i apologize at the end of the show. thank you for being here. >> just apologize for your opinion. >> terrific to have this conversation this morning. >> it's killing you. >> make sure you join us tomorrow. "squawk on the street" begins right now. ♪ ♪ uno, dos >> good morning. i'm melissa lee, carl quintanilla live from the new york stock exchange. let's see how we're setting up this wednesday trading session. a fleury of global headlines including the death of the u.s. ambassador to libya in benghazi. day one of the two-day fed meeting starts today so a lot of waiting and seeing here in the u.s. german constitutional court paving the way for the esm. we see stocks hanging in there at 14-month highs in the european continent. our road map today starts with what could be the most critical tech announcement of the year.

we're just hours away from the unveil of the iphone 5. will we get news of a new ipad, too? >> mark zuckerberg says the ipo of facebook is disappointing but they will not make a phone and will enter search at some point. is that enough to turn the stock around? >> now the german constitutional court decision is out of the way, we're waiting for the fed. will it deliver on new qe as stocks hang in here at multi-year highs. >> all the news around apple, in four hours apple's ceo tim cook is expected to unveil the iphone 5 at a media event in san francisco. it's expected to have a larger screen and offer 4g wireless and believed to be thinner and have a smaller dock connecter. the watch is on to see if apple debuts other products today, such as a mini ipad. the iphone alone, jim, analysts are expecting 10 million units

sold possibly in one month? >> it's hugely important. it's funny because we -- some people know what it looks like, apparently. others are saying, look, it's got -- because it's got 4g and a bigger screen, it will be what you watch tv on, total replacement of the desktop. clearly the most important thing for apple because such a huge percentage of their profit comes from the iphone. >> on addai when a lot of new reviews are coming out on the new kindle. some good, some not so good. chatter with supply constraints and there will be chatter if sharp can keep up with the 10 million unit, if that's a reality. >> texas instruments, in a downbeat midquarter update talked about tremendous wireless. and tablet sales. it's almost as if in the last 48 hours apple's gotten the back after the battle with amazon the other day and talk about google numbers have to come back.

this is big. very big. >> once they unveil this thing, will we see softness in the stock? the stock seems to have recovered a bit this week, turned around solidly at $665. >> i've urged people on "mad money" don't trade this. it's a multiple stock. itsd an investment. once it gets to a premium multiple, then i'll rethink. >> one of the most exciting things about any launch day is taking a look at apple site, which of this moment it's down. if you try to call apple you might end up getting certain kinds of busy signals. i think we have a shot of the site as they prepare to make it look new again in a few hours. >> that's like the mac, which one was it, the mac or the -- where they unveiled it and it was not real in the jobs book.

it was kind of amazing. >> the apple 2 or -- >> right. didn't really work but you got around that. steve jobs was such a showman. it was like, wow. of course, this was intended. >> yeah, this one will work. battery life is always an issue. hope they improve on that. >> that's something he cared tremendously about, as well as trying to create a car that drove on water. >> those are things he -- >> when it comes back to apple stock, of course, incredible, incredible move over now years. you mentioned premium. i don't believe it's traded at a premium. >> dramatic discounted. >> it's hard to imagine it will get to that point. >> obviously, it would be bigger than most of the dow if it ever got to a premium. >> right. but a 20 multiple on it? >> but the growth rate is so good. we've been doing this analysis with facebook forever and facebook is tremendously overvalued than apple. but apple's defied that. apple is supposed to be one product away from failure, which is why the multiple stays low,

as if it's -- >> that's not even counting the cash they have on hand, which is over $100 billion. >> i know germany may be on the hook for another $80 billion in this decision. they got to go. they got to go to apple. spain has to go to germany and -- >> i hope apple hasn't been invested in the bund because there's negative return. >> no, but if upgraded this morning by morgan stanley, eight bid. >> six minutes into the show and got the -- >> i think it's important to recognize spain is the fulcrum of all problems. if you solve spain by taking the bad loans off the book you make it so banco that their loans are backed in euros, you avoid the lehman-like effect for years over there. i don't think tim geithner would

disapprove. >> rfmd has not been a vendor to apple products. that may change. would you take a lark on some of these or -- >> people have been playing sky works solutions, which is a terrific company. they've been doing sirius logic forever, the sound board. i think this is a johnny come lately trade. if you want to do trading, these are situations where i could bless it because they have run up in anticipation. >> they have. >> so, if you come in today you're really late to the game. >> to that point on an investment basis, none have seen the appreciation that apple itself has. none of the derivative plays on apple have done as well as apple itself. so the best way to play is apple. >> the old tear down trade is not working. >> no. >> you open up the iphone and you're an idiot as opposed to the fact big parts. >> berrini associates says 4.1.

used to be 7.2 in january. the bottom line, as apple goes, because there's a confidence in the name, it's not a barometer of the overall market. >> if you're a hedge fund, you don't own apple, you're not going to beat the s&p. >> or not forget the broader ramifications, not just what's in the iphone, but who they sell it to. verizon and at&t have heavily subsigh diesed iphone sales for years. they have not been the big beneficiaries for years. the stocks have been quite strong this year in part because of their dividends. >> dan hesy -- >> sprint has -- people thought the iphone would be a loss leader but it's helped turn the company at sprint. they are trying to stretch out these upgrade cycles, the big carriers to try to minimize as best they can that huge

expenditure they're doing in terms of subsidizing as we know this year equaled if not exceeded their capital spending, just to give you a sense as to how much money they're putting up so you can get your iphone. >> they must hate iphones as much as steve jobs hated adobe and google. >> china mobile may not want to be in that camp where they have to lay out these subsidies. it's a big unknown in terms of the ability of the company to actually gain share. >> we need to find their new president, first, before -- >> that's true. >> right. missing for 11 days. >> he may not be missing. maybe just some place not known to us. >> known as missing. >> that cannot be good for the chinese consumer that reacts to thins of that nature. they've tried to not allow it to get around in china, but i believe it is getting around. >> if google -- if google -- >> if they pull back --

>> search, where's the president? nothing comes up. >> siri, where's the president? facebook shares up since mark zuckerberg's interview. he called facebook stock's performance disappointing but said not to underestimate the company. he expressed optimism about facebook's mobile strategy. >> we're seeing some great mobile monetiization. i think we know we'll do well on that. there's a huge opportunity. >> zuckerbergless facebook has no plans to build a phone calling such a move clearly the wrong strategy for the company. his argument, jim is if we made a phone, we might sell 10 million, 20 million, in his words it it would not move the needle for us. >> look, first of all, i want to say, i thought this was a great conference. >> i thought it was great as well. >> it was great. zuckerberg admits -- i'm holding

up the headlines for "the financial times," zuckerberg admits -- i went over their conference call from july 21st. not once do they say anything is wrong with mobile. they made the bet on html 5 and it looks like a disaster. this has been for the sole of web of internet. do you go with adobe common denominator -- jobs hated adobe so they went with the lowest common denominator. it was a disaster. now they're trying to recover. i wish we had heard about that. we didn't know. we thought that was all systems go in this conference call pip like people who issue mia culpa. cpms, the measurement we all -- 90 cents on mobile. $4 on desktop. he's doing the old cliche of making it up in volume. meanwhile, core usage in

august, com score, this is basically desktop, some -- the age range is kids 12 to 17, down 42% year over year. does that bother you or can they make that up in mobile? >> look. i don't know how they do it. i also don't think in the enthis is going to change the lockup situation that's coming up for facebook. the fact is they never admitted they were on the wrong platform. they're talking about the wasted years. the years in the wilderness. at least it wasn't 40 years and they don't get to the promised land. it's only a couple years. i would point out this is really smart that he did this because now what we say is, a-ha, now i know why they blew it. they can fix it. >> he mentioned it as the worst mistake they made, going into htlm 5 instead of native. that's good to hear. it's nice to hear that was the reason for it. he gave his zuckerberg, i don't to want say magic, but he shared the vision of the country. everyone has gotten hang up --

but to hear the vision again, which is what got people so excited ahead of the ipo. to hear it from the founder's mouth once again, i thought it reinvigorated investors. >> i completely agree. >> to address mobile, and to say we care about shareholders, the phone would be a stupid strategy, essentially. these are all things people wanted to hear. they got it. we're seeing it in the stock this morning. >> you're so right. they're saying, good google, be careful. we can dominate search. search is better than advertising. he didn't talk about the sponsored stories they spent so much time, the cornerstone of our mobile strategy, from sheryl sandberg in the transcript. that was not talked about. what he's talking about is they will be able to monetize search one day. >> search is advertising. >> and the one that works best on mobile. >> do you think 18.50-ish was

the low? >> i think judging from aig, when you have a big seller out there, you tend to revisit lower prices when -- i think these next lockups would next be done as secondaries all at once, which would then attract people, knowing zuckerberg is literally thinking about how to get this thing back on track. and i think that there's a beezuus factor, not a jobs factor, the man behind the curtain has something cooking. >> are you comparing bezos to zuckerberg? you think they're of the same cloth? >> when he comes out, you have to listen -- wait, zuckerberg has something to say. >> that doesn't change the value of the stock for a lot of investors. you wonder why bank on a facebook and what this guy may or may not be able to deliver. you can buy a google.

in theory, think about it, if face book is able to monetize and monetize well? >> i would agree although i would say if facebook gets -- i'm not endorsing facebook stock. if facebook gets monetization via search and takes some of google's business away, and apple gets their maps, which i love google maps, suddenly google up 6%, maybe it shouldn't be up. google is inexpensive but if everybody guns for google. i don't to want sell google. but zuckerberg says -- this conference call was ul about sponsored stories. now he's talking about search. this conference call was a disaster. it was sandberg and your friend who's the cfo who stuck it to morgan stanley. >> oh, yes, my friend. >> there's a lot of you -- i

always allude to friends you really don't have. i think in the end, at least, you feel like there's a pulse and the pulse extends to where peter thiele sold stock. >> facebook up 7% premarket. we'll see if that holds because there was a lot of, jim, weekly call buying going into this. >> right. >> yesterday the recommendation from mike coe, if it stays above 20 you want to roll up and out. >> interesting. >> you want to be more bullish. >> it's incredible. everybody i know says they got in at the bottom on facebook. well, congratulations. i do think this was breakthrough in the sense that he did it in a sarcastic way but he says the deal is disappointing. this is a repudiation of the july 26th conference call that took that stock from $26 to $18. we needed to hear it, if only just to begin the conversation

of maybe facebook isn't the most outrageously overhyped, let's stop talking about the fact that the wedding took place and it was bad to be on a honeymoon, honeymoon with him, no honeymoon with investors. we're getting a discourse that is not cat calling and making people feel like this was the dumbest thing ever to be in the stock. it wasn't after yesterday. i want to put it like that. >> let's talk about europe now because we haven't talked about that. big ruling. european shares on that ruling hitting 14-month high after german court agreed they could continue with the ratification and the german parliament could veto any increase in the size of the fund. news sent spanish and italian bond yields lower. 1.96, i believe, lowest since march. tremendous headway. >> a lot of people talking about federation, a federation now. this is the beginning of a

federation. the republic goes to federation, ala star wars. >> talking about my-federation, right? >> the possibility this opens the door to the end of a level of sovereignty in germany is being greeted by the people in spain and other countries as being, wow. now, of course, spain immediately says we don't need the money. >> it's asking a lot. it's all asking a lot, to give up sovereignty. >> well -- >> no, i mean, i know. it's a good news stories. germans can now participate. >> you think it's going to be more of a confederacy than a union? >> i continue to have significant doubts about the end game here. >> supreme court did not -- >> it's a simple idea. just come back to too much debt. >> well -- >> no growth. >> the supreme court -- >> too much debt. to growth. >> you're really going with that, huh? >> yeah. >> you thought that was like the college of carter -- >> i'm sticking with it.

still to come, interview with michael kors. what a year it's been for that company. we'll see what he says about the high-end consumer. a lot of news to watch. 1 p.m. eastern time is that apple announcement. we'll talk about it all morning when ""squawk" on the street" comes back.

mark zuckerberg gave a piece of advice to shareholders.

he told investors, it's a great time for people to stay and double down. so that brings us to this morning's "squawk on the tweet." your second bet would be to double down on blank. tell us what you think. we'll air your responses throughout the morning. if there's one stock out there, jim, we'll put you in the stock mode, on which you could double down, what would that be? >> i could double down right now? >> bristol-myers. >> i like that. but i'm going to double down on aig because the amount of demand for that stock on that deal, tim massett on "mad money" in charge of the disposition, the amount of money was insane because of the book value being a double from where it was. he told me, look, we could do whatever we want with the last 15%, there's so much demand for this thing. that's important. aig was a huge success. huge. >> huge. >> and fires all over the place. >> we'll see how the stock does.

getting in although 32.50, the green shoe and government's take down to 15.9% like that and now $140 billion proceeds is amazing. >> and no flippers today. the stock is up again. you would think someone would say, i'm taking the quick gain. so i think the book value being 60.64 means double down because you could get a double. >> well, again, let us know what you think and tweet us. getting ahead of the curve with cramer ahead of the opening bell and can shares of expedia continue to soar in a live interview of the ceo of the travel website coming up. let's take a look at u.s. futures. we're looking at a higher open on the board. at optionsxpress we're all about options trading. 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! strategies, chains, positions. we put 'em all on one screen!

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five minutes before the bell on this wednesday. let's get kramers mad dash ahead of the market open. big asset sale at the chesapeake. >> they sold $6.9 million in assets to dutch. if you're a portfolio matcher, carl, you never want to sell your winners, define your losers. these were premium assets. i want to hear from the ceo they're not taking their seed corn. i like those assets they got rid of. oil because oil is working here. maybe it's good for the preferred. i'd like to buy chesapeake preferred. not crazy about the common. >> but they had to -- >> they owed so much money but

they're selling the best. look, utica, but those permean assets have been years and years of great oil ahead and sorry to see them go. but the company has to take action and they're taking it. >> you say it brings to mind a sell of kinder morgan. >> kinder morgan doesn't have a lot of natural gas and natural gas liquids. they are oil-based and that's good news. natural gas, there's a glut. we saw coal companies are hurting. utilities are switching to nat gas because of $2 level. you have to be careful -- kinder morgan is a winner and chesapeake may not be a winner because of this deal. >> good to know. crude at $97 now. brent taking off as well. opening bell a few moments away. a lot going on when "squawk on the street" continues. [ male announcer ] the freedom and spirit of malibu

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kicking off a wednesday session. the opening bell rings on wall veet. street. more than 3700 organizations globally. we're all watching facebook. it opened 7% at the -- right at the outset. 20.80 d$20.80 is the level. >> bigger than where -- remember, it tried to hold that $20 level when stock was on the lockup, expiration. i think a lot of people were short the stock expected they saw some guy with a hoodie that was subtantive. >> we have ford, mark fields, north american chief, apparently going to be malowi's successor.

and he's going to work for a company i've never heard of. >> pilot j, the best company when it comes to compressed natural gas and liquefied natural gas. they own a tremendous number of stores. i believe this is the prelaid to them being public. they would be a gasoline and restaurant story. those have become prominent as companies sell off gas stations to make money. i think it's a big move for jet. >> big loss for pepsi? >> i don't know. they got a lot of bench there. but i was -- i think a lot of people would have your reactions. i follow this company because they have been following boone pickens dictate to get into natural gas for trucks. they are the primary company for natural gas when it comes to surface fuel. >> zynga, shares are up, mentioned by mark zuckerberg, calling it a fundamentally strong company. in the after-hours we saw zynga going up, and in the opening

holding onto the gains. still early to buy zynga? >> i was talking with david about sarcasm and qwhether it gets through. zynga has a good balance sheet. this was a hatchet buried situation in that there was what i thought was dispersions about zynga, by facebook and, of course, by zynga to facebook with pinkus, so maybe the end of the cold war. >> but still probably a little too early to buy? >> zynga, that group is so fattish. it's just a fattish group. so very difficult to make money in gaming these days. remember, have you to click on those bogus coins in order to pay up, in order to dominate on scramble with friends. i lost last night, 1500 -- >> but you're still playing. >> never stop. it's a way to communicate between fathers and daughters. >> usage time is intact at the

cramer household. >> it is so important. my daughter is at college. it's better than -- first of all, you're not allowed to call kids because of text. now they don't even like you to text. so you play scramble. that's how you know thing are well, when they beat. >> you shares of aig up 2%, making the price look extraordinarily strong. >> unbelievable. how would you do if you were on the deal? it's incredible to see -- that is not -- that was not a small equity. that was 600 million shares. >> that was huge. >> everybody's up. where's the scalping? >> we're still talking 15 billion sold by the government. >> billions and billions sold. >> yes. billions and billions sold. and and as ig performing well after that deal. >> cramer says flip. cramer says zynga's okay. no, cramer isn't saying jack.

other than phillies are in it to win. >> that was sarcasm as well. >> financials continuing their tremendous run. citigroup right now higher by 2%. bank of america trading at 915. who would have thought -- >> wow! >> -- we would be approaching the 52-week high on bank of america. this whole group, what a big couple of weeks it has had. >> this bank of america, i underestimated people are still very much in it. they are saying that this is the turn, bn bank of america. the presentation was very bullish in terms of getting the lawsuits behind them. tim massett mentioning, watch fannie and freddie coming back. no one thinks -- former ceo of wells fargo blasting fannie and freddie today. that's a pinata. the idea that housing is coming back is influencing bank of america's trade. >> just this week you said the

laggereds were b of a and alocoa. >> people claim they have the best charts in the book. bank of america can play catch-up. stranger things have happened than bank of america going from 10. >> speaking of housing, builders are up, u.s. gypsum, massco -- >> massco breaking out. >> i think it's important u.s. gyp is cheap. er is sher win williams, this is paint. watching paint dry is like microsoft and how that's not a good idea. watching paint try has made a fortune for those like sher wwi williams. >> we've had a couple technicians, piper jaffray, saying the breakout in the last week or so means you could see

what they're calling, i think, the upper end of the secular bear market 15.50 or so. are you in that school? >> look, there's so many stocks that are undervalued versus their prospects in europe turns around. we need to see growth out of europe. if china cuts -- now it's like if china cuts, that's a continuous loop, if china cuts, if china cuts. but many good things happening that are not discounted. the main thing is that this euro, everyone was looking for a really bad euro. the euro to me is breaking out and that has many good things to say about international companies. >> but that's not going to help growth in europe. if you're looking for growth in europe, you're not getting it and we all know china is growing less than anticipated, a lot less than we anticipated a year ago. >> those stocks have lagged, the international versus domestic. you could craft a scenario, let's use coca-cola, they are terrible fx translation.

j&j, terrible fx translation. remember how people trade. it's like, oh, johnson & johnson, better than expected. then they go through the fine print and see it's the euro. don't underestimate -- >> i won't underestimate momentum which seems to be the overriding theme in this market at this point. >> here we are, still recognizing that the momentum funds are doing well. >> no, it's amazing. david rosenberg yesterday on another channel talking about how he underestimated the death of the equity cult, right? that was his big call, people were going to lose the broad interest in stocks and it has not happened to the degree to which he expected. >> look at those cd rates. look at ben bernanke, if there's one thing that will come out of bernanke is he's going to say, you ought to get out of the cds because they're not -- they're not going to rise in yield. and you should be in the quintessential high yielding

stocky like so much? bristol-myers. >> bob pisani on the floor with more of what's moving. >> looks like we're about to set a four-year high on the s&p 500. european stocks are multimonth high. german is at a high. german stocks up. france, greece, spain, italy, portugal. you know about the german constitutional court upholding the esm and fiscal union. the important thing is the esm will be functional in about a month. that's a big milestone. that's an important development. the reason why we're up today. obviously, europe is moving the stock market once again. mr. barroso gave a speech today. he pushed the limits for pan-european union. he's not talking just a banking union, he's talking fiscal union and political union. on banking union they're unveiling a new scheme for ecb to supervise all euro banks.

now they're releasing legislative details of exactly how they would do it and people are poring over a lot of documents. barroso is stalk being a fiscal union, taking the next step, labor flexibility, new laws, simplified taxation schemes. he's saying we need to go further than that toward a political union. he wants stronger european parties. not national parties within the countries but european, pan-european political parties. he talks about that in his speech. this is going to make the people who are in favor of more union in europe very happy. those opposed will just say, you've got to be kidding? this is utopianism. we'll be done with european talks. we'll be done with the fmoc tomorrow. a lot of people are arguing post-fmoc, some will argue we need to take a pause or they're going to lighten up on their targets for the end of the year. a lot of strategists have hit their targets for the end of the year. they've been conservative. there's a lot of debate going on

where we should go from here. a lot of people believe the fmoc will lower their economic forecast for tomorrow and that will make a lot of other people say, okay, it's time to pull back a little bit. isi, respected analyst company came out and said, green shoots are fading in the united states. some indexes they watch on a weekly basis have been lower recently and that will fuel a lot of talk about a bit of a slowdown. front-running the fed, guys, did you see what happened yesterday? i pointed out some of the biggest etfs in the high yield area. i'm talking about j&k had heavy volume and hitting new highs. why is that happening? a lot of people believe at the minimum the fed is going to extend forward guidance to keep interest rates low to at least 2015. all of that would be a big beneficiary to high-yield funds who are forcing people to go out on the yield curve. this is one simple way people are already anticipating exactly what the fmoc is going to be doing. back to you. >> terrific, bob.

got to ask rick. looks like people sell bond, shift bonds to the dollar. rick is at cm group in chicago. >> thank you. i guess we should welcome europe to the same club the u.s. is in. lots of liquidity. maybe more liquidity coming. and a generally weak economy. welcome to the club. if you look at our charts, they pretty much reflect a lot of what central banking is doing to the marketplace. look at may 1st start chart on our ten-year. obviously, the rates are going up. we all know the reason why with regard to issues. long term maybe reflation but maybe the focus of where the next buying program would be. if you look at bunds, they are more defined in the higher yields. we're at the highest in the bunt, because of the safe harbors? the tide is moving out of funding issues in countries like spain, maybe italy. they're seeing funding costs move down.

stretch out the problem a bit, liquidity is probably not going to be the issue. but the real question is, is it the problem? next chart, this is tens minus twos. continues to steepen in the u.s. that seems to be the trade every bond trader is talking about in lieu of today's two-day start to the fed meeting. and, of course, the last two charts are the grain markets. i can simplify. first of all, traders were scratching their heads why so much movement was out before the report came out at 8:30 eastern. but after the dust settles, corn is lower, beans are higher. why? because corn was less destroyed by the drought and the beans more destroyed by the drought than expectations. back to you. >> great wrap-up. we haven't talked about that crop report. let's check out the latest moves in energy and metals, sharon epperson at the nymex. >> the biggest moves came after the german court ruled on the esm fund. as we look at higher prices for gold, silver, platinum,

influenced by the uprisings that continue in south africa. it is oil traders here are really following because there's so many factors influencing that market. oil prices near a one-month high earlier in the session. some gains, though, somewhat muted as traders still trying to ascertain the impact of the attacks in libya that killed the u.s. ambassador to libya, christopher stevens. those rocket attacks that took place yesterday evening also killed three embassy staff and there continue to be protests in cairo as well. the geopolitical risk in this marketplace could be significant. it depends on how they are interpreted by the west and what the reaction by the west is. that's what traders are talking about. we're talking about a country, libya, that actually has some of the largest reserves in africa as well as in the world. and production there is slowly coming back to exactly where it was before the arab spring. a lot to watch with the libya situation. president obama will speak from the rose garden at 10:35 a.m. about the killing of the u.s.

ambassador to libya and the impact that it is having here. we, of course, will be following that as well. back to you. >> thank you very much, sharon epperson. a couple of quick notes on the market. small moves percentagewise but important. s&p 500 has hit a new intraday high. the highest levels since may 2008. the dow hitting a fresh intraday high, highest level since december of '09. housing stocks of note, we mentioned it before, but the hgx attracts housing trading at the highest level since april of '08. coming here, tweet time f you take mark zuckerberg's advice and your first bet is to double down on facebook, your second bet would be to double down on blank? tweet us. we'll take a look at today's early movers.

♪ fashion >> tomorrow, an exclusive interview with j. crew ceo miller drexler on the heels of fashion week. where is the consumer and what exactly is going on with the high-end retailers? all that and more tomorrow on "squawk on the street."

take a look at the dow heat map. travelers, off the back of the aig placement. it is feeling a little boost here. >> we know mr. fishman runs travelers, run the most conservative insurer. never had any of these problems. i've been waiting for it to take off. here it is. >> there it is. >> yep. and aig, interestingly, just hearing some color on that offering, 70% of the book was hedge funds, which you would not have expected. >> really? >> the long only funds seem to be bidding it up now but we're not there at the price where the government wanted to sell. they thought they would come down, 31.50, 32, they didn't. hedge fund step up to what i'm told 70% of that offering. >> the government could sell the rest like that. >> now they're locked up, the government but conceivably if

they wanted to go as low as 31.50, they could have sold all of it. >> i thought it was long only funds. that's different from what i thought. >> meanwhile, tweet time, our question regards facebook and mark zuckerberg. he told -- did he tell shareholders, per se in mostly a roomful of techies it's time for people to stay and double do this morning we're asking you, if you take zuckerberg's advice and your first bet is to double down on facebook, what would your second bet be? john writes maybe a suit and button-down suit. rimm -- >> someone tweets, when a ceo shows up on time, wearing a relatively not wrinkle-free t-shirt and the stock sees upside, it's not a great short. would you agree with that, jim? >> i don't want to short facebook here since a lot of people already are. in terms of the double down,

i've got an unbelievable fantasy team that swept this weekend, thank you to adam from insider from espn. i would much rather double down on my team than facebook. >> who's your star player? >> mccoy, which will be difficult because he plays baltimore, and alfred morris, sleeper fort redskins. >> no griffin, though? >> no. do you think i should trade cam newton for -- >> i think griffin is going to be a player. >> you may be right. they look good. >> college offense but very good. dow is up 30 point. a lot more still ahead. coming up, as the world waits for the iphone 5 announcement, cramer has something to keep your mind off it. at least for a minute. six stocks in 60 seconds.

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big morning. dutch buying coal. >> i'm wearing socks. shapiro leaving goldman to be the cfo of david yerman. >> kohl's. >> i like the stock. >> wells fargo downgrading. >> cycle is over. take a look. not new news. xhoen is doing well in that truck cycle. >> rbf, what is going on there? >> david says i've been talking too much about banko. >> it's the worst of the worst of the worst. >> narrowing the range. >> down the range. very bad. this is pcs. forget pcs. >> yeah. things tracking weaker than they thought. carmax, morgan stanley likes it.

>> used cars are holding value. very good for people with old cars. >> a lot of people do. >> remember, 11 years is the average age. that's good news for the american consumer. that's why i wanted to include it. >> what's coming up tonight? >> okay. you know, tonight we've got -- this is -- we had paul, and i asked him, when we -- when he was here on "squawk on the street," please come on the hoe. this is about mobile media and mr. you can monetize. how lucky am i when the z man says it's time to monetize and get a lot of money. paul will tell us. >> do you think last night was the beginning of a new chapter in the way we think about monetizing mobile? >> i think what z-man said is, look, the way we were doing sponsored ads, that may not be the solution, maybe search is solution, but the most important thing for me is this is the first time the guy we all banked with came out and said something. it mattered.

it was beginning to be more like the social -- the movie. i was starting to think this guy is just too ethereal that he was not blocking and tackling. he is. i think there's a face that is not -- there's a suit that's not empty. it's not a suit, obviously. there's a hoodie that's not empty, or maybe a j. crew shirt. >> speaking of facebook, i remember before the ipo, there was still the promise out there it was going to reinvigorate interest in stocks, in ipos, in the markets. >> killed it. >> didn't happen. can the new iphone, does it have the potential this afternoon? >> you know -- >> 1:00, by the way, eastern time. >> melissa and you make these great points, correlation with s&p. it can invigorate anything other than the gdp of america because apparently, another rival network, bloomberg, has been saying the apple iphone can actually have an impact on the gdp of this nation. >> yeah. >> and take it up. i thought that was incredible. >> yeah. we'll see what happens in san

francisco in a few hours, jim. we'll see you tonight. >> thank you. >> "mad money" 6 p.m./11 p.m. eastern time. a lot more still to come. we'll talk to michael kors, honorary chairman of michael kors during fashion week, talk about insider selling and the incredible performance of that stock. [ engine revving ] ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just to stay alive... but feel alive. the new c class is no exception. it's a mercedes-benz through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

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welcome back to "squawk on the street." july wholesale inventories expected to be up 0.3 are up 0.7. no revision in our last look. we like to try to figure out, of course, when we make widgets, are they going right into the hands of the consumers or going into a warehouse and what happens and how long do they stay there? this number may be a bit less important than last month's because second quarter gdp is out. we've already had a second revision. we'll get the final revision at the end of this month. july, of course, is the third quarter which we're going to be completing with this month. in the end it may be more important as we try to get closer to factoring in what third quarter gdp looks like.

the big news is europe joins the club of bigger liquidity and that's reflected in less safe harbor trades. meaning interest rates, bunds, moving higher. our two-day fed plays into that as well. >> we'll come back to you later on with that ten-year note auction and a lot more. a big hour for "squawk on the street" getting to the road map. one hour closer to the expected unveil of the iphone 5. is it going to live up to the high hype? what's inside? how about those rumors about a mini ipad? we have a shareholder and top-ranked analyst to sort it out. >> while you're watching apple, one name was broadly outperforming the tech tie ti n titan. expeed kra. expedia. mcdonald's, what about the business in the u.s.? we'll be joined by mcdonald's president of u.s. opes. and mark zuckerberg making

his first comments since the company going public. why is one firm cutting its price target on shares? we have the analyst behind that call in moments. >> michael kors getting ready to debut his spring 2012 collection at mercedes benz fashion week in the heart of new york city. simon hobbs is on top of the high-end retail trade standing outside the michael kors show as the anticipation builds up. good morning. >> reporter: good morning. after burberry came through with profit warning yesterday we decided to go in search of the truth about luxury. as you said, michael kors will be debuting his fashion show here in new york city and he'll give us an interview and talk about what he's working now for michael kors that might not be working for burberry. remember, michael kors stock has ricin 165% since the ipo in december. this is a guy who can make you money. more on that. back to you. >> look forward to that. we want to get back to our top

story in the meantime. apple is expected to officially announce the iphone 5. analysts say it could be the biggest iphone launch yet. shares of apple are hanging in there. down by just 0.1%. how should you be trading apple ahead of the big announcement? brian marshall, has a buy rating and $710 price target on apple. eric jackson, apple shareholder, and he thinks apple will hit $1650 by the end of 2015. brian, in terms of the $710 number what are the numbers behind that expectation in terms of sales of the new iphone 5? >> thanks. that's a conservative target. basically, obviously, the next quarter is the important part of our model. we are conservatively expect 41 million iphones, 85% which we forecast will be iphone 5. last quarter, 51 million so we took a more conservative approach to the december quarter based on what the yields will be

on some new technologies like inintel screens and things like that. >> brian, are you hearing anything about possible production disruptions? mizuho was crimping the availability of the iphone 5 in the all-important holiday quarter. >> we've been hearing this for several months. i think at the end of the day there are some yield concerns. will apple be in a position -- i think the clearan answer is no. i think in the next several days, weeks, apple will number a much better position from a manufacturing perspective to actually ship into the channels. i think yield will be a concern initially but demand is greater than supply so i think the story continues to work in the near term. >> eric, you think it's going to work. 1650 by 2015. how can you wrap your head around that? we don't know if there's an ipad

mini. we don't know if there's going to be -- there's so many unknowns in the next couple of years. how do you come up with 1650 by 2015? >> well, i mean, there are so many unknowns but that works both ways, both positively and negatively. we're pretty sure there will be an ipad mini. we're pretty sure there's going to be an apple tv. not this year probably but definitely in 2013. and my target is just based on those products selling well, seeing a sharper uptick in apple tvs than we even saw in the adoption of ipad because there is a greater family of iso users to soak that up. it's a pretty modest target when you consider there's going to be other surprises down the road. 2013, 2014, 2015 in terms of new jobs that probably steve jobs blessed long ago. i think those are going to be more exciting and leave the stock higher than that.

>> you know, eric, when you get to that number, i mean, we're talking about a 1.4, $1.5 trillion market value? now, i realize -- i guess, are you keeping the multiple the same and just assuming a relatively steady growth rate to get there? >> actually taking it down because that's inevitable as the company gets bigger and bigger. to get to that number iphone will have to ship 100 million units a quarter. this holiday quarter i don't think it's unreasonable to think this thing could hit 50 million units. i'm ahead of brian on that. to go from 50 million a quarter to 100 million in three years when the whole world is adopting smartphones and throwing away their dumb, clamshell phones i don't think that's unrealistic at all. >> brian, is the -- i guess if you're relatively confident in the product, right, and the marketing of the product, is this -- we had a discussion earlier this morning, is the best trade just to follow aapl

or dance around with some of the other chip makers? >> from my perspective i think you want to go straight to the signal, and the signal is apple. i think it's a very stable business model clearly. minimal downside risk. i think the upside is pretty attractive. from my perspective i would continue to go with apple. >> eric, as a shareholder there's a presentation making its rounds on wall street trading decks this morning from jeff gun la, an apple bear, he says we could see pressure on apple and there will be selling because people have made so much on these shares. would you consider that? >> no, i wouldn't. i definitely respect gunlac as an investor. he's been making the bearish

case for probably 150 bucks now. you know, i just think that that -- you know, that worry, i mean, it's a worry for the whole stock market. yes, apple is widely owned. it might affect apple. but we're also going into obviously the busiest time of year. the fall period, the holiday quarter, the new product announcements that are coming. i think that's going to overcome the skiddishness people have. last year, remember, from november to march, the stock basically doubled. >> eric, we got to know you because you being outspoken in yahoo!. yahoo! news out suggesting they're very close to 20% -- they're sale of 20% of alibaba. are you surprised they aren't going to return that to shareholders shareholders? are you still constructive on that stock? >> absolutely constructive. there's nothing built into this stock.

you're getting this stock for purely a discounted value of the asian properties. there's a negative value currently on this operating business. i think marissa meyer will do much better than running a negative operating business. so, i'm very constructive. the deal should happen by wednesday. alibaba should approve the deal on saturday. they're selling after their stake, keeping some of the rest. there's rumors going around that alibi bab ba -- alibi bab ba is thinking of doing an ipo in march. >> let's get to a market flash and we're joined by jackie back at hq. >> well, i'm watching shares of american eagle. they're popping this morning. as a matter of fact, up 3% at this point. the company saying it's going to pay a special dividend, $1.50, a regularly scheduled dividend, flush with cash, and special dividend going to cost $300

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federal reserve kicking off two-day policy meeting today so as the market edges higher hoping for another dose of quantitative easing.

we've got results of the latest cnbc fed survey. steve liesman has them. >> thanks. 90% of the 58 respondents to the survey looking for qe3. and 77% of those looking for it to happen or be announced tomorrow. let's take a look at the stock market, the bond market outlook and the economic outlook from this group of 58 managers, economists and strategists here. they're not looking for much from the s&p. there's the prediction in july. now december 2012, 1453 and not much for next june. just 1497. here are the percentage gains off yesterday's close. what you'll see is 1.3% from where we are now, more or less, and 4.5% up by next year. i will tell you this group has been pretty light. they've been at the 1400 mark

and been a bit pessimistic about the stock market and equities overall and been wrong. that's their prediction. let's take a look at outlook for bonds. they're now a little light given the recent run-up we have. looking for 1.78% on the ten-year. that's just up a bit from where they were back in july. 2% next year. again, they're in the midrange of where we've been, the range we've been in on the ten-year. consistently they've been looking for 20 or 30 basis point bump between 2012 and mid next year. recession probability -- oh, sorry, we're doing the gdp forecast. what i want to point out for you is this is the 2012 forecast. this was their forecast back in july. almost 3%. came down staed steadily. what you see in the blue bars and red bars, we'll get to that in a second, at least the forecast has stabilized. unfortunately, stabilized at a lackluster 2% growth. let's look at the forecast for 2013.

now we'll look at recession probability. 26% is the recession probability, about unchanged from the prior month. and then we're going to go on here to the next screen. we'll have a look here at when the market thinks the fed will hike rates. first we'll look at the july forecast. 21% thought it would be in 2013. 28%, 2014. almost 40% for 2015. and a small percentage, 2016. the latest results we'll overlay now. you can see what's happened is fewer think it will happen in '13, fewer in '14. a lot in growth, on 2016. 18%, call it 1 in 5 from 1 in 10 think the fed won't hike rates from 2016, as we said. in an earlier report they're increasingly believing that at this meeting the federal reserve will extend guidance of the 2015. all these results are online, the full survey. you can read what your favorite

economists or strategists thinks if they answered the survey online at cnbc.com. coming up, interesting political result. we asked wall street who do you want to be elected and who do you think will be elected. that's coming up in "power lunch". we have breaking news. >> well, a somber and subdued hillary clinton stepped before the state department to talk about the attacks in libya that killed four americans, including the u.s. ambassador. they said they were carried out by a small and savage group and says the united states will not turn its back on a free libya. take a listen. >> this is an attack that should shock the conscience of people of all faiths around the world. we condemn in the strongest terms this senseless act of violence and we send our prayers

to the families, friends and colleagues of those we've lost. >> clinton also said there was no justification from this kind of violence. we're hearing from mitt romney right now on the same subject. we'll hear from president obama at the white house later on this hour. clearly -- in fact, we're going to take mitt romney right now, who's speaking before cameras. >> my condolences to the grieving loved ones who have left behind as a result of these who have lost their lives in the service of our nation. i know that the people across america are grateful for their service and we mourn their sacrifice. america will not tolerate attacks against our citizens and against our embassies. we'll defend also our constitutional rights of speech and assembly and religion. we have confidence in our cause in america. we respect our constitution.

we stand for the principles our constitution protects. we encourage other nations to understand and respect the principles of our constitution. because we recognize their principles are the ultimate source of freedom for individuals around the world. i also believe the administration was wrong to stand by a statement sympathizing with those who had breached our embassy in egypt instead of condemning their actions. it's never too early for the united states to condemn attacks on americans and to defend our values. the white house distanced itself last night from the statement, saying it wasn't cleared by washington. that reflects the mixed silk signals they're sending to the world. the attacks in libya and egypt underscore the world remains a dangerous place and that american leadership is still sorely needed. in the face of this violence, america cannot shrink from the

responsibility to lead. american leadership is necessary to ensure that events in the region don't spin out of control. we cannot hesitate to use our influence in the region. over the last several years we've stood witness to an arab spring that presents an opportunity for a more peaceful and prosperous region but it also poses the potential of peril if the voices of extremism and violence are allowed to control. with that i'm happy to take any questions you may have. steve? >> reporter: you statement you referred to was a toughly worded statement. [ inaudible ] >> the embassy in cairo put out a statement after their grounds had been breached, protesters were inside the grounds. they reiterated that statement after the breach. i think it's a -- a terrible

course to -- for america to stand in apology for our values. instead when our grounds are being attacked and being breached, that the first response to the united states must be outrage at the breach of the sovereignty of our nation. and apology for america's values is never the right course. >> reporter: governor romney, do you think coming so soon after the events had unfolded overnight was appropriate to be weighing in on this as this crisis is unfolding in real time? >> the white house also issued a statement saying it tried to distance itself from those comments and said they were not reflecting of their views. i had the exact same reaction. these views were inappropriate. they were the wrong course to take when our embassy has been breached by protesters. the first response should not be

to say, yes, we stand by our comments that suggests there's something wrong with the right of free speech. >> reporter: what did the white house do wrong, governor romney, if they put out a statement -- >> it's their administration. >> we've been listening to g governor romney comment on the attacks in libya. the markets are hanging in there in the green, hitting new intraday highs. expectations ramp higher that ben bernanke will launch a new round of qe. what's the best trade now? tobias levkovich joins us next. [ male announcer ] this is anna, her long day teaching the perfect swing

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♪ markets are up this morning as talks for another round of qe heat up on wall street. tobias levkovich has a preliminary 2013 year-end s&p 500 forecast of 1615.

all right, i'm looking at -- 1437 or so, 1615 wouldn't be bad. let's call it 15 months. china's slowing. europe's not growing. i can think of a number of other things that would say, wait a minute. fiscal cliff. why are the positives going to outweigh those? >> sure. we look at a bunch of things to determine where the targets are going to go. we look at earnings growth, equity premiums. your point about china, europe, fiscal cliff, those are sitting with 30-year highs, basically, on equity premiums. our sense like the fiscal cliff, a debt ceiling is actually going to force washington to deal with some of this. i'm not talking about fixing all the problems. we don't have to fix all the problems to allow premium risk to come down. think about europe, mr. draghi says we'll do whatever it takes, you get the esm vote -- or court

decision. what you see is an improvement in the multiple. we're looking only for about 5% earnings growth next year. but we are looking for the market to be up about 12%, 13%. >> so it comes down as a result you think these problems perhaps not being dealt with -- >> entirely. >> -- substantively or substantially. >> we are to make progress. we have to. >> what about earnings growth. we talk a lot about china. i don't know what the gdp number. it's not an insignificant economy, certainly in terms of europe and even at the end of the day, the circular nature of demand around the world. how are corporations going to deal with that and still be able to grow? >> let's talk about in the context of the s&p 500, which is what i'm focused on. 70% of s&p are domestic, 12% are direct sales to europe, maybe 14% if you put in indirect, but

if you sell a semiconductor to an asian manufacturer, they export it back to us -- or europe, rather. and then china, less than 2%. they're important, we could lose a little here and there but it's not going to destroy what's happening in the u.s. >> 12% of revenues from europe on the s&p 500. >> direct revenues. >> let's just say, you know, if there's a 6% miss on revenues or whatever it is, that's still -- that's still a miss in the eps. >> let's say europe and say half is very cyclical and half is noncyclical. things like autos, you worry about that. that's 20% of the auto group's s&p sales is coming from europe. that's a concern if that drops 30% for that group. >> walk us through what will bring us to that area. >> the street in general top down expect takings are between $105 and $110.

there's an outliar on either end but most people are at $108 so we're not out of whack with most of others on the street. if you look at bottom-up consensus numbers, analysts, their specific numbers, not the economist strategist groups it's closer to 113, 114. that's much higher than what the top-down forecasts are. what's the disconnect there? well, they're listening to management saying we're going to be able to do this, do that. we did a survey in july, 52% of investing clients believe estimates are too high. the investor base already knows they have to be cut. that's no longer an expectation killer. i think that's important, too. in other words, just because you miss doesn't mean you go down if most people thought you would miss. >> we started to see guidance become somewhat tepid during the last reporting period. there was concern, there continues to be, okay, at the end of the day, how much productivity improvement can you get? are we going to get margins? there's a possibility we head

into an earning season, the fourth quarter, next quarter of next year, where we're severely disappointed. >> let's go to lead indicators. i think the issues everybody is struggling with. the best karat for what i've got is the federal reserve's lending survey standard. what are they saying? are they tightening or easing up credit standards? it leaves the economy -- if you look at gdp, industrial production, capital spending, those things, by nine months consistently, it leads s&p 500 revenues by 12 months, so last year, september/october of last year you were starting to see problems in europe through greek elections, our own debt ceiling fight and then the issues around berlusconi and italy. we saw a real tightening up in those credit conditions as a result. all it's done is get better since. it's eased since then. if we think about the nine or 12-month leads, that suggests we're right in the period where we should see the most

challenging environment and then it gets better. unless we go off a fiscal cliff, or some middle east tension -- like the news overnight hasn't been favorable to. >> looking for managers to play catch up to put a floor in, is that part of your thesis until year end? >> it is. our target is 1425 so at the time we put it out a year ago people thought we were aggressive. now i'm getting questions are, wait a minute, we're above this, shouldn't you raise your numbers? we have a very disciplined approach to the way we move our numbers. i don't move them up or down because the market's up or down for two months. i don't think that's insightful. you're chasing your tail at that point. >> we'll see, we'll see many times before the end of 2013. >> you'll have plenty of opportunity to hit me if i'm wrong. >> if you're wrong. we might even say nice thing if you're right. >> let's get breaking news at

crude. >> u.s. oil prices now selling off. we saw a sharp selloff initially when the number came out, an increase in u.s. crude supplies in the past week of 2 million barrels, according to the energy department, up 2 million barrels. many analysts expected we would continue to see the decline in crude supplies in the wake of hurricane isaac. keep in mind, refineries running at low level, that's caused perhaps some crude to back up. that might be one reason we're seeing this build in crude supplies. we're also looking at a decline of gasoline supplies of 1.2 million barrels. gasoline supplies down by 1.2 million barrels. we were expecting to see a decline, according to analysts but not greater than this number. fuel supplies rose when a decline was expected. up by 1.5 million barrels. >> meantime, take a look at this chart, expedia broadly

outperforminging apple in the past six months. what's behind those momentum and how are the mobile bookings doing? we'll speak to the ceo. sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.

facebook ceo mark zuckerberg

speaking publicly for the first time since the ipo, touching on investor confidence. take a listen. >> this is maybe a per verse thing personally but i would rather be in the cycle where people underestimate us. i would personally rather be underestimated. i think it gives us good latitude to go out and take some big bets and do some things that really excite and amaze people. >> following those remarks, one firm did reduce its forecast for the social network, cut its price target from $34 down to $23. the analyst behind that move is ken senna from evercore partners. good morning to you. he likes being underestimated by guys like you. how do you like that? take that. >> i don't think we're underestimating him right now. i just feel to be prudent, i think when you look at some of the traffic trends they are showing, particularly what came out earlier this week from comscore, you're losing quite a bit of its audience, particularly among the 12 to 24

age range. >> you're referring to some august numbers. 12 to 17 down 42%. 18 to 24, down 25%. this is core usage, though, right? does comscore count mobile? >> it does. i think you could use it -- there's another product you can use to capture mobile and you can look at time spent on mobile versus time spent on desktop. what we found is while this audience, you would expect to be moving to mobile, facebook's not necessarily gaining share on mobile. instead they're growing with peers such as google and apple. their share loss on desktop is disproportionate. >> does it break down between people who use one or the other or those that use both? there's the argument one enhances the experience of the other. >> i think that's fine. but if you're talking about total desktop declining, it would be different if we saw the desktop holding flat and that mobile was basically increasing in line with the other competitors. but i think when you're talking about combining the two, desktop and mobile, facebook looks to be

a share loser on that bisz. i think it makes it harder to support a premium for shares. >> at the end of the day, this is a game of numbers. even if the number of users go down, if they're able to monetize mobile, then doesn't that offset that in terms of a profitability leaver? >> absolutely. facebook is not starving for impression. as long as they can drive a higher monetization, but i would say we're within our lower target giving them a lot of credit for mobile opportunity. we're expecting to grow at 20%, three-quarter of that growth is currently betting on mobile succeeding. >> where are those younger people going, do you know? >> at this point it's hard to say they're going to mobile. i think mobile is definitely a big part of the explanation but i think if you look at other sites, pinterest, twitter, even

instagram which will benefit facebook, i think a lot of the younger audience is looking for potentially smaller social network experiences which they will -- which they're gravitating towards and then using facebook more in a similar fashion to twitter for general broadcasting. >> we're expecting the president so we may have to interrupt you. we're watching google shares down 1. %. is it your opinion that with today's rise, we're seeing the money pulled out of google in some fashion? >> i think that's fair but i would argue the opposite. google which grew 11% in time spent on desktop in the month and roughly growing at the same rate as facebook on mobile, i think you could draw that google is doing quite well compared to facebook currently. >> finally, i mean, he is out there, right, he's facing the street in many ways, showing some discipline regarding growth areas, not going to do a phone, looking at search longer term.

any sort of a morphis confidence that came as a result of this interview? >> absolutely. he was excited in the project road map, he showed candor about the missteps they made around mobile and i think he showed a willingness to accept where maybe they needed to sort of reassess and redeploy and that they could do it quickly. i think in that respect, i think the interview went very well yesterday. >> obviously, something to keep in mine as we watch the stock, been volatile lately. appreciate that very much. the $23 price target regarding facebook and the comscore numbers are dramatic, no matter how you look at them. >> and the price target was down 23 from $34, a big move from evercore this morning. meantime, let's move on to expedia, the world's largest online travel agency launching a rewards program today to reward small business travelers. business travel is crucial to the u.s. economy. this year businesses are

expected to spend as much as $260 billion on domestic and international travel. here now for a first on cnbc interview is expedia interview. great to have you with us on the program. i appreciate it. >> thanks for having me. >> thanks for being so forgiving. i want to ask you about this story a lot of main stream consumers are wondering about, frontier airlines' effort to box out online travel sites by putting more restrictions on the tickets, charging more, so people will book directly with frontier. are you concerned this could be the first in a series of airlines to do this? >> well, we've had long relations with airlines on a global basis and we understand the airlines want a balance of direct bookings and bookings through travel agencies. front tear is a small airline in the grand scheme of things and we think as long as we give consumers the breadth of choices

we give, the packages on expedia.com, we'll have consumers coming to us with lots of airline and hotel partners. >> you're hoping just out of ease that consumers will continue, but they could just simply use your site and not book anything on it. what are you offering to consumers? are you putting it together right now, are you in a war room thinking of a strategy to keep consumers buying directly from you, instead of shopping on your site and then going direct to the airline? >> we've been in business for 15 years. the internet provides choice, unrivalled choice. we have over 150,000 hotels, more than 100 airlines on our site. and if you come in and buy those components together, we actually get special deals from the hoteliers and airlines that you can't find on a stand-alone site on a stand-alone airline site or stand-alone hotel site. we have millions of consumers coming into our site. that's fine, if they shop

elsewhere, we hope we leave them with a good impression. but with the growth we've had in the last couple years, plenty are booking. >> i want to ask you about your financials. you materially beat second quarter expectations but analysts are concerned. what are you seeing in items of europe? what are the concerns you have so you're not confident enough to actually raise the full year by you've beaten second quarter? >> i think this is a period of uncertainty. certainly, you've -- we hear all about the uncertainty in europe. the fiscal cliff coming up -- >> dara, i apologize. we have to interrupt. president obama is speaking in the rose garden right now. let's listen in. >> american diplomats and civilians work tirelessly to advance the interests and values of our nation. often they are away from their

families. sometimes they brave great danger. yesterday four of these extraordinary americans were killed in an attack on our diplomatic post in benghazi. among those killed was our ambassador, chris stevens, as well as foreign service officer shawn smith. we are still notifying the families of the others who were killed. and today the american people stand united in holding the families of the four american in our thoughts and in our prayers. the united states condemns in the strongest terms this outrageous and shocking attack. we're working with the government of libya to secure our diplomats. i've also directed my administration to increase our security at diplomatic posts around the world. and make no mistake, we will work with the libyan government to bring to justice the killers who attacked our people. since our founding, the united

states has been a nation that respects all faiths. we reject all efforts to denigrate the religious beliefs of others. but there is absolutely no justification to this type of senseless violence. none. the world must stand together to unequivocally reject these brutal acts. already many libyans have joined us in doing so. this attack will not break the bonds between the united states and libya. libyan security personnel fought back against the attackers alongside american. libyans helped some of our dips find safety and carried ambassador's body to the hospital where we tragically learned he had died. it's especially tragic that chris stevens died in benghazi because it is a city he helped to save. at the height of the libyan revolution. chris led our diplomatic post in

benghazi with courage and resolve, he built partnerships with libyan revolutionaries and helped them as they planned to build a new libya. when the gadhafi regime came to an end, chris was there to serve as ambassador to the new libyan. he worked tirelessly to support this young democracy. i think both secretary and dlin ton a clinton and i relied deeply on his knowledge of the situation on the ground there. he was a role model to all who worked with him. and to the young diplomats who aspire to walk in his foot steps. along with his colleagues, chris died in a country that is still striving to emerge from the recent experience of war. today the loss of these four americans is fresh, but our memories of them linger on. i have no doubt that their legacy will live on from the work we did far from our shores and in the hearts of those who loved them back home.

of course, yesterday was already a painful day for our nation as we mark the solemn memory of the 9/11 attacks. we mourned with the families who were lost on that day. i visited the graves of troops who made the ultimate sacrifice in iraq and afghanistan at the hallowed grounds of arlington cemetery and had the opportunity to say thank you and visit some of our wounded warriors at walter reed. and then last night, we learned the news of this attack in benghazi. as americans, let us never, ever forget that our freedom is only sustained because our people who are willing to fight for it. to stand up for it. and in some cases, lay down their lives for it. our country is only as strong as the character of our people. and the service of those both civilian and military who represent us around the globe. no acts of terror will ever shake the resolve of this great

nation. alter that character or eclipse the light of the values we stand for. today we mourn for more americans who represent the very best of the united states of america. we will not waiver in our commitment to see that justice is done for this terrible act. and make no mistake, justice will be done. but we also know that the lives these americans led stand in stark contrast to those of their attackers. these four americans stood up for freedom. and human dignity. they should give every merng great pride in the country that they served. in the hope that our flag represents to people around the globe who also yearn to live in freedom and with dignity. we grieve with their families, but let us carry on their memory and let us continue their work of seeking a stronger america and a better world for all of our children. thank you.

may god bless the memory of those we lost and may god bless the united states of america. >> that is the president with secretary of state clinton, condemning the attacks on the u.s. consulate in benghazi. of course, resulting in four deaths overnight, including the ambassador to libya, christopher stevens, the first u.s. ambassador, we should point out, to be killed in the line of duty since 1972. saying there's no justification for that attack. saying we're increasing security at u.s. diplomatic posts around the world. amman javer, a reminder of how quickly foreign policy has been reinjected into what is an active campaign. we heard from governor romney not too long ago. we'll see where that takes us over the next few weeks heading into election day. >> strikes me things are unfolding on three different levels. first of all, the human tragedy of the deaths of those four americans. the president saying some of families are still being notified. then you have the foreign policy

headache in an area that the administration had been thinking was a relative foreign policy success for the united states in libya. and then you've got the political dimension of this. the president speaking a few minutes after mitt romney criticized the administration saying the administration had basically issued an apology for american principles and that the administration was sending mixed messages. interesting here in this rose garden setting that the president did not respond explicitly and directly to what mitt romney had said a few minutes earlier, carl. >> meanwhile, i wonder to what degree -- i mean the market, whether it's related or not, has lost a lot of gains as the president was speaking. he didn't reference afghanistan outright but one big concern in foreign policy circles in where this may escalate in areas surrounding the middle east. >> the attack happened on september 11th itself and that underscores the concerns about instability around the world, particularly in the middle east. these things can snap up and happen very, very quickly. >> thank you for walking us

through that story all morning long. >> you bet. mcdonald's was out with a big announcement that could shake up the fast food industry. find out what fast food industr. find out what the president of mcdonald's has to say about the newest edition of the menu.

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you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners. the announcement that's likely to shake up the fast food industry, mcdonald's is saying today it'll post calories for all items on the menu boards and drive-thru menus in the united states. here now for a first on cnbc interview is the president of mcdonald's usa joins us from washington. jan, always good to talk to you, welcome back. >> thanks, it's nice to be here. >> those of us who live in new york, this is not necessarily new, but it's going to be new for a lot of people around the country.

why now? and what do you make of the allegation that mcdonald's has been fighting this and fighting this until today? >> well, we're excited to be able to make this announcement and to post the calorie information voluntarily ahead of next year's reform. as far as fighting it, we've actually been a proponent of it. what we wanted all along was for it to be fair and equitable. and we're happy to go out front and do this today. >> is there any research that it actually drives traffic or turns traffic away? i mean, you try to put yourself in the mind of a consumer, you think of ordering something, you look at the calorie count. you think i can't afford to do that. maybe i won't get it. is it accretive to sales or not? >> people buy what they want to buy, but it helps them make better choices and really does influence someone who is interested in knowing that. so as far as sales, we think that it actually can positively

impact. people will feel better about eating at mcdonald's. >> speaking of sales, we got some same-store sales just this week. a lot better than the prior month. can you talk about at least in the u.s., jan, the trajectory of where same-store sales are going? do you see the rest of the quarter looking more like august? or more like july? >> well, we're really optimistic about the rest of the year from a sales standpoint. we've got great new products coming out. we have a big burger coming out this fall as well as the mcrib and monopoly promotions. so we're excited and optimistic about our sales throughout the end of the year. >> when thinking about the pipeline, jan, i'm curious whether or not your chefs back in mcdonald's think about the input costs and how that will play out as you're rolling out these new products. what's your anticipation, especially with that premium burger and beef prices? >> well, we've been able to manage the cost pretty substantially. we're really interested in getting things that customers

want and will buy. so first and foremost is to make sure that it's products that they'll actually buy. and then, you know, we look at how we manage costs going forward. whether it be from a pricing standpoint, hedging, and other input costs. >> jan, talking to a lot of people who watch the company closely, their main worry it seems is that the kitchen is getting a little more complicated because of the emphasis on beverages which did a lot of good not too long ago, but, for instance, wasn't necessarily mentioned in the recent same-store sales announcement. are beverages making things too complex? because anybody who knows the history of the company knows it was complexity that got you in trouble many years ago. >> well, we always look at the complexities. the nice thing about the beverages, they're not actually done in the kitchen, they're done up front. that hasn't really been a problem. but we're consistently looking at how to make things easier so

that our employees are able to execute it even better. so you'll see us taking a few things off of the menu. things that don't sell as well from time to time. we try to use the philosophy of when you put something on new, try to take something off that isn't selling as well. we've certainly done that with promotional products throughout this summer. >> to the extent you've had an opportunity in test in certain markets the divulging of calories. what have you seen in terms of shifts in consumer behavior from perhaps one product to another? >> actually, there hasn't been a great shift in consumer behavior. i think, again, they appreciate knowing the information. but as far as them buying something more than what they bought before, not necessarily. we've had great success with our favorites under 400. and really pushing the wholesome choices that we did this promotion earlier in the year. an egg mcmuffin is 300 calories, let's go for that every day. i think by educating people on

what the caloric value is, you know, it causes and allows them to feel more comfortable about eating the food more often. >> well, since you got that scene stealer of an apple right next to you, jan, your point is well taken. it's great talking to you again, thanks for coming on the program. >> thanks, carl. >> jan fields, mcdonald's usa chief. michael kors still ahead on the program. stay tuned for that. [ male announcer ] what if you had thermal night-vision goggles,

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tomorrow on "squawk box," phil purcell the former ceo of morgan stanley calling for the breakup of the big banks. >> as the future of finance summit continues. welcome to hour three of "squawk on the street." here's what's happening so far. >> there is nothing in dodd/frank that would've prevented the last crisis or will prevent the next crisis. >> entrepreneurship is not just in silicon valley or new york or a few places, it's spread quite broadly through the country. and even the investments in revolutions are designed to fuel that. >> import prices on a month over month view are up .7%, about half the expected jump we were expecting. >> some people know what it looks like, apparently, others are saying, it's got 4g and a bigger screen, it'll be what you

watch tv on, total replacement of the desk top. clearly the most important thing for apple. because a huge percentage of the profit comes from the iphone. >> they will be able to monetize search one day. they have 900 million people, that's a lot of people searching and that is a way to be able to make up money. >> searching is advertising. >> the one that works best in mobile. >> there we go. kicking off the wednesday session. opening bell rings here on wall street. >> this holiday quarter, i don't think it's unreasonable to think this thing could hit 50 million units. and to go from 50 million a quarter to 100 million in three years, when the world world is adopting smart phones and throwing away the old dumb clam shell phones, i don't think that's unrealistic at all. good wednesday morning, get a check on the markets as the dow continues to be slow and steady, but to the upside, with some new intraday highs earlier on, looking at 4 1/2-year highs for the dow, s&p up to 1,436, off the intraday high of 1,439,

and the nasdaq up four to 3,108. home builders spiking today as applications for home mortgages up 11% as interest rates continue to decline. kb home and toll brothers all higher. and the utility company getting hit with the downgrade to sell over at ubs due to weakening power prices and retail margin pressure. let's get to the road map. the countdown is on to apple's big announcement today. we are live in san francisco with the very latest on what we can expect from the tech giant. plus, michael kors joins us live from fashion week to talk the state of the luxury consumer. what's coming down the pipeline from that high-end retailer. plus the german constitutional court rules in favor of the bailout fund. we'll see what it means for markets here at home when we bring you the european close. then an apple shareholder and a bullish analyst weigh in on what the announcement could mean for the stock price. it generally tends to fade a

week after a launch. that's coming up next in the hour. we'll get to eamon javers with more on the situation in libya overnight. good morning again. >> good morning to you, carl. we've learned in the past few minutes that president obama is joini ining secretary of state hillary clinton to pay their respects to a diplomatic corps clearly shaken by the loss in libya and the attacks that killed four americans last night. earlier the president was joined in the rose garden by secretary of state hillary clinton as he addressed the american people about these attacks in libya. take a listen. >> the united states condemns in the strongest terms this outrageous and shocking attack. we're working with the government of libya to secure our diplomats. i've also directed my administration to increase our security at diplomatic posts around the world. and make no mistake, we will work with the libyan government to bring the justice the killers that attacked our people. >> in those rose garden

comments, the president did not respond directly and explicitly to mitt romney's comments earlier, the republican presidential nominee criticized the administration for the initial response to protests in the middle east and its question of how u.s. officials should talk about attacks on islam. here's president obama a little bit earlier. >> i spoke out when the key fact i referred to was announced, which was the embassy of the united states issued what appeared to be an apology for american principles. that was a mistake, and i believe when a mistake is made of that significance, you speak out. >> mitt romney there accusing the administration of sending mixed signals in the middle east, carl. so this, a tragedy on a human level, a foreign policy challenge, and now clearly something of a political tussle between romney and obama over exactly what the united states' response should be. >> you call it a tussle, eamon, and i hate to put you on the

spot, but a little bit of a misstep because it was so unclear what the embassy was referring to when they put out that initial statement. >> right. the initial statement came out from the embassy of the united states last night saying they condemned religious incitement. what romney is saying that this statement from the u.s. embassy amounts to an apology for freedom of speech and an attack on those who would exercise their freedom of speech right. romney was criticized for that attack. and he sort of doubled down on his position of criticizing the administration. did not dial it back so to speak after being criticized and really weighed in again saying that the administration was apologizing for american values. this thing is going to take a bit of a life of its own today on the news cycle. >> in many ways, eamon, it already has. thank you very much for that. eamon javers in washington. moving on to apple, less than two hours from that big event. our brian sullivan and jon fortt are live in san francisco with the latest on what's going to be

a big day. morning, guys. >> reporter: it is going to be a big day, there are still some questions, believe it or not, around this iphone launch here. we expect the iphone 5 to be coming out. but there are other expectations out there, as well. jon fortt is a lot more dialed in this than i am. but the reason i'm here is the iphone generates about 70% of apple's gross profit. okay. take all their other products, this is the product that matters to the company, to the revenue, to the stock. what are you expecting today? >> well, i'm expecting those new iphones, iphone 5, of course. i also expect a price shift on other iphones. remember, apple's been selling the 3gs at a two-year contract, also the iphone 4 at $99. expect to see that shift, the iphone 4 goes 3s goes to $99, get the 5 starting at $200, and new ipods, as well, and a new version of itunes. >> okay. and a couple of other things

here. it's been about a year since the iphone 4s, but it's been more than two years since the complete redesign of the iphone, right? it's been 27 months. brian white has an 1,100 price target on apple. he says this is going to be the biggest consumer electronics upgrade in global history. we may also get an ipad mini to talk about the so-called kindle killer, perhaps a slightly smaller, 7-inch screen. how big are the expectations really for apple today? >> expectations pretty big. i feel like apple's been signaling to some people who are dialed in that you shouldn't expect an ipad mini today. but apple tends to have separate events. they know if they call us up in another month and say we've got something else for you, we'll show up again, they'll get another pop out of that, most likely. so expect the iphone to be the hero of this event. >> much like the fine program

"squawk on the street," they always have the one more thing, carl, i know that's you. apple's always done that, as well. at the end of the day, they say i have one more thing. what do you think the one more thing could be if we get it? itv? facebook integration? >> i think they want the iphone to be the star here. expect that perhaps to be software or a service. apple's been a lot better about keeping those secrets these days. they were better at keeps secrets when their products are small. now that they're building millions upon millions a quarter, it's harder to keep it from leaking. >> what did ben franklin say? it's easier to take a secret with three men when two are dead. and now reporters and bloggers cover apple. harder and harder, carl to keep those secrets. we're here all day, jon's going in, i'm out, we're going to be using carrier pigeons. >> telepathy. >> to bring you the latest headlines as they cross first on cnbc. >> of course. >> back to you. >> fortt's got it all worked

out. he knows how this thing works. we'll see you later, brian sullivan and jon fortt in san francisco. the capital markets op-ed, and gary who was talking about the dangers, the costs, gary, of not owning apple. >> good time right after that segment. carl, i talk a lot about relative performance. i do it onair and off air. yesterday talking to a former colleague of mine. and we're talking about this idea relative performance if you don't own apple. you remember a year ago, i said if you don't own apple as an active manager, it's essentially being short the stock given the relative performance it's cost you. everyone wants to know what the numbers are. we're going to show you the numbers. take a look at these numbers right now. this is the cost of not owning a single stock during the period. year-to-date the s&p up essentially 14%, x apple 12.31%, that's 14% of the s&p gain, s&p

gain one single stock. one year, basically 24%, 22%, from the low in 2009 and this is analyzed compounded data 89.49%. you didn't own apple, you trailed up by 700 basis points. and if you're an active manager, not owning that single stock, that can cost you your job. let's take a look at the same data if you're benchmarking the s&p 500 i.t., which is a technology benchmark. even more startling numbers. year-to-date, 20%, 11%, one year, 31%, 21%, bear low, 119%, 81%. this is unbelievable if you make the decision to not own one single stock and then you try to tell your clients, as many people are this time of year, well, this was our performance x-apple, whether or not the clients want to buy that, it's up to them. >> as art cashin said yesterday, it's not money collector, it's

money manager, and you're entrusting others to manage the money. >> and we've spoken so much about relative performance. you know what i think it means to the overall market. it was back in late 1989 that money managers gave performance x qualcomm. we started to see some of this a year ago. it's going to be very interesting to see, especially with that data up there, carl. how many people try to say, well, this is what we did for you on a basis of x net of expenses, but we did it without apple or we did it with apple. startling that one single security could have such an overall impact on a broad diversified portfolio. >> it's great data. see you in a few minutes. let's get over to chicago, check in with rick santelli at the cme and get the santelli exchange. >> good morning, carl. i don't know if it was art or some other economist, but i think art made the same statement that there are no free lunches. and there aren't any free

lunches. welcome to the lunch bag table here. let's go through, and you can see how ridiculous some of this truly seems. when it comes to the treasury. the treasury needs to print paper so we can all pay our bills. and for each piece of paper they print, of course, we have ious. and some of those ious are going to go into taxpayers, some of those ious going into tax takers. and some of these ious, actually, are going to go into the pin because that's going to be a printing press for the moment. and, of course, with quantitative easing, the fed needs to reach in and find some money so they can now go to the treasury and buy those securities from the treasury. but what is the fed doing? they're increasing their balance sheets. so once again, let's put ious in the temporary folder. because what the temporary folder actually does, after a number of years when reflation hits, all these temporary ious, they're going to be sprinkled between the taxpayer and the tax

taker. because there's only one entity that funnels our government, that's the citizens. you think it's any different for the ecb? look at what the ecb's doing. they're going to ramp up the printing press, they're going to be going nuts, boat loads of ious in the temporary folder. the tax takers in greece, they don't have any money. so, of course, these ious go back into the taxpayer. now, let's look at things like health care. you know, it's free, birth control, birth control is totally free, but you have to put a red one in the insurance company. for giving mortgages totally free, you need to put a couple of ious in the temporary which are investors and banks. and what happens, all these temporaries have to get split between the two. but the tax takers and the temporaries, the printing press, when it all comes due, it all ends up in one bag. so your free lunch is nothing

but a bunch of red paper. now, what happens when all of these payers run out of jobs or they just can't bear the load? then you get a whole lot more bag of tax takers, and that's the irony. because all the great programs and all the people who we're trying to help, we won't be able to help them if all we have left are these lunch bags. back to you. >> well said. as we pointed out this morning, the court said nothing about growth in europe. that's for sure. we'll come back to you in a few moments, rick santelli. jackie back at hq. leading the s&p 500 higher today, williams financial upgrading the home builder to a buy. boosting its price market by $4 to $17 saying basically they're executing on some of their ongoing strategies and also cutting costs. up nearly 6% today at 15.51. when we come back, we are live with michael kors after a break.

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let's get a sector check. the top performing sectors, consumer staples doing the worst right now. and how the telecon sector is fairing, up about .75% to 156.42. emirates airline is adding a third u.s. city, landing the first flight in washington, d.c. what are the implications for the u.s. carriers?

our phil lebeau is back at hq with more on that. >> we talked about for some time about how international airline service is increasing in the u.s. and you added emirates adding the third u.s. destination this year, seven overall. they flew into washington dulles this morning, they had the traditional water cannon salute. for emirates, the importance of washington is getting into that very lucrative service going into the nation's capital, particularly from the middle east. and as they look at the u.s., you saw their sponsorship at the u.s. open, you see increased advertising from them here in the u.s. they see the u.s. as the linchpin to further growing the airline over the next five years. >> we will continue to grow. once we have served the major cities, we'll be looking at the secondary cities, and our business models throughout the network whether it be europe or asia has suggested to us and proven that by going to

second-level cities and third cities where the market is, they've proven to be very successful. >> so what are those secondary cities talking about in the u.s.? well, right now, here's where emirates flies in the u.s. new york and washington, obviously the big routes on the east coast. big presence on the west coast between san francisco, los angeles, and seattle. in the middle of the u.s., houston and dallas, expect them to add chicago and probably another eight cities, carl. what we're going to see from emirates is a full-on press over the next five years to make the u.s. a major destination or a place where they can take their passengers to the middle east. and what we're seeing in washington today, we're going to see that replicated many more times in the years to come. >> fascinating wrinkle. phil lebeau back at hq today. michael kors not only a household name in the fashion world, but back in november, stock's up over 100%. he wrapped up fashion week and joins us this morning with simon

hobb. >> welcome backstage at new york fashion week. michael kors completed their fashion show. the man that bears the business name joins us. welcome to cnbc. >> thank you very much. great to be here. >> congratulations. what are you laying out? as you look at the pictures of the fashion show, what are you laying out that you believe people will buy in the spring of next year? >> well, i have to say that to me the best thing about being a designer is when you put on the right thing, it changes your attitude. so this collection was really all about optimism. and things that change your spirit. so lots of color. i think color's going to be very important next season. you saw a lot of bold, graphic, stripes, sharpness and neatness which, i think everyone can use that kind of spark of color. that spark of something graphic in their closet. depends on how much color you want to go for.

but i think it just lifts your spirit. you know, this past fall was all about trousers, everything's very covered up. i think it's going to be a sexier season, but at the same time, clothes for people to wear -- >> we should be very explicit about this. when you hit it big, a phenomenal position in terms of share price. do you look forward at the trend, the margin in the future? because there will borrow certain parts of the collection, presumably, that are more profitable than other parts. >> certainly no question. i mean, what's universal in the world today are accessories. you know. no woman wakes up in the morning and says, you know, my wrist is feeling fat. so you can always find a fabulous new watch. a handbag that you use every day but it actually changes your look. so accessories, you know, continue to be super important. and they're look changers, which

i think is really important. and i think that's a trend. >> and on the subject of trends, a lot of people were worried when burberry issued a warning yesterday about its own business. where are we in the broad cycle? luxury will always come out of the cycle first and it'll go in last. where do you see yourself in the broad trend of where the industry is going? >> i think the one thing that's always been my point of view is the designer since the very beginning is that the best product that i design has this balance between something that people actually are going to use and wear all the time, but at the same time, it's not a commodity. it's something that actually lifts your spirits and has fashion to it. and i think that's always been my motive. >> michael kors, you would have loved it down here. we had couple thousand people in the audience, couple hundred photographers, michael douglas,

catherine zeta-jones. >> i heard catherine mcfee was in the audience. gary wore a fashion-forward tie for you, but you're not here to see it. >> i wore this tie just for you today. i was keeping with the fashion theme for you, simon. >> simon hobbs at fashion week with michael kors. straight ahead, we're going to catch the close in europe after a quick break. don't go away.

bell's about to sound all across europe. began at 4:00 a.m. eastern time. we'll get you all the details after the break. it's a game changer. ♪

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the european markets are closing now. >> yes, they are, and a fair amount of green around the continent this morning. most of the markets finishing higher after a german court ruled this morning, you probably heard with conditions that germany can proceed with ratification of the euro zone's permanent bailout fund. the decision gives a lift to a lot of bank stocks, including the commerce bank, italy's unicredit. the news also sending bond yields a little bit lower here. the spanish two-year, take a

look at 2921, and the euro having a good week as the shorts continue to get steered out of that position. eu euros a little over 1.29, the netherlands where a general election is underway. that being seen as a test of whether europeans will, in fact, embrace an austerity-lead unionization. speaking of which, let's get to michelle caruso-cabrera who is live in madrid with why on spain may soon ask for a bailout. michelle, good morning. >> reporter: hey there, carl, good morning to you. this morning, the prime minister of spain indicated that he might go to the ecb and ask for their help in lowering interest rates. it's not actually a full-on bailout, but it is something close to it. if you'll recall, back in the last week, he offered countries two choices, you can go get a full bailout, that's fine, or

that's something like greece has. you get money, need that money to pay your bills, needs that to make payroll and pay for government workers. or you could do what reporters are calling bailout light, which is you still come to the bailout mechanism and come to us, but all we do is we buy your debt. so that way your interest rates are lower. he told a reporter this morning he is considering asking for that. when he'll ask for that, we don't know, could be as soon as friday for a euro group meeting later in the week. that brings us to -- you may be asking yourself, wait a minute, i thought spain asked for a 100 billion euro bailout, they did, they asked for the banks, not for the government itself. which brings us to our second really key headline today which is that jose manuel berosia announced a big banking reform plan today. a plan at this point. the reason this matters is the rest of europe said to spain, okay, we'll give you the money for the banks, but, before we do

that, we've got to have the european wide banking regulatory framework. we heard about that today. it gives the ecb a lot more power to shut down banks, for example, that's going to be very controversial here in spain, in fact, they don't want to shut down a lot of their banks, even though many experts say they should do that. also controversial, a european wide system where a lot of small banks have to put into a fund in case a bank gets shut down, people in germany are going to say, why should we be paying for that? . so all of that has to be worked out. slowly, burr surely, carl, we're moving toward more european unity. we'll see how it goes from here. >> yeah, this morning, cramer said spain continues to be the fulcrum of all of our problems. michelle, you are in the middle of all of it. thank you so much. let's get to rick santelli in chicago talking europe, as well. good morning, rick. >> good morning, carl and peter, good morning to you, as well, but i want to do a -- before i

bring you in. but i see a lot of similarities between the behavior and what's going on with this strike. versus what central banks are doing around the world. teachers are making $76,000 in chicago, now over $100,000 in the suburbs joining in the strike and it isn't so much the money. they want all of this but don't want to be evaluated to see if their performance warrants more money. peter, do you see similarities? a lot of people around the world whether it's greece, funding in different countries. they want the benefit of printed money even though it comes from basically bankrupt entities, just like the city of chicago and the state of illinois! >> no, you're right, and central bankers only want you to read part of their report card. you heard bernanke a few weeks ago -- >> exactly. >> defending his policy. but his book is not written until his policy is reversed. on one side he says, yes, the policies have boosted the stock markets, that drives growth, but what happens when they reverse it and the stock market goes

down? is he going to say those 2 million jobs lost were on my watch? no, he'll probably blame somebody else. so central bank activity just temporarily covers up the underlying disease rather than dealing with that disease. >> well, you know, to me, another way to look at this and i want your comments is that they joined our plan. and our plan is instead of having a depression-like event that would be ugly and maybe it last a year or two, stretch it out over a long period of time till you diminish the impact of the explosion and spread it out over ten, 15 years, isn't that really what's going on? >> right. a la japan, but if you did what russia did in 1998, and asia in 1997, they ripped the band-aid off and they were growing a year later. and look at where they are today, of course, particularly in asia. but it's what politicians do. they don't want to take the hard pain. they don't want to tell a bondholder you're going to have to take a loss.

they don't want to tell a constituency that things will be tough for a year. instead, things will be mediocre for multiple years as a result. >> peter, is it also akin to, you know, a game of chicken. whether it's the ecb and the debt in the banking system, the $16 trillion, whether it's the chicago teachers union in the city of chicago, the cliff of insolvency in this game of chicken stretches a lot longer than the road, does it not? >> there's no question. and it's just a matter of how long bond markets want to finance that. so the fed can get away with what they're getting away with as long as the u.s. bond market is accommodating. but at some point, that will change and the u.s. bond market will resolve as it did in countries like europe. when that game changes, we don't know yet. but that's the sign to watch for when the u.s. treasury starts to revolt against the policies of the fed and -- >> conveniently, peter, everybody that implemented much of this won't be in office at the time to take full

responsibility. gary is in the wings and wants to talk to us. >> once i saw peter, who i have tremendous respect for, was going to be joining us, i decided to come in. peter, i wanted to know exactly what is priced into the markets right now in terms of the fed tomorrow in terms of the fomc? and tell me if this makes sense to you. he says you're pricing around 500 to 850 billion qe depending on what you want to put in the ecb's efforts, as well. the mbs market is fully priced for an epic mbs/qe effort. and, in fact, his work says that the s&p is probably 100 points overvalued if there's no qe at all. do those numbers make sense to you? is that the way you're playing into tomorrow? >> there's no question. to me, this entire rally that began in late july has been all central bank driven. the fed took the mantle when

bernanke gave his speech where if he did not want to do something tomorrow, he had every opportunity to say otherwise and did nothing of the sort. to me, that guaranteed policy action tomorrow. now, he has to deflect somewhat a lot of the criticism that he's getting. so that's why i think he'll space out the qe rather than giving $500 billion type number and say we'll do this every month until a lower number, say 50 to 60 and do that. but either way, he's acting again. what metric model that he's looking at, i don't know. but i'm taking the other side of that trade saying this is a central bank rally and now we're coming to the moment where you have to sell the news. >> peter, yo uh know that the relative performance which i've discussed and continue to think is really going to drive things the rest of this year. if you're a relative performance manager, nothing's going to happen unless there's no qe that's going to make you not play catch-up the rest of the year. >> well, i'm looking at the rest of the year in two different parts. preelection, post election. to me the fed tomorrow is the

last macro event of importance outside of anything happening in spain before that november election. to me you get the extraordinary performance chasing up or down, get me out or get me in based on the results of the november election. and from what happens tomorrow until that november election, i think the attention's going to shift back to the deteriorating global economic environment and the slowing earnings growth story in the u.s. >> one final question, peter, the minute we see the fed statement tomorrow, do you think the first reaction will be in foreign exchange? my opinion is, yes, i want to hear your thoughts. >> no, likely. when they do do something, we'll get a jump in gold, decline in the dollar, a bounce in stocks, and then by 3:30, closer to 4:00, we'll see whether and how much this has been priced in. i think it's been completely priced in. i think people who don't think the fed's going to act tomorrow haven't been listening to what they're saying. >> well, peter, thank you for coming. i'm one of those people. i still think there is a chance that the politics of the day

will keep venues in a microphone rather than a printing press, but we'll have to wait and see. back to you, carl. thanks, gary. >> good to see peter on our air once again. let's get to bob pisani watching, what? >> priced in maybe, but we're still hitting new highs. the market is still acting like put in evidence. with two to one declining stocks, go ahead, complain about the volume, but financials, industrials, energy, materials, and this has been going on for a while. particularly since he gave his famous speech on bond buying back on september 6th, which was a while ago. if you don't believe me, look at the dollar index, we're another four-month low on the dollar index right now. the three-month, but in particular since september 6th, the dollar's been down, the dollar/index is largely almost half of related to the euro and the euro's been going up since

then. you can argue about whether it's right or wrong, but it's moving the market and it's continuing to move the market. let me show you something moving. look at how these have been moving the markets, how the commodity markets have been moving. this is a three-month chart of aluminum. this is unusual to see that happen in a commodity like aluminum. it's also happened in copper, but it's been moving these markets on a regular basis now. you get alcoa and all these other spots moving, they're so closely tied. you can see the move up there in alcoa and other ones in this group too, copper, stocks, are moving on top of that. let me move and smoe you some other groups. builders at new highs, an unusual move in the mortgage applications, up 8%. sales have been going up, apps not particularly strong. these are kind of first-time buyers, new high, toll brothers,

this is big move up. this is two opposite ends of the spectrum in home building, both at new highs. the analyst, no one else seems to give a darn. they're buying everything in the home building space. i used to be the real estate reporter, they're not all the same. let me point out other groups at new highs, insurance companies, allstate, what happened over in new orleans very well. they're pushing through increases in auto, increases in home insurance. that's what's driving these stocks. remember, it's the revenues they bring in. you can argue whether it's moral or not, all i'm doing is watching the markets and seeing it move up. finally, can i point out? four-year high for employees. general electric, four-year high. >> and pretty good momentum lately. >> and you're not just a former realtor, you're the real estate reporter -- >> i am -- >> you remember? >> you remember? >> absolutely.

>> 1990 to 1995, i was the only full-time tv real estate reporter in the united states, i think ever. >> thanks. how you should play apple ahead of today's announcement, and what you might expect in the coming days and weeks. we'll talk to a shareholders and an analyst after the break. smart comes with 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety. at u.s. trust, our expertise extends well beyond investment advice and research analysis. it includes proprietary offerings like our eldercare program, which helps provide for those who came before you. and our financial empowerment program, which helps prepare those who come next. resources like these have made us the number-one trust company. that's why generations of families have come to us to help build their own legacies.

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coming up on halftime, we're counting down to apple's big reveal, will the iphone 5 be enough to take the stock even higher? facebook's face, did zuckerberg deliver? and is it time to own the a share? what will he do? the traders play all of the big story. >> thanks so much. before then, let's get breaking news from kayla tausche. >> hi, carl. moments ago about a tie-up between bae systems and airbus parent in the netherlands. and what's being explored right now is an all-stock deal, roughly 15% premium to where bae shares had been trading before this news came out. the big issue for u.s. investors is, of course, bae has a lot of operations here in the u.s. and the deal will require approval from the council for foreign

investment in the united states. the plan under if current strategy is to wall off all of bae's operations here in the u.s. to allay some of these concerns. but keep in mind, the creation of a single european aerospace giant will present a lot of competition, especially to boeing and the government's going to get involved here. carl, back to you. >> that is a big deal if it happens, kayla, thanks for that, and keep us posted. in the meantime, it's been five years since the first iphone was launched. the excitement has not changed a bit. >> and we are calling it iphone. today we're introducing the iphone 3g. the iphone 3gf. today we're introducing iphone 4. i'm really pleased to tell you today all about the brand new iphone 4s. >> what a great collection of

tape right there. shares of apple flat, up $1.92 ahead of the anticipated launch at 1:00 p.m. eastern time in san francisco. with us this morning is the ubs technology strategist and khanning smith, capital adviser, of the capital advisers growth fund. apple is the largest holding of the fund at 5.4% of that portfolio. good morning. >> good morning. >> good morning. >> steve, i know we're just a couple of hours away, but let's play the game of what do you think it's going to look like? be specific, and tell me how many units we're going to ship in the quarter. >> well, it's going to look a lot like this. this is going to be antiquated technology in about an hour. but finding new jobs to be done, unmet customer needs, and looks like the 5, which is going to be terrific, is going to be a better version of the four. doesn't appear it's going to be any tremendously new jobs to be done. it's going to be doing the new jobs better, 4g, bigger screen,

more language capability and so forth. you know, something like 5 million to 10 million units shipped if they're able to make it available around september 21st. so you get a week and a half or so at the end of the quarter. but i expect it's going to be very successful. our survey suggests there's more pent up demand for this than previous iphones. >> channing, good morning, i don't know if you saw the data earlier in the program. i showed if you did not own apple in an s&p 500 portfolio from the march 2009 low, you essentially gave away 700 basis points of relative performance. walk me through the next 3 to 5 years, if you make the decision not to own this stock and you're benchmarking the s&p 500, how much is that going to cost you in performance? >> well, we still believe in the capital advisers growth and we'll see outperformance. will it be what we've witnessed the last couple of years? not likely. if you look at the category growth, develop markets for smartphones and the iphones, and develop markets about 60% penetrated. and emerging markets, there's

still some runway, but not the runway we witnessed over the last couple of years. you'll see growth slow. and the tablet space, you know, in the u.s., and some developed markets were in the teens in penetration rates, but the emerging markets, still in the single digits. there's still enormous opportunity there. as we move into emerging markets, growth will be tougher because price points will come down and that's going to stretch or put pressure on operating margins. we think it'll still outperform, but it'll be a tougher road in the next couple of years. >> you wrote a good note a couple of weeks ago about the opportunities and dangers of china. that's going to clearly be the biggest deal absent product launches of the next few years. how likely is the china mobile deal? and when might we see it? >> well, our view is that the china mobile deal may not come until late next year, possibly in 2014. i think that's a little later than the consensus expects. some 40% of apple's operating profit growth has been coming

from asia and quite a bit of that from china. so i do think that china potentially is the next leg, but that's something to be watched. now, we do expect some interim announcements. the ipad mini which should create incremental demands, but at the end of the day, it's really new category creation. can apple find new categories that are anywhere close to the size of the current iphone? >> channing, you've been pret pretty -- pretty resilient in your view that 750 is a legitimate near term target. as we get closer, to what degree do you take profits? and how cheap does it have to get before you add to your position? >> well, you know, if you look at apple and the way we run our portfolio, apple falls in our accelerated grower category. and so we're looking for 20% upside to our 750 target. so it'd have to fall, you know, around 625 to 600. it's possible i think you would have to have some supply constraints. you'd have to have a disappointment on the timing of the introduction of the iphone 5

as well as the ipad mini. so it's possible. i think if you looked historically around these product announcements, the stock hasn't performed well. so for investors who aren't in the stock, you might have an opportunity, we would recommend if the stock goes lower to take a position because we believe you could see 50 million iphones sold in the quarter and about 25 million ipads. if we see that -- >> channing, real quick, given what you said, i'm surprised it's the largest position in your portfolio. does that say more about the fact you can't find other growth names? >> well, a lot of that's been appreciation. we still think it's a good opportunity. what we will be concerned about when we talk about other categories is when we start to see the apple tv. we still think there's tremendous growth in the existing categories for tablets and for phones. when we start to see, you know, management venture into the tv world with lower margins and the commodity business, that's when

we'll get concerned and probably trim our position back. >> interesting take. channing, steve, thanks so much, guys. we'll see what the afternoon brings. meanwhile, up next, why airline stocks are seeing a big spike today. back after a quick break. you , everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants. so i can just go talk to 'em? just walk right in and talk to 'em. dude, those guys are pros. they'll hook you up with a solid plan. they'll -- wa-- wa-- wait a minute. bobby? bobby! what are you doing, man? i'm speed dating! [ male announcer ] get investing advice for your family at e-trade.

welcome back to "squawk on the street." a quick market flash. we're looking at the airlines. these stocks are moving after average fuel costs per gallon declined from last year down

2.5% from june, of course, steel costs have been on the rise, but in the airlines scaling back capacity also hedging their costs, these stocks are on the move today. >> yeah, quarter doesn't look too bad for delta. thank you very much. don't forget to keep the tweets coming. mark zuckerberg telling people it's a great time to double down on facebook stock. if you took his advice, what would your second bet be? tweet us @cnbcsquawkst. 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. ♪

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"squawk on the street" this morning. mark zuckerberg says it's a good time to double down on facebook shares. what would your second bet be? morgan writes the next bet is to double down on todd akin's senate race. and christopher writes, your teenager making curfew. spoken like a parent who knows better. two seconds here with gary, talking about a name that made some news yesterday but still rings in the market's ears today. >> the new ceo to come in. here's the thing, this is a company -- you can bring in the best ceo in the world, the nature of the business, asset funds, take aingk