we need money back to the middle class. howard, thanks very much -- why did i call him howard? henry blodgett, thank you. >> howard? >> "squawk on the street" starts right now. good morning. welcome to "squawk on the street." i'm melissa lee with jim cramer and david faber. carl has the morning off. the markets are adjusting a slight increase in jobless claims, and building permits rising to the highest level in four years. we are setting up for a higher open. s&p about, nasdaq looking at about 10. we do have pretty sharp gains in both italy as well as spain, seeing more than 1% increases. a road map for this morning. starts off with walmart.

lukewarm guidance. are the best days over after a steep climb this year? >> a massive dividend hike, sending cisco shares higher, the company sounding more optimistic, but does it focus on capital returns signal slowing growth? >> today is the day facebook's first lockup expiration is here, potentially sending 10% of its hope to the market. we are tracking the fb trade. >> and a microphone always helps me. appletv, more than a settop box? we'll have the latest. let's start off with walmart. at the dow component offering beating the street by a penny, revenues coming in a by shy of analyst estimates. the retail giant also raising

full-year earning guidance main be below. jim, this is a case of emh kind of quarter, but the stock had run up prior to the quarter, so we have a 2.5% decline. >> if the stock had been at 70, 69, people might say happy days are here again. it's just that when this stock has had such a run, it's got to blow out. i was thinking what number would walmart have to do? revenues blow out, and they couldn't do that, but they delivered, and they delivered and now there's a pause. i think under 70 people will come right back. >> yesterday we raised a question of whether walmart was fully valued at this point. bernstein a couple days had a note out compared to valuations had held during the recession. it's close to those valuations and price to forward p.e., so should you be looking at this with a different view? >> well, i think as it comes

down, you want to buy it. i find myself thinking what did targets do right that walmart didn't? target's expectations were also hide. they laid out this multiyear transition to food is done, we're in great shape, and walmart just has great numbers, but not great enough. >> it was a beat and a raise. an unquestionable beat and raise. with walmart, they sort of raised their own guidance, but it was below what the street was expecting. it was a mushy -- >> well look, they had david extraser on earlier today on squawk. he said, look, they did a good job. did they plow it out? no. did they give you a huge dividend increase look cisco? no. did they have give you a giant estimate boost? no. maybe they need to do all of that at 75, but i think those who sell the stock here and just ditch it, you know, a year from now, as long as europe is weak, people will like walmart. >> that's a key poin

of course there was a time when you would not have heard those numbers. there may have been an expectation perhaps it would be a bit higher, that may be sinking in today, why the stock is going to be down. it is interesting to note the lack of international exposure, and actually what sams tube not as quite an aggressive plan to expand in some of those markets as brazil and china is probably a positive for the company. >> remember the days, remember when germany didn't go well and they got out? that was something we saw was a black mark. now we would have held it against them. >> at some point in the future, it will once again be a challenge perhaps for the company. it's not as though they can't and don't want to expand internationally. they must. >> right. >> but it's a problem others have that they don't as much because of their domestic focus. >> they do have some

international exposure which are the -- like the supermarkets. >> it's not as though it's not significant. >> that is where they saw the slowdown, by the way. >> the forex, but this walmart under mike duke deserved this run to some degree i want it had been a long time in coming. >> right. >> ten years and coming, in fact. definitely in the making. >> a lot of other things helped it. i think it's an interesting story. i listen to what you have to say where it goes from here. >> but you know the culture, and the culture is aggressive now. >> yes. >> they ditch suppliers they don't like -- >> they've always been fairly aggressive. >> but the stores look really good. >> do they? >> they do. >> i've not been in a walmart for a bit. so i'll take your word for it. let's move to cisco, another big story. cisco systems up sharply in the premarket, this after the

networking equipment company did beat analyst estimates with the latest quarterly earnings. perhaps even more importantly, it raised the different by 75%. the quarterly payout goes to 14 cents a share. cisco, by the way, just started paying a different only last year. i mean, you're talking over a 3% yield now. it's been such an important part and component of the overall story in the market, when you want to talk bullishly. >> how about a remarkable quarter? i know people will say, listen, they didn't have the revenue growth t low single digit. then suddenly he has. overseas. no more the cash is balkan here. >> what they did with nbc,

comcast, parent company of this network, was rather remarkable. they have taken a lot of share. maybe this is not the growth machine it was, but it is a cash machine. they are returning it. >> specifically when it comes to cash, they exclusively said they will return 50% of cash flow, whether by different or share buyback. >> maybe that is what we have, but maybe partly a recognition before it was there, now it's even stronger. does it attract a whole new class of shareholders, jim, to give some floor to the stock 1 john on the conference call

mised that the reason you've got very critical of chamber. this time the buy back was underwear. remember they had a very high price point. one wonders how the dynamic will shift. some people would say, now this

was a very difference conference call. >> tips from last quarter, they said they talked about i.t. spending behavior being hesitant. this quarter. this was a quarter that said there's really going to be nobody else in this backbone. you need them if you're able to go forward to the next generati generation. let's move on to facebook. we'll be watching that stock closely.

we should know this is not the only lockup that will come, certainly not the biggest that will hit facebook shares. 9% of the shares outstanding will come to market, 2.5 million shares on november 14th, this is the big one, 49% of the float will come, 1.32 billion shares, if you take a look at the various states. that's going to be the big one. >> this expiration, a lot of people who can sell were professionals. that may have been some way that they've beenic to lock in some gains, so the pressure may not be that great. you know what's funny, cisco talked about social, it talked about mobile, and talked about cloud. we keep hearing that facebook still doesn't have the mobile component. i know there is a lot of funds that still want to be in

facebook, because they say it's only a matter of time before they get mobile right. i think engagement is the issue and you don't like to be on facebook on your mobile as much as you like your desktop. i think it's still google that is the company that has figured out mobile better than anyone. you don't wonder if the stock will bottom now that it's here, because we've focused so much on it and talked so much about it, and everybody's been worried about it, or will it have a real impact because it's not one time? >> it doesn't seem like a reason to buy. if one were incollide to buy the stock, you would say, you know what? there are waves of stock potentially. it's another reason. >> there's no doubt about it, and they haven't necessarily given you a reason to buy it, true. how many people will choose to said is another -- their cost

base is, what, $2? >> does goldman sachs want to hang onto it? >> guys at hedge funds, who built decent-sized positions higher than this will not be selling. they're also locked up. i think there's a differentiation in terms of the lockups themselves and how many shares come to market. >> i want to see big advertisers commit to mobile. i know there's a lot of tiesers who did not follow suit. when i get off the desk, i always ask ceos, do you like facebook? they almost invariably say they do. they get an engagement factor. then you ask, do you like facebook on mobile? they draw a blank. >> do they like it because they're tiesing, or they have free facebook fan pages for their brands? >> they like to figure out -- they're using it as almost market research. geez, they like that product? and it's another way to figure

out what is popular. but if you can somehow get a return on investment or facebook can do a lot of missionary work and tell you there's a return on investment, they'll get advertising firms to go there. google has a very, very good mobile option, and google is doing many things more right than facebook. >> right. we should reiterate. david eastboundersman is on the road having at lot of different meetings trying to build addition at demand. >> it seems like they're on the road constantly. >> no, i think they were in a quiet period for sometime. they were belabored -- >> you can't win with me, can you? cisco won. >> exactly. apple, let's talk a bit about that. said to be talking with cable operators about letting customers use as anal device as a set-top box, according to "wall street journal." that paper says despite the

talk, apple does not appear to have reached any deals with cable companies. we know apple has been focusinged on figuring out how to get into the cable television world there's a lot of things here, in speaking to people, it's very different than apple engaging with verizon, at&t, nationwide footprint, two technologies and that's it. you're dealing with digital compression, regional capable operators all over the country, not to mention they don't want to let apple get between them and their customer. >> right. this was a story, i read it, and i felt i had 100 questions. >> yes. >> i didn't feel any were answered. >> exactly. >> the two people talking thing -- >> at sun valley, how long ago was? >> it was glen bret, earlier this summer. it's not inconceivable.

but where does it end up? >> it tells you you know apple is trying to be aggressive, and tells you to pay attention to the broadband future, and the challenges and opportunities it will present for content providers, so the world is changing. now, there are also those who say, don't worry about capable companies, the video stream into your house via the capable is really the margins are far less than on broadband. broadband is the much higher margin product. that's all they should be caring about. the capable companies will tell you something different. >> a big story. >> in a way, if apple figured out a way to position itself, people i would imagine would stream more using some sort of apple-tv device, increasing the use of broadband, which could then create a nice partnership between the capable companies and apple. i would imagine that's a way one would sell it to a xibl company. >> other way we'll charge you less for the equipment or it

will take phone calls when it's broken. >> at the same time you listen to the cisco call and you think they have the great relationship, and they praise nbc. i always feel uncomfortable, but they praise the relationship with com chasm. it seems like cisco set-top boxes not about to be thrown out by anybody. >> no, no. and there's even dvr functionality. >> moving parts. >> but it's apple. when they want to do something. >> they do it and people want it. more importantly. >> i want that device that says put on "mad money." >> also if you can be completely connected with all your wireless devices, it's on your ipad, your iphone -- >> the guys try to -- >> and you control what's going

on at home. >> when you have the guy that can install it, he can link it all together, but he can do it. i'm trying to do it right now. >> yourself, david? >> no, we don't do anything -- >> you're a handy fellow. >> yeah, i am. >> you should see him with a hammer. my gosh. >> sears. >> that's right. we haven't talked sears. maybe they sold a couple hammers. meantime, is apple losing the cool factor when it comes to the chinese market? why the iphone may not be as popular as it once was. the dow looking at about 21 points here at the open. more from post 9, straight ahead. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer.

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"new york times" reporting that no charges are expected against the mf executives. investigators have been looking into the disappearance of that $1 billion over the past ten months. according to the times, investigators are concluding that it was chaos and weak risk controls that allowed the money to disappear, and not because of

fraud. so that brings us to this morning's squawk on the tweet question. we asked you -- execs not facing charges is like, blank, being excused for blank? tweet us. we will air your responses. no matter what happens, no criminal charges? >> both goldman and corzine, the two cases, justice department being forward, telling people they're not going to go after them is highly unusual. i felt that mr. corzine was not going to be prosecuted criminally, because they didn't have a paper trail. >> none of the top executives are being prosecuted. >> frankly i found that disappointing. >> from the investors' standpoint, if you want to restores in confidence there's no punishment for weak controls and chaos. >> and the libor investigation in new york state, they fine

companies, which means the shareholders pay. it's disappointing. eventually someone has to do with what my friend jim stewart said in a recipes in "new york times," indict an individual, please. if no bun goes to jail, there's really no incentive to change your behavior. >> yes. coming up next, cramer takes you ahead of the curve. find out how hi mad dash is, focusing on the futures, we are looking at a higher open. more "squawk on the street" is straight ahead. sneed [ male announcer ] when a major hospital wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. [ yawning sound ] [ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. to hold over 80,000...

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. five machines before the opening bet. it will be up sharply. mad for madden? i can speak fundamentally. john has been on the show a couple times, very challenged company. why? they have to go from analog, to your hard disk to digital, where you don't make enough money. i found this story surprising, given the fact while there's great brand titles, there is not a lot of money being made in the digital portion. >> some would view the business as stable. i heard this name from a couple bankers last weak, so it may be bankers trying to sell the story. the company also put in a buyback two weeks ago. they don't do that if they're having significant talks.

i would only point out again two weeks ago they would have been obligated to have to put -- that being said, stability of the business, i guess, is a key question. it is a p.e. -- it makes sense in the sense it's a $4 billion market cap, a billion in net cash. >> and by the way, if you wait two years, they'll have solved the digital conundrum, because the title's worth a great. however, david, in the end, all media companies, have to deal with you can't make as much money. zynga is digital, and -- >> people still line up for madden. >> these are great core games, the best titles in the world. "star wars" a little disappointing. rick has done a terrific job, but the trend is not your friend in this business. i frankly, it makes a lot of is

sense, because it's so cheap. we're going to talk more e.a. in that opening bell just ahead of us. [ male announcer ] let's level the playing field.

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here we go, the opening bell sound, there's the big board. the producer of sand for fracking celebrating its ipo. and wow, what a feat there. hi crush partners interesting, we asked if they would do an interview, they said no for today, it's a big day. but 24s a real issue for the operations in the shales, because there isn't enough sand, there isn't enough guar gum, and with the drought, there isn't enough water. >> i hate so say anything positive now about the natural gatt drilling business, but you need sand for oil form there is a lot of drilling going on.

last night southwestern, a really good company, down on its luck, they're talking about doing a ton of drilling. at the same time almost everybody is gun-shy talking about it, and remember romney did not back the natural gas act so far that boone pickens wanted. you have some head winds to the story. >> facebook, by the way, is down by about 4.5% here at the open. again, we don't know how many insiders are going to use this lockin expiration. on the likelihood of selling is pretty low, but still some pressure on the stock, down 4.5%. >> it remains a show-me situation, if only because -- i was listening to an analyst talking about the idea they simply seem to have been caught unawares by the march to june

move to mobile, which has shocked a lot of people. the apple iphone and galaxy, to give it credit -- not the tablet, but that was -- in "new york times," the apple iphone changed the world in a lot of ways to this -- no one really saw it coming. how people contacted each other with facebook. you're on your desktop, it's your home page. when you look at it on mobile, i'm in, i'm out, i'm in, i'm out. that's no the what the advertisers want. >> at least not knoll. if we consider yesterday again there's been a disappearance of about $45 billion in market value since this company went public, and it's only, what, two months? >> yeah. >> a couple months. >> obviously there's nothing illegal.

we talk about groupon and zynga, and the fiasco that that has been for shareholders, but facebook puts that to shame. >> jim is being sarcastic, by the way. >> is it not amazing the run that google has had since facebook came public, as we recognize that google has figured out the holy trinity of social/mobile/cloud. facebook shockingly hasn't figured it out, not to my satisfaction. >> cisco, by the way, is up 8.5%. >> good job. >> new focus on cash return to shareholders, always music to shareholders' ears when they're hearing cash return. >> the confidence of the call, you're so right, melissa. it's been one of these situations where the numbers comes out, you buy the stock and then blast it to kingdom come because you hear the outlook.

really, this story was based on something. >> by the way, the other networking stocks are lifting on the back of cisco's perhaps the comments about i.t. spending seems been to stashlize. juniper is higher by 3%, riverbed -- >> it's killing them. >> right. is it a -- is a farce cal rally? >> i'm always hopeful that juniper gets it together, but this is cisco taking no prisoners, and i think if you're going to buy these others guys, you better have a real good story, because i don't hear it. >> we should mention ea shares are up about 8%. glen on "new york post" story. early days they said what i can tell you ishere t been a lot of chatter about the name. perhaps for good reason.

there's about a billion in net cash, a $4 billion market value, or at least there was, a business model that at least is in some flux, jim, that you were talking about. it does make sense from a p.e. perspecti perspective. that does not mean that it's going to be in any way, shape or form a deal. you do also have the possibility of activism there. not that p.e. firms would get hostile, they don't, but maybe an outside activist. >> but you revealed the buyback, because that was a clear piece of information that was left out of the story, that i could see. >> they would have not announced the buyback two weeks ago and been in talks at the same time. >> right. i did not know the custom of this industry was if you announce a buyback, you shouldn't be in talks, or you can't be in talks because you were in possession of material information. >> that what i thought kiboshed

the story. michael packer, he believes in the earnings story. ed bled in the earnings story, but it's been a disappointment, but it's a great company. we all know it, it's got the best brands, but this again, you know, you keep hearing about this digital revolution. >> there's talks about a new console coming, that would be a network device, where you would digitally distribute the games. that would save them a lot of money. >> it is an inexpensive stock, so therefore, it is right to consider, but the piece you gave me that they announced a buyback, that makes me think if this was going on they couldn't announce the buyback. >> good point there. >> or they would have to suspend it. >> all right. let's check in with bob pisani. good morning. >> good morning. hi, guys. hi crush, we're waiting for it to go public, prized at 17. it looks lick it will open right about at 17.

the big talk isn't about the stock market, it's about the bond markets these rising yields have been noticeable. not just the u.s., but german, british, japanese, sovereigns all been going up. we are at 1.4 a few weeks ago. this has created a lot of interest, so yesterday the etf that's shorting long-term treasuries had huge volume. this was on a day when the volume was terrible. they had huge volume. good volume, high-yield corporate etfs, very good volume and corporate bond etfs there was an interesting note late in the "financial times" the sale year to date has surpassed all the sales of corporate bonds last year for the entire year. it's been a great year for corporate bonds. why not? elsewhere, let me move on, we present talked about gold in a while. just opened on hi crush there, 17.11, it looks like, pricing at

17. the world gold council issued their quarterly gold report. here's what's interesting. demand down in india and china. that's really important. demand for investment in jewelry down 38% in india. wait a minute, rupe is really weak, so it's expensive to buy gold. that's the problem in india, plus the weak economy. we also saw china down 7%. i'm just checking my stats here. india and china are about 45% of total gold demand for investment and for jewelry. so that kind of decline is noticeable, and does have an affect on total world demand president it's down about 7%, total demand. that's very important. another interesting trend i saw on the report, investment banks dr or excuse me. the state-run government banks, central banks are big buyers of gold, and certain emerging

market banks are buyers because thee trying to diversify their reserves. let me mention cisco, you mentioned john chambers being upbeat on the u.s., and i thought some of his comments were particularly upbeat. in the first quarter we saw positive ground and/or uptrends, especially in the second half of the quarter. finally, everyone's complaining about the light volume. let me tell you, it is a worldwide phenomenon. the australian securities exchange put out a note, they have seen a very soft start to the trading year. it began in july. down by a third. the values of equities traded is down by a third in the past six weeks. so, guys, this weak trading volumes is really worldwide now. back to you. >> that's amazing.

>> we're 29% below our average for the year, and we are down more than 40% compared to last august. >> worldwide secular trend not good for securities. not good at all. >> no. except for bonds. let's head to the bond pits. go ahead, rick. >> hi, jim. well, in my opinion nothing expresses what bob was just talking about regards a lot of the high quality sovereigns and high quality being a relative term, you know, whether it's japan, u.s., europe, the rates have started to move up. now, i agree with friend of cnbc peter boockvar, verse the "wall street journal," that the catalyst is probably not nearly as much the federal reserve as it is comments by mario draghi, things that happened on the spanish yield curve, but look at the chart on swit two-year yield curves. the pattern looks the same, on this really i think symbolizes

just how far safe harbor has taken you in the negative yields in switzerland. look at may 1st starts for all the following. ten-year bunds, why is it important? this is what made a lot of technical traders start to get short, even when it was a counterintuitive trade. we're comping all these yields back towards may, five-year is actually a winner. yields have come down just a bit, but we continue, meaning people on this floor that talk to me, that yields have a propensity to move higher, more in a thin volume, time-related trade necessarily than all the fundamentals that are so hard to gps. with all the people and entities involved trying to manage their interest rates. back to you, jim. >> let's check on energy in metals. bertha? >> we have oil prices steady this morning, coming off the highs overnight, but traders are calling this a technical rally

with oil yesterday pushing a bit higher on the nymex after that inventory report. the inventory strength really on gasoline was strong demand, a strong drawdown. steve short said after that huge move, no surprise we are seeing a bit of profit-taking here this morning. the interesting thing, bob talked about that gold council record, gold holding above 1600 an ounce. the big move today relatively, though, is copper because of those comments coming from the chinese premier signaling that perhaps they're ready to open this a bit more when it comes to some kind of easing, policy move. back to you, david. >> thank you very much, bertha. there's been another exchange, if you will, of corresponds between best buy's largest shareholders, richard shultz, the founder who wants to buy the company and the company itself, that having taken place this morning in a couple letters, a longer once, reiterating his desire to purchase best buy in a

transaction. you see the stock is having a positive reaction to that. now, in this her as well, he at least in some ways answer also some questions that were raised previously by others out there, namely if you're only going to roll in a billion of your equity, what happens to the other 700 million? he says, hey, i'm ready to potential roll all of my existing stake with private equity firms regarding a new ownership structure. of course, what mr. schulze is the right to conduct due diligence and the right to form a so-called group. this does get a bit complex, under minnesota law, or at least related to you in the past, you can't firm a group without tripping a four-year time-out. he needs firm commitments, would make them a group getting those commitments. at the same time, best buy comes out and says, listen, you keep

saying you can't name the firms. from what i hear at least half a dozen firming are being talked to. minnesota law does not prevent you from further exploring and engaging in discussions with your private equity partners. you don't need the consent to bring forward a proposal at this time. so that is what best buy is saying, and that is true. they could name the private equity firms, but they don't want to be named, into you they don't want to be seen in a hostile light. they want due diligence. they want to do the due diligence, come in with a fully financed offer and name their offers now we want to wonder if there's any pressure to allow due diligence and the right to form a group. are other shareholders saying it? don't forget, it only takes 25% of the shares to call a special meeting. from what i'm hearing, schulze is holding out significantly the

threat if you don't allow me in the very near future to get due diligence, form a group, we are going to embark on a proxy fightivities what the heck does he not know that he needs this? he's got everything. >> the private equity firms want due dill gents. they want to really understand whether their commitments would be worth making. again they reiteration that cs first boston has given them a commitment letter, if you will, that they have received inquiries from other institutions. it's an interesting one. you know, if you end up in a proxy fight for a company that sells an interim ceo, we'll be reporting numbers next week? >> also some is wrong, electronics arts, coinstar, best buy, late august, i don't know. >> we've got a lot of p.e. firms sitting on large funds they need to put to work. you can't start charging

significant fees until you put the money to work. not that they want to put it to work in transactions that aren't going to work out. >> secular decline stories, and everyone's buzzings? squawk on the tweet. published report says there is no -- complete the following sentence for you mf global execs not facing criminal charges on account of weak controls and chaos is like blank being excused for blank. tweet us at cnbc, we're sharing your responses straight ahead. as we head to break, take a look at this morning's early movers here on wall street. mamama

it should be known in the next year or so more than 2

billion shares will come to market -- could come to market, which is a stayingering amount of stock. there's probably -- i mean, where would you be a seller of 20 million shares? >> this has a share count higher than sirius. >> we're just about 20 cents away from a fresh low on facebook. >> how many cents? >> they have to do what chambers did. >> now it's at 15. >> should be a return of capital story in facebook. >> sometimes i say that, and cramer says dividend, and jim cramer -- >> oh, god. >> it's called being facetious. >> let's look at sirius holding. that is up about 4.5%, adjusted

ebitda was up same-store sales are still going down, maybe a little slower. >> better than j.c. penney. >> if you want to compare anything to j.c. penney, it's going to look good. >> groupon, zynga? >> well, retailers. >> i'm just being, again, facetious. >> a little hyper boil. does that come at the end of the season? >> the doritos bowl and then the hyper bole. >> so saying that eddy lambert should thank ron johnson for some of the share it has stolen, but at the same time weakness in home and garden, which sears blames on the drought, may be a nod to home depot.

>> miracle-gro, as scotts has issues, too. look, home depot is killings everybody. it's just killing everybody, but there should have been more growth given the housing market's return, but it was not a disaster. ire aware, whirlpool is the play there, the guys with the least expectations for are going up on not so great numbers. >> yeah. means this 24-year -- we have to take a break here. much more "squawk on the street" trait ahead. up next, they say an elephant never forgets, and that's all well and good. but can an elephant play six stocks in 60 seconds in doubtful, but jim cramer can, and he will, when "squawk on the street" returns. tdd#: 1-800-345-2550 when i'm trading, i'm so into it, tdd#: 1-800-345-2550 hours can go by before i realize

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queer going to look at facebook and the expirations. how do you play them? also ahead, sears sales are still falling, and why people

may be underestimating future sales of the iphone 5, and 40% up side. david, than and more in the next hour. >> can't wait, simon. probably right it still didn't do that well. perigo, why? >> i thought they would blow away the numbers. they did not. this is generic. by the way, some of the competitors are back in their, j & j. >> and they were one of the big beneficiaries. petsmart, lots of holds. >> hole cow, just too negative on the stock. one of the our great growth stocks of the times.

that's pets. >> that's not hyper-bole, is it? >> he slammed it and it didn't go down. >> bernstein usually does decent work. >> he's not been that wrong. >> ross stores. >> expectations, you know, ross stores will be up in a couple weeks, maybe a couple days. what do you have on "mad money" tonight? >> i have afce. i have been corrected often, i don't think i should be. she is the ceo of this company, but it's really popeye's. every time people correct some me, i'm mispronouncing, it's pronounced pup-eye's? pup or pop? we'll see you tomorrow morning. >> "philadelphia". >> yeah, more "squawk on the street" on the head including philly fed. has changed the modern world... would define you as an innovator.

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negative read in a row, and we haven't had four negative reads in a row since three summers ago in '09. it was worse than expected. we were looking for anywhere from down five to down six. minus 12.9, really that was one of the worst levels -- well, june was minus 16, but prior to that, to get to numbers like this, you would have to go back to about the first quarter of '09. the reaction in the market, not very much at this point, though the equity markets seem to have the most volatility, though they're still lightly positive back to you. >> where does that leave us on the question of whether or not the fed will start -- and the big move we've had in the treasury market selling off the yield spiking, what, 20 basis points so far this week? >> yeah, my opinion, i don't know if it gives me any clues to what the fed is or isn't going to do. in my opinion it's a lot more complicated than just targeting equity prices or watching the

correction and interest rates. we have jackson hole, and that's just created a logistic cover-up trade. people that are long these treasuries i think there's more involved in politics, you know, we have debates coming up. i just don't know that ben bernanke and crew would like to hear a question, though general media probably doesn't know what q.e. is. >> rick, thank you very much. let's get to the road map. it is a busy hour. the first lockup period for facebook shares ending today, making 271 million shares owned by early investors and employees available to trade.

is another big wave of selling in store? >> taking it on the chin, but guidance came in rather lukewarm. we'll sort through the numbers and tell you how to play the space in just a few minutes. soaring after the massive 27% dividend hike. is the dividend boost enough to get investors back into chambers' corner? heating you up the wires again this morning with talk of a set-top box. is there more to the talks than meets the eye? gene muenster will be here to lay out his take, and he believes 45% up side from here. >> wow. first a check with what's going on with the presidential campaign. >> the introductions are under way in can ton, ohio. we're at the home of the cavaliers here, and what's going

on here on the campaign trail has been fascinating over the past couple days. we've seen paul ryan campaigning himself. that's what you do, you divide and conquer, get your guy into the battleground states like here in ohio. we'll see paul ryan speak in a bit, but what his addition to the ticket has done is focus the attention on the medicare issue. democrats thought they had a winning issue here with scaring senior citizens about the ryan plan on what to do about medicare going forward. ryan, though, sees this as an opportunity. he wants to hit medicare very hard. yesterday he told a crowd at his alma mater, miami university of ohio, that he welcomes this debate. take a listen. >> the president i'm told is talking about medicare today.

we need this debate. >> to big rounds of aplus at paul ryan. big rounds of applause. here as the introductions go on. we expect to hear what he has to say. the other thing we've been watching is the contrast really between paul ryan and joe biden, as the vice presidential candidates go toe to toe and dueling media appearances. that has been a stark contrast on the road. we'll wait to see what ryan has to say here. it could drive that contrast even further, back to you. >> thank you very much, eamon javers. we are watching shares of facebook shares nearing another all-time low. is another large round of selling in store? rick summers, a senior analyst joining us here post 9, mark

harding an analyst, mark, i'll start off with you. the argument goes that every single ipo faces a lockup, but this one seems different in terms of the number of shares that would be available to be sold over the next year or so. what sort of a headwind does that present for the shares. does it factor into your analysis on the company? >> i think the first way to look at it, factors into the analysis, it really doesn't. whether or not the shares come out or are sold, it does not have a impact on the fundamentals. you'll continue to see very strong growth from the monthly active users, continue to see improvements there. whether or not it has an impact on the stock price, well, clearly it will have. there's likely to be some sort of perceived concern about selling pressure, and that could contribute to it. whether it's actual selling pressure or perceived, it's unknown at this time. >> i understand it doesn't factor into the fundamental

analysis, but in terms of you deciding what the price target is on a stock, the fact that the float could actually quadruple over the next 12 months, that must play a role. >> not really. if you think about how the -- until you have some additional certainty or some additional fundamental factors to point to, the stock will continue to trade on concerns about the increased flow to the increased selling pressure. in the near term, the market is a measure of supply and demand. you'll have incremental supply. >> so what is the fundamental valuation then? we're at $19.90, on your fundamental analysis question would be? >> right now it's trading about 32 times 2013 earnings, so it's a -- it is rather expensive when you take a look at perhaps some of the other companies, but i think the important thing here is you're not actually seeing any mobile contributions in

those assumptions. you have a number of factors playing as head winds here. >> let's bring in rick summer, who is standing by. rick, it seems to me a lot of these shareholders that could sell today are probably longer-term investors, founders in the main. they may not want to sell actually at $20. they may hang in there for $30. however there is this massive short interest that's up at 80%. whether the founders sell or not may not be as important to whether other people can borrow their stock now and they will sell it short. fair comment? >> yeah, i think that's somewhat fair. what we see as a move is a bit after self-fulfilling prophecy. everyone's waiting for these latter lockup expirations that are occurring. we're a bit more interested in the october operation. we'll see some employees unload some shares. importantly we look to the ability to hold on to

investors -- or employees to the extent that the shares are good incentives for employees to stay there and motivate them going forward. that's more critical to the story. >> you know, this is a broken stock, rick. you're talking about a company that's lost $46 billion of market value since it went public. i don't think we've ever seen anything quite like that. when is the news flow? all right, you can work about the lockups. when is there is going to be perhaps a bullish case on, so you can reverse what is, again, a broken story? >> that's a great question. what we see with these head winds, we thought they were northwestibility. we certainly see celting profit margins. they're going to have to invest. until mobile starts to materialize to be very meaningful to the company, and we look to another three to four quarters for that to occur, weed see head winds to the company. the question is, do investors try to get in ahead of those trends turning around. five years from now we'll be

talking about a very different stories. facebook will be a dominant advertising company in our view and still quite profitable. >> five years from now. mark, at the same time your 12-month price start is $37 a share, and here at 19 it would make facebook a screaming buy from year perspective, same time, what point -- you must look at the way this things trades and it concerns you and must cast more doubt to whether the stock will hit 37. >> as far as how the stock trades and whether or not that actually concerns me from the fundamental perspective, it really doesn't. i keep going back to -- >> what about david's assertion that it is a broken stock? how do you react to that? david faber really says things like that. >> that's true. >> how do you react to the accusation it's broken? >> actually what i would think is you've probably seen a migration from momentum investors, from some growth

investors perhaps playing the scarcity value that was built into the ipo. you're seeing a rotation from those investors out into more traditional growth investors. you still have a company that has a fantastic installed base of users, they're monetizing those users at significantly lower rate than other online tiesers, so there is room for them to see improvements. >> and a potential short squeeze, however you have more more lockup expirations, so presumably that's unlikely. >> rick, you mention the five-years outlook, and i think at the be great if everyone was investing, but in the nearer term, what might we look for as evident that they are at least turning the corner on the mobile challenge? >> i think those are great questions. it's the mobility to actually continue. we've heard the fact that they're making a half million a

day as an example in the mobile channel. seeing ad rates go up in the mobility will be important. more interesting to us is that ecosystem. do they have mobile partner. not just people going to facebook.com or facebook app, but using ads within their environment. that would be more interesting. importantly enough, when we look at this volatility, i would rather have a broken stock than a broken company. we look to a big margin of safety. frankly we've had told our clients not to get excited to this stock. >> by the way, this is a fresh low on shares of facebook right now, 1976, last quick word to you, mark, what are you looking for in terms of signposts? >> i think the important thing is to actually see a commentary calming from the industry. you know, are they looking at -- have the necessary metrics been provided to them, so they can actually feel comfortable with mobile as an advertising

platform, or is it still really the wild west? >> mark and rick, we'll left it there. thank you for your time. >> thank you. a market flash with jackie deangelis. >> we're watching shares of groupon, they're down about 6% on the day at $5. they briefly dropped below $5. of course this stock reporting earnings earlier this week. the earnings were fine, it was the revenue miss that was problematic. david faber, back over to you. >> thanks very much, jackie. walmart perhaps missed on the top line this morning, a bit lower than might have been anticipated. we're going to sort through those results to get a read on what walmart's numbers were saying. that's next.

9 retailer missing expectations, but increasing the full-year guidance. is walmart still one of the best defensive plays in this market?

good morning, chris. they put up a 22.3% comp in the u.s., it was lower than the bar of three. the bar is a bit higher, but the important point here is july was the best month of the quarter, it talked about that in the release. june's we know its retail has saw the swoon across the board, this is the first back-to-school season where they have a new apparel merchant, so we think we're running at the high end of q3 guidance with a strong apparel set. >> what is going on? do you think it will decline from here? >> i don't. two things. number one or price targets are

estimates and they beat us and guided up. so estimates are going higher. if you look back to '06, '07, when walmart more consistently positive, it traded at 15, 16 times, so you have about a turn evaluation ahead of you as well. i think the market will think about, you get another 10% in the stock to the year end on something that's up over 20% year to date. over four months for a low beta defensive stock, we think that's pretty good. >> at what point, chris, should we start getting concerned about walmart's valuation? >> like i mentioned, '06-5th 07, when they were more consistent, that it traded at 15, 16 times. right now you're a turn below that. over the balance of the year, the stocks move into out-year valuation, we see bl a turn. if we get another turn on p.e., we're trading that 16 times,

then you have to get more concerned in terms of price per perfection. >> now that walmart has turned the corner in terms of same-store sales, first straight year of positive comps, how should we start thinking about sales in the future? a share take from competitors or j.c. penney's or sears or target? >> when they went back and added back assortment starting in july of '10, and that's a process that completed at the end of 11. they invest in price, taking the marketing message up. when you turn big ships like this, we saw it with home depot, the trends lasts a lot longer that than people think. so, yeah, comps get tough, but certainly interest the back half here, we expect continued strong trends. >> chris, what are they telling us? what is our takeaway from what

they're telling you? we had some great retail sales figures a couple sessions ago. the market got enthusiastic about that, and obviously fed into expectations, but the cfo of walmart is saying today that the paycheck cycle remains pronounced. in other words, they continue to see signs that customers are strapped, spending more at the beginning of the month when they get their paychecks. that is not a good signal, is it? >> no, it's not. i think two things there. number one, on the international side, it became more pronounced sequentially. it remainsed pronounced. comps decelerated in four other six key geographies, so it seems that global uncertainty is impacting some of the broader international markets. in the u.s., all these retail management teams are really concerned about the election, about uncertainty around tax policy, and i think the consumers are seeing that with nair consumer behave.

implts chris, one last quick question, are you concerned about the allegations of what went on in mexico? is it material for you? i sigh "the financial times" is carry another article on that, about how washington appears to be rallies to the cause. >> yes, they absolutely. a large dplobl company, it's easy to pick on them, not excusing the potential behave if something did on other, that was wrong. i think the risk is if we lose a senior executive. otherwise, you know, generally this company is so large, it's bigger than any single person, chris, thanks. good to talk with you sdpla apple's next frontier? it reportedly is in talks with major companies about a new set-top box, but is there more to the story than meets the eye? we'll have the lowdown, straight ahead.

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the euro trading higher today, 123.41 is the level right now. is this a level that traders think ecb will take action soon? willy williams joins you. great to see you. >> thank you. >> you're opting to stand away from the euro trade. why is that? >> i think the euro is caught in between two opposing forces. on the one hand the market is waiting to see if there will be a greek holiday regards them servicing their debt. will spain be allow to use some of the excess funds from the loan program to purchase bonds directly in the market. at the beginning of the month, we saw a massive rally. our u.s. economist brian jones at a first pass is looking at a number closer to 60,000. if the u.s. data comes out weaker than expected and the two

factors happen you could see the euro trading higher from here. >> you mentioned a couple, specifically pertaining to europe, but how does that factor into your analysis in deciding to stay away from this trade, at least for now? >> i think on the other side we have u.s. data outperforming the g-5 peers at the moment. you also have a situation where the mac is still concerned some of these policies by europe might come into play. the u.s. data has continued to be strong. right now the currency market is follows higher u.s. yields. the ecb and the fed have both kind of cut the tales of the distribution. fez there's new policy or statements out of jackson hole, that would cause the market to have a sharp breakout in either direction. >> let's talk about the specific levels that the get you back to the trade. >> in euro dollar, a break above

125 on the topside. we're pretty much dead mac in the middle of the range we have seen over the course of the past two to three weeks. >> if it breaks above 15, you're in it, and in it -- >> i think if we -- no, if we get to 1.25 on the up side i think the ecb or the spanish government or something has happened to make us say there's more room for the appreciation, whereas if we break on the down side we've been disappointed and the u.s. data and higher u.s. yields are leading the derek. >> good clarification. willy, thanks so much for your time. be sure to catch "money in motion. requests we're back after our olympic hiatus. go to currency class at cnbc.com. let's look at where we are on facebook. of course, swell spoke about the lockup, the first of fish to expire on the stock.

we now trade at 19.74. >> the new low hitting today's session, 19.69. coming up on the program, a more upbeat message from cisco. and announcing a 75% hike in its quarterly dividend. we're joined by someone who believes that it's an under-appreciated stories like apple some years ago. stay with us. ♪

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i'm bertha coombs. natural gas futures are moving higher. the inventory numbers saw a slightly smaller expected build. the consensus had been for $24 billion, about where we saw it last week. the biggest drawdowns were in the west. producing regions also say a 4 billion cubic feet drawdown as well. that leaves us with supplies at about 80%. guys, this summer's heat has helped to britain down those supplies of natural gas, but with the cooling temperatures now, it remains to be seen whether we'll see these continue. thank you very much. we're an hour into the trade. the top stores we are watching.

that marks the fourth straight negative reading for the index, but it is the highest since may. $19.69 is the new low of today's session. the average rates on 30-year fixed mortgage rising for, up to 3.62%, according to freddie mac. one of the big stories has been the sell offin treasuries with the yield on the ten-year, up about 20 basis points. to check now whether cisco systems has been trading higher, the network equipment operator also raised its different by 75%. shaw wu has a buy rating a $23 price target. it's great to speak with you. >> thanks for having us on.

what stood out to me based on your call is you believe cisco is an under-appreciated turnaround story, similar to ibm, emc and apple. both on the share appreciation base and the fundamental basis. the keys to the duranaround is you need an installed base, a fundamental technology advantage, and you also have to have some vision. take some time, but we think they're progressing well. >> with ibm it was a shift to services, and all the other i devices. what is it? what is it that is going to spark that turnaround and sustain it?

as we had earlier, we think the key things to a turnaround is a stalled base. they have a lot of cash, and they also have the vision in terms of taking advantage of the cloud, taking advantage of mobile. we think that's going to drive the story. >> yet the environment is still poor. we don't want to live through the last three, four years. it seems to me the man at the helm changed the strategy to a very large extent so, you know, really two things he has done --

one of the things he's lowered the cost structure, to make cisco competitive, with more competitive pricing out there, but still make, you know, good profits. the other thing you mentioned, he's being more shareholders friendly, returning more of the cash to shareholders. he says he'll commit at least half. they're setting a precedent out there. they're going to lead the stock higher. >> is it a growth stock or value stock? >> yeah, it's definitely more value. i mean, the reality is this is becoming more of a blue-ship name. the comps we think are more like the procter & gambles, the coca-colas of the world. network equipment is becoming a necessity, right, in terms of everyone wants to be an internet, more and more services are being put on the internet. >> it almost sounds like you're saying what they're selling is a commodityized good, and you say

it's like a blue chip company, it seems sort of tenuous. you think commodities are bad, but you look at companies that sell detergent, actually it can be a good business. >> it's not apple selling ipods or ipads. >> we like apple to different reasons. it's more product cycles the cisco is also, to a degree, but cisco is more of the backbone, right? infrastructu infrastructure. we like both companies. >> shaw, we're going to leave it there. thanks for your time. it's a big day, a big morning for facebook. we're going to send it away from post 9 to gary kaminsky, who is somewhere on the floor.

they don't care where the stock is trading, whether it was at 38 a couple weeks ago, 30, 27, it doesn't matter. if you're a disciplined institutional seller, you're going to sell when you get a certain lockup expiration out. more importantly, i think you had a number of long sellers, people that bought the stock around 27, 28, anticipating you get this bounce, you did not see the bounce. it opened at a million 2, and right after that, you started seeing the selling.

if we pull in and we look at the real-time trading that's happening, you're seeing a bunch of 300-share lots. very few sizable bids. they immediately hit it, it went down, 85, and 1908. right around those levels against. this seems to be the level where you did get some sizable bids, 1980, 1985, 1990, but they were immediately hit. this is what i think will happen. if you put in a sell order and you said you want to be 10% of the volume, you look at about 10 -- where are we? you essentially say, okay, how much have i sold? are was i excused? do i basically want to change that order? in terms of what sizable bids we see, you may be seeing them in the third market, they dark pools, but not seeing the sizable pools.

>> gary, thank you very much. and we'll keep you up to date with what is happening throughout facebook through the program. let's take a break, and we'll talk about sears, cutting expenses, but the revenue still fell short of expectations, so turnaround efforts are they about to pay off? stay with us. sell tools? tools are uncomplicated. nothing complicated about a pair of 10 inch hose clamp pliers. you know what's complicated? shipping. shipping's complicated. not really. with priority mail flat rate boxes from the postal service shipping's easy. if it fits, it ships anywhere in the country for a low flat rate. that's not complicated. no. come on. how about... a handshake. alright. priority mail flat rate boxes. starting at just $5.15. only frhe postal service.

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sears narrowed its loss in the second quarter. sales keep declining. late last year the founder rolled out a plan in the hopes to turn around the struggling retailer. is the strategy working? ed preem, and -- a quick step into the classroom, so to speak. ed, let me start with you. i think you've said at least,

and i read in my notes that sears does not have an underlying purpose or perhaps doesn't have one, a gal have a nicing idea. without that, no amount of restructuring will ultimately create any value. really? is that really true? >> well, i think it is, look, i grew up on a dirt farm in georgia. you know, sears is one of those great institutions that helped build this country. somewhere along the way they kind of lost what they stood for. this decline, my understanding, has been going on for a very long time. i don't think you can cost cut or financial re-engineer your way out of that. having said that, this might be the only thing they might have left. i find that sad. >> eddy lamper would not agree in terms of the idea that a

turnaround is not -- eric you've written that it fits nicely with the model of what's called permanently failing. fairly critical here, aren't you? >> it does fit the model of permanently failing organization, permanent failing organization is one that staying alive, not by the profitable economic activity it engages in, but it stays alive by selling parts of itself off over time, and you know what the cynics say. the most -- the best thing you can buy at sears these days is sears itself. >> right. well, there are those that would at least argue that the company will position itself, for example, margins were up 100 basis points for this last quarter, but ed, it will at least position itself as a viable retailers in the physical world and have a strategy on the

web that at least makes some sense, and that can return it to consistent profitability and growth of those profits. you don't suchly think that's a possibility? >> well, it might be. i think eric is right, if you're going to escape that, you escape it because you've inspired somebody to figure out why customers ought to go there, what the value proposition is, for customers and employees and suppliers, how those things go together, and i don't know the inside story here, but i don't see that as an outsider, i don't see that happening. so, that's why i think eric would put this as, you know, a permanently failing or declining for sure. you might turn it around, but i don't think this is going to turn it around substantially. >> you know, eric there are a number of companies, apple comes to mind, where a great leader comes in and effectuates an

incredible turnaround. is that a possibility at sears? >> of course it's a possibility, but i want to make this point. we tend to focus, when we look at companies that are approaching a death spiral, we tend to focus on those few companies that are capable ofsh with brilliant leadership, pulling themselves out of these death spirals. we forget the many, many companies, in fact the majority of companies that are not able to do that. so i -- i hope -- sears used to be a jewel in the crown of american retailing, and i would love to see it and mr. lambert pull off a tremendous turnaround, but it doesn't seem to me at this point to be happening. >> okay.

well, i appreciate both of your time. that was an interesting and not particularly uplifting visit to academia for us. >> i haven't seen a more depressing piece of television in 30 years. >> and that's saying something. he likes his depressing tv. >> i'm british, we know how to get depressed, believe me. >> we should get eddy on. >> yeah, eddie lamper more or less consistently refuses to do interviews. thank you both. >> as depressing as that interview are. >> death spirals. >> permanently failing. great phrase there. speaking of retail, buying and selling counterfeit goods is an exploding enterprise, and the bad guys pushing the contraband show no guys slowing down. carl goes into the criminal industry on new york's chinatown, where they discover a

hotbed for knockoffs. take a listen. >> so the guys we're looking at across the street, no doubt in your mind? >> no doubt whatsoever. they have shopping bags, suitcases, big black garbage bags. >> reporter: they don't seem to have much fear. >> the police can only arrest them if they witness a sale taking place. there's nothing on open display, so they feel immune from any kind of liability from arrest we're driving business away from them. how much can they sell? >> they have a store, they could sell thousands of items during the day. they're walking around in the bad weather in with a suitcase. that's a victory. catch more of this stories on "crime inc." airing tonight here on cnbc. piper jaffray say the iphone 5's launch has the potential

to -- but first rick, what are you working on for the next big hour of "squawk on the street"? >> in my own backyard, there's only one topic to work on, and that is interest rates. why now? why are they moving higher? an article in the journal, many don't necessarily agree, but i know one thing, in my opinion, the central banks versus markets, who do you think always wins? >> markets always win. >> i think that says it all. markets always win in the end. that's what we're going to talk about at the top of the hour. tot that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. to hold over 80,000... well, that would make you... the creators of the 2012 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. ♪ join mercedes-benz usa on facebook for the best summer sweepstakes.

apple is said to be talking to cable operators about letting customers using an apple device for set box for tvs. that's according to the "wall street journal". is this a new direction for apple tv. good morning to you gene, thank you for joining us. what did you make of this article in the "journal" today? it seems to be off the point of what most of us hope the new apple tv will look like and it will do. this is a sidebar, isn't it? >> yeah, it really is. i mean this is a good step in the right direction because ultimately you need to get these

cable people, the content people involved in order for apple really to revolutionize the tv market like they've done with the smartphone market. so i look at this as just one more point, one more checkpoint on the road to a very exciting living room story which is probably sometime in 2013. >> yeah, my hopes were perhaps less ambitious than that. if they can solve the issue of whether you can control the television with your voice through siri, if you don't have to have so many remote controls and whether it has other functions, that's where the money is, isn't it? not whether you can to a deal with time warner cable or not. >> i think that there's a lot of money to be made. there's a lot of innovation around tv for doing what you described and i'll put it more basic, fixing the remote control problem. but beyond that i think that there needs to be something around contend because apple thinks about where the world is going and this whole over the top, over the internet content,

integrating that within an experience, tv experience i think will be part of it. basically what apple wants to do is rethink how you do channels. channels will be app based but to do that have at base channels you need the cable companies on board at least initially. >> would cable companies have to be on board in a substantial way if they change the way people watch tv, i.e. making apps for channels they will have to change how people pay for tv, i would imagine. >> they will. you'll see an opportunity for them to just inch up what they are charging people carly fiorina some of these packages based on that. consumers will pay for a great experience and if they can rewrite the paradigm in how you interact with their tv people will be willing to pay $5 a month more for that experience. still a lot of gray area between where we're at today and what it will look like when it comes out but i think there's room for people to pay more. >> gene, let me take to you the

note you published which is the reason that we actually put you on the show. you believe that potentially people are underestimating the power of the iphone 5 and a september launch, and it's reinforcing view that you think there's 40, 45% upside to 910 on apple stock. >> there's still owe anxiety with investors around the september quarter. the iphone 5 is more likely to come out in september and those units will alleviate that anxiety. if you're afraid about a tough september quarter i don't think you have to worry about that because of that iphone 5. what's more important is just how big iphone 5 will be. this is interesting, apple disclose this. every version of the iphone has sold as many as the previous versions all combined. and if you assume that that holds, these numbers get to be pretty funny, some funny math

but if you assume that holds for the iphone 5, the point here is that the september quarter is going to be okay because of the timing of the iphone 5 but more importantly this will be a huge product. >> give me trading call, gene, in terms of the typical run in apple stores the typical selloff immediately after the product launch. this product launch happens to happen before the season very strong period for apple. how should investors start thinking about establishing a position there or managing their position? >> you can't over think it. this is a huge product. even though the street numbers are high like we just talked about, you could build an argument they will be higher. ultimately if you get cute and trade around it you will miss it. the stock will get higher. smaller version of the ipad. tv stuff. a lot of good stuff. cheap valuation. >> gene, good to see you again.

david, you were shaking your head through that. you're unconvinced. >> that's not true. i'm shaking my head no i'm not going to ask gene a question. you guys are doing a great job. >> you don't believe in the iphone 5. >> 250 million units is a large number. that would be an awfully big number. >> look, some final thoughts, by the way on cisco, facebook. walmart. and a lot more after this.

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welcome to hour three of "squawk on the street". here's what's happening so far. >> i think it's going to be a huge product but i do think that the competitors have caught up. the iphone is a full year ahead of everybody else. now it's in the mix. >> i would raise taxes on everybody over $40 million. >> to what 100% marginal rate? >> no only 50%. >> that raises a trillion dollars. >> you cancel out the debt between the fed and the treasury. >> how do you cancel it? >> you just cancel it. >> up 2,000 on initial claims from a slightly upwardly

revised. >> what did target do right that walmart didn't? target's expectations were high and target laid out this multiyear whatever, the transition to food is gone. we're in great shape. walmart had great numbers. i know there are a lot of funds that still want to be in facebook because they say it's only a matter of time before they get mobile. right. >> opening bell on wall street. >> five years from now we'll be talking about a very different story, facebook will be a very dominant advertising company in our view and still quite profitable number two behind google. >> keys to the turn around is that you need an installed base. you need have a fundamental technology advantage. you also have to have some vision and we feel that cisco has those ingredients. >> that's what you would have missed earlier on "squawk on the street". good morning if you're just joining us we're life from new york stock exchange. let's have a check on where we are on the markets.

relatively tight range. these are important levels. we failed to hold 1407 on the s&p earlier in the week. this 1410 level if we can break through that resistance you might get some more short covering to take you up to the highs the year. although we're churning and again it's an important level we could break out from here. so some sears, one of the biggest gainers on the s&p today as the lone struggling retailer reports and narrower than expected loss for its second quarter. the company saying it's making progress on cutting expenses and reducing inventories and agilent technologies. >> retailers getting a discount on their stock. we'll wrap up the results you need know about. investors hit the sell button. find out what losing half of its

carpet max means for facebook. plus tom coburn will join us about the farm bill what it could mean for farmers hurt by the drought in the midwest. is apple losing its cool in china? we'll tell you how you should play the stock as it loses its stronghold in one of the world's biggest markets. >> we start with "squawk" on the beat. some names in retail releasing their results. >> shares of discounters, walmart and dollar tree under pressure today but it could be less of a reaction to disappointing earnings. for the second quarter the largest retailer beat the street. revenues could have come in line. the world's largest retailer narrowed the range and upped the guidance. and instore sales increased. management also noted july was

one of the strongest months the year and season to date back to school apparel categories are up 7%. now very little direct mention of the allegations of bribery in mexico. the $34 million spent connected to the ongoing investigation in the quarter and walmart expects 35 to 40 million to be the run rate for that investigation expense which was and is factored into guidance. dollar tree beat the street by four cents but same store sales came under estimates. dollar tree offering weak guidance for the current quarter. high expectations and subsequent miss for comp sales has taken the wind out of shares but most analysts are not concerned. $tree and walmart are spending cautiously. walmart noted its paycheck cycle on its conference call that it hasn't mentioned in quite some time. >> courtney regan thanks so much. we want to get to capital markets. gary kaminsky, weak controls and

chaos? not criminal -- >> i want to read something. this is sarbanes-oxley section 906, you know i get up very early. >> and read sarbanes-oxley. i wanted to go back and read section 906 cry is the criminal penalties for the ceo/cfo financial statement certification. without getting too inside baseball, basically in terms of content the statement required under subsection a shall certify the periodical report complies with the requirements of section 3a and 15d of the securities and exchange commission act of 1934. it's been reported there will be no charges related to what happened with mf global, sarbanes-oxley, you know what it's worth? it's worth nothing. because that, if you cannot tell me that they could not find a case against certification of the financial statements, having

something to do with mf global then why do we even have sarbanes-oxley? >> this is a lay person's question, but they said no criminal charges. so sarbanes-oxley, if you found something guilty in sarbanes-oxley is that a violation of securities law or the basis for criminal charges? >> i'm not a lawyer. i went to business school not law school. i believe the intent of sarbanes-oxley, when it was put into effect, when it became law to certify the financial statements as a result of many of the thing that happened, enron, tyco, worldcom the plan would be criminal charges would follow if you were the ceo or cfo you signed the certificate if -- certification. >> had they signed? the whole thing fell apart. they had the audit. >> now we're talking about a

timing issue. if you remember what happened, melissa you probably remember. they did that big junk bond offering. i don't have the data right in front of me. it was in august of last summer when they priced that, was it a $400 million junk bond deal. i don't have the exact date. but, simon, to answer the question they had to know when they signed the certification in the summer of 2011, in my opinion, that there was concerns related to the mark to markets of certain assets which would be assets that they then had problems with in terms of where they were holding them. so i am not going to answer it with a guarantee -- >> if i look -- i'm sure you're right. if i look at today's "new york times" which there may not be criminal charges there still may be civil charges according to the insiders, specifically on the question that you pose, whether top executives misled investors about the firm's health and failed to protect --

the regulators are still involved. >> unfortunately civil charges become part of the cost of doing business. >> hang on. corzine could be fined tens of millions of dollars and barred from operating on wall street at a time when he wants to launch a hedge fund. there are implications from that, is there not? >> i'm old school when it comes to this. i thought when sarbanes-oxley was put into place and people that are responsible as fiduciaries for money, as far as i'm concerned no criminal charges at mf global sarbanes-oxley complete waste. >> gary, thanks so much for that. let's check on shares of facebook. they are down by 7.5%. facebook, this is the day the first lockup expiration occurs. 270 million shares could potentially hit the market from

insiders. so there you have the impact. >> as gary was pointing out a simple lack of buyers. >> it's interesting because we're showing here 20. i was at the post earlier. keep your eyes on this. i'm going run over there and be back. >> we need to get to rick santelli at the cme. rick, over to you. >> i have to put a tomb stone on some of gary's comments. first on the issue youance it was 300 million what's key is that there was material information that people knew but not investors. the european position was known to buy the sec but wasn't shown to investors. i just talked to the man who represents thousands of mf customers and he told me he is not giving up going after a criminal pursuit, charging corzine criminally so, of course, this issue isn't over. as far as the markets, you know, i really enjoyed reading "wall street journal" today as do i

every day. i don't know i agree with them on the reason that rates are moving up. they fraumd it in the context of qe. let's let the markets speak to themselves even if they are managed i can hear a whisper coming through that sand. if you look at a chart and let's start this chart on july 24th because that was the all time low yield around 138. chart please. you see it there clearly. when did mario draghi make his big statement? two days later on the 26th. just to show you how significant that affected markets let's take a step back. july 1st, you can see some context. is there any doubt that was a major influence in making investors panic a bit? there was the hedgies that were in the twos and tens in spain or technicals of what looked like a double bottom forming at 116 and interest rates in the bunds it certainly was the optimum time from a technical standpoint and to get the most bang because a week later was the meeting. so the biggest issue i want to

bring up here is markets versus central banks. we pay attention to central banks. they have a lot of power. it's how they use that power and how long it lasts that i'm concerned with and in the end markets always win but i don't think there's flames in europe so i don't know if this sell off will have legs much past the first week of september. back to you. >> want to get to jack back at hq. >> good morning. we're watching shares of idenix pharmaceutical. they are placed on a partial hold by fda. this coming not long after bristol myers encountered safety issues. they want more information on this drug. not a pretty chart. melissa, back over to you. >> coming up next facebook has been in a steady decline since it went public a few months ago.

now more shares have hit the market. how will the lockup will affect the company going forward. more after this. ♪ we're watching shares of

facebook very closely. shares hitting another all time low on the back of today's first lockup expiration, 271 million shares potentially able to come to market at this point. 19.69 was that fresh low hit today. it's trading just below 20 bucks

right now. evelyn joins us post-nine from san francisco. i want to start with, you've been inside the company, you have a lot of contacts within the company. i'm wondering what if any impact this low stock price, the stock price that seemingly continues to hit new lows after new lows is having on material on the company and employees willing to stay? >> well, i think that they've done a pretty good job of trying to focus the employees away from the stock price, and really this is something that marc zuckerburg has pounded into their heads for a very long time. so he sort of is telling everybody to stay focused. they have these posters all over the walls. and so far as i can tell it's doing a good job. that doesn't mean that employees are not upset about it. i speak to them all the time, and they don't look at the stock price every day but when i tell

them what the stock price is they bang their heads against the wall. there's definitely, you know, i would say disappointment, but, you know, they do believe in the company and that's in large part due to marc zuckerberg's efforts. >> we talked to a lot of analysts this morning, evelyn, and, obviously, every ipo goes through a lockup expiration and they come out on the other side relatively okay. but this is very different because there's so many shares. this is the first lockup expiration. and there's going to be about, you know, 2 billion shares at the end of the day that will come within a year and that's a huge increase to the flow. what are you hearing in terms of insiders and their desire to sell? >> i think for some insiders, they were able to make some money during the initial ipo. but if you're looking at the stock right now and if it's less than $20 a share you have to be for some of them hopeful that eventually maybe after all the expirations, after may 2013 that

the stock will pop up higher than $20 a share. i think some of them will sit tight. some of them obviously are selling a bit today. but if i was, if i was an early investor i would hang around for a little bit to see if there's any other catalyst on the horizon. >> some people bought in the second market and bought for a higher cost basis than where the stock is trading right now. some were early on in the investment their cost basis was practically nothing. what are you hearing about insider selling? >> i read a story about this last week. one of the things i heard is that they don't want to hold on to these stocks for too long especially the people who got in early, they have been sitting on this for such a long time they want to get out. at the same time i don't think they want to look like they are getting rid of their entire position because maybe it looks like they don't believe in the company. so what they are doing instead of selling their shares, they

are distributing the shares to the general partner and let each general partner decide whether or not they want to sell. that may be what you're seeing today. it's not necessarily that, you know, one of these firms decided to tell everything but it's that each of these individual partners decided, you know, i'm going to sell this much and keep this much and that may be a part of what we see going on today. >> retail investors might feel burned like they had the wool pulled over their eyes. the big banks made money on zynga and lost money as well. >> some not so much as others. a lot of them will still have to see how it place out. jpmorgan has a growth fund with investments. it's still not public but living social as well which we've seen from amazon investments they wrote that down. goldman sachs made some money when they initially sold in the

ipo, but now they are slightly one water because they bought at roughly $20 a share. so these banks, it seemed there was more promise last year and now these bets have soured and some will lose some money and some will make a little money. >> guys, thanks for your time. coming up next, senator tom coburn is here with the status of the farm bill what it means for farmers in the midwest. we're counting down the close in europe. about ten minutes to go. back after a short break. why not take a day to explore your own backyard? with two times the points on travel, you may find yourself asking why not, a lot. chase sapphire preferred. there's more to enjoy.

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welcome back to "squawk on the street". i have a special guest today, senator tom coburn, republican, oklahoma. i'm not sure we refer to him as dr. coburn or senator coburn. but, senator, we have crop insurance in this country and i do believe it is subsidized by the government as a matter of fact. why is the issue right now especially when i see the president in iowa that we need

to hurry up and get this farm bill passed because they need help? why didn't they buy crop insurance, sir? >> well, if they were smart they did. and the point is 62% of every dollar that's spent on crop insurance, the average factory worker or serviceman or woman is subsidizing that. we're taking from middle income america, subsidizing crop insurance for them and what the president wants to do in terms of disaster payments, if you didn't buy crop insurance you shouldn't get a disaster payment since it's a fairly lucrative benefit for the farmers. farming income this year even with the drought will be the second highest in the history of the country. $91.8 billion even with the drought. and we're going to spend $3, $3.5 billion subsidizing the crop insurance coming out of middle income americans paying for that.

there's no excuse for not buying crop insurance. >> now, let's switch gears a bit. on monday, agricultural secretary vilsack offered $278 million buy back program to buy back catfish, pork, lamb and chicken. we have futures here for lean hog. so the pork side. that was announced monday. we saw a little bit of a pop and then it's right back to where it was on friday settlements last week as of yesterday. this is just from the strategic reserve. is that politicking throwing a million here or there, even though 38 cents about that is borrowed so it's being subsidized by china. isn't that a dumb idea as well? >> it's politics and make no long term effect on the price of goods. the price of feed will do down

because people will diminish the size of their herds. you'll see an increase in supply and the next year the price of meat, meat is going to go up. the real question on that is we ought to be asking why are we sending 40% of our corn crop to ethanol rather than to feed? >> i'll tell you, this is the debate on this floor and there's a mixed crowd here senator and i want goes something like this. argument number one for ethanol we would never plant the kind of acreage if it wasn't for the ethanol mandate. so they that we're using too much corn we wouldn't have planted that much. how do you respond to that which i find is the best criticism? >> think that's a legitimate criticism but if you really believe one markets, what farmers will do is plant to what they expect the demand to be. so we artificially increase the demand for corn and because we don't have real market force we have a federal law that mandates

minimum usage of so much corn so when you have a lessened crop what happens is 40% of it still gets taken away, and used on terms of a renewable fuel standards which means it raises the price disproportionately to everybody else that uses that product. >> not to mention that i believe it's next year we do from 10% mandate to 15% mandate, forgetting how it will damage certain cars made before '03 and '04. do you think this year, forgetting all years, but this year in particular would you relax the mandate considering the demand crisis and the supply crisis we're seeing? >> i would. my conversations with the ethanol producers is get smart and start producing methanol and not ethanol. it is water insoluble, decrease the transportation cost and

widen your margins. >> thank you, senator. always a pleasure to talk with you. back to you. >> thank you, rick santelli. the "closing bell" is about to ring across europe. we'll have all the action and the impact on the u.s. trade. we're back right after this. where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ ] it's another reason moi'm with scottrade.ying... you know, ronny... folks who save hundreds of dollars by switching to geico sure are happy. and how happy are they jimmy? i'd say happier than a bodybuilder directing traffic.

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30 seconds to the european close. let's go to simon. >> we have a very powerful rally coming through in the final closing minutes of the european session today. speaking to people earlier in madrid and thrown, there's a view that the money is coming for the banks in spain, that

they will get the 100 billion euros, mainly for the bank here and some others and there's political movement as well. there are substantial gains. look at madrid now up 4%. spain is up 4% at the close and you can see the way through the session we have built on those gains. leapt me show you this chart which says it all. thank you very much. and here you can see the way in which the spanish market is up 4% at the close. italy is also managing to get leveraging coming through towards the end of the session much more than london back down here. of course a lot of the bank stocks in spain trade almost like options at the moment because we know that the money is coming through, normally in a nationalization you would wipe out text. here there's a big question how much might be left for existing

shareholders. bankia is up. could easily be down 20% tomorrow. that's the volatility in which it's trading. popular is also up. other big chips, blue chips like the oil giant doing well. in italy you've seen some big gains on the banks there on today's session. and this is berlusconi media group, the former prime minister, there's some talk there's middle east interest in buying that stock. let's break away and talk very briefly about what angela merkel is going. she's back at work. she was up in canada earlier in the week. we now have a very clear image of what angela merkel is going to be doing in terms of summits for the next few weeks. let's leave greece out of it. she's meeting the greek prime minister on friday. remember what track i had said it's either the germans or ecb

to persuade the italians and spanish to skr for help. then the ecb will come through and backstop them with substantial buying of their bonds in the secondary market. that's what we're heading for. look at how we now learn, angela merkel not this week but the week after will meet the italian prime minister on wednesday. then on the thursday, this is significant, she's going to madrid to meet the spanish prime minister on exactly the same day that we have mario draghi coming through with not only an ecb meeting but a news conference. those two in combination are potentially very important events in terms of public perception and what they might say to the markets. don't know what's going to go on but there's an expectation we'll get cuts in interest rates and further indication when they buy bonds or spanish will ask for help. libor fell to record low. just for the record. you know, after the libor

investigations you got, i guess, treat it with a little bit of caution inevitably. this is on the expectation they will cut rates at their september 6th meeting for the ebc. one more i want to show you. the big story of the week, let's not get away from it on which yields are rising on both sides of the atlantic. selloff in treasuries and sell off in europe. you can still see for the month the degree to which the ten year bund has risen substantially higher in germany. melissa, back to you. >> let's check in with bertha coombs. >> we're watching wti flirt with $95 here and extending gains after yesterday's draw down coming from the government, it was more than 3.5 million barrels. another thing, folks are watching the situation between israel and iran as that rhetoric continues to be at a fairly high pitch. you're seeing a lot of calls for

next month and october. the expectation is these prices will go higher and with the outline that is i monday outline we hear something from the ebc we could see a move to the outside. brent futures are lower as they are set to expire so that brent premium has come in just a bit. we're seeing profit taking in gasoline after that big surge yesterday on the big draw down on implied demand. nept garks smaller than expected injection this morning nonetheless. it didn't really hold up in terms of the flip up we saw in prices. it's now lower. gold despite that report coming from the world gold council with the dollar, little bit lower. gold is strong. when you look at the precious metals, outlier is platinum. big violence happening down at the third largest platinum mine down in south africa, that mine has seen some people killed in what has been an extended dispute with workers, the mine is asking workers to go back

from that strike as of tomorrow. we'll see if that happens. back to you. >> thank you, bertha coombs. let's head over to rick santelli with his take on europe. rick? >> i was so glad simon brought up the nice close to 4% up tick in the ibex. on this floor we're holding charts up to the light. simon, watch this. before we put the charts up. i want to know what they are. this is one year chart of ibex, spanish stock indices. a chart of ten year bund yields and a chart of ten year note yields. what's fascinating they are virtually all identical. my point is we can argue about whether central banks can fix insolvency. but what we can't argue is that there's a big hope that ultimately stock markets and economies do better. i shutter to think what borrowing costs will do if this relationship on those three charts continues to hold the way it has.

>> interesting. thank you very much for that. rick santelli in chicago. nice job. let's go to bob pisani for more on trade. the dow up 39 points. >> a lot of talk about manchester united. let's put the chart up. remember what we talked about back when it started trading, 14 is where it started and there's been a syndicate bid at 14. every time you get to 14 there's bid there's to hold it up. suddenly boom, look here. now there's been a lot of talk on bringing on a big, big player. that may well be the case. the stock had been moving up on that kind of speculation. today it's down. because the syndicate bid has evaporated. the stock got 14 and while there's bean bid there there's no bid. that's the syndicate bid. it's gone. that's what happens when the is in dip indicate bid disappears. it doesn't always happen but in this particular case that's what's going on. i want to move on and talk about the housing market because we got housing starts for july that

looked on the surface fairly disappointing, down 1%. permits were up but i'm in the building world. permits don't matter. what matters is whether you start the house or not. you can accumulate all the permits you want. housing starts have been very slow to come back. house is in a recovery. this is how i look at the world. this is a ten year chart. 2.2 million in 2006. we're at 760,000 and we're calling at it recovery. just look at this. look how slow that slope is. yes, we bottomed in 2009. yes, things are getting better but what would be normal? how about maybe 1.3, 1.4 million. look at that gap. that's an enormous gap to get anywhere back to normal. we have to add another 500, 600,000 housing starts to get back to a normal before the big boom as we were going into '03 and '04. let's take a look at some of the

building names here. all to the upside. most are near multiyear highs. good day overall. you can own the housing business in a single exchanges fund. the itb this is a four year high. got to go back here to just about or three years, got to go back to 2009 to see those kinds much highs. the bottom line is we're doing okay in house. moving to the upside but agonizingly slow. this is the better part of the economy right now. >> is the itb only home builders. >> yes. there was index before, the hgx included some material names. this is more a pure play on the home building side of things. >> bob, thanks. jackie has a market flash. let's check in with her. >> we're watching shares of dunn and brad street. trading higher. a sale could be in the works. could be priced at about 90 bucks a share. that would be about 7% premium

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facebook gets worse as a flood of insider shares hit the market. why one multibillion dollar investor says he's still a buyer. and apple in your living room. a look at which companies take a hit from apple's rue motor box. stocks or bonds, our traders debate which is your best bet right now. melissa, simon, we'll see you at the top. hour. >> let's talk facebook again and get back to our capital markets, gary kaminsky a huge day for this stock. >> i'm back here. we pointed out about an hour ago that essentially a million two was the open. traded 91 million shares in the first two hours of trading. very interesting because you knew this stock was hitting the market. it opened up on a very small print relative to what you expected the volume to be today and we continue to see mostly 100, 200 share lots looking real-time. these are the largest blocks traded since the top of the 11:00 a.m. hour. you had a couple of hundred

thousand share blocks. if you want to buy this thing in size it's for sale. many buyers are sitting back and waiting to see what happens this afternoon. i want to talk about restricted stock and the game plan. this is something, obviously, given my former life i know something about. when you get restricted stock and you are a sophisticated investor, when you get lockup stock and you are an executive at a company, you have to forget where that stock was trading a week ago, a month ago, two months ago. can you go a fancy financial planner, they will tell you all these things, charge your money, run these model, run capital gains scenario, talk about different option strategies to hedge position. at the end of the day and i know this for a fact the best thing to do is to treat it as the following. when you wake up in the morning in a get that restricted stock you say to yourself if i got money, if i just got a check in the mail would i go out with that money and buy that same stock at that same price on that same day and if the answer is

no, i don't care where stock is trading you sell it right then and that's what you're seeing here today. forget where facebook's ipo price, the only relevant thing here is this is what the market clearing price is for this security today and you cannot try to guess where it will be six months from now. you're a venture capitalist and play that game it's a loser's game and they know it and that's what you're seeing on the tape today. >> sage advice, gary kaminsky. >> as we mentioned the "new york times" reporting no charges no criminal charges will be filed against executives at mf global after the firm's collapse. >> reporter: at this point the band of regulators pouring through the mf global situation. the department of justice holds the key. former mf global ceo. jon corzine is expected to participate in a review of mf global but nothing can be

certain. it's not unusual for cooperation with federal regulators to come with strings attached. in the meantime other parties seeking access to corzine in order to speed up their respective views have deferred to the doj trying to avoid stepping on the toes of the federal regulator. as it approaches it's one year anniversary rrkts could seek to experiod dict the process if those key players refuse to cooperate with the doj, the doj for its part declining to comment. sources have been waiting to hear from the lawyers of edith o'brien, alleged to sap customer funds to plug holes elsewhere in mf's accounts. when she appeared before a congressional committee she chose to plead the fifth and i want remains unclear whether she's decided to cooperate with the federal review. the trustee overseeing the bankruptcy proceedings decided to lump their lawsuits with those of other plaintiffs, offering participating lawyers

access to some key documents and expediting the civil process. the trustee said it would decide by august whether to pursue civil lawsuits against corzine and other individuals. in these civil lawsuits the best thing can you get is money. remember a lot of customers still haven't been made whole for the money they lost. commodity customers as well. cnbc was told crimes were un committed. i'll see justice is done. whether the crimes committed are literally or figurative, this debate will keep going on. >> a lot of the headlines clearly and correctly are attached to corzine but edith o'brien is interesting. she's not been accused of any wrongdoing but there's a suggestion in the "new york

times" today that potentially those involved in the case believe that she's the biggest fish that they can pin liability to. she's taken the fifth, refusing to cooperate at this stage. where do you think we're likely to go on that. >> some of our sources say if they can't get cooperation with edith on the doj front that other regulators could seek to expedite that process and see whether there would be any criminal liability. a lot of people say edith didn't do anything wrong, she was in the wrong place at the wrong time and had a tough job to do. but what you're a customer who lost money you want to know who moved it and who had that oversight in the 11th hour and she's the person there. >> people will feel cheated if something -- we'll leave it there. kayla tausche with the very latest. apple trying don't question the world of cable here in the united states, but it might be

losing its core in china according to some. how will apple be affected by their popularity if it wanes. we'll discuss that next on cnbc. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forsiness.com. ♪ ha ha! good afternoon. chase sapphire. (push button tone) this is stacy from springfield. oh whoa. hello? yes. i didn't realize i'd be talking to an actual person. you don't need to press "0," i'm here. reach a person, not a prompt whenever you call chase sapphire. get two times the points on dining in restaurants with chase sapphire preferred.

apple may be a tech powerhouse here in the u.s. could it be slowly losing its appeal in china. one analyst thinks so. the technology strategist at ubs has a buy rating and a $740 price target on apple.

that's almost like blasphemy to say apple is losing its cool in china. you point some reasons, some are structural. can you go through some of them. >> the basic point is once we get through this iphone 5 cycle that's likely coming up then what? our view with over half of smart phones being shipped to asia that's important particularly in china. apple that's 20, 25 million users of iphones in china. it's a very small number. the opportunity is there may be up to 200 million adults that could afford an iphone. we think the challenge is that china mobile does not have a deal with apple today. that's an opportunity but we actually think that deal may not occur as quickly as many investors think. in addition my colleagues on the ground suggest apple may not be as cool as it was 12 months ago. many of these good enough phones that are starting to match apple on the hardware side if not the

software side are getting more notoriety. we don't want to get too negative but i want to highlight the opportunities and challenges. >> when it comes to china mobile what are you hearing about why there's a delay in formalizing an agreement. is there a reluctance to subsidize the phones? it's almost like a curse and a blessing at the same time to have an apple offering. >> i think that's right. the reasons that we think there might be a delay in the relationship are, first of all, china mobile would take an earnings hit in terms of the b subsidization of the phone. they may not be as excited about the smartphone as they were 12 months ago. there's a question whether the government will bless it. the government wants telecom and unicom to offer the iphone. in the case of china mobile which is the big one, it may be that the government wants them to support local vendors over

apple. so our guess is that this may not happen until later in '13 where the consensus view is it happens sooner. >> on a more basic level isn't at it fact that the main selling point of the iphone 4s is siri and siri doesn't sneak mandarin and cantonnese and that changes with the iphone 5. it will speak to customers in china and they can talk back to it and it will understand them. doesn't that blour expectations of what's cool and what's not cool out of the water? >> well, simon, i think there's truth to that in the new operating system. there will be better mandarin support. that's important. my colleagues do notice that's one of the reasons that perhaps the 4s hasn't been as popular in recent quarters as it was prior to that. but i would generally argue apple continues to have that software advantage. the chinese user acts like the

american user. they have more time on apps than they do on android. i think having more mandarin capabilities will be very important going forward. so we do think the phone will do very well but it's something to watch. >> so with apple might be losing its cool and there are plenty of good enough phones out there who makes these good enough phones. who might be gaining share in china. >> well, interestingly at apple's level, samsung is supportive on the china mobile network. lenovo said they are now the second largest seller of cell phones in china. there's an amazing number particularly in the mid to low end. if you compare the hardware, they are matching up pretty well to the current 4s except for battery life. the 5 will take another leap forward. there's phone companies coming out of the wood work. >> steve, we'll leave it there. we appreciate it. >> keep those tweets coming. the "new york times" reporting

no criminal charges are expected against any top executives at m.f global. investigators said it was risk control but allowed $1 billion to disappear. it wasn't fraud. we're asking mf global execs not face criminal charges on account of weak controls and chaos is like blank being excused for blank. your answer after this. wait! [ garth ] great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with double miles or 2% cash back on every purchase, every day! what's in your wallet? [ cheers and applause ] ♪

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time for squawk on the tweet. "new york times" reporting no criminal charges are expected against any top executives at mf global including john kosh zin as a criminal investigation there enters its final stages. investigators are expected to conclude weak controls and chaos rather than fraud allowed known disappear. this morning we asked you mf global execs not facing criminal charges on account of weak controls and chaos are what? >> like bank robber being excused because the bank had weak security. >> christopher tweets like mad mad being excused for misplacing a few dollars. earl tweets like children being excused for having bad parents. wow. a lot of strong opinions out

there that's for sure. comparisons to bernie madoff. >> madoff was a different situation. you asked me during commercial break if corzine manages a hedge fund -- that's the way wall street works. fortunately or unfortunately depending on what your opinion is. i can give you dozens of people that blew up funds and then came back and launched other funds. i can't tell you why. >> because members of the old boy network -- >> corzine still has a very big social network and people will invest with him and and he was former governor, former ceo of goldman sachs. he'll raise money. that's how the world is. >> if he -- if he's not actually accused of anything criminal don't we have to see him in a better light, no criminal case to argue? >> it depends on what your perspective is.