coca-cola. intel. a lot of other earnings reports and a huge week next week. >> we'll know more about the state of the economy than we do today. great being with you. that will do it for power lunch. >> have a great weekend. "street signs" begins right now. and welcome to "street signs," everybody. i'm brian sullivan. are the bonuses to blame? can we harpoon wall street whales changing the way they get paid? we'll debate. signs of life. the stat buried in jpmorgan's earnings, perhaps some real hopium for housing. herb loves costco. as a store, not as a stock. he's here with why costco is broken. if italy doesn't have enough problems already, now a possible wine shortage. mama mia, mandy. >> indeed. after a string of losing sessions, wall street is ending the week with the best session of july so far. with the dow and s&p 500 on the

verge of breaking six-day losing streaks, both could go positive for the week before the day ends. the nasdaq also looking like it's having a pretty good bet to break its five-day losing streak and more than 1% away from breaking even for the week. why don't we find out more of what's happening with bob pisano? i think you called today's rally a good enough rally. right? lots of factors good enough and you know what? coming off a low base and losing streaks. get in to next week. a huge earnings week. what do people think it does for the stock market? >> most people expecting very modest numbers and encouraged by the financial numbers. look at the financial stocks and very modest -- a penny on wells fargo and jpmorgan. they're so weak it makes a difference lifting the overall earnings picture already. yes, very, very early but that's a big help. most people i talked to, this is not a big quarter that anybody's expecting. a third and fourth that's

important. put up the s&p. mostly a trading range. at least that's the comment for several weeks here. this is up for the year and here's the trading range here that we have been in for the last few weeks. i think the important thing is if you're interested in stocks that have been holding up very well, they've all been defensive. new highs on a number of names here. colgate and the other ones, merck, ely lily. they're olding up best right now. mandy? >> doesn't matter not exciting or sexy. as long as they make us un, right, bob? >> that's right. >> you'll talk to us about the wine crisis in italy. you did research there last week. >> research. >> i'm going my bit here in the states and see you then. thanks, bob. >> okay. >> i have to correct you for a second. who says toilet paper is not exciting? have you ever run out? that's exciting. >> yeah. >> we'll see -- bob's like, i'm out. we have a big week coming up. lots of earnings. a big week for the banks and

monday, citigroup kicks off earnings and charles schwab. we get the numbers of goldman sachs and latest on consumer price index. it is a huge day on wednesday. bank of america and ibm report and we have cnbc's delivering alpha conference with interviews of tim geithner and more from the smartest money on wall street exclusive content all day for you on wednesday. on thursday, earnings from microsoft, morgan stanley, google and the existing home sales numbers and closing out the week, we'll get earnings of xerox and ge. ge a minority owner of this fine network. >> will we deliver on the conf >> it is being gathered and backed in to a truck and delivered on wednesday. i can assure you. >> that's what we do with a bow on top. thank you, brian. if we get a wave of good news next week, is that enough to keep the rally going?

joining sus barbara rhine hart, managing director and chief investment strategist at credit swis and president of kin sale trading. thank you both for joining us today. barbara, first of all, do you feel that perhaps -- i don't know -- we've hit a short-term bottom, are things materially better? is today a bounce off oversold positions? >> of course, it's oversold conditions but we think things are materially better or at the margin better since the beginning of june. we think that the expectations for the eu summit that had been baked in were very, very low and earningse estimates of the u.s. marked down significantly and probably easier for the market to beat the depressed expectations. >> can i just follow up? do you think perhaps this level is market is pricing for a recession, barbara? >> we don't think. we think that the u.s. economy has, of course, slowed since the beginning of this year. but we think that there's a couple of developments that are

somewhat underappreciated by the markets. first one, of course, is the meaningful drop in gasoline prices. their down about 13% on a year to date so far. also, drop in crude oil prices. stabilization in housing is also another meaningful change at the margin for the u.s. and stabilization in the auto sector, as well, all positives. >> tom, is there reason to invest until we have clarity on whether or not congress will do something about the fiscal cliff? because if they don't, the level of economic growth that's going to get wiped out will crush stocks, right? why invest now until we know what they're going to do? >> i think that generally your point is correct. i mean, the fiscal cliff, if we go over it, and, you know, in the past markets would just have assumed that politicians would come up with a way to work this out but after the circus that we saw with the debt ceiling last year, markets aren't so sure of that anymore. i think you've got to be very sector specific.

i think you have to look at where some sectors are doing better and where the fundamentals are improving. housing is one. liquid natural gas is another. they're neariche but things thao on providing opportunity. >> you know what? i'm glad you said that, right, because we're trying to do a feel-good friday here on "street signs." talking about housing for a year now. the numbers continue to improve. with europe, fiscal cliff, whatever it is, getting a recovery in housing, tom, is that big enough to pull everything up with it? >> no. not initially. but it's a huge first step. i mean, housing is such a massive part of this economy, part of the reason we have been trudging along at 1% to 2% gdp is because housing is an anchor but it's turning. it is like a cruise ship. it takes a while to turn and generates some momentum when it does and that's a big long-term positive. in the short term, europe's going to dominate. the election's going to

dominate. look to housing. it's a good thing for brighter days ahead. >> built in to the stocks, as well. there's an anchor right next to me. barbara, let's talk about investing from your point of view. there's good things out there and you're staying very defensive, staying with utilities and telecoms, health care, consumer staples. defensive sectors had such a good run-up, are they looking expensive to you or doesn't matter going for yield anyway? >> of course the defensive nature to them is a very attractive to investors in a volatile environment. additionally, the dividend yields are the sectors favorable. they're focused on the u.s. and consumer staples and health care, they have not been the big leaders through the sectors for quite sometime. so we think that those are the kind of steady eddie pieces in a portfolio to give you some, you know, meaningful returns. one also part of the market that

we have been to discussing on for sometime and hadn't worked in the beginning part of the year is master limited partnerships. mlps are a play on u.s. energy infrastructure. they had been behaving quite poorly earlier this year and started to play a very big game of catch-up in part because of the 6% distribution or dividend yield they carry making them attractive for investors in a low interest rate environment. >> thank you. have a great weekend. >> thank you. let's get a market flash of brian shactman. >> apple and more of the story than the stock. earlier in the week they opted out of the environmental ratings system and made news and dell and hp rallied off it. cities like san francisco saying we might not buy apple products. full circle and issued a mea culpa and going back in to the system. we heard of loyal apple

customers and i recognize that this was a mistake. companies like apple rarely admit to mistakes. back to you. >> do they -- apple makes mistakes? >> that's a great point. yeah, they did, actually. there's a couple. the newton. >> yeah. the newton. >> the apple -- kidding. can you blame bonuses for jpmorgan's whale of a loss? we'll dig in to whether bonuses are broken and whether the system encourages big, stupid beths. an latter on, battleground costco. it is one of the most respected retailers in america. why's herb writing about how they might be broken? the reasons and reactions straight ahead. oggles, like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform.

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take a look at jpmorgan. big story of the day. it is up about, well, earlier on 6%. now just five and change after second quarter earnings and became the first bank to claw back pay from senior managers. brian? >> that clawback got us thinking of money, specifically, whether or not the wall street bonus system is responsible for these huge bets and often huge losses. joining us now to discuss this, the president of the delves group and don, here's the thesis i was talking about this morning. it was this, believe me, i'm a capitalist. no problem of people paid for what they make but that said, does our system encourage these massive outsized bets to, you

know, produce massive outsized bonuses to the person but if the bets go bad the bank, the shareholders and maybe the taxpayers have to pay? we're privatizing gain and socializing losses, are we snot. >> there's really no question that the bonuses and the bonus system caused people to take risks. that's what they're designed for. they're designed to make people, you know, take risks to make a lot of money for the bank so they make a lot of money for themself. i think the problem is not so much that there's an incentive to make a lot of money but there that there's improper oversight over the risks this people are taking or inappropriate checks and balances built in to the bonus systems themselves. >> yeah, but, you know, listen. it's not just wall street getting the attention. listen, there's bad actors in every industry, right? whatever it is you're going to have people just naturally inclined to do bad things. but with wall street sort of limitless bonus -- i mean, people making $100 million bonuses. doesn't that provide sort of an

overwhelming incentive to just be greedy to the point of crooked, don? >> absolutely. i mean, there's no question and when you see that kind of money, you know, some point, you know, you're going to just do everything you possibly can to make it. i think it's extremely tempblted for anybody with that kind of incentive. that said, those incentives cause people to inventd new products and be very creative but that creativity needs some kind of oversight. you got to have people just as smart as the guys doing the trades making sure that they're not taking inappropriate excessive risks which obviously happened here. >> paul, do you think that compensation is to blame here and does it necessarily need to be changed? >> compensation is certainly to blame. as i said earlier, i've written a report for the council of institutional investors eindic e indicating that the structure on wall street one of the prime

movers of behavior that caused the financial crisis in 2008, 2009. so yeah, there was definite first cause there. and we have seen a lot of changes since then. those changes have been much more dramatic in europe than in the u.s. but the u.s. is beginning to catch up with the changes to compensation. >> do those changes actually work, though? does this situation suggest that maybe the changes haven't gone far enough, paul? >> well, the thing is that the behavior that we saw at jpmorgan where the excessive risks were taken is not governed by changes that went far enough down the organization. most of the change that is we have seen happen in the u.s. have happened for senior executives, they've only happened for a small proportion of compensation. they haven't really been really brought down, the organization, deep down in the organization. while as if you look at the swiss and german banks and french banks, some of the uk ones, much of the changes to deferred compensation to put that deferred compensation at risk so if the good results that

you saw at the beginning that generated those bonuses actually turn out to be illustrative, you lose a bonus. most of the changes put far down the organization in europe but they haven't spread that far down the organization in the u.s. yet. >> don? >> i do want to add that i think the clawbacks in place here and being executed at jpmorgan are going to have a significant effect. >> this sets a precedent, doesn't it, don? >> it does. it absolutely does. i think it will cause -- i think that we'll have a very positive effect on -- you know, on putting some kind of damper on the amount of risks and inappropriate risks being taken. >> do we need almost like, paul, i mean, listen. hard to say this stuff as a capitalist but a salary cap? if i'm a software salesman with 10% of the commission and i kill it 100 billion bucks and 2 million back, i don't lose anything.

i just don't make it. on wall street it's different. right in if a trade goes bad, you have risk on the other side unlike most any other kind of sales job and a lot of wall street jobs we talk about are sales positions. >> well -- >> yeah. i don't think -- i don't think a -- >> let's have paul and then don can respond. >> sure. i don't think a cap's going to work. not so much a cap but putting in the safety nets like ironically jpmorgan's clawback provisions among the more draconian of the investment banks. we'll see whether those are applied retrospectively or not. many of those came in to play this year. but in terms of the processes by which to try to control this behavior, you need to tie performance -- pay, sorry, to performance over the long term, not the short term and put the pay at risk again over the long term so if you see a situation whereby, well, this looks like a great idea, make the investment, the trade and pays off in a huge

bonus, well then take three to five years to figure out whether that actually led to long-term value and if it didn't then you lose the bonus. as simple as that. that's a cap. not a cap but it works like one. >> i couldn't agree more and right on. and i would add to that that there needs to be sort effectieffect ive governance. it's in this instance for a committee to watch over this type of pay program and risk. >> we're getting a hard wrap. thank you very much here. the issue not going away. don and paul, thank you. take care. >> we'll hear more on this. >> we heard one thing to feel good about in jpmorgan earnings today. glossed over by the whale headlines but what this one thing says may be about how we're feeling right now. americans aren't feeling too hot about the new olympic uniforms. showing you these yesterday and we told that they were made in china. designed of course by ralph lauren and made in china.

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well, it's been six months now since the concordia tragedy and the stick is there. half sunk. the ship slammed in to the rocks on january 13th. 32 people were killed. two of whom have never been found. the ship's turned in to a tourist attraction on the small island. a salvage rig trying to refloat it. it could take another full year to raise it. will cost more than $300 million. by the way, carve value use lines, down 6%. china's gdp a biggest headline. came in at 7.6%. that is the weakest pace in three years and to bolster the slowing economy, the government spending jumped to 17% 7%.

for the latest read. all while the euro reached a two-year low today and indeed certainly not being good against the yen, either. is there opportunity in the uncertainty? joining us is peter kenyan. good to have you with us. feels like the market read on the chinese gdp is this is a relief, right? number one, not worse than expected. number two, lots of toolless in their tool box to be able to do something about it if they wanted to and number three, my read is it's a cyclical slow down. better than the structurally shifting down economies like japan, u.s. and the eurozone. >> yes, always opportunity and yes cyclical slowdown and yes i think probably at the tail end of that cyclical slowdown, meaning we have probably found stabilization just north of 7% of gdp for china. worst-case scenario stabilization, good opportunity for growth. the fact that the chinese are

spending 17 prsz of the gdp on infrastructure and programs of productivity is a great sign and frankly that's one of the areas that i think we should be looking at. >> okay. let's delve more in to the investment opportunity. what about opportunities for us? what's the tradeable idea on the back of this? >> first of all, vwo. vanguard emerging markets. now, this is not limited to china. it is a global emerging market story. it's a portfolio of 100% stocks and preferred stocks. no debt instruments, bonds. very little cash and it's really invested in great names like china mobile, taiwan semi. really strong companies with global footprints with strong home base and support domestically. have the ability to sustain whatever kind of headwinds is coming at us through the eurozone crisis with a pe of 11

it's very, very attractive. >> thank you for enjo joining u. enjoy your friday the 13th. we'll talk to the master of gloom and doom, mark faber and why he believes the global slowdown will get worse. his name is mr. doom and gloom. that is tonight 7:30 p.m. eastern. i'm going to get a little of the sunshine out of him. >> you have a long day. >> it is 7:30 tonight. eastern. >> you are working for the people. thank you. all right. speaking of china, to the new wrinkle of what i'm labeling right now here right now as beray-gate. the olympic uniforms designed by ralph lauren with commonly worned items like the ascot and beret. we heard of -- only in scooby cartoons. harry reid blasting the olympic committee saying the uniforms should be burned. chuck schumer of new york chiming in calling for the

opening ceremony uniforms to be replaced and suggesting that rochester, new york, based suit maker hickory freeman up for the job. is this a real scandal or pishposh of the media? >> i'm obviously someone all for the globalized world. living in asia many, many years and olympic uniform, a symbol of national pride and should be supporting jobs and manufacturing here in the united states so i say not necessarily torch them but i would be definitely in favor of using a u.s.-based manufacturer and keeping the profits here. >> a serious thoughtful consideration. my whole take is they're just ugly. like an ascot and a beret? you look ike an air france flight attendant of 1963. >> stylish. very, very -- for the girl, stylish. >> they should have a smoking -- during the olympic ceremony. you know? >> no self respecting man should be seen wearing a beret unless he's got a baguette and onions over the shoulder.

>> sandy the producer saying nine days from now. go to american apparel. >> go to the gap. >> enough of that. beret-gate is not over, folks. get ready for a long weekend. up next on "street signs," yes, you, too, can buy a lifetime tub of mayonnaise but should you -- or buy costco stock. a bunch of news of the wine. italy's looming vino crisis and why they want to bank california wine. what will they do next?

special friday the 13th edition of "street talk" time is lexmark. >> down 15.5%. cutting guidance. seeing second quarter revenue down about 12% versus a year ago. there's other issues there here. you have a cut of barclays to an underweight. cut the target. down about 27% this year. x xerox and hp down on the lexmark. printer maker. >> unfavorable exchange rates. weakness in europe. paste and cutting the guidance

and putting it on every international company's earnings this system. cytec, increased deand the, up by 5%. >> we should talk about all companies up given the rally. it is a name that's higher. lexmark is not. big earnings boost here. they went a buck 14 or the street did, at a buck 14. cytec guided up 150 to 155. they're codie ing coating resin is killing it. i don't know what it is. >> i looked it up. i knew you didn't know what it is. low environmental resins is what they supply globally. there you go. >> don't act swarmy. i still don't understand it. >> i had to google it. >> coatings resins, baby, it's the future. >> not like we talk about coating resins every day. looking far good movie to watch? don't expect many releases in

q3. >> maybe, okay, an analyst coming out saying that he's a little concerns about the third quarter for coinstar worried about the dvd schedule. maybe not blockbusters hitting the red box machines. they own that rental business. piper and pacific crest defending the name but the daughtry is who everyone is listening to. >> i have hunted gear and garb and coinstar, dumping change. that was the highlight of the celebrity. >> i love the machines. i think their q degre2 results out soon. first up is a space. for-profit education company bridgepoint. >> the company denied accreditation by one acrediting agency earlier this week and now the one company that

acredited -- look at the stock's actually -- ah, off. the company still giving accreditation to its ashford university is now saying it will be under special review. when's really important here is -- not killing it. just looking at it. >> may look at it. without accreditation, you do not get federal student loans and talking to rob mcarthur, very right on these companies saying if these acrediting agencies are tougher, especially the higher learning commission which is the one that's now going to take another look at ashford, he says, you know, take a look at apollo because if they get tough, he thinks apollo and bearish on is very vulnerable. >> bridgepoint not a well-known name but is there a situation of trickling up to the big boys? >> especially, again, if the acrediting agencies like the credit rating agencies show they're not in the pockets of those they're rating. >> we've wheeled out another stock for you.

trouble at green mountain cof e coffee. >> down 52%, lost half of the value. >> the company came out with a weird kind of press release this week talking about the growth of the single serve segment. they didn't talk in there about margins. well, when's interesting, an analyst is the big bear on this stock, he came out today. lowered his estimate which is already low. on the earnings. but he also sliced a stock target down to $14 a share and said very interesting. he said k-cup pricing is decelerating and this is the important part. he said a few pennies of reduced pricing has a meaningfully impact on earnings. that's the key thing and going to want to watch. >> if a pack of k-cups is five bucks and they lower it to 4.85, may seem a small thing but the way the volume is based that could be a disaster? >> absolutely. not just them by the way. it's the competition coming the

space, prices are falling. quite a great story. one for the books. >> all right. herb, thank you. >> oh, i -- that's right. are you kicking me off right now? >> you can stay. >> just -- we'll do a group hug after the show. up next -- >> stare in the camera. >> the whale losses dominating the newses. perhaps lost in this is housing hopium, right? everybody's killing the whale at jpm. understandably. but inside the release, i was going through it, i saw mortgage originations up 29% in the second quarter year over year up 14% quarter over quarter. now, a lot of that is re-fi. real estate reporter diana olick is digging through reporting of banks. die why that, jpm one of the first big banks to report. looked pretty good. can we expect the more loans and more housing, good news to come from other banks, do you think? >> you have to look at when's happening in the mortgage market.

first of all, we saw wells fargo originations way up, as well. wells fargo, jpmorgan, they're in the mortgage market in one and two because bank of america and allied financial pulled back on lending and shares changing. a lot of smaller lenders out of business, a lot of them not doing that anymore so you have a certain consolidation in the market. now, as you say, a lot of those are re-fis and nothing wrong with that. puts money in the people's pockets but the mortgage market right now, 77% in the survey of the mortgage bankers association they were re-fis. check out the chart there. a surge in june with a new change in fha rules and surge in january because of the government's underwater refinance program so again a lot of re-fis. we need to see more purchase applications to see more hope ahead in the overall housing market. >> absolutely. rick santelli, you're a guy that follows the space, as well.

i want your take on it. >> of course, any news is good news whether that's subsets includes re-fis or not. seeing the numbers of wells farlgo and jpmorgan doing more in terms of that number is a space and be real here. there's two other things to be cognizant of. imminent domain argument to many is disturbing and according to realty track for the month of june california for the first time since this record was kept going back to '05, captured the highest foreclosure rate of any state in the country. one out of every 288 properties and they were also for the most of month had 4,70 -- >> maybe be about to change because california just pass add new law that it's going to protect homeowners and slow down the system like in nevada passing a law criminalizing the

foreclosure abuses and paperwork and things like that so we'll see a slowdown in california as we saw in nevada and also -- >> i'm with you, diana. >> and imminent domain, will it slow down the process? >> seems the programs have done nothing other than reminded us as sam zell and slowed the healing process in his opinion. >> so much for the hopium. >> i know. they hijacked the whole segment. >> supposed to be a good newses segment. >> everybody's saving money on the mortgages. rick, come on. >> good thing. >> i told you -- >> going in to the week, rick. >> listen. >> good news. >> miling about anything that creates a healthier economy with sustainability and without tearing up various rules we live by in the society. >> good news with an asterisk. >> see below. the caveat and fine print. >> a suitcase of cash at the door. the segment was hijacked.

>> thank you for being debbie downers. a little bit of reality. the globe trotting back from vacation bob pisani with bad news for the winos out there. plus, a dose of viral sunshine with a combo of cookie monster and pop music. and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation.

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i'm bill griffith. coming up, jpmorgan details the trading losses, cuts ties with the traders involved. is it a turning point for the banking sector? and with financials often leading the way in market rallies is this the time to start betting on those stocks again? we'll look at coming up. plus former new york ag and governor eliot spitzer talks about the on going libor dispute and a lot to get to. we look forward to seeing you at the top of the hour on "closing bell." we have breaking news. tyler here for us. >> a fascinating turn in the

story of russell wasendorf. he has admitted in a suicide note that he forged statements of harris bank and u.s. bank and a predecessor bank first star and says in that signed suicide note, found in his car when the sheriff's department out there in cedar falls, iowa, responded to his home, found in his car on that morning, that the fraud had been ongoing for 20 years. i have committed fraud, he wrote in the note found in the car and also by his son russell jr. in the office out there. i'm very remorseful that my greatest transgressions to my fellow man. later he says i had no access to additional capital. i was forced in to the decision. should i go out of business or cheat? i guess my ego was too big to admit failure so i cheated. i falsified the very core of the

financial documents of pfg, the bank statement. so, a very interesting turn here. this in a statement from the u.s. district court for the northern district of iowa. those quotes from the suicide note that russell wasendorf left in his car found unconscious in it a few days ago and in the office the note found by his son. back to you. >> all 20 years. thank you very much. questcore pharmaceuticals slammed over what it didn't say at an investor conference today. bank of america initiating coverage of a buy and a $60 price target. that stock, though, not helped by that. stock down about 3%. we're getting herb with more on that and doing that for you on monday. obviously, the important breaking news with tyler and remind us to get you more on monday. >> sad and interesting news. a little cookie sunshine for you. cookie monster's cover of "call me maybe" has 4 million hits on

youtube. the spoof is called "share it maybe." latest celebrity to cover the pop song hit. >> i was hoping to have music. ♪ it's taking the toll ♪ please feed me betty crocker". >> are the french fired up over foie gras. they want to ban california wine after california banned foie gras. calling ate show of solidarity of foie gras. california produced wine exports in 2011 and hardly export any wine to france. ours is far superior. bottle rocket, great movie, they don't need wine. >> they need berets. the olympic team -- >> talking of which, this

summer's heat wave isn't just a concern for the crops here but the italian vineyards are feeling the heat an they're worried. >> we have a heat wave here and they have one over there. i did just get back and on top of the general worry of the economy there, there's also a little worry of the wine crop. i visited a vineyard and the concern is if it continues it could reduce the quantity and the quality of the wine crop. now, dry conditions are good for wine, concentrates the fruit. too much dryness and heat damages the berries later on. they need the rain starting in a few weeks. italy relying on exporting wine. they export more than they consume ear with sales down in italy they need a strong market, a high quality wine to export. and they're huge exporters. it is a big part of the economy. look at this, italy holds a 23%

share of the market. they export 70% of their wine to just a few countries. u.s. is biggest one. germany, uk, canada gets italian wine and with consumption down, the italians are the biggest wine drinkers in the world rivals the france. 54 liters annually. that's about 72 bottles a year for every man, woman and baby in the country. it's legal to drink if you're 4. >> if you're 4? >> you know what? believe it or not they drink half of what they used in the 1960s. all the european countries are down. i'm kidding. it's 16 mandy to go in to a bar and drink wine. regional laws and 16 to buy it. >> the industry -- i don't know if you heard this, the industry downgraded by standard aend pours. >> hilarious. >> i'm not -- i'm up holding my end of it. >> i was in italy and as cheap of a bottle of wine as a bot of

of water. guess which one i chose. >> not anymore. it's a lot more expensive than the euro came in. >> thank you so much. the extreme weather we have been talking about causing serious volatility in the cotton industry. some companies looking to stabilize the market. one small farm at a time. it is today's scarcity solutions report. without some serious focus on supply, the fabric of our lives won't be around forever. some of the cotton industry's biggest customers ikea to levi's underwriting the better cotton initiative, a program to train a network of very small farms for better cotton. so what makes the cotton better? >> farmers are taught farming techniques that allow them to grow cotton with less water and less pesticides, less fertilizers. >> the farmer is going to have better yields.

manufacturers assure us to get not only the supply they want but at reasonable prices. >> reporter: levi's says the investment won't drive up the cost of next 501s despite the volatility over the last two years. >> prices had shot up to all-time highs, the market was even higher than it was in the civil war. >> we are not interested in creating small, short-term niche markets. >> reporter: though they could arguably hype the fashion to boost sales, levi's and others not labeling the better cotton prices for spear of spike of demand before they can deliver. all right. coming up, battleground costco. >> herb is back, looking at the changing american family and how that might affect the profitability of the price clubs going forward. ♪

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costco continuing to flirt with all time highs, up another half percent today.

herb is back with us. herb, you love the store costco, you have five pound jugs of mayonnaise at home, but you don't like the stock? >> you would never think there might be something wrong with costco, but the sales have been on a slow bleed. there is a deceleration of shopper frequency. something is up, and my hunch, demographics are playing a role. people like me, whose kids are long gone from their house, just don't buy as much as costco as we used to. now the cfo told me he doesn't believe the demographic shift has hit yet, but it's something they talk about internally. what i know is this. if a lot of people like me are spending less and going to t store less frequently, there has

to be an impact. and i just have to tell you that i learned through years of doing this, sometimes it is the thing that's most obvious, in front of you, that you don't see. >> we have your side, thanks. so should you cash out or buy in bulk? jan, always good to have you on our show. i'm looking at your notes here, it's a costco love fest. the best large scale retailer in america, the happiest employees, best managers in the country -- >> you're selling my story. i don't mind disagreeing with herb. i hate being on the other side of those that have these as an under weight. i have been watching these guys since 1985 when i visited the first store. i said who is going to shop in a

charge to shop in a crumby warehouse. they were the fastest retailer in history to $3 billion. and they've never looked back. they're the best management retailer in the world. >> i can't agree with you more on everything you're saying. i think they have one of the greatest cfos out there. this isn't about how great they are or not or the quality of the food. it's really just about a demographic shift that is happening. and you know it's happening. you're in my world there. you're not in my world -- i'm well beyond your world, but you know that demographically, there is an impact and the empty nesters are not going as much or buying as much. the other group coming in isn't as big and it's taking a toll.

>> i think your theory is half baked. it may be true, but i don't see any evidence that's happening. >> how are you going to see the evidence? where will it show itself? will someone ring a little bell and say it? >> even if it is true, i believe the best management team in retailing will sell higher end product. they have 55 million people carrying the card. i'm one of them, so are you, i think they can deal with whatever demographic changes happen overtime. >> the model works great in canada and mexico, and in the u.k. -- >> i mean with countries of a better demographic profile. >> well i just believe they're a great management team, they understand the business, they know where they're going with

it. they have a huge business in canada and mexico. they're not tied up in the european problem right now. and i think they react very methodically to anything going on. they're very good at what they do, and they do $1,000 per square foot. the next closest does $600. >> herb, is there anything jan said that making you change your mind? >> no. this is something you just have to talk about, okay? we're getting the conversation going. >> okay, thank you for joining us, jan. thank you for watching "street signs," happy friday. >> "closing bell" is next, have a great weekend. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee.

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