in the meantime, that's not all bad for risk assets. they muddle through in the economy and grind harder on equities. >> bob, we want to thank you for being here. >> thank you. >> thanks, bob. make sure you join us tomorrow. "squawk on the street" is next. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with kelly evans live from the new york stock exchange. good to have you with us. >> great to be here. >> filling in, of course, since melissa, jim and david have the week off or something close to that. futures this morning, moderate strength as we kick off a busy week, all leading to jackson hole at the tail end of the week. take a look at markets in europe as well. london is closed for a banking holiday. but otherwise, green arrows as we continue to watch data from all around the world. our roadmap for a monday leads with apple at a new all-time high in the wake of that legal victory over samsung.

how much does android stand to lose and how much do companies with patents stand to gain? nokia and r.i.m. are up in the market. >> and industrial profits, is china's economy in the danger zone as investors keep an eye on central banks, jackson hole this friday? >> and tiffany missing the quarter, cutting its forecast, watching margins slip. but shares are up. the full story isn't written just yet. we'll begin with apple's major court victory over samsung and the contentious patent dispute. samsung being ordered to pay apple more than $1 billion, a development that would be a game changer in the world of smartphones and tablets. apple is poised to open at new all-time highs this morning. $700, not that far away from here. we go to our silicon valley bureau with the latest on that and jon fortt. jon, good morning. >> reporter: how does this verdict change the landscape for mobile devices which have become

the growth story in computing? the pc isn't dead but as we saw last week in hp and dell earnings, the business isn't growing. over the past five years, apple and samsung have emerged as the two top companies in smartphone combining to claim all the profit in the smartphone business. this is about the top two names in smartphones duking it out. the judge will decide on september 20th how far to go in halting u.s. sales of samsung's smartphone. the galaxy s3 wasn't part of this suit. if samsung has to update some software to keep selling the s3, that's challenging but doable. then there's the question of what this means for google. samsung is the biggest android phone maker in the world. is it a huge blow? not exactly. after the verdict, google pointed out most of the areas where samsung got in trouble were if its own modifications to android. in a way, this strengthening

google's case to smartphone makers that you don't need to make a lot of changes to the operating system we give you. that can be dangerous. this ruling could strengthen the case for a third player in smartphone platforms beyond apple's ios and android. microsoft has a lot of patent protection, so it could make windows phone 8 an attraction to smaller players. it could be why r.i.m. got a bit of a pop after the ruling. but i don't think r.i.m. has much to offer in terms of protection. carl? >> interesting. a lot of monday morning quarterbacking about the actual make-up of the panel. some of these jurors had technical experience. does it feel to you like this is the thermonuclear war that jobs was talking about? >> absolutely, absolutely. apple tangling with samsung but also motorola mobility now part of google. this is going to be a multi-year battle.

this first big victory goes to apple which puts everybody else on the defensive. >> jon, what's fascinating is to look at apple's valuation. it's still trading at a discount to the market. do we expect this to finally turn that around? >> i wouldn't say so. some people are scared of the overall market cap, the biggest ever, if you don't account for inflation. we've also got to see where some of the growth is going to come from. last quarter's numbers spooked some people. we want to see if that tablet trajectory continues to take off, a smaller tablet might help that, see what they do with tvs. all that's going to be key. >> jon, thanks so much. long weekend for you. jon fortt in san jose. a friday rally was not enough to prevent an end to the s&p's six-week winning streak. data showing a sharp drop in profit for china's industrial sector in july reinforcing calls for more easing from the chinese central bank. wall street looking ahead to bernanke's jackson hole speech on friday.

got a piece in "the journal" today, a paper you know well -- basically taking all the potential pitfalls of more policy and saying, the situation's really not that bad, when it comes to inflation, when it comes to the dollar, is that john speaking or is the fed trying to tell us something? >> i think it's a way of saying the three major roadblocks to further action are not in each of the three cases something that's going to stand in the way from them doing more. the takeaway is, don't expect any of this to hold the fed's hands. >> we had that letter from bernanke to darrell issa on friday, basically saying there is scope for more policy. but it's hard to imagine him saying anything other than that, right? >> absolutely. he has to continue to make his case and do it based on the information that led him to act in the first place.

just in the name of consistency, it's almost a defense of why they've acted so far. doug cass had an interesting note this morning saying is the fed becoming the central bank to the world. is the fed having to stand up b because the ecb or others can't get their act together and is it overstepping? many would argue that, no, it's the unfortunate situation the u.s. is in. >> attention to the bottom of your screen, ibm to acquire kenexa for $1.3 billion or $46 a share. >> merger monday. >> yeah. even though they're not ginormous deals. >> but we haven't seen a lot of ginormous deals. it's a reminder even though we've had a quiet month, the financing is in place. a lot of deals are getting done behind the scenes. and this incredible rally we've seen with regard to loans and junk bonds out there is putting the pieces into place for a lot

of activity. >> as we count down to the fed chairman's address in jackson hole friday, let's get insight on the markets. barry knapp joins us. heck of a golf tournament over the weekend. good morning, barry. >> good morning. >> expectations for this week, is it about bernanke? a lot of people suggested it's actually draghi whose address we should listen to the closest. >> no, i think that's probably fair. the draghi situation and european situation in general -- there's an interesting parallel going back to last march where when we initially got really concerned and cautious on the market, one of the things that we noted was the vol markets in the u.s., the level of the vix, the premium you pay for downside puts, all of these various measures, you pull out of the index vol market in the u.s., we're almost pricing that contagion risk at the lowest levels we've seen since the lehman bankruptcy. obviously they went up a lot

during the 10% decline. but we're back to those levels now as if the whole european situation has just been cleaned up. they're going to cap yields and it's all going to be fine. when you start going through the details of all this and say, they could create an open-ended liability to monetize the debt, no, they couldn't. really? some of these things are going to be far more complex than the market seems to be perceiving right now. for sure, i think the draghi speech will be critical. but the bernanke speech is obviously important, too, given how much the market is infatuated with the idea of more large-scale asset purchases and what a driver that's been for the stocks with bond-like characteristics over the last couple of months. >> china concerns seem to be coming back to the forefront. what do you make on the news of industrial profits and the slowing steel situation this morning? >> what people underestimated -- we've been talking about it all year with respect to asia.

people almost forgot about how export-dependent that whole region of the world is. if the biggest trade block in the world, i.e., europe, is exceptionally soft and c consumption is under an exceptional amount of pressure given what they keep going back to, they raised the vat tax in italy, they raised it 3% in spain, obviously tax receipts will fall there, too. and consumption will plunge. it's hard to see your way clear to the export part of those asian economies. the only part of the world that's somewhat immune from that is right here. but i just don't see asia sorting itself out until europe stabilizes. >> when it comes to the picture right here, you and i have talked about this a little bit. but how much do you think it's the policy picture that's

driving things? we were just talking about the fed. but are we overlooking the fiscal element here as well? >> absolutely. when we look through sort of the five factors as to why we got bearish back in march, the earnings outlook hasn't improved. the pricing contagion has gone down. we don't expect it to get much better. if you look at capex and how it's being impacted by public policy, you come back to what is the public policy outlook? if you think about the longer-term perspective on that, there is a good story for the u.s. in the back half of the decade. manufacturing competitiveness, the energy story, our demographics are better than the rest of the world. but we can't get there until we sort out tax policy and get our debt on a sustainable path. that just brings you squarely back to the election and what's going to happen and are we going to have a set-up that's conducive to actually starting to take on some of these problems. i think the market's starting to

sniff that out. i think this is pretty similar to 1980 where reagan went from 30 points down to three points behind. he was three points behind with ten days to go but the market kept rallying from late march through november. it was up 43%. and the market had already figured out that we were going to get a change in control down there. it turned out to be a giant sell after the election rally. but still, i think that that's what the market's starting to focus on and will do. >> interesting point, especially on a day where they're going to hit the gavel at the rnc. >> barry, good stuff. talk to you next time. >> talk to you both soon. >> shares of tiffany rising in the premarket despite this earnings miss, reporting second-quarter profit of 72 cents, below estimates by a penny. sales short of consensus. the company lowered its sales and profit forecasts for the year citing economic weakness in a number of its key markets. one of my favorite metrics is

the sales -- new york flagship store. >> they've been such an amazing barometer. >> down 9%. >> and how many quarters did we see those sales up double digits? even during a lot of the economic softness we saw during the depths of the great recession, they continued to do well on tourism and foreign buyers. now it's seeing weakness. >> they were plus 1% in q2. going from 8% to 1% is not good. >> and it's not just about top line with this country. what's been happening with so many different areas, whether it's gold or mrplatinum, that a adds to their base. >> we see the results as not so bad. expectations have moderated significantly over the past several weeks, despite unfavorable macro, challenging comps. we expect moderate input cost.

diamonds will be on the show later. we believe current levels shares represent an attractive value for longer-term oriented investors. >> investors seem to agree with him on that front. but i just wonder with tiffany, it's nots just an issue of what it says an its end markets about input costs but also design. is tiffany staying relevant, is it staying fresh? >> the macro versus execution -- >> absolutely. it's moved a little bit -- i don't want to say a down market. it's gone from being a super luxury market to a more affordable brand. is that strategy still working for them? >> an interesting week for retail overall. we'll get retail sales later on. "the times" with a big piece about how back to school is not shaping up to be gangbusters. >> and do you know what's cool?

what's exceptionally different is the ipads and the ipods. >> some m&a news as well. >> that's right. you'll hear two deals this morning that we'll be discussing, including one involving a pair of regional banks. m & t is buying hudson city bank. shareholders will receive either cash or stock valued at $7.22 a share. m & t expects to gain about $25 billion in deposits and a $28 billion loan book from the merger. here's a look at the banks in the dpeel and how they're trading premarket this morning. hudson city adding 14% and m & t adding 2%. this is now a done deal, hertz buying dollar thrifty for $2.3 billion. that's $87.50 a share in cash. 8% premium over dollar thrifty's closing price on friday and well above the $41 it offered

originally back in 2009. you see dollar thrifty up more than 7%. hertz up 15.6%, carl. >> nice gain for a deal that people saw coming, no question about that. >> in both case, the acquirers are benefiting this morning. >> it was accretive very early. when we come back, tropical storm isaac having an impact on everything from refineries to the republican national convention. we'll get the latest on the storm's path. a live report from the gulf coast on preparations in that region when we come back. futures this morning, pretty positive here as we quick off a week after the dow lost 117 last week. a lot more "squawk on the street" live from post 9 in just a moment. at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade,

seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade. there's natural gas under my town. it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy. at chevron, if we can't do it right, we won't do it at all. we've got to think long term. we've got to think long term. ♪

best buy stock popping up almost 8% on the news that the company, the board, that is, and founder richard schultz, have reached an agreement that would allow schultz to put together an investment group and begin conducting due diligence. he will be granted access to certain due diligence information, it says, put together a group of private equity sponsors. no guarantee that an offer will actually be arranged. board has 30 days to review the second transaction proposal. this is exactly what he was asking for earlier when he came to the company, can i get a look at the books even though i know the company pretty well? it's one incremental step to him putting together an offer for

this company. >> and a lot of investors are going probably, why aren't we considering this? >> we'll keep an eye on that. louisiana and mississippi are each under a state of emergency declaration due to tropical storm isaac. the national hurricane center says it expects isaac to strength ton hurricane strength by tuesday. weather channel meteorologist alex wallace is tracking the storm. when can we expect landfall? >> we're looking at this point sometime between late tuesday, early, early wednesday, somewhere along the gulf coast. that is certainly what we're following right now. here are the latest stats from the national hurricane center, 65-mile-an-hour sustained winds. the pressure down to 988. it's dropped a bit. that means it could be an indication that it's trying to get its act together, showing some signs that it may be intensifying. we'll certainly be following it as its traversing its way through the gulf of mexico. still a rather large circulation. the center of the circulation right about in year. but feeling the impacts all the

way across the peninsula of the sunshine state. we've got rain bands rolling on through. with those bands, heavy downpours sliding through orlando back towards tampa. and even some of the rain getting up towards jacksonville. we're going to be really feeling the impacts of this thing well away from the center. right now, over 400 miles away from the center feeling the impacts. late tuesday into early wednesday, the gulf coastal areas within that path. we could be talking about a category 1 hurricane by tuesday. >> our senior correspondent scott cohen is in gulf shores, alabama, with the latest from there. >> seven years since you and i were in new orleans dealing with hurricane katrina. this is no katrina but the timing is eerie for a lot of folks here. people still have it fresh in their minds.

a lot of preparations going on along the gulf coast. we're keeping a close eye as the forecast tracks to the west, west of where they thought even as late as over the weekend. it begins to affect the oil and gas production situation in the u.s. the refinery situation is dicey. we spent some time yesterday in mobile, a short distance from where we are in gulf shores, alabama. there's a small shell refinery there, chemical refinery. that was operating just fine. just about all of the others along the gulf coast seem to be. but the u.s. is not isolated here. remember, there was that big refinery explosion in venezuela last week that primarily impacts diesel fuel. but it impacts the entire supply of distillates including gasoline. and so that becomes an issue that they're watching closely. look at the locations of refineries along the gulf coast. you get a sense of the issue that we're looking at, again, as the track of the storm and that cone of uncertainty tends to move to the west.

that's where the refineries are. you get into louisiana, you get into texas and you get into big refinery country. that's what we're looking at. oil production is being affected as they evacuate rigs and platforms ahead of the storm. about 22% of offshore oil production shut down as of yesterday and about 8% of natural gas production. so that also impacts an already tight supply situation. if this storm remains relatively week at a category 1, they can get it back up and running again fairly quickly. but there are disruptions nonetheless. carl and kelly? >> thanks, scott. you make the point, between the explosion recently in california, this one in venezuela, isaac, refining is having a hard time. a bunch of obstacles in its way. >> it's bad enough when you get oil prices rising because the global economy is doing better. the worst thing is when you get a situation where oil is rising because of supply concerns. that continues to be a problem lately. still to come, the changing

of the guard at vmware as to look to profit from riding the cloud. an exclusive interview with the incoming ceo and the outgoing ceo of that company. one more look at futures before the opening bell on this wednesday. >> more "squawk on the street" from the nyse straight ahead. po? with the fidelity stock screener, you can try strategies from independent experts and see what criteria they use. such as a 5% yield on dividend-paying stocks. then you can customize the strategies and narrow down to exactly those stocks you want to follow. i'm mark allen of fidelity investments. the expert strategies feature is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

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. and we're proud to work with all of those who are creating a stronger future for everyone. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt.

last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ with market cap of $620 billion, apple is the world's most valuable company. with its victorious case against samsung, just added another $1 billion to its coffers. apple having another billion

dollars in its pockets is like, blank, getting more blank? that's the question. fill them in. tweet us. we'll get your responses. >> i'm going with roger federer getting more singles titles. >> that could happen easily. >> yeah. >> we'll find out in about a week and a half. meantime, about four minutes before the bell on this monday. want to bring in matthew cheslock. he joins us at post 9. good morning. >> good morning. >> do you expect a quiet week? doesn't feel too quiet? >> no. it's nice. m&a activity, the apple news. oil's had a nice reversal as well. downgraded the storm, oil came in, it was up when i came in this morning, now it's down a buck. certainly not quiet as all. never know what's coming out of europe either. if there's any headlines out of pre-bernanke, maybe another market-moving event like we had last week. >> europeans are back to work, merkel is having various meetings, did over the weekend. is the expectation that news comes more from wyoming than europe or europe than wyoming?

>> i think we're looking more from wyoming. i think that's a bigger market-moving event for us. we've shrugged off europe for so long here. we're looking for q.e. 3 or news about it. we're looking more for wyoming. anything he might have to say. >> could be a combo if it's draghi and wyoming. >> that's true. >> that works. >> opening bell a few moments ago. thanks, matt. >> anytime. >> back in a moment. is for a cl, domestic energy future

that puts us in control. our abundant natural gas is already saving us money, producing cleaner electricity, putting us to work here in america and supporting wind and solar. though all energy development comes with some risk, we're committed to safely and responsibly producing natural gas. it's not a dream.

america's natural gas... putting us in control of our energy future, now. [ male announcer ] drive a car filled with 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. take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data. make information instinctual, visual. introducing trade architect, td ameritrade's empowering web-based trading platform. take control of your portfolio today.

trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. you can just hear the echo of the opening bell there. take a look at the s&p on the top side of your screen. over here at the big board, 11 yaerld crystal carter celebrating being named northwest region youth of the year by the boys and girls clubs of america. over at the nasdaq, the ceo of durata therapeutics. last week was very interesting, the worst week for the dow in nine weeks but had the best day embedded in it in three weeks. >> it was almost as if people started to finally by attention to how well the market was doing only for it to turn around and have a week in the red. >> news on aol. special dividend. we might hear from the company

on this show later on in the morning. dividend of $5.15 a share. that's the amount the company received when they sold all those patents to microsoft back in april. >> patents in focus so much this morning. also the dividends. i think back to morgan stanley a week or so ago coming out and saying, investors still despite the attention we've seen aren't focusing enough on dividend strategies. there should be more dividend-focused hedge funds. that's their big pitch. seeing more income generation driving markets. >> true. it's a good opportunity for us to, too, to sort of debrief you and see what the -- how this is all being read in europe, how these merkel meetings went off last week, some of the rhetoric we got from her saying, i want to keep this together if we can. meaningful or not? >> what's interesting is i think we got to a point a couple of weeks ago maybe during this market melt-up where people started feeling better about the european situation, policy

mccainers a makers were getting their act together. you've got fitch coming out and talking about the difference between substitute versus support for market access if these temporary bailout funds or the permanent successor are used to buy unlimited amounts of peripheral debt. maybe there is a process we can trust after all. it's still a drawn-out case f. you look at the example of the fins, for example, it may not greek that promps a lot of existential angst. >> euro has been a stubbornly difficult short for a lot of investors, especially after last week. we get this random headline on a friday afternoon in the dog days of august where the ecb is considering bands of targets on yields. >> yes. >> is the belief that those headlines are real or more pie in the sky -- >> this is another case where it seems to be where there's smoke there's fire.

"the wall street journal" following on this soir saying it's being examined. but there's a difference between a plan being examined and something actually happening and that something doing enough to solve the problem which is fundamentally a political problem for the euro really. >> you don't believe that merkel's going to get germans to pay higher taxes, do you? >> i think if the german public starts to be sold on this concept of higher wages, i.e., some inflation in their own country in order to help allow inflation across the rest of the bloc, we know deflation can't happen when you have highly indebted countries, perhaps that will be more palatable. but watch austria, finland, the regions where the rhetoric is much sharper than it is in germany. >> we just got this news that ibm is buying kenexa. >> we know ibm has been diversifying aggressively into software. but at the same time, kenexa is

an i.r. services form that owns salary.com, i think. an interesting move there. >> i think it's $1.2 billion, 1.1 $1.3 billion. tiffany, best buy, some of the names we've covered this morning, google, the second worst performer on the s&p as people are trying to sort out the meaning of this verdict. >> it looks like android really in the cross hairs here as they do. >> let's get to bob pisani this morning for more on the floor and what's moving. busy night tonight as well. >> i'm excited about our diamond special. i'll tell you all about it in just a minute. kelly, hello, good to see you down here as always. i know you're looking at china. we have another new low today. again today, a multi-year low on china and no real news that's out there. one of the ministers came out and said that they would reach their gdp target of 7.5%. market didn't care, just drifted

lower, down at 1.7%. again, the worst-performing stock market in the world, admittedly, a slow couple of weeks. but it's been happening day after day. that's been an issue out there. and we have the earnings growth slowdown. a 10% earnings growth. doesn't seem too bad compared to our 2%. but it's poor for china. no real stimulus measures being proposed of any great size right now. so those things are weighing on the market. over in europe, there was a lot of interesting commentary over the week about how successful the draghi/monti coalition has been in splitting the germans apart. we saw the head of the bundesbank over the weekend saying he's opposed to this idea of sovereign caps or yield caps on buying sovereign debt saying that's a drug that's addictive, not a good idea. and yet ms. merkel over the weekend did a tv interview. and she came out and was very

careful not to voice any support for his position and not to criticize draghi at all. she's very much right in the middle and that's a big victory for draghi and monti to successfully split the germans like this. it means they're making progress on getting the germans to buy into the program to help spain and to help italy. that's a big one. the next ecb meeting is september 6th. you guys were talking about tiffany. this is a company i watch carefully. we're at a three-month high. it's up nicely this morning because the news was not great. top line wasn't great. bottom line was a little bit of a miss as well. and they slightly lowered their 2012 guidance. but it wasn't as bad as a lot of people thought. this was a stock that had very low expectations. there were a number of them this quarter that happened. this stock is trading to the upside right now. u.s. sales were down 5% on a constant currency basis. you mentioned the flagship store, down 7% on a constant currency basis.

interestingly, it was the united states who was the loser. japan was on the upside. even europe was up a little bit. the important thing here is diamonds and what's going on with diamonds. diamond prices have been going up for several years, particularly on the higher-end diamonds. talking about three carats and above. there's been notable inflation there in 2010 and 2011. it looks to me -- gross margins, down 270 basis points. it looks like those higher-end diamond prices that have been going up have now stopped. they can't raise prices anymore at this point. might even see some decline. speaking of diamonds, the special i've been working on, tonight, 9:00 p.m. eastern time, "the diamond rush" here on cnbc. kelly evans, we in this show are going to put an 80 carat diamond ring on your finger. >> oh, god! >> we'll see how that looks for you. wait till you see it. have you seen it? >> probably about my size. i did actually glimpse at it upstairs. it's beautiful. it's huge, though. it's like an inch big. i was assured that it was worth

less than $10 million. >> notice she didn't say, i won't wear it. >> exactly. and sotheby's, we thank them for bringing it in with a bunch of nice guards standing outside the new york stock exchange. and a little more about the diamond industry, you'll be able to see the biggest diamond mine in the world. we'll take you behind 47th, street, the biggest diamond district in the united states, and show you how that industry operates. and we'll talk about it throughout the day as well. >> bob, thanks very much. my favorite lunch spots are in diamond district. let's head over to the bond pits now. rick santelli is at the cme group in chicago. rick, tell us about the action this morning. >> you know, the action continues to be somewhat similar over the last week or so when it comes to high-quality sovereign. look at a chart going back to july 1st with regard to our ten-year. you can see the pattern. we're coming down. after we reached and crossed the 1.80 mark.

look at bunds, very similar pattern. but here's the fly in the ointment. we're also seeing some of the rates that need to be fixed, like in spain. look at a year-to-date of spanish ten-year. for the most part, they continue to remain lower after mario draghi's big comments on july 26th. same could be true for italian ten-years as you see the pattern there year to date. so we see that the lower-quality sovereigns like italy and spain are, first of all, unchallenged by a lot of the hedging and the hedgers and the hedge funds that were holding those major flattening trades prior to mario draghi's comments. and when it comes to the currency market, it is not nearly as undecided or split decision as fixed income markets. euro currency still continues to hover at very lofty levels and of course the mere image of that is the weaker dollar and some of the upward pressure that puts certain dollar-denominated commodities like gold and like

energy. but energy these days needs no help. just think isaac. >> rick, thanks for that. speaking of isaac, energy markets keeping an eye on that tropical storm. let's get over to sharon epperson who's at the nymex with the latest on how that's impacting markets. sharon? >> kelly, it's having an impact on oil and on refined fuels. there is increased chatter and perception among trader that is we may see perhaps a coordinated release from the strategic petroleum reserve, not just because of isaac and the potential disruption that that could cause but also because of what we're seeing from venezuela and other refinery issues around the country. this is just the perception of traders, nothing kompld. but the international energy agency apparently talking on friday about the potential to have a coordinated release if there was a need, it's something this marketplace is talking about. they're also looking technically at the fact that oil was unable to stay about the 200-day moving average, why some traders are

saying we're below $95 a barrel. and cruel oil at the nymex is off more than a dollar a barrel. this is happening despite the fact that there's great concern about what could happen in terms of refined fuel prices, particularly gasoline price, in the wake of what happens with tropical storm isaac as well as this 640,000 barrel per day refinery in venezuela, one of the largest in the world, being shut down and perhaps being shut down for several days f not a week or more. in terms of isaac, we are talking about 12 refineries that are in isaac's path, about 16% of the nation's refining capacity. some analysts say that we could see 75 to 90% of the gulf of mexico's oil production shut in temporarily. but it would be a temporary situation. that's why some traders say it's not having as much of an impact as you might expect, at least not yet. >> we'll keep an eye on it. thank you very much, sharon epperson. take a look at apple versus google today. fascinating story unwinding from that verdict out in california. apple has now passed google's

share price, just the sheer share price, a lower p/e. apple is a 16. google has a 20. but interesting psychological landmarks here. >> it's the valuation that gets me the most. apple trading at 11.7 times earnings. the s&p a full percentage point over that. if you exclude the cash from apple, it's under ten times estimated 2013 calendar earnings, which is amazing. and it's been that case consistently despite and throughout its run-up. >> samsung with $12 billion in market cap lopped off, the worst one-day decline in about four years for samsung. >> and keep in mind, apple now pays a dividend. if i told you you could get 1.6% for your money, would you buy a u.s. ten-year or a share of apple. >> not much argument there.

it's not what the republican party had in mind for today. the events delayed by a day due to tropical storm isaac. they're going to hit the gavel and immediately recess after ten minutes. we'll get the latest from tampa straight ahead. take a look at this mornings's early movers. [ male announcer ] at scottrade,

you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade. the economy needs manufacturing. machines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy.

we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪ ♪ ♪ ♪ [ male announcer ] at&t. the nation's largest 4g network. covering 2,000 more 4g cities and towns than verizon. at&t. rethink possible.

take a look at the potential path of tropical storm isaac. the national hurricane service this morning says it is expected to become a hurricane by tomorrow, landfall late tuesday, although with only 30 hours till landfall, still a very wide -- relatively wide geographic area still in the cross hairs which a lot of meteorologists find a little concerning. we'll see what the next couple of days bring. in the meantime, republicans in tampa trying to weather the storm literally as their national convention delays formal events until tuesday due

to isaac. john harwood is at the tampa bay times forum, the site of the convention with the latest. john, good morning to you. what needs to happen for the republicans over the next couple of days? >> one thing, mitt romney needs to give a great speech on thursday night. that's the most important thing. republicans, carl, already have weathered the storm. i was just outside. it's not even raining anymore. the weather's cooled off. this storm, i think, is going to spare tampa any major direct impact. but it has caused the postponement of the first day of activities today, which is less significant than it seems. these conventions are too long any way. most important thing is for the tuesday, wednesday, thursday program to continue. and mitt romney said yesterday while preparing for his speech in new hampshire that it would continue. >> governor, any concerns about the hurricane, governor? >> concerned about the people that are going to be affected by it. >> are you concerned about your

convention? >> it will be a great convention. >> here's the schedule on tuesday, wednesday and thursday night. the key speakers tomorrow night, tuesday night, ann romney, the candidate's wife is going to speak, along with chris christie, going to give the keynote address. on wednesday, condoleezza rice will speak followed by paul ryan, the vice presidential running mate, popular among conservatives. and then on thursday, the final nigh of the convention, marco rubio, the young latino star of the republican party, senator from florida, is going to speak. and then mitt romney. the audience all these speakers are talking about is the same group of about eight battleground, swing states in this election. 95 electoral votes in those states, talking about ohio, iowa, nevada, colorado, florida, new hampshire. these are where the election is going to be decided. that's where all those messages are going to be pitched to, carl. >> john, always hard to judge

what a real story in the "new york post" means. but the headline is chris christie saying "fat chance," arguing the reason he didn't consider the vp nod is he didn't think romney had a good chance against the president. what do you make of that? >> first of all, i don't think mitt romney was going to pick chris christie anyway. second of all, of course he thought about his future and the relative merits of going on a ticket this time versus 2016. one of the interesting undercurrents here is the positioning and the sort of vibe being sent off by different camps before -- in advance of the election. there's a group around paul ryan that sees him if romney loses as somebody well-positioned to run. chris christie and his team think they're well-positioned e to run. but most republicans would agree that mitt romney is behind narrowly. you have to say that president obama's the favorite to win the election. but mitt romney's still very much in this race.

we'll see whether or not he can use these three days in tampa to give him a little boost and get him over the hump. >> i know these conventions aren't really about the policymaking. but i wonder at what point we can expect any detailed clarification about some of the cuts longer term they might be looking for, some of the loopholes they might want to close to help push forward broad tax overhaul. >> the chance we'll hear those specifics are precisely zero. this is not a place where a political candidate wants to lay out specifics that are sometimes difficult to hear. no one's tried that since walter mondale in 1984. kelly, you probably don't remember. walter mondale was running against ronald reagan accusing reagan of being disingenuous about the -- he said, i'm going to raise taxes.

and lee atwater, the strategist for president reagan at the time said he thought he was dreaming. he couldn't believe that walter mondale had said that. no, we are not going to hear about specific cuts or tax loophole closings. i'm not sure we're going to hear about them this fall, maybe in the debates. >> he nailed it in minnesota, though, didn't he, john? finally, rubio introducing romney on thursday night. how significant, even symbolically. >> i think that's useful for the republicans. and, in fact, all the schedule shuffling worked out fairly well. rubio was going to speak on tuesday. he then flopped spots with ann romney so that she could sort of give -- etch a portrait of her husband which is going to be sympathetic. ann romney is very popular. but the fact that monday's proceedings are cancels, marco rubio goes to thursday, i think that guarantees him a large audience and republicans want

marco rubio to be seen. they have a big problem with latino voters. in the long term, somebody like marco rubio is a big part of the answer. >> as much as i wanted to see you in hurricane gear, john, it's going to be an interesting week. thank you very much. when we come back, apple's legal victory over samsung boosting the market cap on what's already the world's most valuable company. complete the following sentence -- apple having another billion dollars is in its pockets is like blank getting more blank. i love this one. tweet us. your answers are next on "squawk on the street." at bank of america, we're continuing to lend and invest 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. and we're proud to work with all of those who are creating a stronger future

for everyone. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today

and discover another reason serious investors are choosing fidelity.

there's a look at the losers on the s&p. now over to simon hobbs with a look at what's coming up in the next hour of "squawk on the street." >> good morning, happy monday to you, kelly. we have analysis pouring in still about apple's victory over samsung on friday. we're going to bring you the very latest on that. we'll have two analysts who think you should still be chasing tiffany, even at these elevated levels. and the very latest on tropical

storm isaac and the excitement surrounding the start of the republican convention. see you in two. >> simon, see you in a minute. "squawk on the tweet" this morning with a market cap of $620 billion. apple is the world's most valuable company. with its victorious case against samsung, just added another billion to its coffers. our question for you is, apple having another $1 billion in its pockets is like blank getting more blank. jeff writes, it's like buffett winning the power ball. and it's like kim kardashian having another pair of shoes. and another says, it's like someone finding a dollar in their pockets while doing laundry. and george writes, apple getting another billion dollars is like zuckerberg getting another hoodie. a lot of possibilities out there. tweet us more. when we come back, breakfast with tiffany, shares of the high-end retailer rising despite an earnings miss. we'll explore whether the stock is set to shine brighter or lose some of its luster even though it's up 6%.

we create easy-to-use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading. so we built it. chances of making this? it's a lot easier to find out if a trade is potentially profitable. just use our trade & probability calculator and there it is. for all the reasons you trade options - from income to risk management to diversification - you'll have the tools to get it done. strategies. chains. positions. we put 'em all on one screen! could we make placing a trade any easier? mmmm...could we? around here, options are everything. yes mom, i'll place a long call to you tomorrow. i promise. open an account today and get a free 13-month eibd™ subscription when you call 1-888-280-0154 now. optionsxpress by charles schwab.

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, the ways to receive your money, and more. plus, when you call now, you'll get this magnifier with l.e.d. light absolutely free. when you call the experts at one reverse mortgage today, you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home. and here's the best part -- you still own your home.

take control of your retirement today. ♪ ♪ to experience the ultimate expression of power... 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."

kelly evans going to help us through yet another hour here. let's get to the roadmap. cracks in the high end, tiffany second-quarter earnings edging up only 2% as they report weak sales in both europe and new york. is it a broader concern for high-end retail? >> and the street's praising apple after the key victory in court over samsung on friday. what's the broader impact across the entire smartphone industry? >> and tropical storm isaac barreling toward the gulf coast. we'll take you live to the coastline as we track the storm. >> and vmware going through a changing of the guard. we'll sit down with the company's incoming and outgoing ceos in a cnbc exclusive. first let's consider tiffany lowering its fiscal year sales and profit forecasts, citing global economic conditions. weakness both in europe and new york. however, the stock is doing well. courtney reagan has the very latest. >> hi, simon.

it was another tough quarter for tiffany. there was a 2% increase in profit but the iconic jeweler continues to note global economic conditions and key weaknesses in key markets. but it may not necessarily be felt by other high-end competitors. the street will have to determine if it's a big trend or just a story. tiffany missing estimates and lowering its full-year guidance to $355 to $370. the new guidance still brackets the street's estimate of $374. expectations for the jeweler were quite low. comp store sales slumping in key markets down 5% in the americas, 9% lower at the new york flagship location, off 7% in asia-pacific and europe. but up 12% in japan. that's interesting. tiffany did cut its full-year sales growth by 1%.

the retailer expects to return to growth in the key fourth quarter holiday period. and that could be what the street is looking forward to when bidding up those shares. >> good point, thanks so much, courtney reagan back at h.q. let's get more insight on tiffany's numbers now. brian nagle has an outperform on tiffany and a price target of $75. good morning. >> good morning. >> you're being cited as one reason the stock didn't open lower. what are you seeing? why is this not so bad in your words? >> i think the results could have been a lot worse. tiffany was facing mac co-economic damages throughout the world. earnings were lighter than street numbers and sales did decline but it could have been a lot worse. i think the market is saying we're through the most difficult time for tiffany. not out of the woods but through the most difficult time. there's light at the end of the tunnel here. >> what does that light look

like and is it a q3 story or not? >> i think it's more of a q4. the way it sets up is the comparisons for tiffany's ease in the third quarter and ease significantly in the fourth quarter. macroeconomic headwinds, i think we're starting to see some. and you can't discount just how strong the stock market's been lately. that's also very much a positive for tiffany. >> brian, what about gross margins? those were much lower than expected. i wonder, is tiffany's having trouble raising prices in this environment, how much of a headwind that's going to be in the next couple of quarters? >> it's all a t matter of where we're going from here. what happened in the second quarter, they faced their most challenging input costs. with commodity prices having moderated recently, we should start so see lower input costs for tiffany's in the third quarter and then in the fourth quarter. the gross margins were probably at their worst in q2. >> just wondering what the risk/reward is here, brian.

euro you're punching out $75 as a price target, 10%, 12% higher than where we are now. but you also note the risks, which was a deterioration in the macroeconomic environment, lower consumer confidence or severe declines in the stock market. given that we know we have a fiscal cliff approaching and no sign that that can be dealt with until november, after the election, isn't that risk/reward relatively unbalanced? >> with tiffany, i've followed tiffany for a while now. and our clients, i tell them, the way you think about tiffany must depend on your investment time horizon. in the nearer term, there are clearly still challenges out there for tiffany. the fiscal cliff being one of them. but over any length of time, here's a company that has proven to be a very superior merchant. they have a great longer-term international growth story. so i think near-term challenges, but long-term reward. what happens today in the stock prices, we're basically seeing the market saying, we're more

focused on that long-term reward. >> brian, is there any risk in their own execution? we had a discussion earlier this morning about design, the degree to which they may be attracting a lower-income consumer than they have historically. is any of that a liability on the shares or not? >> my concern is -- and i've written about this. i think there's a fashion miss in their lower-end business, the silver business. as i look around the jewelry market, i think to a certain extent, tiffany has lost step to some of the up-and-coming brands. we have a number of product launches at tiffany over the next several months that should correct that. but the concerns about them attracting a lower-end consumer are really overblown. tiffany, given the company's history, any type of near-term execution errors usually are corrected pretty quick. >> given the miss you referenced, any competitors who have benefited as a result of that? >> probably not.

looking across the jewelry space right now, the results are pretty consistent where you've had a bit of softening -- it would be a stretch right now to say looking at q2 results, saying anyone took substantial market share from tiffany. >> were you surprise t at all by some of the flagship numbers? >> no. i go back to -- it's easy right now to blame the macroeconomic environment. but i think the biggest issue for tiffany's is how strong the second quarter was last year. when i noise these numbers and slice and dice them, when i look at their sales numbers stacked on top of the prior year and the year before that, on that basis, sales trends actually held in really well for tiffany. >> i wonder, too, if that's not what's happening with japan where the figures were quite strong. is that in part because of the weakness we saw a year ago? >> definitely. with japan, we're cycling past the tragedy over there following

the earthquake. >> brian, you say the quarter is not as bad as it could have been. what would have signified bad, though? what would bad have looked like? >> well, you could pick a number. they did a negative 1% comp. if comps were down 10%, that would have been bad. i'm just picking a number out of the sky. but down 1% given the strength last year, again, is not bad. >> i know you do mostly specialty. this might be a little out of your universe. but "the times" runs a story about back to school being a little more backloaded, not as energetic as past quarters, maybe some concerns about inventory. does any of that apply to some of the retailers you cover? >> with my retailers, again, i don't follow the clothing retailers. what i've heard so far from my vantage point is that back to school got off to a decent start. i hear the back end loaded -- seems like every holiday we're hearing more and more of that.

from my vantage point, back to school is off to a decent start. >> brian, appreciate your time today. interesting story. turning now to a deal out of the regional banks this morning. m & t announcing it will acquire hudson city bancorp for $3.7 billion. kayla tausche has the latest on that deal. >> kelly, a conference call just getting under way to walk through the merits of this deal which is the largest regional bank merger since the recession. talks were escalating over the weekend for a deal that valued midwest city bancorp at $7.22 per share. but by the looks of both stocks today, that's a merger the market believes is the right course of action given the political and yield landscape of banks. but because of the structure of the bank, if m & t rises, that means hudson city is rising as well. hudson city had a tough time rising from the recession.

the percentage of its overall loan base turned sour. that changed with the recession and its cost to fund itself rose at a higher cliff, a key part of this deal. it's also the case for many of the smaller regional banks like hcbk, the cost of operating becoming increasingly expensive. the industry players i speak to think this is an inflection point for bank deals. we hadn't seen much activity in this sector besides european banks. banks in the u.s. were paralyzed by the uncertainty over the regulatory landscape and what that would mean for transactions. this deal marks the first time that banks started merging in order to handle that issue. it's very interesting to note that this is a deal that will require regulatory approval. so it's not necessarily in the bag yet. but certainly one that the market feels good about. back to you. >> kayla, thank you.

m & t talks about how this will add to their regional footprint but not in an anti-competitive way. but m & t is coming out and becoming one of the more interesting players in this space. the players like m & t, it was one of two banks during the crisis that didn't lower its dividend. >> i'm so sorry david isn't here. with two m&a deals coming out on a monday. >> three if you count ibm. >> maybe this is it. maybe finally the gates are about to open. >> i'm sure he's working the phones in montauk. but hudson city, the bigger gainer on the s&p and being the acquire e tells you all you need to know. >> m & t shares are up in the range of 2% to 4% this morning. >> actually, the fourth biggest gainer, m & t. >> and partly because of the structure of this allows them to benefit as hudson does. >> investors continue to bid apple higher this morning after the jury found samsung copied

critical features of the iphone. will the verdict put shares ultimately above the $700 mark? we'll have an analyst take on that next on cnbc. i don't spend money on gasoline. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ for fastidious librarian that i forget how to put gas iemily skinner, each day was fueled by thorough preparation for events to come. well somewhere along the way, emily went right on living. but you see, with the help of her raymond james financial advisor, she had planned for every eventuality. ...which meant she continued to have the means to live on...

...even at the ripe old age of 187. life well planned. see what a raymond james advisor can do for you.

welcome back to "squawk on the street." i'm courtney reagan. take a look at shares of navistar, a heavy truck and engine company. shares are spiking today after the announcement that its ceo has stepped aside. the new ceo is the former ceo of textron. it's been a tough year for this trucking company with worries about whether its class 8 engine will get epa approval. >> ahead on the program, preparations for isaac. hurricane warnings for the gulf coa coast. states of emergency declared in louisiana, alabama and mississippi. the latest on the storm's track, plus a live report from the coastline, straight ahead on "squawk on the street."

with the fidelity stock screener, you can try strategies from independent experts and see what criteria they use. such as a 5% yield on dividend-paying stocks. then you can customize the strategies and narrow down to exactly those stocks you want to follow. i'm mark allen of fidelity investments. the expert strategies feature is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

apple's big billion-dollar win against samsung has the shares trading higher, though we've given up a little bit of the ground. will power kindly joins us now. good morning to you. >> good morning. thanks for having me. >> a lot was written, a lot was spoken over the weekend about the importance of this deal. how do you feel about the judgment? do you feel that it is a watershed moment?

>> i'm not sure it's a watershed moment. but i think it's a clear positive for apple. you're seeing it reflected in the shares today. i think really validated and probably vindicates some of the claims they've made over the past several years. and i think it really hinges from this point where the potential injunctions look like from a competitive standpoint. >> what is your guess on that? >> it's a good question. i think there's a fairly high likelihood that some of the devices that are brought up in this particular patent case, there probably is an injunction being put in place. the bigger question is on some of the current products like the samsung galaxy s3, does it relate to that as well. that's really up to the judge. >> i've seen a bunch of estimates about the impact on samsung's bottom line. i've seen 4% to 5% tossed around. have you been able to model that yet? >> i actually don't cover samsung, so i don't have a good feel for you on that.

that's going to obviously ultimately hinge on how the injunctions playous, et cetera, how it potentially impacts future designs, shipments, et cetera. from apple's standpoint, clearly a positive opportunity particularly to the degree that it impacts samsung's ability to ship into the u.s. >> will, about the degree to which the ruling in apple's favor seemed to focus on the iphone and not necessarily the ipad design, especially given that the ipad's going to be more and more of a focus going forward? >> well, the iphone, remember, is still far and away their dominant product, both in terms of revenue and in terms of profitability. i think the positive rulings on that front probably more than outweigh the lack of a patent i suppose on the ipad front. the ipad has tremendous momentum. i don't expect that to change. but it can help them further segment the market. we continue to expect strong growth there. the reality is the android eco

system hasn't put up a competitive player there yet. >> is this $1 billion figure likely to be a minimum, given the sort of willful language used in the ruling that we could see something ultimately higher than that? >> i think that's certainly possible. that would be positive, at least on the margin to apple. but, again, in the end, it's less about the billion dollars, whether it's $2 billion, even $3 billion. they both have plenty of cash and strong free cash generation on the books. it really comes back to more of the competitive landscape and how this might shape that over time. >> so you've got this now out of the way -- at least for the short term, it was report this had mortan ipad mini is on the in december. people have ridden this for a while. if cramer were here, he'd say, nobody ever went broke taking a profit. >> that's right. from a trading perspective,

perhaps. but that's not what i'm in the business of, at least with apple today. i think medium to long term, there will be further upside. while it's possible to see profit-taking on the classic sell the news, when all is said and done, there's substantial upside from iphone shipments relative to where the estimates are today. as those estimates start to rise, you'll see the shares continue to act well. >> what is your price target? where are you? >> currently at a $740 price target. that's based on 13 times earnings, no consideration for the cash. that more or less puts it in line with the market multiple. i think my expectation is that as iphone shipments rise and our estimates rise that, pushes the earnings estimates higher, even on the same multiple would push our target price higher. >> a quick word on r.i.m. and nokia, holding patents that could be worth more now. a game changer or ultimately more of the same for them? >> i think the benefit for us is we'd be sellers into the

strength on both of those. we have underperform ratings on both nokia and r.i.m. it could provide a window of opportunity, depending upon how damaging the injunctions look like and what it does to the android eco system. but my sense is that samsung and the other android players will reach an agreement with apple or find workarounds. long term, the same challenges are still facing nokia and r.i.m. tomorrow the same as they were yesterday. >> thank you, will. >> thanks for having me. tweet time, with a market cap of $620 billion, apple is the world's most valuable company and with this victorious case against samsung it just added another billion dollars to its coffers. this morning, we're asking you, apple having another billion dollars is like blank getting more blank. we have good answers. tweet us and we'll get more of your responses throughout the morning. in the meantime, hurricane isaac moving forward towards the gulf coast. we're joined now by the weather

channel's jeff morrow for the latest on its path. jeff, welcome. >> thank you. looks like we still have a tropical storm, but it very soon could become a hurricane. isaac, 65-mile-an-hour winds, beginning a new advisory from the hurricane center within the next half hour. they may bump some of those winds up a little bit. pressure has been dropping, an indication that isaac is strengthening. here is the radar. you can actually see where an eye is trying to form here. we may well be on the way to a hurricane. there's still a little dry air getting into the system. that's holding it back. but it has a fair amount of time between now and tomorrow night to get from here all the way up to new orleans. we think that it's generally tracking in that northwest direction. so southern mississippi, eastern louisiana, yeah, those are the areas that really need to watch right now. and of course, new orleans still fresh the memory of katrina seven years ago, almost to the date, which is kind of spooky, really. this afternoon and on into early tomorrow morning, it goes up to category 1, maybe 80 miles an hour. but has a chance to strengthen a

little bit more by the time it makes landfall. and then comes in as we head through the day on wednesday, could actually get up to 90 or 95 miles an hour. not a katrina-size storm, but still enough to cause some damage here, particularly with coastal flooding and a lot of rain and maybe some pretty gusty wind damage as well. guys, back to you. kelly, i think i'm tossing back to you. >> you are. jeff, thanks very much. chilling to look at the path of that storm again. the airlines are scrambling to cancel flights in the wake of tropical storm isaac's ever-changing path, phil lebeau joins us from the united control center in chicago as united is holding its latest meeting, determining its latest round of cancellations. phil? >> and right now, there are about 20 flight operation leaders here at the united operations center looking at the latest forecast for isaac in terms of what might happen, what they might do with their flights. let's bring you up to speed in terms of what the airline industry as a whole has done over the last couple of days

when it comes to canceling flights down in the gulf region. 235 flights canceled today. 857 were canceled yesterday. miami and ft. lauderdale bore the brunt of the problems yesterday. they are now operating but on a slightly limited schedule this morning. decision regarding what happens with flights in and out of new orleans, that's expected tonight from many of the airlines, including here at the united operations center. by the way, they canceled 26 flights down in the gulf region. as i mentioned, about 20 of these executives are discussing what their next step will be. and they'll make that announcement probably here in the next couple of hours. carl, back to you. >> amazing how little we know about its path even as it's so far along into the gulf. thanks, phil. phil lebeau at united. as isaac's latest path has it barreling toward the gulf coast, want to go to our scott cohen who joins us from gulf shores, alabama, as preparations there begin. scott, good morning once again. >> reporter: good morning, carl. the last time a hurricane made

landfall on the gulf coast was in 2008, hurricane ike, another "i" hurricane. if you don't remember it, it was because it was the same weekend that lehman failed. it was the depths of the financial crisis. but i can tell you, having lived through that storm, it was not fun. this, as you heard from the weather channel, is not -- appears not to be as strong of a storm, likely to be a category 1 when it makes landfall. nonetheless, people along the gulf coast are taking it seriously, particularly after the hurricane warnings went up from the florida panhandle all the way to louisiana yesterday. that set off somewhat of a flurry of activity in supermarkets, in gas stations as people began to stock up supplies just in case the worst thing happens. and as we know, the forecast continues to push this storm further and further to the west toward more of the population centers. so that could be an issue, particularly if it picks up more strength. the broader impact, though, is already being felt. remember, they shut down a lot of oil and natural gas

production ahead of this as a precaution. 45% of u.s. oil production takes place offshore in the gulf of mexico. and right now, at least as of yesterday, according to the government, 22% of the oil production is shut down offshore and 8% of the natural gas production, as well as the drilling and exploration. we heard from transocean which is evacuating drilling platforms now in the gulf. so work tends to cease as the storm passes. and because going into this weekend, a lot of people thought that the storm was going to skirt the big production areas in the gulf, prices were actually down. so that's why we saw prices come up on the exchanges beginning last night and into today. and we're seeing scenes repeated across the gulf coast, people stocking up on gasoline. they're worried about, of course, the short-term shortages if there are stations that run out and if prices go up and power goes out. but as i said, they're taking it

seriously here, even though right now, i guess it's a breezy day at the beach. but we know we're going to pay for this down the road. >> enjoy it while you can, scott. it's going to get awfully interesting. thanks so much, scott cohen in gulf shores. when we come back with the shanghai composite sitting at post-'09 lows, is the china slowdown about to intensify and will we see more stimulus from their country's central bank. we'll explore what's at stake for the global economy and your money when "squawk on the street" comes right back. we're sitting on a bunch of shale gas. there's natural gas under my town. it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy. at chevron, if we can't do it right, we won't do it at all. we've got to think long term. we've got to think long term. ♪

a passionate belief, and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch.

one hour into the trading session, here are the stories we're squawking about. it's 7:30 west coast time, 10r 30 here on wall street. shares of kenexa soaring as they agreed to be acquired by ibm for $1.3 billion, $46 a share in cash. best buy shares up almost 7%. announcing it has agreed to let richard schultz have access to due diligence information as well as permission to form an investment group with private equity investors. he's looking to acquire best buy and take it private. and jm smucker known for its jam

and jelly are hitting new all-time highs today. and courtney reagan's back at headquarters with a market flash. >> welcome back to this side of the pond, kelly. a quick market flash for you. take a look at shares of idenix. shares were down as much as 24%. we are steadily coming back from 6%. >> courtney, thanks so much. the economic slowdown in china impacting some stocks. the shanghai index at three-year lows. is a hard landing ahead for china? john rutledge joins us in a moment from san jose on the phone one more data point we got this morning was about industrial profits and after all

the weak data we've seen in china and some of the recent attempts to soften policy, the question is whether or not china is in the danger zone, so to speak. i saw one headline this morning suggesting that this is really it. we're really in it. >> what's interesting is that the shanghai continues to make new lows, suggesting the weakness we're seeing still isn't priced in. there are concerns about how much that reflects just domestic buying versus the real strength of china's macro picture. but you would imagine at some point we're going to have to price in the weakness and we're not there yet. >> what's interesting about john rutledge is he doesn't believe you should buy stocks in china but plays in companies outside. he doesn't believe there's the institutional protection that people should have. >> did you see the story over the weekend about the bridge that collapsed, was built nine months ago and collapsed for no good apparent reason in one of the cities that was one of the main beneficiaries of so-called stimulus, raising questions about the quality of their

infrastructure and -- >> meanwhile the economist has come out with its see no dependency index. is now the time to reverse that strategy? >> let's bring john in. john, good morning to you. >> good morning, carl. >> with regards to china, how bad is it now? >> medium bad. but the interesting story to me is that china goes up and down a little bit and the foreign investors, most of whom have never been there, run for the hills or else buy everything in sight. so 80% of the swings in the market, the volatility in the prices, are because investors really aren't underneath the numbers there. the fact is, policy in china is a heavy-handed instrument. last year, they whacked it pretty hard to slow down the real estate bubble. infrastructure spending ended, the economy took a real dip. but now infrastructure spending's back up again. the trick is that infrastructure

spending is done by state-owned big companies. they're not covered very well in the hsbc index. they are the core of the official index which comes out later. and that strength is probably going to be out in about a week. we'll see that. but right now, investors are spooked about china. it will probably grow 8%-ish for the year still. but this is not a time to own chinese stocks and it's not a time at the moment to own the stocks of the banks. >> even for chinese investors who aren't invested in chinese stocks but have an interest in how china performs given their role until global economy, you don't think the central bank is behind the curve and even if they are, they can hit the pedal to the metal to the extent that it will help? >> central bank policy in china works a little differently than it does here. the interest rate itself is not very important to determine spending. spending is determined by the

beijing officials calling up the heads of the big banks and saying, we would like you to loan more money, please. there's more administrative controls. that started happening. but basically the big up in china is the infrastructure spending increase and residential real estate has bottomed and is heading north again. the down-tug is the industrial value added numbers. and as you said, the profit numbers, because prices in china are falling faster than materials cost, which means margins are squeezed and profits are down. >> so, john, where does that leave us on commodities and the demand component that you get from china? >> i think at the moment, the market -- the commodity markets are going to be quite soft because of both the softness in china but more importantly, the western investor fears about hard landing in china. and we can see that in the prices and the commodity markets but also in the earnings numbers

from the bhps and freeport-mcmorans and rio tintos and the like coming up. if you compare it against some of the local stocks in china, by which i mean retail action in china, listed outside, so yum! brands, for example, they're showing strong gains in sales and strong profits. this is really an industrial-heavy story now. the weakness now. >> that's true. but i wonder if longer term the consumer story is one to bet on. what happens in the interim as we continue to see people perhaps squeezed a little bit by some of these forces you mentioned? >> incomes in china actually are growing quite strongly. in the cities, they're growing about 10% a year. in the countryside, they're growing 12% a year. and that income growth is feeding an increase in consumer spending. so the consumer spending picture in china is really pretty good. the export manufacturing is not so good. and the private industry which relies on banks for financing is not so good.

that's why the hsbc report is so soft because it covers those small private companies called smes in china. they're the heart of the weakness now in southern china. >> you mention s&ps being one component of the weakness. does this mean until european demand recovers, that they're going to continue to be in a hard place? >> well, exports, of course, are important for china, especially important for southern china where a lot of the assembly is done for re-export back to the west. but the fact is, so far this year, net exports have actually made a contribution to chinese gdp of less than zero, which means that if the first-half growth was 7.8%, the part of it was that was made at home was 8.3% and minus .5% was net exports. net exports have not been driving the chinese economy. it's infrastructure and

residential real estate. but the weakness on exports is hurting china s hurting the commodity markets and is going to remain. i don't really feel very optimistic about europe at all. and the u.s. is not doing that great right now. so china's really pulling its own wagon at the moment. >> fascinating insight, john. always good to have you. welcome back. thanks again. >> thank you. >> john rutledge. up next, it's a changing of the guard at vmware. a total stock market darling. we'll cheikh speak to both the company's outgoing and incoming ceos right after the break. my volt is the best vehicle i've ever driven.

i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station. it's pretty great. i get a bunch of kids waving at me... giving me the thumbs up. it's always a gratifying experience. it makes me feel good about my car. i absolutely love my chevy volt. ♪ we create easy-to-use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading. so we built it. chances of making this? it's a lot easier to find out if a trade is potentially profitable. just use our trade & probability calculator

and there it is. for all the reasons you trade options - from income to risk management to diversification - you'll have the tools to get it done. strategies. chains. positions. we put 'em all on one screen! could we make placing a trade any easier? mmmm...could we? around here, options are everything. yes mom, i'll place a long call to you tomorrow. i promise. open an account today and get a free 13-month eibd™ subscription when you call 1-888-280-0154 now. optionsxpress by charles schwab. ♪ a deal within the cloud space this morning with ibm buying kenexa for $46 a share. and over at another cloud play,

vmware, it's a changing of the guard as the software firm looks to profit from riding the cloud. joining us now from vmware's annual global conference for a cnbc exclusive interview are both the incoming and outgoing ceos. paul maritz is vmware's ceo and pat gelsinger is the company's incoming ceo. and our own jon fortt is with them. jon? >> thanks, guys. i want to start off with paul. it was a surprise announcement, surprise to me, about a month ago. tell me, was this your last ceo job that you're leaving at vmware or might there be another company in your future? >> i've learned the hard way to never say never. but i'm looking forward to taking this opportunity to take a step backwards and looking at some of the deeper trends running through our industry. and i was fortunate to have a great colleague and friend in pat to hand over my baby to in the form of vmware. >> so let's talk about that.

emc, biggest stakeholder in vmware. pat, you're coming from emc, previously from intel. interesting acquisition made recently in the networking space. how big a part of vmware's future do you expect that to be? >> well, the bigger picture is what we call the software define data center. do what vmware did to compute a memory to the rest of the data center. networking security and storage and availability are two of those critical pieces for us to extend our position to. the acquisition is an essential ingredient to that strategy with regards to networking and security. it's going to be an exciting few years in front of us. >> let's move on to what you're going to be talking about here at vm world. big announcement today about exactly that, broadening out your influence over the data center. what are the high points people want to take away from this, as far as vmware's growth in the

future, what the implications are? >> the first one is the software define data center, the first embodiment of that is what we call the v-voud suite, bringing in the pieces to deliver that. this is the first release of that integrated suite for cloud computing. but our customers say it's not just the technology, how do you operate it? we're announcing the v-cloud ops forum as well. these are the instructions, this is how to organize in the cloud world, versus the i.t. infrastructure of the past. and finally, a set of announcements about a multicloud world. as much as we're working toward standardizing vmware for all i.t., we realize there are multiple clouds like amazon and physical. and we're extending our export to those multicloud environments as well. >> i heard you guys are supporting open stack through nisera.

based on what we saw last week with dell and hp earnings, particularly hp talked about global slowdown in demand, enterprise orders getting pushed out, is that just a hardware issue or are seeing hesitation based on the macro environment globally? >> two trends are playing out. there's still a lot of nervousness out there. people are wondering what europe will do to global demand. on the other hand, companies realize that they can't just stay still. they have to continue to transform their i.t. capabilities because that's going to be the key to their competitiveness in the future. we still see demand in spending as companies look forward and try to transform their i.t. operations. and we're continuing to benefit from that. >> i wanted to ask you about apple/samsung. both of you at one point worked at intel. paul, you were at microsoft. you've got some experience clearly in i.t. in general but

also in client. what do you think this sort of decision means, if anything, for i.t. in general, as far as the intellectual property environment, demand going forward, how companies react? >> well, i think it means that it doesn't mean a lot in the long term. i think there could be some short-term disruption here. but generally people have found ways to work around these issues. >> okay. >> for samsung, you mean, short-term disruption? >> samsung and the whole android community. i think in the long run, we're still going to see healthy competition in the device space. this is really about the client devices. it doesn't really affect the broader cloud environment which will continue to evolve very rapidly. >> pat, your thoughts? >> well, being in many lawsuits, i'm enjoying being on the sidelines of watching the to and fro of this one myself. but for the long term, as paul said, it's a competitive

environment, clearly the importance of intellectual property has been reevidenced yet again. and for us, we just want more devices to hook up to our infrastructure. >> to both of you, congratulations. outgoing and incoming ceos of vmware. thanks for being with us. kel kelly, back to you. >> thanks very much for that. still to come, aol chairman and ceo tim armstrong joins us live with more on the company's special dividend and its $600 million stock buyback. but first, rick santelli, what are you working on for the next hour of "squawk on the street"? >> swiss psychologist did much work in the 20th century regarding aadaption. i've seen a new word to describe quantitative easing. what is it? you have to tune in top of the hour to find out.

still to come on "squawk on the street," from this hotel basement, we're going to take you inside one of the most exclusive, one of the most difficult clubs to get into in manhattan. and that's even after you've navigated the garbage. we're sitting on a bunch of shale gas. there's natural gas under my town. it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy.

at chevron, if we can't do it right, we won't do it at all. we've got to think long term. we've got to think long term. ♪

♪ new york's hospitality industry is counting down to fashion week in ten days. for hotels and bars the launch events and afterparties of fashion week are potentially crucial business opportunities. if venues can establish a reputation for atmosphere or design the payback can be permanently higher profits in the years to come. michael lyndin -- big hotel owny scott gerber to come in. scott's stonerose lounge has been chosen as the main party venue. before we talk about fashion week, why do the big hotels pay you to come on to their premises? what can you do in driving food

and bevage sales they can't? >> the big hotels have figured out they're really good at putting people in the beds. when it comes to food and beverage they're just not as focused as we can be. by focusing on that business we've been very successful at bringing in great clientele, producing great revenues and really being a great amenity to the hotel guest choosing that hotel often over another one because of the food and beverage choosings. >> michael, this is your fifth hotel in eight years with dream. what's the playbook to successfully launching a hotel that will be considered hit and therefore can generate higher margins? >> i think attention. you want to have a sustained campaign in the medium. the observer named dream downtown, the hotel that never stopped opening. we attract mark jacobs, beyonce, groups and corporations that know how to operate in the media. a sustained media campaign and attention. >> one of the things you do is you say no a lot. you took us to see the electric room. we went back through the -- the

delivery bay at the back of the hotel past the bar gaj and into a place that actually more often than not you won't allow people into. it has one of the strictest door codes in manhattan, you claim. >> we have a modicum of exclusivity. guests expect that. new yorkers expect that as well. for us lifestyle hotels should interact with the local community. there are new yorkers at our hotel. we're not doing anything different than a lot of people in the industry. we're just doing it extremely well. >> scott, it's shocking meantime if you realize how many big hotels in a city like manhattan don't actually make money. a lot of big hotels run at a loss because of the money they have to give the management companies to have a marriott brand, whatever, because of the buildings, nature of the buildings and because of the unionization of some of the work forces in a city like manhattan. how do you approach that? >> when we're in hotels that are union, we obviously sign on to a collective bargaining agreement. the union wages are very, very expensive. to give you an example the bartenders are categorized as

nontipped employees. they're getting paid $28 an hour. that's only part of the cost to the employer. that's another $15 on top of that that's benefits. it becomes very, very expensive. in addition to which what each position can do, a bartender can only make the drink and serve you the drink. it takes somebody else to clear the grass. it becomes very expensive. we've been successful in those businesses but our margins are obviously a lot less than if we don't have to be union. >> presumably you have to run them in a very different way. >> we do. >> i just decided i'm going to bar tending school. that's an amazing deal. have you gotten any clues that the major chains are aware of the trend, investing in the trend that you're trailblazing? >> i think so. what you're seeing now believe it or not, a lot of the hotels especially in a place like new york are not even doing restaurants. it's prohibitively expensive. somebody visiting new york can go to any restaurant across the street, anywhere else. they're finding it's not that necessary.

what we're doing a lot are doing bars that are offering food. if you come in at 10:00 one night you can grab a hamburger. you don't have the hotel staff sitting there waiting for the one person to have the hamburger and losing 2, 3, $4 million a year. >> what markets outside new york? >> markets like an francisco is very, very similar. wages are prohibitively expensive. they're trying to figure out ways to minimize losses while providing four star experience. >> we had diaggio friday. a number of americans are graduating from beer to spirits. does that mean better margins? is that a bit better markup? >> for us it is. most probably 70% of our business is in spirits. 15% beer. 15% wine. the margins are spirits are tremendous. >> michael, i know you won't

tell us what you're hosting for fashion week. that's the nature of what you do. it is very important for you clearly. >> absolutely, yes. again, there's a lot of coverage on fashion week. we need to be -- there's a lot of saturation in the market for night life. we need to be doing the most high profile events. just, for example, last year we hosted victoria secret's fashion show after party. >> do you chase all year to get hold of these one or two events? >> you want to be in the position of answering the phone when it rings. certainly we're aggressive to try and get those events. we work on our prices a little bit to make sure -- >> are they loss leaders for you? >> they're not loss leaders, no. they're not loss leaders. when you include the soft -- what you get back on soft dollars and media coverage, they're not loss leaders. >> what about drake and chris brown. the throwdown fight. >> that's a loss leader. that's a deal killer. that's not what you want. that's exactly what you don't

want. that place is out of business now. can't do that. >> it is attention. >> that's bad media. >> there is some bad publicity. >> agreed. we've come to tehe end of or time. good luck. the republican national convention is kicking off tomorrow. we'll sort through the issues on deck, give you a taste of the gop agenda with the president of americans for tax reform. yes, grover norquist. at bank of america, we're continuing to lend and invest 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. and we're proud to work with all of those who are creating a stronger future for everyone. exclusive to the military,

and commitment is not limited to one's military oath. the same set of values that drive our nation's military are the ones we used to build usaa bank. with our award winning apps that allow you to transfer funds, pay bills or manage your finances anywhere, anytime. so that wherever your duty takes you, usaa bank goes with you. visit us online to learn what makes our bank so different. to dabble with the idea of hybrid technology, it's already engrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. looking for a better place to put your cash? here's one you may not have thought of -- fidelity.

now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity.

welcome to hour three of "squawk on the street." here's what's happening so far. >> the president of the united states, the leader of this nation, puts forward plans to unserious not a member of his own party would give it a vote. we've got some serious problems, but we got a chance to turn that around this november. the pick of ryan cements the fact that the president, governor romney, is going to take on the tough issues that this nation needs to deal with. ibm to acquire kenexa. add that on top of dollar thrifty and hertz. >> merger monday. >> yeah. the "time"s today with a big piece about how back to school

is not exactly shaping up to be gang busters. kids only want what's exceptionally cool. >> guess what's different. what's exceptionally cool are the i pods, i pads. there's more of a desire to buy those damagadgets. that's crowding out some of the other spend. earnings were lighter than expected, lighter than street numbers. sales did decline. it could have been a lot worse. the market's basically saying we're probably now through the most difficult time for tiffany. still not out of the woods. there's light at the end of the tunnel here. from apple's standpoint, you know, clearly a positive opportunity. particularly to the degree it impacts samsung's ability to ship into the u.s. good monday morning here live on post nine at the new york stock exchange. check of the markets on a monday. typical monday fashion, the markets cannot seem to get out of their way. the last up monday for the dow

was may 21st, if you can believe that. we're down 12 of 13 mondays. we'll see how today ends. we're down about 25 points. s&p roughly flat. google stock slumping today on some concerns over the future growth of the android martphone after the apple/samsung verdict. best buy one of the biggest gainers on the s&p. the company announcing it's reached an agreement with founder richard schultz that allows him to conduct certain due diligence on the company in preparation for a possible sale. road map this morning, apple as we said emerging victorious against samsung pushing the stock to a new all-time high. we're going to talk to two attorneys and get their take on the case and look ahead at what could be coming in any samsung apeoples. tropical storm isaac targeting the gulf coast threatening oil production in the area. what it means for gas prices in the near term. the man who some say drives the gop's fiscal policy. president of americans for tax reform, grover norquist will join us live from the rnc in tampa to talk all things taxes. aol getting a boost as the

company announces a special dividend. chairman and ceo tim armstrong will join us live to tell us more. all that and more coming up in the next hour. we'll start with apple, though. scored a major victory in its patent infridgement lawsuit with samsung. jury awarding apple $1 billion in damages. samsung has filed an appeal. christopher is a patent tornado at mcandrews. joining us on the cnbc newsline is nick rodelli. tornado and adviser to institutional investors. both gentlemen have followed the case closely. good morning. >> good morning. >> christopher, i'm interested in your reaction when you first heard the verdict. landmark decision or not? >> it definitely is. it was live on the television last week on friday when it came down. and it was an exciting moment. this is a sweeping victory for apple, the jury verdict form. not only a vindication for

apple's intellectual property portfolio, but also a large victory for designers and design rights in general. >> how many generations till we start seeing designs that now have to look different than apple's? >> i would expect in about one to two cycles, product cycles, that we'll start seeing new products come out. that's sort of the exciting news about this decision. for a long time now parties with respect to smartphones and tablets have basically huddled around a particular looking design. i think this particular judgment is going to force parties to go back to the drawing board and come up with uniquely different and appealing looking designs. i'm highly confident that this will be done. it's just a matter of the business folk loosening up and providing some creative license to the industrial designers at the particular companies. >> yeah. nick, fascinating, too, that this panel which had some jurors who had some technical backgrounds found so much in apple's favor. not just on the engineering, the utility, but the design.

do you think they were in the right in both cases? >> look, carl. our objective is necessarily to call it right but to guide investors through the process and what's to come. i think here what's -- what's remarkable among many things is that this is a jury from a venue that historically is somewhat i.t. skeptical. you had on this jury several engineers. and this was not a jury that punched the teicket along party lines. they went through and differentiated among different types of claims. they obviously split the difference on damages. >> you think samsung gets tripled? >> excuse me? >> you think samsung will have to pay triple damages implying willful intent? >> well, a large measure of that will be within the discretion of judge coe.

both with respect to an element of willful infringement that she will have the discretion to decide and also the amount. you know, she can do anything up to three times. but she need not do that. so she could come to a lower number. >> christopher, meantime, we're seeing some names like rim and nokia today, companies with patents trade a little bit higher. does this whole thing feed some m & a. do companies like that have a window here? >> i think it could even be the silver lining for samsung in this particular instance. remember, samsung a prolific user of the design rights system in the united states along with apple. last year samsung was awarded the most amount of design patents of any company. the sort of silver lining here is this surge to fortify and strengthen am sung's intellectual property portfolio but also other competitors who have been savvy enough to invest in their design. >> unbelievable. this thing has gotten personal.

what a dramatic verdict on friday night. thanks so much. appreciate your time. talking a little apple, samsung. capital markets editor gary kaminsky setting the game plan scenario for once we get through labor day and markets reawaken. happy monday. >> coming to you from pcr 1 where all the fun is here behind me. i thought we'd have fun this week. if you manage money, when you go back to work next tuesday ass e assuming you're on vacation, you probably are this week, you do just what everybody that goes back to school and has kids that go back to school. you kind of think about what it is and refresh for the end of the year. what i wanted to do this weekend was i asked a legendary money manager, give me sort of the six templates that you're going to fe k focus on with your team when you sit them down next week, probably tuesday 11:00 a.m. give everybody time to get back to the office. these are the topics. u.s. elections. ecb. what happened this next weekend with bernanke, jackson hole. what are the revenue estimates

out there for the third quarter in terms of the final reports. the volume in stocks. was it a nonconfirmation this past summer? most interestingly, gold and silver. what's happened the last couple of weeks and what does that mean in terms of inflation and thus interest rates. this is where we're going to have some fun. you know what i think about a lot of these wall street strategies. in fact, many of you viewers know more about what's going to happen with equities than these strategists. but these strategists will be reporting back to all of you and telling all those that manage money next week, these are the factors that they think will drive the equity markets the rest of the year. this is what i'm going to ask people to do. take a look at these six ideas. then i want you to tweet back to us on the "squawk on the street" twitter handle, which i will be checking out this week, or if you want to e-mail me directly we're going to come back friday and tell people what the viewers think is the major factor in terms of what is going to move the equity markets the rest of this year.

i'll tell you this based on experience. come tuesday probably into wednesday and thursday you will make a determination of how you want to position the portfolio. the stocks that'll win and the stocks that'll lose the rest of the year as a result of that will be what people do next week. because they'll set the positioning. then they'll let it ride for the rest of the year. >> you want to lead us to one or two of the possibilities you think are most likely? >> i'm not going to say anything. >> all right. >> until friday. i know what i think. because i think our viewers know a lot more than these guys do. i think, again, let us know which of those six topics you think will be the driving factor of the equity markets the rest of this year. i'm going to tell you when we report this on friday, driving into next tuesday, we're going to give these people an opportunity to set portfolios up the right way. >> friday will be important for other reasons, too, which we'll talk about later. cme group, rick santelli. looking at some long-term effects of qe. >> indeed, there is another name for qe. and we'll get to that momentarily.

one of the great things about the human race is they can assimilate and accommodate. we talked about the swiss psychologist in the 1930s, the 1960s, really doing a lot of work here. what it simply means is that we're very adaptable as humans. i think quantitative easing fits into that. it's something that really doesn't seem like it's the answer for problems, printing more money, printing more debt, creating debt to solve a debt problem. nonetheless, we've come very familiar with it. as a matter of fact, in the "wall street journal" today there was an article talking about exactly that topic. now, today, we had a gentleman on who in canada, when he talks, commodity traders listen. rick rule is his name. he said something interesting today. let's listen to rick rule. >> there's been no shortage of cash in the system. but one wonders if this economy is based on lick kwidty whether building an economy on what is, in fact, counterfeiting is very

good for the economy in the long term. >> now you know the word. counterfeiting. i'll tell you, it really struck me when i heard rick rule on squawk box today use that word. because on section a8 in the "wall street journal," angela merkel cautious on criticism of greece, she specifically on ard television sunday night in germany talked about this topic with reference to a bavarian conservative politician. liking the bond buying by the ecb to counterfeiting. so i ask you, it is counterintuitive that by printing more of these, we're going to take care of a problem created by printing too many of these. but nonetheless whether it's bund -- there's a lot of people that think the medicine of quantitative easing is addictive and a bit dangerous. just now add counterfeit to that long list. it might feel comfortable to us.

but not everybody is going to accommodate that type of strategy. back to you. >> interesting parallel. of course, every counterfeiter will tell you that their very activity implies there is a market for those counterfeited goods. which i imagine you'd agree with. thanks, rick. rick santelli in chicago. back to hq check in with courtney reagan for a market plash. >> there's been an unfortunate explosion at a refinery in venezuela. the country's largest. however, we are seeing subsequent ripple effects here for some of our u.s. refiners. valero, marathon and philips 66 all bid higher today because these gulf refineries are going to be the ones making up a difference getting it down to south america. back to you. when we come back, tropical storm isaac getting closer and closer to the gulf, threatening the coast almost seven years to the day after hurricane katrina. we'll get an update on the storm and see how the region is preparing. plus, what could it mean for fuel prices? we're back after a quick break. [ male announcer ] at scottrade,

we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade. it's another reason more investors are saying... well another great thing about all this walking i've been doing is

that it's given me time to reflect on some of life's biggest questions. like, if you could save hundreds on car insurance by making one simple call, why wouldn't you make that call? see, the only thing i can think of is that you can't get any... bars. ah, that's better. it's a beautiful view. i wonder if i can see mt. rushmore from here. geico. fifteen minutes could save you fifteen percent or more on car insurance.

tropical storm isaac bearing down on the gulf coast. scott, interestingly, we've got crude off a dollar. a lot of those has traders thinking this is going to be so bad it almost has to mean some release of the spr. >> reporter: that's exactly part of it, carl. there's a lot of cross currents going on as far as the oil markets. the traders went home on friday thinking this was probably going to be a nonevent so they were bidding prices down. then it looked over the weekend like it was going to track into the refining areas. and the production areas as well. we are seeing in the neighborhood of about 1 million barrels a day of refining capacity already shut down. you would think, supply and demand, that would be a problem. here's what's going on. sharon epperson wrote a post about this which will be up shortly on cnbc.com.

there's talk about releasing oil from the strategic oil reserve. with the fire in venezuela that could be just the reason or excuse depending on how you look at it that the administration needs. also as far as refining capacity the u.s. now is a net exporter of gasoline and refined products. and so we have a little bit of room to -- a little bit of wiggle room here if refining capacity is disrupted. so that may explain why the prices are shut down. but, nonetheless, in the 11:00 eastern advisory from the national hurricane center, there is still about a 500-mile disparity between the computer models about where this storm is going to hit along the coast. hurricane warnings still posted along the northern gulf coast. and preparations are well under way across this wide swath. and also in new orleans where it is not escaping anyone that if this storm hits on wednesday, it will be august 29th.

>> the timing of this storm coming on as fate would have it the anniversary of katrina has everybody in a sense of alertness. that is a good thing. >> reporter: and the hope is that it gets them alert, but maybe alert for naught. that is the hope. the other thing the national hurricane center said in its last advisory is that as this storm gets closer to the friction with the gulf, with land, that it could create some more activity on the northeast quadrant of the storm, the dirty side of the storm, which is probably east of new orleans, mississippi and here in alabama. we're certainly watching for that. as you can see, if you've been watching us all morning, the conditions already starting to deteriorate even though the storm is still hundreds of miles away. carl. >> scott, 500 mimles. hard to tell where it's going to go. gulf shores, alabama. straight ahead, we'll catch you up to the close in europe. a little more than ten minutes to go.

interesting week setting up there as well with not just bernanke speaking at jackson hole on friday, but draghi as well. back after a short break. i don't spend money on gasoline.

i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ tdd#: 1-800-345-2550 hours can go by before i realize tdd#: 1-800-345-2550 that i haven't even looked away from my screen. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 that kind of focus... tdd#: 1-800-345-2550 that's what i have when i trade. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 ...helps me keep an eye on what's really important to me.

tdd#: 1-800-345-2550 it's packed with tools that help me work my strategies, tdd#: 1-800-345-2550 spot patterns and find opportunities more easily. tdd#: 1-800-345-2550 then, when i'm ready... act decisively. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 with the exact same tools, the exact same way. tdd#: 1-800-345-2550 and the reality is, with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 ...until i choose to focus on something else. tdd#: 1-800-345-2550 trade at schwab for $8.95 a trade. tdd#: 1-800-345-2550 open an account and trade tdd#: 1-800-345-2550 up to 6 months commission-free online equity trading tdd#: 1-800-345-2550 with a $50,000 deposit. tdd#: 1-800-345-2550 call 1-877-994-7694 tdd#: 1-800-345-2550 and a trading specialist tdd#: 1-800-345-2550 will help you get started today.

let's get to rick santelli in chicago talking some crops. >> my guest today, affectiona affectionately known on the floor as uncle frank from futures path. it isn't only the usda that does crop inspections and tours which happens right around this time of the year. you get much better information, of course. pro farmer is a well respected private organization that did just that on friday. before i let you talk about their findings, one of their findings i found interesting was, is if you looked at the aggregate age, average age of all these people on tour for pro farmer on friday, it was about 20 to 22 years younger than previous tours. frank, i was kind of shocked by that. what do you think that means? >> i think one of the things

we're looking at, you know, there's a lot of older farmers out there. one of our worries, of course, there's not a lot of younger farmers coming up behind them. i think that's one of the things that's telling us, rick. >> we just looked it up. less than 1% of the population claiming farming as an occupation. we don't want to lose too many. let's get to point. what did they find on the pro farmer tour with regard to the farming, corn? >> we've got less. as expected in here. we're all looking for a small crop to get smaller. that's exactly what happened. corn yields, the usda told us about 124. profarmers down at 120. >> no great chase. >> down about 1% on the corn. we went from a crop size of 10.77 down to 10.47. >> was there anything surprising and new and interesting in pro farmer? >> the soybeans, really. >> soybeans? i see beans right now. if we can put up a chart i see the contract for nov.

i see 17.60 up there. that should be a new contract high but it's lower. what happened friday? >> a lot of this was into the market. on the beans we're 2% less there. the thing about beans is they're still in a growing situation, you know. they're still maturing right now. we've got wiggle room on this production number with the beans whereas we don't really have that in the corn. again, it's not a big number. we really have a pretty good idea on crop size right now. soybeans did get up to new contract highs, up to 17.60, but we're really not advancing much from here at this point. we're back down trading in the 17.20s now. i think we're probably looking at the next crop report for any more clarity. that's up september 12th. >> if i was to recommend in our final 20 seconds here, is this now time that you're going to see a strategy shift from being long corn on the spread to maybe short corn, long beans? is that a spread you'd recommend? >> i don't know about i'd want

to be short any of these products at the present time. i tell you who is going to want to look to be short. we've got a lot of producers out here. we just started harvest. we're going to have 10 billion bushels of corn. we've got producers searching for selling opportunities for this crop. not only with the corn products but as well with soybeans. >> thanks, frank lesh. back to you, carl. we're going to get the bells across europe in a few moments. we'll get that close and all the details on the impact here this afternoon. plus, the chairman and ceo of aol tim armstrong will join us live. talk about the company's special dividend and the $600 million buyback after the break. you know why i sell tools? tools are uncomplicated. nothing complicated about a pair of 10 inch hose clamp pliers. you know what's complicated? shipping. shipping's complicated. not really. with priority mail flat rate boxes from the postal service shipping's easy. if it fits, it ships anywhere in the country for a low flat rate. that's not complicated. no. come on. how about... a handshake. alright.

priority mail flat rate boxes. starting at just $5.15. only from the postal service. with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.

bring in simon hobbs. count you down to the close in the uk. actually not the uk. they have a banking holiday. >> today is a public holiday in the uk. we talk about europe a lot. occasionally you come across something that really sums up what's happening there in a way that you otherwise might struggle to. today the head of unilever for europe said they are now in europe going to import some of the packaging ideas, i.e. cheaper packaging, small eer portions, they've actually pioneered in indonesia because the poverty in certain parts of europe is becoming so bad. the argument he made is if you have a spanish shopper who has 17 euros to spend on a trip, there's no point in trying to sell him a washing powder that costs half of that 17 euros. that in many senses says it all.

today is a relatively quiet day in europe. which is why i took the time to tell you that story. london is not trading. so much volume still originates from london. here we go. >> the european markets are closing now. >> you'll see actually it's relatively positive. we gained during the course of the session. one main reason for that, actually. the chicago fed president had some comments in hong kong where he's talking about the need for more qe here in the united states. of course, you have ben bernanke speaking on friday and a big focus on that. also because german business sentiment, the ifo survey, fell again today for the fourth month. there's a suggestion now that what's happening in europe more broadly is so affecting the german industry that it actually may push the germans to be more flexible with the rest of europe in an attempt to boost growth. we saw the banks rising higher today. i must mention nokia before we go any further. this stock has obviously done well in the wake of the apple/samsung ruling on friday

night. i believe, a, its phones with windows which are launched next week may be able to make further headway against androids if those androids have problems coming to market. also because of, of course, the imbedded value of the patents nokia holds. bear in mind nokia is still down the best part of 90% over a five-year track. some of the banks have done well around europe today. just drifting higher. it was notable earlier, though, we've seen some selling into that. in italy one of the big gainers. some of the french banks have done well today. worth noting obviously we've had some comments from the germans over the weekend. actually, angela merkel meets mario monti on wednesday. we had the french and german finance ministers meeting today. they say they're going to set up working groups to move toward suggestions for greater currency and fiscal union. of course, over the weekend angela merkel was trying to knock back some of those more vocal anti-greece proponents

within her own coalition. you also have the head of the bund bank saying bond buying was a drug people could get fixed on. you could still go forward with bond buying by the ecb with germany in the minority as it's happened all the way through. >> talking to kelly about this. potential for more tape bombs, quote, unquote, from europe this week? >> yeah. you're going to get more of that. there's obviously all the working committees within the ecb coming out with proposals. you can get that coming from anywhere at any time. they may be conflicting because no judgment will be made until the 6th. when the ecb meeting is held. and when merkel also meets the spanish prime minister the same day in madrid. >> see you on "power lunch." thanks a lot. working a long day. capital markets editor, gary kaminsky locking up the control room again. do not touch anything. >> we've got a little fight

behind us. one guy says somebody stole his paper, took the paper. we're getting great answers to that question earlier. hit me up again. gary.kaminskynbcuni.com. let us know. the six sort of topics i gave you, they weren't my topics, carl. those came from somebody who's running billions of dollars right now. i asked what are the six topics you're going to sort of debate next tuesday when you get together with your analysts and portfolio managers. i didn't put on there bond yields, obviously something i focus on, because that wasn't on his list. another thing not on the list was china which got a lot of conversation going certainly last week and over the weekend. take a look at the headline from the "wall street journal" on friday if you have it there. tip of the iceberg for china's banks. big story on friday. carl, you probably remember peter joined us, china expert back in the winter and spoke on this very topic. let's listen to what he had to say having just got back from a trip seeing a lot of his factories in china.

listen to what he said about the banks. >> i think they'll have to take bad -- you know, bad loan loss provisions on their books. how they'll report it i'm not quite sure. we've seen factories disappear now going into chinese new year. which is completely unusual. >> now, here's a little update from that. i've spoken to peter many times since that appearance. the business over there only got worse through much of the spring and into the summer. the factories continue to work in very small percentages of capacity. whether or not the banks are going to finally have to take these writedowns, i don't know. but i also don't believe that things just show up in the journal for some reason. i guess i've always believed as somebody who's read the journal too many years they put these stories in there for some reason, because somebody thames them to put them there, carl. i got to believe maybe the day of reckoning is coming where these banks finally start to mark to market. whether it's going to have an impact on the overall world markets, i don't know. but i wouldn't be surprised if we start to see these mark to markets actually get hit.

>> talk about contagion. we'll see if that can be contained. >> i'm going to go settle out this fight right now. because you're at the new york stock exchange every day, this is the kind of stuff you don't have to deal with at hq. >> you want to be more specific? >> we've got one guy over here behind me says this guy over here producing "power lunch" stole his newspaper. >> it's all in the name of journalism and competitive -- >> exactly. >> okay, good. >> exactly. not wanting to buy your own paper. i'm going to deal with it now. >> corporate darwinism. thanks a lot, gary. meanwhile, bob pisani is here on post nine i think taking aim at a long standing argument about the markets. >> yeah. equities, bad day in china. but it's been tough here in the united states. we've been hearing about the volume. we've been complaining about it. four-year lows in the volume. headlines, the death of equities. equities are not dead, folks. the baby boomers are definitely reducing their overall exposure. i talked to my friend and asked for data on this. it's pretty eye opening, what's been going on. put up some stats here.

i asked for numbers on pension fund allocations. in 2006 pension funds allocated 60% of their resources to the stock market. today it's 38%. an astonishing drop in six years from 60% to 38%. other ones, endowments. endowments got a lot of money in this country. 200648% of their assets in the stock market. today they have 33%. is that statistically significant? heck, yes. that's an enormous drop. we've been talking about mutual funds for a long time. take a look at what's been happening the last few years in mutual funds. since 2008, $442 billion has left equity mutual funds. is that a lot? right now about $5.5 trillion in mutual funds. we're talking about a drop just in the numbers that have been coming out of about 10% just in the last four years. no matter where you look pension funds, endowments, mutual funds, money has been coming out. most of this is because baby boomers have been reducing their

exposure. what have they been doing with this money? they're going into areas that are -- that are on the surface bond like but, in fact, more stock market like. put up something else here. i want to show you what's been going on with high yield funds. numbers here -- put up high yield funds. $212 billion in 2011 for high yield funds. in 2008 there was only $102 billion. the bottom line is money is pouring into high yield funds. that is a big problem because high yield funds are not bond funds. even though they might say that, they act like stock funds and track the stock market. that's a big, big problem. there's the numbers here. look at this. 50% increases in these numbers just in the last four years. that's where all of this money from the baby boomers is going. if you look at companies, etfs like the jnk, high yield etfs, they have had money pouring in here. this is what i'm telling you. these etfs, high yield etfs act

like stock funds. dropped 40% to 45% in 2008 just like the stock market. s&p dropped 50%. that's not a bond fund. that's exacting like a stock fund. these baby boomers are really more in stocks than anybody thinks. put up volume full screen. we've been complaining how lousy the covolume is. it's even a lousy year for options. why is this important? options business has been growing for years and yoors. every single year for nine years the volume has been up. finally, my friends over at the tab group are estimating the volume is going to decline 10% this year even in the options. interestingly, commissions are up. so there's fewer amounts of contracts that are being written. but they're charging more because they're more at risk at this point. so the guys who are actually out taking the risk are charging a little bit more. >> some of those stats from '06 to today, that's stunning. >> it's the boomers reducing their exposure. that's why the volume, that's why the volatility is lower right now. >> we'll see about your diamond

special a little later on. >> we're going to show you an 80 carat diamond ring. we want you to tell us exactly what you think that's worth. one of the most valuable die monds in the world. aol announcing this morning it will return $1.1 billion to shareholders through a special dividend. said it will repurchase $600 million in stock. aol's chairman and ceo tim armstrong joins us on the phone for a first on cnbc interview. tim, always good to have you. good morning to you. >> nice to talk to you again. >> there's an old school of thought that says if the company's returning dividends in a big way that maybe they're out of ideas in terms of how to reinvest it. why do this? >> first, carl, i think this is a continuation of, you know, aol is on plan and on strategy. and for us and our shareholders, we have basically said we are going to continue down a two track path. one was innovating aol for the long term. i think we are the leaders in kind of defining the content

space for the internet, which i expect to be the next hot space on the internet. two is for us to continue to return shareholder value. as we do that. so i think owners of aol and employees of aol get the benefit of a two-prong strategy which is working well. which is continue to reinvent the company and continue to reinvest with shareholders and give shareholders value back as we continue the comeback of aol. >> stock seems to like it. obviously the chart sure looks better than the alternative. where does this end? are you trying to buy investors' love? >> first, the investors we've had, we went to a proxy contest last year. i think you're seeing basically the reaction of our now sentiment being pos tiff. it's positive because we have a significant amount of long-term investors in aol that believe in the brand as a global brand. the marketplace we're in is one of the best industries in the world. i think as you've seen the improouchls operationally in the company combined with investor

improvements we've been doing on shareholder value i think you're going to see the company and our investors continue to add value over time. and i would say we have a long-term mentality at aol which will continue into the future. >> yeah. a lot of analysts have -- they seem to be trying to hedge their bets, tim. i mean, they see some metrics like display, domestic display, maybe lagging the industry. but, then again, revenues declining the lowest in seven years. when do you start catching up to some of those overall industry metrics? >> i think overall, you know, the company, we've been on an aggressive strategy to essentially move the company to growth areas of the market. when you look inside of our revenue, actually what you see is kind of the historical way of advertising done online has been declining. newer areas, project devil and video, some of the things we've been doing have been growing. i'd expect over time for those to be our fwrogrowth fuel for t future. we're happy with that. the aol services team on the historical business which most people wrote off, they've done a

great job. already mentioned our cfo is now going to be coo has done a great job with that business. when you start to look at the areas we've been investing in, things like patch, local product, and video, those are exciting things for the future. i think we've shown investors that we will make operational improvements. we've shown investors we're going to continue to return shareholder value. i'm the single largest individual shareholder in the company. i wouldn't have put my own money or time into this if i didn't think it was going to have a substantial outcome. that's what we're really aiming towards. >> yeah. last question, tim. i'm asking you here to take off your ceo hat maybe just put on your average stock trader hat. but why are names like zynga and facebook and groupon, why is social taking it on the chin so much? did they mismanage expectations? is there something structural about making money in social that maybe we don't understand yet? >> that's not my area of expertise. you know, one trend i do see online, though, which i think is

interesting, i think over a long period of time, you know, people want to use things that actually enhance their life and their interactions and those things. i think some of those companies you just mentioned do a good job of that. i also think there's a regression to basically what's really important to people in the world. i think when you look at the beginning of something like an ebay as an example, you know, 15 or 17 years ago, you know, people were staying up all night doing auctions and those type of things. over time they've included the buy it now button so you can have the same interaction must faster on an ebay. i think you're seeing that in the internet space where consumers are wanting to deal with a limited amount of services and use them a lot. but also have a really good interaction with those services both as content and commerce. i think over time those companies you mentioned are valuable companies. but i think it's going to take -- continue to take time for those marketplaces to get behind them. >> yeah. >> you know better than i would on what the valuations are. >> your point about ebay and the buy it now button, it's

interesting how our tastes change and companies have to follow it or die. >> yep. >> tim, good to talk to you. thanks for coming on. >> thanks, carl. talk to you soon. >> tim armstrong with aol. the republican national convention's kicking off tomorrow after a one-day delay thanks, of course, to tropical storm isaac. we're going to sort through all the big issues and what it means for taxes with grover norquist, after this break. [ male announcer ] while many automakers are just beginning to dabble with the idea of hybrid technology, it's already engrained in our dna. during the golden opportunity sales event,

get great values on some of our newest models. this is the pursuit of perfection. 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. and we're proud to work with all of those who are creating a stronger future for everyone.

with the fidelity stock screener, you can try strategies from independent experts and see what criteria they use. such as a 5% yield on dividend-paying stocks. then you can customize the strategies and narrow down to exactly those stocks you want to follow. i'm mark allen of fidelity investments. the expert strategies feature is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

welcome back. coming up next on the halftime report, as isaac takes aim at the gulf, is it time for you to get into the refiners? how to play the coming jump in gas prices. and what does apple's huge patent victory mean for smartphone players like google and nokia? a top analyst weighs in. bracing for a china bear market. we're going to show you the key indicator intending for a hard landing. coming up. the u.s. open is kicking off. the first round action is today in flushing meadows. while it's all about tennis this week, this last week one of the top stories maria sharapova launched a new candy business called sugar pova. a premium line of gummy candies. sharapova talked to us about

balancing business and tennis. >> in the last couple of years while i've been working on sugar pova it's been the time where i've came back to number one. in a way i see it as my lucky charm. now the work is done. it's out for the people to see. >> sharapova, of course, last won the u.s. open back in '06. ranked number three in the world. she's also the world's highest paid female athlete according to forbe's. she earned more than $27 million in the last year with about $22 million of it coming from endorsements. when we come back this morning, what if you could have more of a say in the price of diamonds like this 80 carat gem which is literally about a foot away from me? we're going to tell you how one man single handedly is trying to change the way the diamond industry works. we'll find out how when squa"sq on the street" comes back. gomer abigail higgins had...

...a tree that bore the most rare and magical fruit. which provided for their every financial need. and then, in one blinding blink of an eye, their tree had given its last. but with their raymond james financial advisor, they had prepared for even the unthinkable. and they danced. see what a raymond james advisor can do for you.

taxes and the fiscal cliff will be no doubt a conversation at this year's rnc that will hit full speed tomorrow. who best to talk about them than the person credited with driving the fiscal policy. grover norquist joins us this morning from tampa. welcome back. always good to talk to you. >> good to be with you. >> we were just talking this morning about why conventions aren't platforms to unveil new policy. someone cited mondale as one reason we don't do that anymore or at all. that said, is there something you would like there to be said during this week in tampa?

>> sure. i think you're quite correct. this is going to focus a lot on introducing governor romney, the man and his history and his resume and what he's accomplished. but it's going to also highlight the threat of $500 billion in tax increases on january 1st if president obama's re-elected. that's the lapsing of all the tax cuts. the alternative minimum tax which now hits 4 million people will in january hit 31 million families. the personal child tax credit disappears. rates all jump up. it's a massive tax increase unless the republicans win the house, senate and presidency and stop it. >> how does that dovetail, grover, with this mission the gop has this week of trying to identify with the average guy, the common voter? you mentioned some of these family tax credits. but a lot of these tax cuts are going to fall to people who make a lot more money. >> well, one of the challenges that obama has is that he

promised he wouldn't raise taxes on anyone who earned less than $250,000 a year. he broke that promise 16 days into his presidency when he taxed tobacco. average smoker, $40,000 a year income. there were eight different taxes on middle income people in obama care. the president's new promise which he's now said six times, starting in grand rapids august 8th, is that he won't raise your income taxes for a whole year. so value added tax is available. excise taxes are available. one year after he's re-elected, he's opened the door to raising income taxes on every single american. so we no longer have a president not -- promising not to tax low income people. the way he's spending, you know he will. >> grover, i know you've seen this poll asking people what they think about medicare and if they would be in favor of rising taxes to preserve benefits. a lot of americans are saying they would be in favor.

even those many years from collecting. your response to it? >> the good news is that you can ask people a question, but if you don't put numbers to it it's really not very meaningful. we have seen the american people do understand that both medicare and social security cannot continue. they're not sustainable at the present level. the tax rates would have to double in order to do anything like meet previous expectations. the advantage of ryan and romney's plan on medicare is that it changes nothing for people over 55, people who can't make changes in how they organize their lives. and does allow younger people to have different options and alternatives, including staying on the old system if you want one. the republicans by writing a plan down on medicare make it difficult for the democrats to do what they generally do every two and four years, which is to make up stories and say the republicans want to end medicare. they have to speak to a very well written bipartisan reform

that would be very helpful to younger people and doesn't threaten older people, which is why they're still losing among older voters. they're not making the traction they thought they would. >> finally you mentioned ryan. we're looking at some pictures of him here. you suggested he was so valuable to the house as a policy guy that maybe you were secretly hoping he would not be picked to run on the ticket. do you agree with that? >> yes. i thought ryan's presence in the house was central to getting the ryan/romney plan through and perhaps that would be the most important place for him to be. but when romney put ryan on the ticket, it really sent a signal to the whole nation that he's serious about reforming all the welfare programs like medicaid and food stamps. and serious about maintaining medicare so it's there in the future. so i think actually it is an advantage. and because the house and senate republicans have almost all voted once already for the ryan plan, perhaps it can all be done with leadership through the

white house. >> grover, appreciate it. good to see you as they conduct the sound check in tampa. thanks again. straight ahead, the inside story on this huge diamond, when we come back. my volt is the best vehicle i've ever driven. i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station. it's pretty great.

i get a bunch of kids waving at me... giving me the thumbs up. it's always a gratifying experience. it makes me feel good about my car. i absolutely love my chevy volt. ♪ it makes me feel good about my car. 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, the ways to receive your money, and more. plus, when you call now, you'll get this magnifier with l.e.d. light absolutely free. when you call the experts at one reverse mortgage today, you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home. and here's the best part -- you still own your home. take control

of your retirement today. ♪ ♪ the economy needs manufacturing. machines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy. we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪

welcome back. if you were ever to trade diamonds like gold and silver, the pricing would be easier. many in the industry are against it. there's one man looking to change all that. >> a lot of people that know stuff, they toedon't want to te the truth. i get out there and blow it all out. >> reporter: in the secretive world of international diamond dealers, martin has become a rock star. he invited our cameras to his hotel penthouse for a party he was hosting for vips at the largest diamond and jewelry convention in north america, which attracts buyers and sellers from around the world. >> in real estate it's location, location, location. diamonds are connections, connections, connections. >> reporter: he isn't a dealer. he runs the rapaport price list updated weekly. the industry's go-to list for finding out what a diamond is