.s. that's next. ♪

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and europe stocks down. it is again a sea of red. europe has its own problems, but today frankly that is like a big mirror sitting on the other side of the atlantic. looking back at america and reflecting what the europeans see here. let me explain why. because the fed chose not to act yesterday or even hint that it would further stimulate the economy. more importantly. when so many other central banks around the world has done that. there's disappointment there. you see it in the commodities

and the start of earnings season, with cummings and applied materials and advanced materials, you know, that kind of is an indication or a concern for europeans, not just happening here in america, but symptom symptomatic around the world. here you see those big basic resource stocks in negative territory. that's got a huge amount to do with the feds and the fact that it's split on further action. take it from me. look at some of the banks in europe today. it's holiday-thin trade i should add. if you're shorting and the short is coming to a greater extent today on the names and you know why you might short those, you get a slightly exaggerated move because of the time of year. we do have something very specific that's happened overnight though. that is that the ecb's decision to cut the amount of money that it pays on overnight deposit into the ecb, cut to zero.

they announced that before. it became effective overnight. what's happened there, believe it or not, there's much less money that's gone into the ecb depos deposit. it fell to $325 million and the ecb is trying to push that money out. it wants others to invest it, banks to put it in the economy. what's happening they're putting it at the front end of the bond market in europe. these are very important moves. you see where we are today. this is a negative yield. this is a lifetime low for the two-year bund. you lose money putting your money in there over a two-year track. you have record lows in the netherlands. in austria, belgium. let's go over to france. because france is quite interesting as well. people were worried about the french fiscal position not so long ago. that's completely driven out of the way now in that search for

yield because it's negative in germany. you can pick up more if you're over in france. you can pick up positive as you can see, .062. see the effect you have had as a result of that. in driving the yields lower as people go into france. now, back to european problems. there is one place notably where that's not happening. let me take you to the two-year in spain. they have had some respite, but essentially we continue in essence to track higher there. spain is still the eye of the storm. back to you. >> let's head over to gary kaminsky. gary? >> before we get to that, i was listening to simon. i'm reading something coming off reuters here. german paper is told that spain will be liable for paying loans back. it won't be the slightest loss for creditors. isn't that hilarious? >> what else would you expect, right? let's go back to monday when i

had beautiful facial hair. do you remember at this time i read something. i said markets need to go through the periods. don't be laughing. of doing the opposite of what they normally do. to keep guys honest. otherwise, it would be easy. do you remember that on monday? there we go. there it is. do you remember that, melissa? >> yes, i remember that. but i don't remember beautiful facial hair. >> yes, you do. >> i remember facial hair, period. anyway -- >> in terms of trying to figure out what to do right now. i want to look at something. because it was pointed out, if you look at what's happened that game of stocks versus bonds, equities both here in the united states and in europe, if you look at the connection, the relationship between credit, equities continue to be overvalued. you know where i come down in europe and what i think is happening there. but take a look at the s&p. here. when the fed disappointed back in april, you had somewhat of a correction in april and then higher in the early part of may.

it wasn't until may 12th where you made the lows of the s&p. the point is very simple. if in fact the markets do things that you don't expect, to keep people honest, the disappointing news out of the eu summit and out of the fed that we didn't get to qe-3 perhaps we had a lower low and then a higher high here in the sense if you expect it and everybody does expect it, especially given what simon's reported, and that's why earlier in the show i wanted to point out how you try to edge being possibly right, but being wrong in the short term. i'll leave it at that. >> all right, gary, we'll think about that. >> pondering. three programs and you sold out. >> you know, simon, simon, simon. >> three shows. three shows. >> simon -- >> didn't take much, did it? >> i'm speechless. you know, i have never been speechless. i'm speechless. i don't know what to say. >> yeah.

that's the way i felt when you said beautiful facial hair. let's bring in bob pisani back from vacation. you missed the facial hair brouhaha. >> you know, i have that terrible -- i start to look like a poor man's bob dylan after four days. ugly. not the cool, you know, scruffy, sexy look. i look like bob dylan 1963. >> it's horrendous. >> it was a beautiful -- beautiful mustache. i looked like brad pitt. >> well -- >> it was good. >> i liked it a lot. so i come back from my reverie in italy. first thing i want to do is get back on a plane. all everybody is complaining about is the earnings situation. i got 20 e-mails saying, bob, there's something wrong with the numbers here. bank of america, merrill lynch, one of the big strategists came out and lowered their numbers for the full year. the numbers are going to start coming down now. i'm not talking about the second quarter. i mean the full year in the second half of the year.

that's what's got everybody talking. they lowered the numbers by 1.4%. earnings are too optimistic. we have heard this before. but they're talking about the second half of the year and the consensus expectations are in the early stages of being reset lower right now. i'll show you what concerned me and what's concerning b of a merrill. look at the second half of the year. look at the full year. earnings growth here is back end loaded. nobody is expecting a lot from the second quarter. q-3 is going to be better. this is the s&p 500. 13% growth. a couple of weeks ago it was 15%. that's where all the earnings power is for this year. that's where everybody is expecting things to turn around. why? because all of a sudden, flip to the next page here, suddenly in the fourth quarter in starting the third quarter, we are supposed to get really good numbers -- earnings numbers from financials and technology stocks. look at this, a 23% increase in financial earnings expected in the fourth quarter.

huh? this is not going to be happening with the kind of numbers, the kind of macro situation we are seeing right now. that's why everybody has woken up in the last couple of weeks and said, uh-oh, we think the numbers are in the second half -- these are the fourth quarter numbers are particularly too high. materials are alshigh. but this is a tiny part of the s&p 500. these two guys, these are the big kahunas, financials and technologies. when you get growth like this expected that's a problem. the numbers are going to come down. that's where a lot of the talk is. finally, have you seen what's been going on in the gold and the silver stocks since i have been gone? i have been gone several days now. look at this, in the last few days. this is because of that disinflation story. did you see what happened in brazil this morning? they cut the rates in brazil. what? brazil, this is where they invented inflation. the brazilian central bank said this morning they're not concerned about the inflation picture. this is -- when the brazilians start telling you they're not that concerned that's a sign that inflation is not an issue and the gold stocks which as you

know are plays on inflation have been reflecting that recent decline. >> it's a good flight, you fly through paris? or direct? >> no, a direct flight. philadelphia. lands after eight hours. you can read novels. my wife could be a tour guide. 8 1/2 from philadelphia. >> wow. wow. >> from philly, yeah. >> 8 1/2 hours to a fine glass of wine in italy. >> even a bad glass. even 30 minutes on the subway. >> true too. bob, good to see you. let's turn back to technology. groupon hitting new lows. what do they need to turn it around? let's bring in dennis berman, a columnist with "the wall street journal." great to see you. >> great to see you. >> how much longer does the ceo have at this point? >> well, look, a company like groupon wants to create its own fate. for a long time it has been sort of operating by its own rules.

it would say, look, andrew mason, the young entrepreneur who founded this company is in a good spot. but i've got a different hunch. it's a hunch. that the pressure from the stock price, the pressure from the market is going to force a change here. you have to ask yourself as an investor is andrew mason going to be the ceo by the end of the year now i even to the end of the quarterly report in a couple of weeks? one has stepped back and that's left andrew mason -- he's got a good management team there, but the pressure is going to be on him. i would say, again, a hunch, a year out from now he's moved on and someone else has stepped in. >> in addition to the cofounder stepping back, the european head also left. is mason seen as a grown-up at this point, dennis? are there a lot of institutional shareholders in groupon to actually demand that a grown-up

be in charge? >> there are a number of institutional shareholders and venture investors. anderson horowitz is in there. new enterprise associates. they're all in there. andrew mason had built an impressive company. the revenue growth on groupen as you well know is quite incredible. but the loss of sam in particular, he built the european business. he was essential to helping that growth take place. they brought in a number of executives from the likes of amazon, from the likes of ebay, salesforce.com. but again to manage a company as it's growing up and things are good is a lot easier than managing on the downside. >> yeah. >> there's really a tough spot for any entrepreneur, for any person. managing on the downside. just is more difficult. >> well, yeah. and to that point then, how do you recruit? if the ultimate insiders are kind of checking out as you're saying, those who had the big equity stakes who comes in? how do you attract somebody with

the vision? i mean, you were a real high-flying tech ceo or entrepreneur for want of a better expression, why would you take the helm at groupon? >> well, i'll give you a couple of reasons. first off, the stock is so low you can get your options priced a at pretty good level right now. from the very top interested level, to i'm going to make a killing doing this job. there's the option, okay, of perhaps someone wanting to buy groupon down the line. the enterprise value is below $4 billion and the $3 billion range. that is not a huge purchase, certainly for goiogle. >> but lange on. if i was acquirer, i can buy groupon or invest $4 billion creating my own groupon and it's probably cheaper to invest my own $4 billion. there's no barriers -- >> amazon, they have got very deep pockets. i think that the time seems to be running out for groupon to engineer a sale of itself at a

decent premium. >> right. you guys are giving up on it. there's some serious problems with groupon. it may not be able to do things as it wants. but you can't discount the tremendous number of people who have signed up. the relationships they do have with merchants. right now though, the numbers we saw yesterday are 12% decline in traffic visits to groupon. so it's all about the question of valuation, simon. $3 billion, $4 billion maybe it makes sense. where it was before, $16 billion made no sense. maybe you can be a ceo there. >> no, i don't have the skills but i want to explain. i'm playing devil's advocate to you. it makes the interview more interesting. >> right. we have no feeling at all. >> i can't invest in -- well, i do have a view but i'm not telling you what it is. >> with the departures, the pressures on mason and would this stock do well if say there

were a new ceo with some, you know, real experience in managing a company that's had some hits, probably the answer is yes. we'll see. mason is a tough guy. >> would you run it? would you run it? >> i would not run it. i'm not qualified to run it. >> they play you too much at the journal presumably. >> i wish. we'll see if mason can pull something out his hat. you have to respect what he's built. >> any man who drinks beer at staff meetings -- >> i know. that's amazing. thanks. san bernardino is the third city to face bankruptcy protection in a couple of weeks. who could be next after this. i take insulin,

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welcome back. i'm julia boorsen. there were reports that yahoo! passwords and user accounts were hacked. yahoo! coming owithout a statement saying it confirms that an older file of -- containing about 400,000 passwords and names were stolen yesterday, but yahoo! does say that less than 5% of the yahoo! accounts had valid passwords. so they're saying that less than 5% of the 400,000 hacked accounts had valid passwords. they say they apologize to the affected users. they are taking efforts to control this issue. and they are fixing this vulnerability. so they acknowledge there's been a problem.

it's not quite as bad as it was originally reported. and they are making steps to correct this. simon, back over to you. >> not helpful of course when they're having the shareholder meeting there. it will be a particularly feisty edition of "fast money halftime report" because michelle cabrera is hosting. >> coming up, traders or names you should be buying on this day when everything is selling. chesapeake has risen 25% in the last 22 months is the controversial stock back from the brink? hours left to trade before jpmorgan's earning report tomorrow. just yesterday, san bernardino became the third california city to file for bankruptcy protection in two weeks. who might be next in the bankruptcy domino effect? jane wells, live in san bernardino, with the very latest. jane? >> melissa, on the brink is the headline in the paper.

there's accusations of cooking the books going back years now. what are the ripple effects? the county of los angeles has ordered a look to make sure its financial policies don't compare to stockton's. people are looking at santa ana. and marilyn cohn said what's happening in san bernardino has people asking is river side next? now, riverside, like san bernardino saw huge growth in housing, followed by a big collapse, lower tax, high unemployment. but most of the city is having financial trouble in california have been north. vallejo, mammoth lakes and now hercules, a small city only nine miles from vallejo. the fbi looked at the city's books and the state controller called the financial records the worst he's seen. >> i understand that we're sort of the banner child or for, you

know, what not to do as an rda. but we're turning those things around. >> now, rda is a redevelopment agency. how are they turning it around? the mayor said it's selling assets. voters approved a sales tax hike. police accepted concession, but what's making it worse in california, the state with its own fiasco is holding on to more money than cities were expecting. >> the state of california said every city is supposed to get 7 cents of every tax dollar. hercules currently gets 3 cents on every tax dollar. >> until now defaults have been rare. only 30 of the 12,000 municipalities rated by moody's have junk status. "christian science monitor" says over 42 years there's only 42 that have defaulted. >> we are seeing growth in nonproperty tax revenues and i think some of the spending cuts

that have been done in the past couple of fiscal years will bear more fruit going forward. >> well, she says expect more before this is over. in fact, moody's just down graded $47 million sewer bond in bloom field, colorado, with negative outlook, expecting quote, cash margins will further deteriorate. a phrase we'll hear quite a bit in the months to come. >> i'm sure we will. jane wells, thank you so much. the markets, well, right now, far off from the lows, we are down by 45. down 9 on the s&p 500. much more on the markets after this. 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? (sfx: loud thud sound) what a strange place.

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welcome back to "squawk on the street." when the technology sector is the worth performing look at s.a.p. the business software company, posting better than expected revenues and earnings. revenues at the top of their range. they saw strength in all areas of the business. "squawk on the street" will be right back. choose control.

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time now for squawk on the tweet. time now for squawk on the tweet. supervalu said it would step up efforts to get everyday low pricing is as low as competitors. what could your local market do you in to shop? gary tweets, cooking classes. i'd have to buy the ingredients. >> good idea. >> not bad. solomon, my supermarket gives free coffee and doesn't have any clocks. i guess they're going for the vegas effect. and do the abercrombie gimmick, line up the hunks. not bad either.

to attract the house -- all right. rick santelli, what is on your radar? >> you know, i like when simon was frying to explain lm -- trying to explain the lunacy of how a two-year note in france considering where their economy seems to be headed is in the teens. it's because the liquidity is going somewhere and it brings up the peugeot thing. in a socialist country, the unions will have been kowtowed to. you can't fire people, this will make it better and there's a lot of analogies things with that, considering what we have done with our own auto industry and what does that mean for competition globally? next issue, governor brown in california, the whole san bernardino story aside a second, is looking maybe to furlough up to 12,000 employees. we had erskine bowles on saying we need them to address the

issues, like pension issues and entitlement. look at the governor of wisconsin, what he went through. when i look at what's going on in california, i don't know what makes me more upset, that they have waited so long. they didn't furlough people in wisconsin, but also the other scenario is san bernardino and the stories about trying to tie that into libor, excuses. back to you. >> all right, gary kaminsky, what are you watching? >> i'm glad we touched upon something positive, the positive portfolio is well off the lows. but as i was walking over i looked at the the new low list. four names stood out to me. why do they stand out to me? obviously what's happening with gold. they're not going to come off that new low list. going to keep making new lows. portfolio managers are not going to reload the names right now. seasonally no reason to do so. >> all right, gary kaminsky