important election but we have to be ready to work with all sides. >> is it a reason not to do policy? >> no. the company has acted in the past. you can go check the record during election season. the committee has acted but that was in an interest rate environment where you could make a 25 basis point move. >> thank you so much. appreciate it. that does it for us right now. time for "squawk on the street." good morning. welcome to "squawk on the street," i'm melissa lee with carl kint knquintanilla and jim. slight uptick in the claims numbers. it's a flash pmi coming out of china holding us lower in the morning. the dow, s&p and nasdaq looking to open lower. key meeting in europe between

merkel and olon. the fed president says the probability of qe, not as high as the markets expected this summer. he adds if growth stays at 2%, the fed stays on hold. what does that mean for your investments? >> meantime, china may be quicker to ease after manufacturie ining data came in negative for the tenth straight month. in the meantime, tacking on another 20 buck here. >> hewlett-packard lowers the high end of its earnings forecast, says it's too smart to try to beat apple at a consumer tablet. what's next for hp as apple hits yet another all-time high? still, the buzz surrounding yesterday's release of the fmoc minutes of the july fed policy meeting. this morning on "squawk" jim bullard said the fed minutes are a bit stale and it's not clear

to him that action is needed now. probably the most important headline here, jim, 2% appears to be something of a fed put strike price if there is one. >> mr. bullard's been very wrong for a very long time. he was very hawkish last april of 2011. terrible time to be hawkish. previously mr. poole was the head of the st. louis bank. he was hawkish right into the housing crash. so i always want to temper my thoughts about what mr. bullard says, because i think he's out of sync. >> a nonvoting member, we should add, too. >> mr. ben bernanke, if there's a fiscal cliff, we are giving you a bit of a safety net. there's not a lot he can do. the home sales, copper is up a little. i don't see a lot of strength in the u.s. economy. >> the employment report certainly changed things.

that's, i believe, what he was immediately referring to when he says that the minutes were a bill stale. that doesn't change your thinking in terms of we should expect out of the fed? >> no. >> okay. >> you don't seem to be that interested in the fed, period. you made your point last night that banco bandara is what it's all about. >> what the fed can do, 2010 focus, what will the germans do? what will the spanish do? what will the french do? the idea that we need banks that own a lot of sovereign bonds to be kol convenient is the far more important than what the fed can do or not do. anyone who's in the market for a mortgage knows if you have 25% down and you have pay stubs you can get an unbelievable

mortgage, not unlike what my father got when he came back from world war ii. i truly understand the desire to focus on bernanke because he's in america. >> he's ours. >> yes. as i said on "squawk box," i care more about sandara than i care about banco america. >> even with the walk-back, maybe bernanke says i want to see the august jobs number before i say anything. >> i think so. the jobless numbers weren't so hot. some say the minutes were released early. the market, the dow jones, s&p, they shot up quickly, algorithms, fires, all that nonsense who like to lose money on a daily or hourly basis. it came right back down. if apple hadn't reversed at the end of the day, it would have been a particularly ugly day. it's easy to talk about the fed because it's here, it's in

english. ben bernanke is very visible. i think we all know why we bottomed and why the 10% rally came and that was because the germans said you know what, we're going to stop being selfish. chinese have not done anything yet. to speak of. >> they've indicated overnight they're willing to entertain all interest rate tweaks including another rrr cut. maybe it's the central bankers that we need to watch outside of the united states. in terms of the trade that we've seen, risk embracing, equities, then we see the rise in gold, in dmodties across the board. and bullard's point was interesting this morning. comparative to the surgeon who had to work on lincoln after the assassination, meaning you do what you can but there may be limits to your medical knowledge and technique. >> the play was great. i really want to emphasize a couple things here. okay? i think this is a rally that is

stalled here, maybe because of jackson hole, maybe because we need more data. it's a rally that's been on the backs of some very bad economic and very bad corporate news, hewlett-packard, dell. but it's also a rally that has confounded people. i think it's confounded everyone. i don't like to just look at an isolated fed guy and say, he says that the ecb will do this or that. i think the world is still in balance and the germans can still pull the rug out. i also think it's suicidal. the german data is not so hot. >> not at all. eurozone pmi across the board not so hot. meantime, let's talk about china and gold. we mentioned that before, gold prices up sharply after new data showed august manufacturing activity in china falling to november lows. the precious metal rallying on hopes for additional stimulus measures. the central bank and the united states, in china and as well in europe.

these are key technical levels in terms of the rally. this is a rally in gold specifically that a lot of people doubted a few months ago when we were at the depths. here we are. >> gold is something on "mad money," people can have up to 20% of their portfolio in gold. it's funny. you see the gold minors up. costs keep going up. look at what's happening in south africa. there is scarcity in gold. i think gold is a terrific place, i don't want to own barrett which is trading up. rand gold is in places that when i said to him, i question where you are finding gold, he said it's not for sissys, jim. i haven't been called a sissy

since fourth grade. >> makes you want to cry and go home to mom. >> oh, yeah. wow. >> on china, though, the flash pmi was a bit more of a steep drop than we've seen in recent months and more discussion about whether the central bank is behind the curve. >> they've got a lot of room, though. they can cut, cut, cut. i think china, someone was asking me what chinese stock would now recommend? i said are you out of control? the chinese stock market is so hideous, first to say that some the european markets are great. i'm worried about china. they have to move. they have to move. that's the put under the market. people are always afraid to go short on fridays and of course mondays have disappointed so many days because the chinese don't move. >> that's why we've seen a streak of losing mondays for the whole, what, past 19 weeks or so. >> absolutely. we must shengs, too, some of the eurozone pmis not so great. 11 out of 12 months below 50. slight upticks, keeping it below

50. slight upticks in countries like germany. still no worries that the recession will come back in q3. >> i never want to wish bad on the economy. if the german economy were to slam on the brakes here, it would be much better, because i just -- the urgency here is great. and the germans are dithering by not coming through something. >> jim mentioned hp a few minutes ago, shares of that company falling in the premarket. the computermaker reporting a nearly $9 billion second quarter loss. that's the biggest in the company's 73-year history. earnings did beat expectations. revenue came in below street forecast. the company cutting its four-year outlook because of the slumping pc market and continued weakness in western europe and china. meg whitman urging investors to be patient as she implements a major restructuring plan.

if they hit their year-end target, that's the forward p/e of about five which you'd think is relatively inexpensive. >> it cowl be 20. this is a horrendous call. this is one of those conference calls where you just said, no, no. but the bright spot, we have printers. cash flow was good but a lot of people left, a lot of people seem to have left, kind of throwing their hands up leave. this was -- i search for words to describe how bad this quarter was. >> it was clear when you take a look at the notebook numbers and desktop numbers that they're simply losing customers, period, to somebody else. notebook sales were down 13%. desktop sales up 8%. down 2.7% was better than expected. this is my favorite quote this morning. the laundry list of areas needing immediate repair far

exceed our hope. >> let's go back to the 2.7, the gift you gave them. usually you hear hedge funds say listen, i hear that that number was good but the -- this was on the conference call. they said they stuffed the channels. i very rarely hear a company say the inventories are high, the channel is full. this number was inflated. it was inflated. one of the reasons why i think people at home might say why is this stock so down? they took away one of the few bright spots which is printers. they're equally as horrible. apple, accenture and ibm take it to them. this autonomy seems like a disaster. the write-off for the edf seems like a disaster. wow, meg whitman has her job cut out for her. >> this decline in premarket, put this in context, they saw a 3.7% decline in hul littewlett-

yesterday. >> why did they raise the dividend? why are they doing a buyback? why are they trying to put lipstick on this pig? i wish them well. a lot of people work there. hewlett-packard is digital equipment. the remnants sold to compaq before hewlett decided to double down on pcs. they did get it ultimately from emc. it actually broke even on this. i still can't believe it. these were two companies left behind by the commoditization of hardware, microsoft and intel. now, this company -- these two companies have been left behind by the proprietor, the proprietary ipad. >> speaking of tablets, they'll unveil this tablet aimed mostly at businesses rather than consumers. who is going to try to tilt that

windmill. >> how did the first tablets fare when moses brought them down? >> robinson is playing a date fast. here's what i worry about. when i look at reasons to buy, i need to see something other than cash flow. and that tablet was lame. the pcs are lame. servers may be okay. they done the have mobile. they don't have cloud. i mean, social. not that right now we want social. and one of the quotes that meg whitman, what a self-less basing person. hewlett-packard needs to shift their portfolio. they are basically the army and have to become the marines. that is hard. there's an aspect of this company that is so yesteryear it

was horrible. >> the notion of also leaving the tablet consumer mark tote apple and concentrating on the corporate, seems like they're kidding themselves. think of how many companies out there use the ipad, use iphones these days. finally embrace that strategy seems a little bit too late. we'll see how it plays out. they may be successful. >> compared to the alternative, right? they take on that 800-pound gorilla? seems more foolish, wouldn't you say? >> i guess so. it's the lesser of two evils. maybe the best solution would be to think of another technology they could make advancements in. i don't know. >> they need someone from apple to come in here. you're always trying to figure out what would you do if you're meg whitman? you've got to keep cutting costs but you can't cut them faster than the sales are coming down. you've got to take a look and say, all right, where can we actually win something and shrink the company dramatically? i don't know. that's a very tough call. >> all right.

let's talk about apple here. how high can it climb? shares of ipad and iphonemaker coming off an all-time closing high of $668.87. the stock setting a new all-time intraday high. apple shares up now more than 64% so far this year. when goldman sachs came out, you think if they owned apple, they would be trouncing the major averages. >> i think people at home have to understand that portfolio managers want to beat the s&p. the big risk was apple because you had to so overweight apple as to run the risk of looking like, wow, did i ever screw up. it turned out to be a great buy. i think that can take down everything. it's been a remarkable run. when people sell apple today, never get hurt with taking a

profit. when people look at hewlett-packard they should be thinking, it was april that'll killed these guys. it's very rim like, research in motion like. >> when we come back this morning, a lot more still to come. drinks, profits and the global economy. we'll discuss them all with paul walsh, ceo of diageo. take one more look at futures this morning. as jim said, sluggish action here after bullard implied up and down, about 16 points. more "squawk on the street" from post nine in a moment. road trip buddy. let's put some music on. [ woman ] welcome to learning spanish in the car. you've got to be kidding me. this is good. vamanos. vamanos. vamanos. gracias. gracias. gracias. ♪ trece horas en el carro sin parar y no traes musica.

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earnings reporting increased profit across all of their food processing segments. spam. we are asking you to put your always creative product development hat on and tell us beyond food products what else should we seal in a can so it lasts forever? tweet us at cnbcsquawk.

i'm sure the answers will be creative and out there. >> they tested spam in thermonuclear war and taste every bit as good -- >> probably better. >> that company is a good company. they've got a very long dividend record. >> does it maintain its form after a thermonuclear war. >> i will tell you the spam juice is every bit as good before and after an "h" bomb. >> your diet after nuclear war. >> if you mix that with johnny walker. >> we can ask paul walsh about that. coming up next, cramer's countdown of profits, get ready for his mad dash ahead of the opening bell. let's take a look one more time. some continuing to stall out on the multiyear highs. the s&p down two at the open. much more "squawk on the street," straight ahead.

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a few minutes before the bell. we look at the team captain from u.s. women's soccer. we'll talk to her in a moment. let's get jim's mad dash ahead of the market. >> on "mad money" tonight, this was a remarkable quarter plus he did an acquisition of a company premiere foods. most people don't know this, premiere foods, you can raise numbers on it. this trend whether it be whole foods, whether it be the spinoff

of dean foods, this is what people care about. i had international flavors and fragrances on last night. people care about good food that tastes good. i think that's hane. this is not an aberration. it can go higher. >> whole foods is upgraded today. >> whole foods versus safeway. what a great company. by the way, they haven't raised prices as much as people think they have. they've kept the ticket more reasonable. i think that's helped the next leg of whole foods. >> mcdonald's. their comps have been challenged recently. >> 85, 86 when they first imploded. opco says the august numbers could be solid. i don't know a soul who thinks this. there's a lot of people who have written off mcdonald's because their comp store sales were mediocre versus everybody else. this would be a shocker. obviously someone is going to say it's a head and shoulders.

this isn't procter & gamble. we're not talking shampoo. i will tell you, that the -- speaking of good foods that taste -- that don't have many calories, the egg mcmuffin has fewer than 400 calories. >> i think i did know that. it's been stubbornly resist and the to that level. >> that's because of dividend. it's a yield play. people have to understand we could get a big dividend boost this year. you met the ceo. were you not confident? >> yes, he's no stranger to the company and some of their big growth initiatives like mckcafe over the past few years. >> they've had the single best trading program for ceos. he's following a long line of ceos and make this thing happen. >> the dow could use the help after hewlett. tough one yesterday. >> good point. trading time just around the

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welcome back to "squawk on the street." getting ready for the opening bell, capped with the captain of the women's soccer team. adorned by her two girls, i believe. >> the floor traders are getting younger and younger and younger. >> and wearing diapers. >> if i said they were cute, would i be immediately suspended? because they are. >> they are adorable. they're like little dolls walking around. >> hewlett-packard, it will be interesting to see what the reaction is. and the chips, there's weakness in that session. the continuation could happen today. >> if intel didn't have a good dividend, you'd see the stock break down to 23. >> 23? >> yes. you also have windows 8. it's a shame. they don't have the apple in the iphone. you need that contract. samsung's got it. how long will that last? >> yes. >> we're also watching the euro

firmly at the 125 level, 1.2548. there we have it. opening bell is ringing on wall stre street. christy rampone, captain of the u.s. women's soccer team ringing the opening bell. syntel. hewlett-packard opens lower by 7%. >> i think when hewlett-packard had another -- they had a previous bout of tough times. people came in and herd turned it around. herd is now ott orach -- at ora big opponent. >> as carl mentioned, we did see a noted short seller, jim chanos

who i think nailed this. he does fabulous work. i hate to go against chanos. >> market cap of 38 billion, 10 billion in cash. isn't there a cheap enough price here, jim, where you're counting on growth even if it's two or three years down the road. >> balance sheet did get better. when revenues fall off, a lot of terrible things happen, whether it be in retail or tech. you can't see declines in revenues and expect to be able to maintain that cash position for too long. >> we're watching shares of kayak. kayak reported last night. it had a monster run going into these earnings. yesterday alone it was up 11% going into the earnings. analysts this morning, largely positive on the stock still because they didn't see the same weakness in europe as their partners did, priceline and orbitz worldwide. i interviewed the ceo yesterday.

he said for the mobile and desktop, he actually believes, there's data to prove, that they are the same user people do the search on the mobile and then they go to the desktop and purchase. >> i think that's true. i am co-owner of an inn in summit, new jersey. kayak is make or break. you get people looking and going right and ordering. you get a couple bad reviews and you want to commit suicide. >> you only get good interviews, right. >> people don't like to give me a tip. that's fine. had heard about the place from kayak. >> oh, really? >> yes. >> you don't wear a pill box hat when you're a bell hop? >> no. >> is there a bell and you come? >> i picture you a la jerry lewis. >> it is such a blast. you see people in a totally different direction. i brought the bagels this

weekend. my friend haley made the poached eggs. >> i want to ask you on a more serious note about this now failed vote over at the s.e.c., shapiro realizing that reform of money market funds is probably a 2014 issue now. idea was say that you can break a buck or put money aside. she clearly does not have the votes to put it up. >> what have we learned here? >> remember go back to that period where things were so dark that you worried about whether your paycheck was going to be cashed or be there. the atm. one of the things that cost it was we had reserve, first reserve. she's trying to do a little bit of -- it shows you how hard the job really is because the industry is so powerful. >> take a look at shares of big lots. this is a huge decline at the open. down 17%. it was a miss on the eps as well as the revenue side. they took the full-year guidance

well bow low estimates. they pointed out the percent of consumables at big lots is much lower than the other dollar stores like family general and dollar general. >> except for the incredible amount of cheetos at the checkout line. >> really? >> trefritos, cheetos. my big lots is -- i should go visit. i shouldn't single it out. >> are they just in the wrong demographic? their demographic in terms of household income is somewhere between 42,000 and 45,000 a year. are we not seeing that middle range consumer. you go to walmart or target or nordstrom. >> dollar stores have really -- dollar tree is an incredibly nice place to shop. big lots is a jumble. i urge people to stay away from the stock. they were going to do a buyout,

whatever. big lots, go to big lots before you buy and then reach a conclusion. >> let's go to bob pisani. you want to buy rhodes? >> did you see the headline this morning? the greek foreign minister is on a charm offensive. he's going to be meeting with merkel tomorrow. he'll be meeting with the french over the weekend. the headline out says greece may sell islands. you know of course as part of the agreement the greeks are supposed to accelerate asset sales of asset that the state owns. the sales haven't been doing anything. they met opposition from everybody, selling any industry meets opposition. now the greek prime minister is floating the idea they're start selling islands. he made it very clear they're going to sell uninhabited islands. what ones he didn't mention. what people would want to do with uninhabited islands, he didn't say that either. he did say they had some value.

anytime anybody talks about selling anything in greece, there's an uproar. they almost went to war with turkey over some tiny little uninhabited little eyelet that was in the middle of nowhere in the aegean. meantime, the betting is they are going to get some extension of the bailout terms. they're going to extend it, they're going to wait. merkel said she wanted to wait to see what the comments were from the troika on where they are right no you in terms of how much money they've got. that will come out in september. the bottom line is they're betting right now, at least down here, they'll get an extension of the bailout terms. there's a spanish cabinet meeting tomorrow. this is important. everybody is talking about it because they may drop hints about whether they are going to make a formal request to the eu for aid. this is in addition to it the $100 billion bank bailout money, whether they're going to make a formal request, because that's what the ecb said was a necessary condition to get any

money from the bailout funds or ecb bond buying. everybody is watching that meeting tomorrow. it's a normally regularly schedule one. they have one every month. it will be importance that's going on. have you saw, i know you were talking about the miners this week, they're all up again this morning. chinese data was weak. they jumped dra matically yesterday once the fed minutes came out. this has been one of the best weeks for silver stocks that i've seen in the long time. some of them were up close to double digits. gold stocks also on the upside. you said a lot about hewlett-packard today. only thing i would say, pc sales down 10%. servers down 4%, services were only up 1%. i don't know if anybody thinks that windows 8 will save the company but as far as i can tell, pc sales globally are flat to slightly down. when you have hewlett's pc sales down 10%, that means they're losing market share. that mean s lanovo or acer are

saying market share. i guess the question here at this point, guys, is whether or not we'll have hewlett-packard in the pc business two years from now and windows 8 isn't going to matter at all to them. finally, i want to talk about whether people believe we're going to continue on this rally here. there's a survey out of strategists now. most of them have 1425 at the end of the year for s&p. we're at 1413 or so. most of the strategists think we'll end the year close to where we are right now. a lot of interesting debate about whether or not there will be a big move in september. most of them feel there will be a bit of a correction at this point. >> guys, back to you. >> sobering unless of the hewlett-packard situation. let's go to rick santelli. >> the score is china 10, europe 7. and this is not a score where china wins. china now has ten months ar 50 on their pmi.

and europe has seven months after 50 on their eurozone pmi even though it was up 0.1. we want to continue to monitor that. it speaks is volumes. look at a 24-hour chart of ten-year note yields. they're down around 66 now. it was about 45 hours ago we were 186. we shaved off 20 basis points, close to a two-week low yield, should we close here? i do most of the comps on a closing basis. you can see the two-week chart. let's switch to currencies. the fed doesn't seem to have a lasting effect on positives in the economy. but they do seem to have a very big effect in the here and now on the dollar index with this announcement of this potential 80/20 qe. look at the two-day chart of the dollar index, it gave up ground. how much ground did it give up? well, go back to june 1st. these are about the lowest dollar index levels should they

close here, since about mid-june. jim, back to you. >> thank you. sh sharon epperson at the nymex. >> gold on fire. what is bad for the economy, whether it's the eurozone or china is definitely considered good news for gold. that's part of reason why we're looking at gold prices that seem to be marching toward $700, $1,700 an ounce. a lot of traders are looking at that as the next technical level to watch. the stimulus helping not only gold but silver as well. it's the best her performing commodity on the floor. keep in mind, though, copper, even with the weaker data that we got out of china, that continues on a tear. we're looking at oil prices, they're up as well. spread between brent and wti continues. $1 $115 or brent crude and marching

close to the $100 barrel mark for wti. some are saying many mid-october we will see, perhaps, weaker crude demand. for now it looks like we're looking at higher oil prices to come. carl, back to you. >> sharon, thanks so much. fresh from the opening bell this morning, welcome christy rampone, captain of u.s. women's soccer, three-time gold medalist. you might remember u.s. women clenching the 2-1 victory over japan, london where christy's fourth olympics. >> thank you for having me. >> got to ask you about japan. what a sweet win after a tough loss at world cup. >> it was amazing. definitely motivation for the training throughout the year. coming up short at the world cup, getting the opportunity to play them again in a final, a little revenge, motivation, it was amazing. we respect japan so much. they're an excellent team. >> was this your sweetest victory having been through a

few of them. >> yes, at my age, being the mother of two, bringing the team to that gold medal match, winning it as a captain. >> your girls are here. >> riley is right there. >> challenges of having a career like yours while being the only mom on the team? >> yes. good balance. i think i enjoyed playing the sport more as a mom. i don't think about all the mistakes they make and the issues. just have fun with it. i'm playing soccer, enjoying it and i'm a mom when i'm off. >> you have a business on the side. >> yes. >> self-storage facility that you started five years ago. >> yes. >> business climate to you right now as an entrepreneur in this country? >> i mean, i'm going pretty good. it was definitely a slow start. something that i was looking into an indoor facility as a soccer player, my husband played baseball in college. wasn't a great location, started the self-storage. it's going. we're about 80% full. very excited. we're still pushing, still trying to make it successful. >> would you feel confident

expanding at this time? >> we're looking into that. we are looking into it. >> really? >> we have the room to expand. it's trying to get more occupancy. when it gets full, we'll look into it. >> man u went public on this exchange. we had the ceo here. there was astroturf on the floor, a few nets. do you think soccer is at that point where the average investor will want a piece of it? >> i think so. i think it's been so popular overseas, now it's coming to america. it's getting more and more popular. it's out there. i think i would buy. especially man u. they have a lot of money, get players on that team. always striving. >> those players getting more expensive all the time. >> oh, absolutely. >> for wayne rooney. >> he's a good player. good to go watch. you have to pay for him. >> thank you for coming. christie rampone.

a cnbc exclusive coming up, paul ryan on the economy, taxes, your money and your vote. "squawk on the street" returns in just a couple minutes. [ male announcer ] when this hotel added aflac

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take a look at the dow. the dow down by 0.4%. hewlett-packard is down. dell down another 2% after yesterday's loss. lexmark is down as well. >> second day in a row we'll have technology weighing on the major averages, jim. >> it's been a source -- we have a rally usually in the fall. people tried to get ahead of it. it's difficult to get ahead of it when you have pc sales so badly. you mentioned lexmark, the channel is stuffed, we know that from hewlett-packard itself. i don't see a lot that makes me jump up and down.

>> let's get to squawk on the tweet this morning. hormel reporting increased profits across all of its food processing segments, including strong sales of its iconic product, of course, and that is spam. beyond food products what else should we seal in a can so that it lasts forever? linora writes, jon corzine's hubr hubris. another writes, i wish i could put apple's product launch in a can. we should put common sense in a can so it will last forever and andre writes, greece. you know, greece once again today, citi, saying 90% chance in the next 12 to 18 months, jim. >> they said september, it could be as early as september. that's a change in the language. >> i bet you you would argue, who cares?

>> i care about spine. i care about spine and italy. that is somewhat factored in. the comments about how the europeans may not be able to do anything i thought were more devastating than anything he said about the u.s. economy. wow. that started the rally. it could end the rally. >> there's scuttlebutt, speculation, a secret cap on yields, italian and spanish debt as one tool they could use. >> we have to be careful. what we really want is them to have a fed. we want them to go and do what ben bernanke did. they don't have that kind of jurisdiction. they have a path. if the germans are willing to help out, there will not be this suicide pact. the germans have to get past the idea that they are an island, but an ilan that supports the

euro. >> bernanke, maybe the highlight of jackson hole that they should be watching is draghi's speech. >> gold being a barometer perhaps they have to refligate over there. baltic freight has been up for the last two days. just trying to look for pieces of data that support the decision that it's not the end of the world. >> facebook is up a percent. >> i use facebook to post pictures. >> do you sepia them? >> excuse me. >> do you sepia them? >> did you watch my twitter pictures of being at the waste management dump or at the restaurant depot holding the meat tubes. >> what are meat tubes? >> 30 pounds of hamburger meat. >> we'll have a report later on this morning that instagram may

have a path to get out of the deal with facebook and still pay on the way out. >> terrific piece on bloomberg talking about how his actions were highly unusual versus other venture capitals. >> really? >> and that it put it in terrific context. i heard nothing but defenses of him from that industry. it was good to see a roundup that says please, look at the facts. people don't do this. >> your comment made the rounds, too. >> facebook has been a first-class disaster. like many other disasters that we've seen for the individual investor. >> dow is down 64 points. we'll keep an eye on major movers today. coming up in a few moments as well. a cnbc exclusive, presumptive vice presidential candidate paul ryan on spending cuts, your money and your vote, that's today at 10:00 a.m. a lot more "squawk on the street," still ahead. coming up, cramer is kicking it into high gear.

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i love it when we go from simon la bond to simon hobbs. what's coming up at 10:00, simon? >> paul ryan, an exclusive interview with paul ryan. kudlow will be on the show. looking forward to that. we have an exclusive interview with the head of tanger factory, stocks up 25%. jpmorgan says he can't go much higher than that. and an interview with the ceo of diageo, the largest spirits company in the world, still unable to buy jose cuervo, though. >> he's bringing samples as i understand it. >> is he? >> going to be an interesting 10:00. let's get to six in 60 with jim. caterpillar. >> not too much of a good

outlook so i don't know. >> joe global upperform at clsa. >> people were freaking out on coal. >> ultrapetroleum, a sell at stern. >> a lot of people have been saying we have a bottom in natural gas. clearly this is not that count of call. >> guess. you called it a disaster. >> guess is missing the mark. they used to an as separational brand. now it's a brand that's gone bad. >> salesforce.com. >> this is one of highest risk/reward stocks there is. you've got a guy sticking out his neck, piper saying the pipeline will be good. bernstein totally disagrees. negative article in the "wall street journal" this morning. >> what do you want to ask him? >> there are questions about whether they are actually making us money -- as much money versus how much they're spending. there's also orders really do matter here. i want to know about whether there's large orders. i want to know about europe.

mark has been a terrific guest in terms of being honest about the state of his business. >> i can't wait to see this. >> he's been remarkable and irwin simon, what can i tell you about celestial, and greek god yogurt? wow. >> getting hungry just listening. >> we'll have a chaser with the johnny walker blue. >> we'll see you tonight. >> thank you. >> "mad money," 6:00 and 11:00 eastern time. thanks, jim. >> thank you. new home sales, two-year high back in may. we'll see what this number says when "squawk on the street" comes back. the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score

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you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. welcome to the second hour of "squawk on the street." we have july new home sales jumping up to 372,000 from an upwardly revised 359,000. in percentages, that's up about 3.5. exactly 3.6%. how does 372,000 stack up? well, as carl referenced quite accurately, may was 382,000, highest since april of 2010. that was close to two-year high.

so here we are sitting with a better number. didn't take that number out. let's move to a june home price index. month over month, up 0.7%. about as expected. look at q over q, quarter over quarter, it was up 1.8. that is a disappointment. many were looking for 2.5%. slight payback, last month's quarter over quarter, originally released it up 0.6. it was upgraded to 0.9. the housing data is better than expected. the pmi is at 51.9. at least it's above 50. back to you guys. >> at least somebody has above 50 numbers. thanks, rick. very big hour. a cnbc exclusive, presumptive vice presidential candidate paul ryan on the economy. taxes and what it all means for your money and your vote in just a matter of minutes. plus, fed president jim bullard making headlines saying current economic conditions are

not dire enough to justify more monetary easing. jackson hole just days away, what is the fed's next move and how can you play it. back-to-school season in full effect. we sit down with steven tanger with be president and ceo of tanger outlets. you'll want to hear what the ceo of diageo has to say when he joins us in just a few minutes. we begin by covering slew of recent u.s. economic data points and reports with a panel of chief u.s. economies. morrie harris is here with us. a lot more discussion that may be distressed is not all this there is to this market, that real buyers are coming back. is the confidence behind housing justified? is it for real? >> again, define that for me. because if you want to make an argument that how'sing is off

the bottom, i concur. if you want to make a market that housing was gathering momentum, i'd push back on that as an idea. it's too early to suggest that will happen. you're not seeing mortgage politics for purchase do anything but move sideways. in that sort of environment it's difficult to make an argument that housing is gathering momentum. is it off the bottom? that's a foregone conclusion at this point. >> do you want to differ from that? >> these low interest rates are pushing investors into real estate investment. and the investors aren't using mortgages. the investors are using cash. the mortgage application, a little bit out of date as an indicator. i think when you consider how low rates are and how investors are moving into real estate and are buying the distressed properties, which is putting a bottom on prices, making people

more confident to buy new houses, i think we've got some more upside momentum here. >> i would say that it's a fair point. the one thing i would push back on a bit there is, few people have actually the means to put down a proper down payment. if you go through the fha, which a lot of people are doing, it requires a smaller down payment, then yes. few people can actually -- >> maybe maury is not talking about -- from the investor maybe that means private equity firms or larger investors. >> on that point i completely agree to it. >> there's scale to it. >> if you want to look at one of bright spots in housing, it's actually the fact that a lot of these multifamilies are being converted into rental units. there's been a dearth of rental units. in a single family home perspective we're not there yet. >> maury, let's talk about bullard. how much of what he saids tod s how much of what he saids todai was important? was it a walk-back of minutes that were overplayed themselves yesterday?

what was your take? >> bullard is in a minority right now. i actually lean more toward what bullard is saying than what the consensus is saying. but it seemed like from reading their minutes and looking at the previous statement, that, yes, the senate was shifting toward easing. i wouldn't put the easing odds at any more than 50/50, though, right now. a lot of this is going to be contingent on what happens with these august numbers. and when you looked at the unemployment claims, even though they were up some this morning, if you average out what's happened over past month, the unemployment claims are lower than they were in july when we had a better than expected payroll number. i think a lot of this decision really comes down to august payrolls. >> other people would say it comes down to politics. steven lewis at monument asked a very important question. why when so many members saw the case for further accommodation did they not actually shift three weeks ago? his conclusion is quite simply,

it's for political reasons. they know whatever they do is likely to be politically controversial, particularly with the republicans. they won't shift until december, december 11, '12 becomes important. would you agree with that? >> if i'm wrong and the august numbers are weak instead of okay, then i think they could go in september. i think they probably won't. but i think the most important thing for the fed is to try to do the right thing for the economy. look at it this way, if they were to ease the republicans would come back and they wouldn't be critical of the fed. they'd say, the economy is so weak, the fed has to ease again. so i don't know that they're that worried about the politics. at the next meeting, after the september meeting, right before the election, then i think the politics would be more important at the last minute. >> tom, for those who are buying stocks in advance of jackson

hole, is that going to be a nonevent that day in wyoming? >> i think jackson hole is an event day. it's interesting. i agree with what bullard said to some extent this morning with you guys. that the minutes are sort of stale, we received a lot of data since then. i think there's a misconception that a lot of the data had been so much better. in fact, just before we left the office we were tallying the data points since the last august fed meeting. in fact, most of the data points have not been better. >> retail sales. retail sales. >> basically it's retail sales and payroll report. outside of those two reports which granted are giants, a lot of the other data have been solved. i think from that perspective, jackson hole is very important. we'll get a refresh on what the chairman is thinking. >> all right. tom, maury, thank you guys. confusing set of data. thanks for helping us with it. >> thanks. larry kudlow sitting down for an exclusive interview with presumptive interview with paul ryan moments ago, talking the

economy, taxes, what it means for your money and your vote. joining us now, mr. larry kudlow. take it away. >> thank you very much, melissa. it's interesting today, two items i want to just highlight quickly. i don't know if we have tape or not. number one, on the tax reform and tax cutting plan, really even though i may favor it, the numbers don't add up. they got a lot more work to do, what austin goldsby wrote in the "wall street journal" yesterday, i think they have to tough it out and have better numbers. they're going to work on that. the second one is, the fiscal cliff, you know, i said to paul ryan, this country cannot take another recession. and cbo is predicting a recession next year if we don't solve the fiscal cliff on the tax hikes. and ryan said to me, that would be their first order of business before anything else happens, they would try to solve it and extend the bush tax cuts and deal with the spending cuts. so that's what i picked up.

there is a clip here. let's take a listen to what we've got. >> it's a three-point plan, pro-growth policies, energy policy, regulatory reform, tax reform, spending cuts to get the deficit down in the near term and reforms that get the debt paid off ultimately over the long term. that is how we dodge a debt crisis. >> are we talking about $700 billion in spending cuts in the first term, 800 billion, a trillion, what kind of ballpark number? >> you know, we can have a long debate about this. that's what we have to negotiate with congress in january. but mark my words we have to cut spending. we're very serious about that. mitt romney has been clear about that. the house has led on cutting spending, passing budgets. president obama has been m.i.a. on this debate. we have a debt crisis staring us in the face, it's on the horizon. what has the president of the united states been doing, four budgets with trillion dollar deficits every single year and not a sing solution to tackle

this problem. >> melissa, you could hear it, i'm all in favor of tax reduction and tax reform. but the numbers have to work or nearly so. and i think the missing piece is the spending cuts and they're going to have to come around and probably deliver some more information. i went through this many years ago with ronald reagan. everybody always questions our numbers. they wanted specifics, specifics, melissa. you can't always do that in a campaign. i do think team romney and ryan will have to provide more specifics on these numbers for anywhere pro-growth plan. >> we look forward, larry, to hearing the rest of the interview. larry kudlow joining us this morning. catch the full interview on the kudlow report, 7:00 pvm eastern time right here on cnbc. >> let's get a quick market flash. courtney reagan. >> thank you very much. take a look here, hedge found operator corvec raising its

stake in the private foodmakers performance. they don't like what they've been doing because of them rejecting the bio offer from conagra last year. shares are up 2%. we have slid down from where we were earlier in the session. back to you, simon. >> thank you very much. back-to-school season is in full effect. how are the sales faring at the outlet stores? steven tanger, president and ceo of tanger outlets will join us next on cnbc.

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the back-to-school shopping season is in full swing. the national retail federation expects spending to reach nearly $84 billion this year following flat sales projections last year and most shoppers are looking for bargains. the nrf saying two-thirds of shoppers will visit discount stores. steve tanger is president and ceo of tanger factory outlet stores. steve, good to have you with us. >> thank you, melissa. >> school is going to start next week or the following week. i imagine a lot of shopping has been done. how has it been shaping up so far? >> this has been a terrific back-to-school season. across the country our traffic has been spending up 4% to 5%. sales are about the same, trending up 4% to 5%. melissa, the value continues to be the key driver as the economy drives many purchasing decisions. >> from what you can see, steve, what sorts of stores at your

outlet locations are doing the best? are they apparel stores 0 are home goods? >> ladies accessories such as handbags, coach, michael kors, kate spade. william sonoma, pottery barn. children's is coming back. this is the season for back to school. oshkosh and carters are doing well. the major international brands like polo, nike, stores like that, gap are doing very, very well. >> to be clear, mr. tanger, when you say that you're talking about volume, i assume, not necessarily where they are on margins or profitability from your standpoint? >> simon, we get profit -- we do not get profit reports. we get volume reports. >> right. >> volumes are increasing. >> steve, a lot of discussion about what's going on in retail right now. that is that the brands hold all the cards, right? some of the department store chains are beholden to them. brands can go online, direct to

consumers, even at store-in-store, they have a great amount of leverage. do you see that changing in any way? >> we've been a big supporter of brands for the 30 years we've been in business. the outlets are the place where consumers can go direct to the brand and cut out the middle person. so every day of the week they get the best value on the best brands in the world. >> at the same time, steve, a lot of people are going online. there's a figure here, 40% will also go online for back-to-school deals, according to the nrf survey which says consumers are looking for discounts. are you seeing that migration. you as tanger is there any sort of way for you to capture any part of that? >> well, that's a two-part question. for the past 15 years, the people have been shopping online, our sale have increased virtually every year. we are embracing social media. we communicate with our customers through the tanger app

on your iphone or ipad. we have all kinds of social media interaction with our consumers to tell them what's happening in our stores. but people love to socialize. people like to go out and feel the fabric and look at the color. we have been resistant so far to any negative impact of the internet. our sales continue to grow. our traffic continues to grow and we really are very optimistic. >> let me ask you about the share price if i may, mr. tanger. we're showing it up 25% so far this year. jpmorgan put out a note in which they said they were quite neutral on the stock. they felt you had a constructive story, that was built in. more importantly, they felt as the economy tens to recover, investors' capital will more likely favor other types of retail and property that have been beaten down to a greater extent. do you think that's fair kmen? >> there's ten analysts that cover us an they each have a

different opinion. we are a dynamic growth company. we have assets in canada and the united states that continue to trend up. our comp noi, which is our comparative cash flow was up about 30%, so far in the first six months of this year, about 18% on a per share basis. i can't control what the stock price does. our management works very hard every day to drive our profits and our cash flow. and so far, the consumers have reacted to the products in our outlet stores, driving more rent as our occupancy now is 98%. we are able to continue to drive rents. >> i'm getting the impression maybe you're disappointed that the stock isn't higher. is that what you're saying? >> i've been doing this for close to 30 years. the stock market reflects a multiple of the potential for future growth. we are a growth company. and the market will determine the stock price.

>> finally, sfeef, we've gotten some guidance from retailers that maybe back-to-school will be more back-end loaded, consumers wait until the last minute, maybe it's a paycheck dynamic before they actually shop. do you think the real -- the sweet spot will be later in the season? >> the labor day weekend is usually a big weekend for us. and depending upon whether we're very o -- weather, we're optimistic about labor day. our stores have brought in more early fall merchandise than previous years. the inventory assortments are better than previous years. the outlets, the pricing continues to be terrific. it is a value proposition. as i like to say in good times people like a value. and in tough times like these, they need a value. >> all right. steve, we're going to leave it there on that note. steve tanger, thanks for joining us. >> thank you. hewlett-packard continues to

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telecom stocks have had a great year so far, up about 15%. something's going on. people are clearly checking out. over the last week, we're down almost 3% on the s&p telecom index. james ratcliff is an analyst at barclays. you have a neutral rating overall, i read here, james, on the sector. is that correct? >> that's correct, yes. >> why? >> fundamentally these are the overall telecom business is stable and a number of the names such as at&t and verizon have been attractive dividend stocks. it remains a highly competitive space with very high capital

needs as companies need to continue to invest in their networks to support the growth of mobile data. >> however, that said they are dividend placed. a lot of people will be happy to sit there. they don't need to chase capital appreciation which is what your neutral rating is aimed at. >> exactly, yes. at&t and verizon in particular. as traditional stable dividend stocks have been attractive to investors in the first half of this year in particular. >> a lot of headlines have been grabbed by t-mobile usa owned by deutsch telecom, announcing a new data plan and some people will be concerned that maybe that's going to sort of commodityize the space. >> i think it's primarily a marketing tool on their part. they are taking price down modestly. the number one thing they're doing is adding the option for unlimited service. and the previous offering they had on the table with the 5

gigabyte cap. consumers like the appeal of having the unlimited labeling. you don't have concerns. you don't worry about overage charges and the like. that's primarily what it's designed to do, improve the market perception of the offering. >> james we are awaiting the launch of the new iphone in september. how much of a lift could that be for the likes of an at&t, verizon, sprint? and when will you typically see that impact? the. >> the number one impact will be in 4q or 3q when you'll see the new iphone pressure margins. the iphone is for carriers the most expensive phone out there, the subsidy is in the $400 range as opposed to 250 to $300 for the typical android phone. you would expect to see a significant impact on margins, about 7 percentage points from

3q to 4q in our forecasts. >> james, a lot of people have been drawn to the sector because it's a good dividend play, relatively safe, not a lot of foreign exposure. has that dynamic been played out for the year? i know you say if you're looking to exposure to data, you go with towers instead, right? >> exactly. our view is towers give you exposure to the growth in mobile data without the capital risk. heavy capex spending is good for the industry. while at&t and verizon look fully valued to me here, unless we see investors step away from higher dividend yield stocks and more stable stocks and looking to take on risk, i don't see what the significant downside catalyst for them is at this point. >> favorite names in the tower space? >> particularly like sba, end crown castle, but would own any of the three, including tower. >> to what extent do you think the likes of at&t and verizon

will be able to push people away from the iphone this time around, new windows 8 phones that are coming to nokia and android more generally. clearly that is the game they are playing. >> absolutely. they are trying to push consumers toward android and as well toward new windows on the belief that having more platforms out there and competition among handset manufacturers and platforms is beneficial to the carriers. that being said, the iphone is a unique product. it's unlike the android world. there is no other carrier making that phone. customer loyalty appears to be quite high. >> so it's not a change this quarter, this isn't a tipping point for apple? >> i wouldn't expect so. i expect to see heavy apple phone sales and iphone upgrades this quarter as well. >> good to talk to you, james. thank you very much for joining us. james ratcliff from barclays on

telecom. hewlett-packard one of the biggest drags on the dow. third quarter revenue came in well below estimates. there are concerns over restructuring and the fate of pc market. what is next for hpq? we have two analysts, next. hi. i'm henry winkler. and i'm here to tell homeowners that are 62 and older about a great way to live a better retirement. it's called a reverse mortgage. [ male announcer ] call right now to receive your free dvd and booklet with no obligation. it answers questions like how a reverse mortgage works, how much you qualify for,

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welcome back to "squawk on the street," i'm sharon epperson open the floor of the new york mercantile exchange where natural gas futures are plummeting after the weekly storage report from the department of energy showed an increase in natural gas supplies in storage for the past week.

that was much greater than what analysts had anticipated. it was up 47 billion cubic feet, 47 bcf. analysts were expecting an increase to storage of about 36 to 40 bcf. this level that we're seeing right now is still below the five-year average. it is greater than expectations. even though we saw natural gas futures at a one-week high yesterday, closing at 283, we are looking at natural gas futures that are below 2.70. traders are anticipating that we could see upside potential in natural gas futures because of hurricane season we're deep in and we're watching tropical storm isaac to see if that becomes a low-level hurricane, whether that goes into the western gulf of mexico region is what traders will be watching. for now, they are trading on that natural gas storage number, an increase of 47 bcf. again, a bearish number for many traders based 0en what they were forecasting and natural gas futures are sliding.

carl, back to you. >> sharon, thanks so much. sharon epperson over at the anytime flex. about an hour into trading, some of the stores are we're talking about, 7:31 on west coast, 10:31 on "wall street journal." new home sales up. the results matching two-year highs reached in the spring. the average rate on the 30-year fixed rising for a fourth consecutive week now at 366, according to freddie mac. >> shares of hewlett-packard one of the biggest decliners on the dow. they had a near $9 billion loss third quarter. joining us now is senior technology analyst. good to see you again. you wanted to look at the notable balance sheet improvements even though we saw sharp decleans almost all of its

product lines. how can you reconcile the two in terms of what is most important to see in the turnaround story at this point? >> yes, i mean, hp is obviously not a growth story. it's more of a turnaround story as you say. key thing in a turnaround is, you know, stabilizing the business and generating cash. the stabilization side, they still have yet to do that. the business is still declining. on flip side, they actually improved profitability. they actually paid down their net debt by $3 billion. and we think if they can continue to do that, that will be viewed as a positive. >> they paid down the debt. that's why you're positive on the story. everything else, shaw, sounds like you were disappointed by. >> yes, the businesses obviously are tough right now, given the state of affairs with the economy. and then their pc business, right, that's about 30% of

revenue. but we think -- you know, we think they're right sizing the company. they have the restructuring. they'll lower their cost structure and make them more competitive. we think the business will stabilize. the key thing we think people are missing today is that they generated very strong cash flow of nearly $3 billion of which a lot of it was used to pay down the net debt. >> yes. i thought it was a misprint until i heard you say what you just said. your price target here is $31 from $18. >> that's correct. i'll walk the math there. our $31 target, it looks high, but it's based on a seven multiple, which is way below the market multiple of around 11 to 12 times. the stock is currently trading at 4 times earnings. very depressed, we think. >> yes, but even if you listen to what meg whitman's saying,

she's saying it will be a four to five-year program turnaround. she's talking about defending their number one position in laptops, pcs, in consumer goods. we've seen time and time again, i would sight rim or nokia, that consumer electronics when you've lost your edge, that can be a deep hole to fall into surely. >> no. we're not arguing with that. the key difference with hp versus rim versus nokia is that hp is about 25, 30% consumer. it's not 100% consumer. the other key thing is that hp actually makes money. they're profitable, generating cash flow. rim and nokia don't make money. that's really the key difference between hp and those other companies. >> i want to bring in brian white of topeka capital. he joins us now. he has a hold rating on the stock with a 17.75 price target. brian, how do you assess where the turnaround story is now that

we have the full picture on the quarter from dell and hewlett-packard. i'm thinking about some of the highest margin, higher growth businesses, servers, storage networking. dell saw increases, hewlett-packard saw declines. how do you assess the two? >> i think hp is looking at competition from several fronts. one number, they've been appled in the post-pc era, they're struggling. they're seeing asian competition. number two, they've got competitors that are aggressively expanding servers, storage and software liens and number three, they have a cost structure across the board that's not sustainable. meg whitman said it herself, this company is in the early stages of a turnaround. it will take a long time. >> so brian, to shaw's point does a 7 multiple seem deserved? i don't know, in the short-to-medium term? >> you look at apple trades sat 10 times ex cash. cisco is trading at six times x

cash. the big fear is that the earnings number isn't correct. i think as we go forward, october 3rd we'll get the outlook for 2013. but the big risk is that that earnings number is not correct. >> what does that mean? >> you mean the forecast? >> yes, the forecast. >> oh. >> as you go forward, this is going to be a long-term turnaround. meg said it herself. and there's going to be bumps along the road. the macro is a risk. they have the biggest europe exposure of any company i cover at 36% of revenue. the services business is going to go back and forth and pcs is clearly an issue. so the earnings is really the risk. whether it's a five multiple, six or seven, i don't think it's out of the realm. i think it's the earnings that will be at risk. >> shaw, we love having you on. i can recall a couple other calls regarding other companies where it felt like you wanted to be a bit of a hero, swing for the fins a bit. is that what this 31 target's all about?

>> i don't know if it's that necessarily. you know, our top picks are apple and ibm. we've liked them for a while. so obviously those are the better stories. jut back on hp, you know, again, it's all about cash flow, right? at the end of the day, if they generate cash, we think that's more important. the earnings, i think meg is trying to be conservative. she's going to set the barlow so she can beat the numbers. i think it's more of that than anything. again, i think the $3 billion in cash flow this quarter cannot be de-emphasized. >> shaw, we had you on i believe the other day and you wanted to make the comparison of the turnaround story with apple? yes? >> yes, yes. >> that was with dell specifically? >> yes. >> at this point, now that we've gotten dell's quarter and hewlett-packard quarter, just as sort of underscoring what is actually going on in the pc industry with these two companies, do you re-assess that? or do you really still think there's an apple-like turnaround

in store? >> yin terms of referencing appe we did it for three things. we talked about having installed base, right? and having a balance sheet or rebuilding a balance sheet. and also, you know, a plan -- a growth plan. so we think hp has the ingredients. also cisco's another name. we use that in reference to. we think these companies have the ingredients necessary for a turnaround. rim and nokia, they don't have quite those things. so we think there's a big distinction, we want to make clear, between like an hp, a cisco versus a nokia or rim. >> right. >> which face much more dire futures. >> brian, last question to you. that concerns apple. i believe your price target is on the stock is 1,000 or 1,001? >> it's 1,111 is our price

target. >> wow. >> it's still cheap at 1,111. >> it's been a parabolic run over the past couple of weeks or so. any thoughts of adjusting that even higher? >> well, we can't talk about a price target. it is what it is today. it's the price per share. we have an exciting next 1 to 6 month on the horizon. i think the stock will continue to do well. especially when investors are frustrated with the turnaround stories in the tech world. this one continues to work. we still like apple here. >> we'll leave it there. thanks for your time. brian white and shaw wu. >> great ideas. tanqueray, captain morgan and red stripe, just a few brands owned by diageo. should you take a shot and invest at diageo if you've not already? we will talk to the company's

ceo, next on cnbc. [ male announcer ] while many automakers are just beginning

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diageo, the world's largest liquor company by revenue trading higher after reporting a 2% increase in its full-year profits led by strong growth and spirit sales. the company raising its full-year dividend by 8%. over the last year, shares of diageo are up over 40%. here first on cnbc is paul walsh, the ceo of diageo joins us from london this morning. good to have you with us. good morning. fascinating way the company has positioned itself around the world. you have torrid growth in emerging markets like latin america. well positioned in the u.s. for any improvement here. is the overriding concern still

western europe, the periphery there? >> well, i think first of all you're right. we operate in 180 countries around the world. 40% of our sales are coming from the new high growth markets. where we continue to see double digit growth. and we expect that trend to continue. the u.s. is strong. so in aggregate we reported an 11% increase in operating profit and 13% growth in eps. regarding western europe, i think europe is what it is. we shouldn't expect it to change anytime soon. we saw a small contraction in sales but our profits actually increased in europe. we just have to be alert to growth opportunities, to offset what our inevitable structural declines in certain european markets. we believe we can do that. >> all right. sales of spirits, up 12%. about 80% of your growth.

why is migration from beer to high-end liquor happening? and as we would say in america, in what inning are we in that story? >> i think we're in a very early inning. i think what you're seeing, you've seen it for the last number of years, is consumers want variety. they want style. they want the affluence that our brands can offer. and that's true very much around the world. and we are riding that wave. and the other thing to bear in mind is when you look at the demographics in many of these new high growth markets, there is a wave of consumers coming into legal drinking age. they have the knowledge through the internet, they know about our brands. increasingly, they have the economic wiherewithal to access

our brands. that's a very, very strong trended. >> smirnoff today is not your father's smirnoff, necessarily, paul. there's a lot of innovation happening to capture those trends. what are some of the newest kinds of alcohol brand extensions, if you will, that will help capture that unyer demographic? >> well, innovation takes many forms. you're quite right. we've done a lot to revitalize smirnoff over the last few years. our total vodka portfolio, which is largely made up of smirnoff and two others, we saw a 13% growth in sales. there are flavor extensions, new market entrants. there's a lot you can do around digital marketing. we engage with madonna to select a dancer to go on tour with her through the smirnoff experience program. so there's lots of things we can do from new products to new marketing to new markets.

and we are trying to do it all. >> mr. walsh, let me ask you about jose cuervo if i may. obviously before your contract to distribute that liquor brand in the most important markets expires in june. you're trying to get some sort of equity stake. we thought you'd come through with an announcement that you possibly bought the brand for $3 billion today. you haven't been able to achieve that. does the owning family basically hold all the cards here? what's the problem? >> they do. hold all the cards because they're the brand owners. so as much as i may wish to buy, and obviously that would only be on the right terms, it would be value creating for our shareholders, if they don't want to sell, there's not much we can do. it's much different than myself. i go to our board, debate it and figure out what are right parameters. this is a family. they can decide they want to

sell or not to sell. >> what is the latest, what have they told you? >> i'm not prepared to go into details. we have known the family very well. i have high respect for the family. we'd like to have a deeper ownership of the brand. time will tell whether that is possible. in the meantime, we're a distributor and that's what we will continue to be until the contract expires. >> mr. walsh, pleasure to have you. congratulations on the quarter and the year so far. paul walsh, the ceo of diageo, joining us from london. and let's stick with alcohol. why not. we want to talk about a growing trend that is happening across this country. we're talking about spiked frozen treats. cheese cake factory giving its eight spiked shakes their very own menu section in red robin which has sold adult-only booze shakes for years. >> is that alcoholic then? >> that is alcoholic. it's spiked. so yes, it's alcoholic. it doesn't look appealing to you at all. >> not with a cherry and

umbrella in it, not really. >> it's not just limited to shakes. alcohol is showing up in ice cream sandwiches and snow cones. who knew. sounds like a good way to end the summer. adults only, of course. >> then get only, of course. >> if you're not on a diet. >> snow cones don't have fat. >> the content of everything you're looking at gives me the willi willies. >> we'll take a look at how facebook's less than stellar performance could be putting the deal with instagram in serious jeopardy. rick santelli is working on the next hour. what's coming up? >> feds apolitical, feds apolitical, feds apolitical. the fact i said it three times fast, does that make it true? we'll talk about that. the other thing we'll talk about, what is it that's making gold move? i have thoughts on why gold is moving. we'll call it the golden rule. come back at the top of the hour. all energy development comes with some risk,

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coke versus pepsi is one of

the more rooichlryes ever. when they sent the soda secrets to pepsi, it is the company most to gain that plays nice. take a listen. >> after endless taste tests and an advertising arms race, the atlanta-based coke continues to dominate the more than $400 billion soft drink market. so for pepsi the stakes were high. after receiving this most unusual letter, it made a most unusual decision. turn the document over to its fiercest rival, says federal prosecutor randy chartash. >> pepsi does the right thing and they sent the letter to coca-cola saying you will be interested in this. coca-cola brought in the fbi to assist them in trying to figure out who was doing this. >> the question of course is what happens to the spy? will you have to wait until crime inc. airs tonight.

secrets for sale premiers at 9 p.m. eastern. >> the recipe was sent by an employee to pepsi. >> it was a phone call to pepsi. >> right. >> from an employee, an administrative assistant, begrudged, who said i have something you might be interested in. let's meet at an airport, maybe an exchange of cash. >> did pepsi see the recipe? >> no. i mean, pepsi's response was to call the authorities. >> so it is not like they took a look and turned them in. >> we haven't seen is really, can't take it back. >> that's not really playing nice. >> it is interesting how easy and how many people have access to important information, intel, boeing, the space shuttle, all been targets of efforts like this and we talked to guys whose job it is to find the spy, once the company suspects there is one, to go in with bugs and thermal devices. >> i thought it was all about the folks that copy them. >> you mean somebody leaves a secret on the xerox. >> no, something that they can say that's from that

photocopier. i know nothing. i will watch tonight at 9. >> it is a great story. great tale. >> all right. tweet time. hormel out with earnings there morning reporting rising profits across the foods segment. it brings us to the squawk on the tweet. we're asking to you put on the always creative product development product hat and tell us what else should we seal in a can so that it lasts forever? tweet us and you have your answers after this. [ male announcer ] eligible for medicare?

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squawk on the tweet for thursday morning, hormel reporting increased profits across all of the foods processing segments including strong sales of spam, the iconic product. we're asking you what other foods besides spam should we put in a can so that they last forever? actually beyond food, john writes my 401(k) would be so nice to take that key and open it up. christopher tweets the genius of steve jobs. hp could use a little of that and ryan writes a lock of my hair. >> you don't see people wearing locks of hair around their neck like they used to. >> that's kind of word. >> i have in on idea what that

means. >> that's kind of bizarre. >> in the 19th century. >> like in amber? >> they wore it around their necks. >> like a fossil preserved in amber. >> jurassic park. what's tonight. >> the cdr, a lot of retailer shrinking the footprint houses and with plarkts on multi-year highs what are the best opportunities right now? >> good story. we'll see you tonight, 5:00. thanks so much. let's get a check on the markets at the top of the hour. dow down 71 points. we were down almost 100 earlier on as some comments out of a fed president bullard adding pressure to markets. s&p down almost 6, nasdaq down a little more than 12. payne sell les he will up sharply and announcing it plans to buy certain packaged food line from premier foods and steel stocks taking a hit after dahlman rose down grades the sector. steel dynamics, u.s. steel, ak

and new corp all in the red. facebook gets the grlt for the acquisition of instagram but does instra gram still have a way out? we'll tell you why the deal may not be done just yet. how to make money outside the u.s. we'll head to india to find ways to profit from that emerging market. then the tech start up helping main street businesses get back on track by making credit scores obsolete, the ceo of on deck capital joins us live to tell us how he is trying to change the world of small business lending and the politics of pot. yep, you heard right. we'll look at how the legalization of marijuana could have huge political implications this november, all of that and more coming up in the next hour. first up, hormel reporting q3 result that is were in line with estimates, the company's food and meat products seemingly doing well with the budget conscious consumer helping to us look at the bigger picture of the result this is morning, tim raemy, senior vice president and research analyst with d.a.

davidson and the managing director and food analyst with stevens. good morning to both of you. >> good morning. >> farah, let me start with you. we know the company's innovation is pretty good but commodity prices will be the first question any investor has. are they in a trend where margins will start to get better once supply of things like hogs gets a little more profound? >> absolutely. near term we think hormel is going to really benefit from the liquidation in the hog herd, but going into the second half of 2013 we are concerned about how grain prices will affect this company's earnings. >> that's not a short-term dynamic, is it? explain why it is more of a story for 2013. >> i think near term hormel does benefit from good grain hedges, and it has some feed just in its system already, but longer term it will cycle in to higher grain prices. >> tim, gross margins were 15.3,

down from 15.6. is this a process of sliding further or are we close to where margins might be bottoming out? >> i think we will see some further margin pressure next year as farah alluded to. takes awhile to work this through the system. takes 22 weeks to grow a tom turkey, so the turkeys coming to market now have corn that was purchased quite a while ago even if there wasn't a hedge. i think we will see margin pressures in fiscal '13. we have earnings but we do have the stock rated under performed. >> what's your target on hormel. >> i have a $25 target. it is a great company, great management. make no mistake. i think the margin outlook is going to be much tougher. >> are you sensing, tim, that pricing is going to be tough? are consumers at a point they'll resist any kind of attempt to make up some of those added cost pressures? >> it is always tough to raise

prices by large leaps, and i think eventually these corn prices are going to drive meat producers to do that. the only way you can do that is by cutting production and really shorting the market, so it is a tough, tough thing to execute. hormel does it better than most for sure but it won't be easy. >> farr a your view on the stock. tim has 25. what's yours? >> we have an equal rate rating. we think it will continue to range trade at around 28 to 31. our price target is 31. perhaps we give hormel more credit than tim because we do believe that near term their earnings will be supported by that liquidation in the hog herd. further more, we think that given it is a u.s. centric company with a fantastic balance sheet and a great management team, we do think that tends to support the stock on the downside. >> interesting. and you have to give him credit.

i guess both of you alluded to this. their ability to find or make products that stand out in a grocery shelf aisle which a lot of companies have a hard time doing with the likes of a whole foods taking advantage of another distributor like a safe way, right, farah? ? >> their innovation is pretty notable as well as their marketing. they're very smart in how they put their marketing dollars to work highlighted by the fact that spam helped this company grow volumes 4% in the current quarter in a market where it is very, very challenging to find growth in the grocery industry. >> yeah. spam gets a lot of jokes, a lot of ribbing, but it definitely support this is stock price. thanks so much. >> thank you. >> talking hormel, one of the movers on the number. squawk on the beat this morning, mary schapiro's attempts to make sweeping changes to one of the most popular types of mutual funds are stalled. what does that mean for your investments? mary thompson is back at hq with more on that and

fascinating political story. >> it certainly is and the battle may not be over. with money market mutual fund reforms shelved by the sec. mary schapiro is calling on regulari regulate orz. she said it is too important to investors, economy and taxpayers to put our head in the sand and wish it away. other policies declared the sec will not act and can take this into account in deciding what steps need to be taken to address the issue. the question is does the financial stability oversight committee take up the banner, step in, declare money market mutual funds systemically important and have them impose new rules. without reforms the sec fears millions of small investors will be at risk given the funds remain susceptible to losing perceived but not promised dollar of share value. not everyone sees it that way, though. democratic commissioner luis

aguilar citing with counterparts to not consider these reforms. investor advocate bullard says it benefits industry and investors by preventing new rules before the public knows the impact of one put in place less than two years ago. bullard's referring to the sec mandate that money funds increase their very liquid holdings, a rule they didn't go far enough to improve fund safety but one that bullard says they never backed up with evidence. the attempts at reforms coming in the wake of the financial crisis when an institutional money market fund lost the dollar a share value they wanted to prevent or limit this from happening you about proposals were beinged by the mutual fund industry who claimed they would be too costly for investors and the industry. i don't think we heard the end of this. >> is the read on this now that it is a short-term hit to reform but this gets revisited in 2013, 2014? >> i think right now it is up to

the fsoc which is led by the treasury and in a statement that was issued to cnbc, the treasury said, you know, reforms need to be made, but they didn't say what specific steps might be taken. i think it will be interesting to hear what's talked about at the next fsoc meeting. we're not privy to that but it will certainly be a subject of conversation because all of those regulate orz involved in that, many focused on money market fund reform. >> hard to believe we're talking about this so long after the fact. thanks a lot, mary, mary thompson at hq. hop over to the cme, rick santelli grave us a preview before the break what he will talk about. i had a feeling it might involve what bullard told squawk. hey, rick. >> hi, carl. here is the question. i am not sure anybody can answer it and it is couched in humor but just a bit. is the fed apolitical or is the fed a lot political? well, you know, in mid-july and remember, november 6th, november

6th is the election. most politicians on either side of the aisle and even the middle of the road aisle if you want to count that as a political position, they really don't want to give you too much because they want to hold back a bit. the more things you say, the more ways you can get penned in by the other side. it seems as though in mid-july in front of the senate banking committee there was some instructions in my opinion given to ben bernanke. listen to senator schumer. >> the fed is the only game in town, so get to work, mr. chairman. get to work, mr. chairman. get to work. get to work. get to work, work, work, work, work, mr. chairman. >> in my opinion you can say that is a bit of humor, but in the context of objectivity, if i take a step back and if it looks like a duck and quacks like a duck, sometimes it is a duck. we know the politicians don't want to get off center.

i think that bernanke seems to be dragging all of this up in a timeline that certainly seems to intersect with november 6th. i look at gold. i cut my teeth trading gold late '70, early 80s. looks like it is up $36. what is making gold move? this is a debate on the floor everywhere. in my opinion what makes gold move in a proactive trending way is any time the barometer of anxiety goes up. september is approaching. europe, you know, mario draghi, i don't think what he said is doable. i think what he said when he said it was absolutely brilliant. it bought them four to six weeks. you know, that might not sound like a lot to everybody, but it has stabilized the markets. i think that gold when it corrects, when it goes from active trending based on anxieties to the upside, liquidation mode is much more random. i think that's where everybody kind of gets off the game plan. when it goes into correction

mode some people are liquidating and some people are paying other positions. in the end i think we're in the proactive trending phase and i wouldn't dismiss how much higher gold can go. back to you. >> rick, thank you so much. rick santelli in chicago. a lot more from him later on. our own larry kudlow sitting down for an exclusive interview with paul ryan earlier this morning talking fiscal cliff, taxes, and what it could mean for your vote and your money. >> if this happens, if president obama gets his wish, we'll go back into a recession. so they try to measure the world against this massive tax increase that they want to occur which we think will trigger a recession which hurts revenues. we're saying plug loopholes, lower tax rates. >> do not miss the full interview with paul ryan tonight on kudlow, 7 p.m. eastern time right here on cnbc. let's get to courtney reagan at hq with the market flash. >> mary thompson was on talking about the lack of the sec to be able to pass those new tighter rules.

as a result, federated investors shares are popping, 75% of its total assets make up the money market funds, and without those new tighter rules, many analysts think this company could be one of the biggest beneficiaries. karl, back to you. >> thanks so much. when we come back we're traveling out of the u.s. to find new investing opportunities and with india's market up more than 11% in the last three months, compared to the dow's 5%, could that be a profitable choice for your portfolio? we'll talk about that after the short break. still to come this notify, marijuana is on the ballot in three states. is this a dopey idea or opportunity for states to hash in -- cash in, and can all of this change the outlook of the election? we'll head over to the mile high city, pun intended, to discuss the possibilities later on "squawk on the street." road trip buddy. let's put some music on. [ woman ] welcome to learning spanish in the car. you've got to be kidding me. this is good.

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all day on cnbc looking at ways to make money outside the united states. want to take a closer look at india. so far this year the sensex up 15%. want to talk more on investing in india with jeffrey dennis, market strategist at citi

joining us on the "newsline." good morning to you. >> good morning. >> 15, 14%, not bad. what accounts for that over whatever time period and how does it compare to what other emerging markets have done in that time? >> it is up a little bit less in dollar adjusted terms. you have given it back in terms of currency, still about 11% in dollar terms. there has been out performance of emerging markets or sure up about 6% this year. it has been a relatively good performer. it has had fairly strong earnings growth in the lower single-dig digits which certain helped and a very nice run earlier on in the summer really when oil prices were coming down, commodity prices on downward pressure because it imports a lot of oil and relies on a lot of commodity imports as well so tends to do well on commodity prices and those are some of the factors behind the decent performance here. >> i think u.s. investor paid attention to the country

probably knows the economy has slowed down somewhat as some would say sharply. >> yes. >> looking for various interest rate cuts. does that mean a rally for the rest of the year will be somewhat muted? >> i think it is going to be muted. we do like emerging markets for the rest of the year and we think there is more upside, perhaps around 10% or so for emerging. we think india will under perform that sort of gain, so it is going to lag, and it is really because the central bank in india has a much tougher job i think in managing monetary policy than is the case elsewhere in emerging because n infligs is high, 8, 9%, so they don't have a lot of room to reduce interest rates in the face of what has been a sharp slowdown in growth by indian standards and the currencies also on the weak side so they're tied in terms of politics and flexibility and i think that combined with relatively high valuations in india compared to the rest of the emerging world i think puts a cap on india's performance. >> that said, if an investor did

want to weigh in, what's the easiest way? how does one start investing in this country? i know you like a few sectors in particular. >> clearly an investor may want to look at mutual funds and look at the overall market and also listed in europe for sure, and our preference, and this reflects really what we're saying about emerging markets overall and in fact to look at financials and look at consumer discretionary names which are generally benefitting from the downward trend going on in the emerging markets generally in terms of interest rates certainly is the case in india and we like the industrial names in india also. some of these stocks have gone to relatively cheap and compared to the market overall and really reflects also our fairly high stance towards emerging markets as a whole for the rest of the ye emergi market, whi o ear is yearnd also like kor and so like south africnd a

le def morefse pl and thore the four bigger markets what we like and india we have under weight right now. >> it has been a good run if you have been in it already. thanks so much >> thank you. >> jeffrey dennis, emerging market strategist at citi. a lot more on investing on different countries on our website, like europe's fastest growing economy and how you might be able to make money there. head to investingin.cnbc.com. we'll talk a lot more about the new start up helping main street businesses by making credit scores nearly obsolete and count down to the close in europe about ten minutes away.

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control. [ engine revs ] during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. welcome back to "squawk on the street." take a look at shares of save way. jeffries down grading to hold from buy on concerns that walmart's push into its neighborhood food market stores in call calling could really be detrimental to safe way which has a large bunch of stores in california as well as those rising gas prices. we know they're high out there out west. >> on deck is a technology powered main street lender and today is announced it secured nearly $100 million in new debt commitments, 80 million from gomd man and joining us here noah, the ceo of on deck capital. good to see you this morning. before we get into the specifics of the commitment, explain what

on deck is and how it is changing the way small businesses get continuing. >> absolutely, a technology enabled lender, a business owner can come to our website on a monday and ask for a loan and they have up to $150,000 in their account by tuesday, so we're making the process fast and frictionless for small business owners across america. >> and in that it is allowing them to see things that you wouldn't ordinarily get to see if you were applying for a loan, right? >> that's right. we integrated with dozens of different online data sources that have become available over the last ten to 15 years to make a holistic determination about the business's credit worthiness in an efficient and past process. >> does that mean they're meaningless or still a component part of that? >> it is still a component. we're able to approve many businesses that are very health and i traditionally overlooked by banks. >> a metric that you would look at besides credit score might be? >> cash flow, might be public records, might be things like social data even, so really

little a wide swath of data. we have deployed $300 million to businesses over the last five years and we found that no single data point explains performance. when you look at the combination you get an amazing result. >> it is not as simple as saying i might have a better chance going to you than a traditional lender. >> for many businesses it would be true for that. there are a lot of businesses that can go to traditional lenders that choose us because we're fast and convenient. >> what is the market like now? to what degree are they anxious about funding? we hear about uncertainty, to hiring. >> we have a ground level view of what's going on now and what's fascinating is three years ago when the economic environment deteriorated we saw few businesses coming to us for purposes of expansion but today that number has actually doubled in the last sort of 12, 18 months. many more business owners are optimistic. they're using our loans. they're growing their businesses and taking advantage of opportunities. >> are you able to see whether

or not they are securing the credit for safety sake, for safety net, or actually putting that capital to work. >> because of our technology we have a nice pulse on the cash flow of businesses. what's interesting is just 90 days after taking an on deck loan the average business grows revenues by 24%. >> in 90 days. >> 90 days. >> so what's a great example is think about auto parts store in the new york area. they got an amazing do he will on wiper blades from a supplier. without working capital they can't buy the inventory to markup and sell at retail but they have fast access to working capital and they can take advantage of that situation. >> interesting. as far as your own business, talk about your growth prospects. what does the debt commitment mean? how fast are you expanding? >> it has been a pretty exciting time at on deck. we had been growing about 100% year-over-year which is an amazing clip for any company. in the last four months we have grown another 50%. the new debt commitment is really about fueling that growth for us andal loug us to take things to the next level. >> is the eventual plan to be bought to go public? have you thought that far in

advance? >> we believe we have the components of what could be a publicly traded company some day. we're excited about that. for now the focus is on growing the business, getting the word out through great shows like this. >> with goldman and fortress on your side. >> absolutely. >> thanks so much, noah. >> thank you for having us. >> nbells about to sound across europe. we'll get the close in details on how it might affect us on a thursday morning when squawk on the street comes back. mamama

a lot of news out of europe this morning. some pmis, not just from that continent but china as well as the meeting with continue. a lot to cover. >> europe is going into recession. that's quite clear if you look at the combined pmi which is both the manufacturing and the services data that came out today, it is down below 50. it is contracting for a seventh month. if you were in any doubt europe is heading into a recession you saw it with the japanese trade figures yesterday the first six months are down and the exports to europe were down 25%. clearly the economics are poor because the asset markets have done reasonably well arguably the same as in the united states because of speculation where we're going with the central bank. actually, they're still holding in there in a relative sense, though we have sold off during the quarter the session. let me show you the session chart of notably where we are in germany and also spain and italy have moved lower during the course of the session and i will talk about why that might be.

we are off our lows and still italy down almost 1.75%. >> the european markets closing now. >> so right across the board but again don't forget these markets have moved very strongly over the last month or so. spain up over 20% as i keep saying that's the border context in which we're operating. reuters has potentially an interesting story out but also a very curious in the way that it is written. they're suggesting exclusively that spain is in talks with the eurozone in order to get some sort of bailout on its sovereign aid, but it is confusing in the sources that it cites, just one of the sources says the discussions are on going and the main point of the story seems to be primarily be that the efsf would buy its bonds as spain issued them and that the ecb would come into the secondary market. we know that. that's what draghi said on the 2nd of august. i am not sure where the reuters story takes us. it is interesting. i guess if you want a solution in europe first spain because

draghi said this, spain and italy have to ask for the bailout and then will draw the line in the sand defending the bonds in the open market. the yields today are just slightly higher, 6.37 as you can see. they moved slightly higher in the market obviously that has been rallying and therefore the yields have been falling more generally since we had the draghi comments coming through. i want to show you the big banks that have fallen that might be in response to the reuters story. you see insurers of banks, bank of ireland, bank of scotland down. it is going to be a two-prong process. first of all, when they ask for assistance, when they ask for the balt out, obviously that's immediately negative until the ecb comes through and says we're going to buy the bonds. that may be why when we have the ecb meeting you have mario draghi talking frankfurt and then merkel arranging a news conference side by side with the spanish prime minister in madrid afterwards. that's the choreography.

this is not the main focus of the markets at the moment. you be aware yesterday the new prime minister of greece started his diplomacy with the guy the head of the euro group in athens. they met. doesn't seem that he gave much up on behalf of the rest of the eurozone saying the board is very much in that court and greece's last chance to deliver on austerity and avoid bankruptcy. separately at 1:00 eastern, new york time, merkel will meet with along, the french and the german leaders meeting to get a common policy on what to do with greece but probably seeing merkel suggesting no deal when she meets with greece on friday and it is a much longer term thing now and this is be after they have gone back in and reported until the end of september or october. >> i have seen some quotes saying it is greece's last chance. >> yes, that's what yanker said. >> i think they're trying to pile the pressure on so they will move smps they can and also

said yesterday it would be bad news if they tried to eject greece from the eurozone. the question is can they default on the debt and stay in the eurozone? those two things may be possible. >> big debate if they're mutually exclusive or not. thank you so much. let's get a check on metals and energy with sharon epperson. >> traders are talking about there is going to have to be some type of stimulus am coming out of the eurozone and also out of china and the fact we have gotten this very weak manufacturing data from both sides of the globe. that is something helping gold prices. we're looking at gold right now at session highs, 16.75 an ounce, up $35, very strong showing for gold and even stronger showing for silver, silver certainly on a tear here. it has broken out technically as well, and for gold we're looking at $1700 an ounce, the next key level to watch and silver well above the $30 an ounce level. in terms of the other metals as well as oil, the fact we got

this manufacturing data hasn't stopped the rally there either. we're looking at higher prices for bread for wti and copper as well and the really breakout has been in what has happened in terms of platinum and palladium, the unrest in south africa, the tragic story, 44 miners dead, that is something that is really actually helping those commodities and we're looking at a 10% gain in palladium in just the last week. simon, back to you. >> sharon, thank you so much. gold stocks are higher on the rally in that commodity. check with courtney reagan and get a market flash on that as well. >> not quite up as much as a precious metal but take a look at the gold stocks moving higher despite falling shortly after the open as we see that precious metal tick higher. there are hopes the fed will institute quantitative easing. as you can see we're higher almost across the board and for the month gold corp up 24%. that's one of those names we're

highlighting today. >> thanks so much. bob is here talking about the moves today. we were down triple digits earlier. what happened? >> i get e-mails people demanding an explanation. human beings want a story and demand some kind of explanation. i will give you an explanation why we're down. we're down because of us. specifically we're down because of mr. bullard and the st. louis fed on our air. exclusively on cnbc pushing that already. take a look. markets were up earlier and tooling along and not a lot of volume and even in europe not a lot of things going on. here is the two-day. here is 7:00 mr. bullard comes on, just a little after 7:00 and there is where we go from there. now, can everything happen and be blamed on mr. bullard? no. he did make it clear the data from the fed was a little stale, used that idea, kind of threw cold water on the idea that some kind of qe3 coming was inevitable, kind of threw a little cold water on that, so it makes sense you get a little sell off. i wouldn't make too much of that. it is very much on the light volume side right now. elsewhere, one of the things

that's getting a little bit tricky now is what's going on with the dividend payers. utilities keep sliding. we're at a two-month low, very close to it, on the utilities, and we have not seen any movement, not as dramatic a drop for example in reits or pharmaceutical stocks. they're also doing nothing. this big play on the dividend picks is definitely looking a little old at this point. this is an unusual move to the downside for utilities. they're very low beta stocks. they don't usually move as much. what can you say about hewlett-packard? i will say a few more things. that's what i am here for. still no takers. still no takers. we're at seven-year lows here on hewlett-packard. dell three year low. look at what's happening here. take a look at the fact we have -- do you know how rare this is? the forward p.e. ratio is four.

it is six on dell. i am just drawing this in as a comparison. this is the line here. the s&p is trading at 13.8 times forward earnings right now. there is a comparison. ibm is 10. microsoft is 13. hewlett is four. you would think there would be buyers all over the place but there are none because cheap is not a bargain anymore. the trading community knows that. just because it is cheap doesn't mean it is going to happen. are there any analysts pounding the table on this? take a look. only 35 analysts, this is me doing the math here, only nine that have a buy on it right now. 17, half have a hold and six have a sell. it is hardly a screaming recommendation. even at this level. even at $18. >> yes. >> four times forward earnings, you still can't get anybody upping the recommendation. >> even if they hit the target for the year end it takes their multiple to five. it is not like the multiple is going to scream. >> there is no big future right now. analysts and buyers don't see it

in pcs right now. >> thanks, bob. >> rick santelli is in chicago with update on commodities and the drought as well. >> thanks. i always like to call my guest the gentleman farmer of the floor, trader, farmers and at the end you will find something out as well. when we were talking off camera specifically about corn and your corn in your fields, this year if you had to sum up corn in the drought, it is all about timing. >> yes, it is. i planted my first field about april 24th, and then i planted a second field on april 28th. the 24th field pollinated early, didn't pollinate well because it was really hot and the second field did well. the first field estimated to be about 60 bushels an acre, the second one about 120 to 130. >> tell viewers where your farm is specifically. >> it is in southwest michigan, about 50 miles into michigan. >> and how can you tell what the yields are? obviously you haven't harvested. what percentage of the corn roughly do you think throughout the country has been harvested.

>> less than 10%. >> less than 10%. how do you have an idea of your crop yields? >> once you have the ear out there you take 1/1,000th of the field, 17.5 feed in 30-inch row and you go through and count the ears that are viable and take five of them, divide those by one, take the total and divide that by 90. there is 90,000 kernels of ear in one bushel of corn. >> i love the way you throw out the numbers. let's go to the next thing. you were telling me about another friend that planted way after you and his crop looks just terrific. give me details on that. >> he farms really low ground in the muck area south of south bend. he planted on may 10th, throughout may 20th, and his corn looks some of the best in the country and they have done estimates on him close to 200 bushels an i canner and it is just timing. >> you're a farmer. you're a trader. you also do something else. let's throw some of those pictures. what did you do a couple weeks

ago. >> i raised a sailboat kwu beck to france and 700 miles from quebec to the ocean and 200 miles across the ocean and took us 14 days. >> you are the busiest guy i know. thank you. back to you. >> nice stuff. thanks so much, rick. historical moment about to take place in the massive bailout of aig. our senior economics reporter steve least man joins us with details. steve, parting is such sweet sorrow, isn't it. >> sometimes, especially when you make money at t likely within the hour or early this afternoon, the new york federal reserve will hold an auction for the last remaining assets it owns of aig, ensuring at least the federal reserve will exit its part of this massive bailout with billions of dollars in profits. the new york fed set to auction $1.46 billion, the recently estimate value of remaining securities and those are in maiden lane three, an ebt at this created to old aig assets secured at original $24 billion loan. that loan part of a broader

rescue package between the fed and the treasury, $182 billion which threaten to put together because the aig because of its business guaranteeing subprime and other derivative contracts. if the assets sell at the fair value prices assessed in june the fed will be guaranteed a $7 billion profitability, that part of the bailout, the fed earlier sold at a profit all the assets of a separate company maiden lane two that secured $20 billion loan. so put those together, and in lane 3 the fed looks like earned in excess of $9 billion on the aig bailout. there is more to the bailout. the treasury currently holds a $23 billion equity stake in the company, down from 92% when it originally lent 70 billion to aig to rescue t the treasury needs a $29 strike price to be profitable. the fed looks likely to walk away with the billion profit and if they sell the remaining stake, walk around with around

$5 billion in profits. that's a lot different from what people said might happen when they first launched this. >> although somewhat argue it doesn't make is right. >> absolutely want. the ent profits do not justify or otherwise change that argument. it is just that it is a lot better to have that argument when you have $9 billion in your pocket. >> that's true. interesting end to that story. thanks so much, steve. straight ahead the facebook instagram deal got the green light. is there any way instagram could still get out? we have the details with kayla tornado watch in just a moment. the markets keep moving. ] make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days,

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what's your policy? the facebooknstagram dl gothereht sterda value fromhe faceok's declining stock price. ruben miller and kay tausche join us this morning. >> this is interesting. it is giving us a picture as to how facebook is viewed at least within the state as the hearings take place and facebook tries to make some things confidential that ordinarily might not be. can you walk us through some of that? >> right. well, they have asked for some exemptions from the department of corporations out in california including some that could be interpreted to be designed to keep public awareness of this hearing to a minimum.

they claim they don't want interruptions or disinterested parties to way lay the process but also asked for a few other exemptions that will be discussed at length, i assume, on the august 29th hearing. >> kay larks do you want to jump in here? >> i think if you look at the language in the deal, obviously the ftc ruling yesterday takes out one giant obstacle. at this point the only other way that instagram or facebook could walk away is if the hearing were to rule the valuation wasn't fair for instra gram. there is a drop dead date of december 10th. at this point as long as the judge rules the valuation is fair, the shares will be issued in the following three days. at that point how do you get to the december 10th date without some big wrench being thrown in there. >> ruben, how do you think this is going to play itself out. >> well, i think both emerging parties will go and present valuation testimony. you know, at this point i doubt that instagram shareholders will

really seek to be amending the terms of the agreement. the valuation of these companies is so volatile, who is to say they're unhappy with the deal? if this was any other industry, i think we would be seeing them clawing for the exits, but again this is volatile social media world. vin's mind but there is a question how much do they want to be a partners with these guys. >> there is a big question. i am told the majority of instagram shareholders are on board with this. they're big kids. they knew when they struck the deal the share price could go up or down from where it was trading. i think the other issue is for facebook investors. they've had a really tough road since facebook went public. they've had to lock up expiration last week, a lot of shareholders selling. the fact that $500 million more of shares could come to the market next week is another sticking point and thorn in their side. it is a little unfortunate but at this point what can you do? >> how is the request for the special treatment gone over in california? how is it being viewed? >> well, the kbligs has gone

back and forth with facebook a fair amount. facebook's tried to keep confidential some of the non-compete clauses with the directors of instagram, the compensation packages, and the department of corporations has asked for a lot of information there. so they will be talking quite a bit about that, i assume. >> and kayla, i guess it does just paint to the dangers of putting together a deal we know was done without the significant aid of attorneys, done largely in the privacy of a bedroom in somebody's house. >> and no banking advisers to figure out what the right valuation was. we were able to get tea leaves from facebook's filings. they had zero revenue for the two years of operation and also was operating on a $2.7 million loss with 13 employees and relatively no over head f you're kevin systrom, he owns 36% and

still making out pretty good in this deal. >> that would be okay i am sure with him. thank you so much for your time. kayla, i know you will keep an eye on the story for us. thanks a lot. >> when we come back we'll take a trip to the mile high city when one of the biggest issues on the ballot in november will be marijuana. brian shactman is live from an undisclosed location within denver. >> that's right. listen, we might be making cnbc history or even cable history. i am inside a warehouse growing pot. i will tell you why i am here and how it might have implications for the white house when "squawk on the street" comes right back. continuing to lend and investe in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us.

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for colorado legalizing minor is one of the most important issues. it could have implications for the presidential election as well. brian shactman is live in the mile high city, we don't know where, with a lot more.

good morning, brian. >> wouldn't you know it, he does a live shot from a pot farm and you can't reach him. we'll try to get to brian in a moment. it is i knundisclosed apparentl because it is larger than it is supposed to be even though marijuana is medicinally legal in the state. i will find out if this is a technical issue or not. don't forget to tweet us. hormel getting a boost in the third quarter thanks to sales in the budget friendly products. we want to know beyond food products what else should we put in a can and seal to last forever? tweet us and we'll get some of your answers after this short break. [ male announcer ] at scottrade,

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as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. trying to go back to brian shactman reporting live in the mile high city with a story about marijuana. we haven't had technical difficulties all day until we toss to the guy in the pot farm. >> right. it is high security although everyone is sober who is managing this shot, i will tell you that. we do have a little breaking news. i want to point out the naacp of

wyoming, montana, and colorado came out this morning and said they support amendment 64 which is the amendment that will make pot fully legalized in colorado and colorado is not alone. oregon and washington state are also going to have something on the ballot, but a lot of people think that colorado has the best chance of approval because they already have a fully regulated medical marijuana industry that serves about 100,000 patients, and i spent time yesterday with jared police who represents the district that includes bolder and he supports the amendment and says the whole situation could set up a classic battle between state and federal powers. >> if one of them passes, it sets up a conflict with the federal government where all of a sudden it is harder to ignore it which you're doing with medical marijuana saying we're not enforcing the law. >> it could end up in the supreme court a lot like health care. let's be clear. lyle li

legalizing is not a slam dunk. the long time governor not mincing his words. >> it is messy either way. the best way to reduce the mess is go back to the old days where we had 1700 people that grew it themselves or had a caregiver and didn't have a dispensary on every street corner. >> he is referencing 2009 when they expanded access to medical marijuana. obviously people are probably gaming the snl when it comes to medical marijuana. we visit add lot of dispensaries, and i can tell you this is really helping a lot of people, but if you fully legalize it, who knows? >> brian, as we look at the shot behind you, i mean, clearly these are businesses. real businesses. i wonder if you can just give us color on the sophistication of the people who are running these farms. >> well, listen, they're not non-profits. they're for profit. they're very organized. a lot of them have other businesses. they're entrepreneurs.

we have one gentleman with pizzas and another woman with restaurants. the key is and we'll talk about this later, they can't bank because banks don't want to deal with them because they're federally insured and don't want to violate the federal law. i do want to point out it has implications for the white house. obama care in colorado in '08, gary johnson getting a lot of attention here and might take a few percentage points away and might put things in play here. >> brian shactman joining us from denver. good stuff, and a fascinating story. thanks a lot. tweet time this morning, hormel reporting increased profits across all of the segments including spam. we're asking you beyond food what else should we put in a can and seal so it lasted forever? a wunch of good responses, oil so i can drive in 50 years. larry writes seal facebook in a can. i