chris, what would you have done with it? one thing. >> i would retire the national debt. i'm a responsible guy. i feel, you know, a little bit of guilt over the debt. and then i'm going to buy the philadelphia phillies. you know, next time this money appear, i'm going to act more quickly. >> chris, i like it. pay down the debt and buy the phillies. they're both good for the nation. chris reynolds, thank you very much for joining us. thanks for watching "street signs," everybody. bill and mandy up next on "closing bell." and we do welcome you in to "closing bell" on a newsy say. i'm bill griffeth. >> indeed, very newsy. i'm mandy in for a change. we're mixing it up. i'm down at the new york stock exchange. maria will be back tomorrow. the day is full of heavy hitters and continues here on cnbc with ben bernanke on capitol hill to a literal who's who of wall street at cnbc delivering alpha conference. the market is reacting to both events today.

there's also a whole lot more coming up from delivering alpha. we have activist investor nelson pelt, coming up in a few minutes. he may be making headlines at what he is looking at now. we'll bring that to you live as soon as it happens. right, bill? >> leaders of pepsico will be listening to that. and another activist investor, carl icahn, and the dell letter getting hot. he issues a letter ahead of the vote tomorrow. he'll have a lot to say on that surely issue coming up. that will be a little while from now. stay tuned. and an hour from now, buckle up, because ibm, intel, american express, ebay are out with their earnings. huge companies with huge ramifications for our markets. we'll have it for you as soon as it happens. this is a rather interesting reaction -- all right. we'll go to new york city right now. andrew is getting ready at the

alpha conference to interview activist investor nelson. >> we have a lot to talk about. and i should tell the audience to get the pens and paper out, because we have news to break on a number of issues. there's been a lot of speculation around your big stakes you've taken in pepsi and we'll get there in a moment. we have a lot of questions on what that's all about. >> right. >> before we do that, in preparation for this interview, i learned literally in the past two hours you have just amassed and are continuing to mass a very big stake in dupont. can you comment on that? >> andrew, you asked me in the green room about ten minutes ago. if you say dupont, what comes to mind? remember i told you? i said tank. >> that's all we're going to get? >> that's all you're going to get. paint. we're going to talk pepsi. we're going to talk about -- >> we're going to -- i know you're an activist, consider yourself a constructionist. to clarify the point, several

sources have said -- and i think you can take it to the bank -- you are investing in dupont. the stock has already moved today before we are now reporting this for the first time, and is there anything you can say about this? >> no. other than what i told you already. >> okay. had to try. but we are breaking some news -- >> you can try again if you like. you only have 30 minutes. >> we're at 29. maybe in the last minute we'll come back to it. >> okay. >> let's go to pepsi. because for the past three, four, five months even, there have been rumors about what you were up to with pepsi. you have a big stake, $1.5 billion stake, in pepsi. you have 1.3, or maybe, or $1.4 million in mondelese. you have not said what this is all about. what are you trying to do? >> first of all, that's our trial. our goal is to invest in really good companies, great brands, great franchises, great cash flow, that are quite -- that are somewhat missing it on the

income statement or in the structure. and we have a plan. so our goal always initially is to go to management, talk to management, talk to the board, explain to them what we think they should be doing as opposed to -- i know you guys love it, you come on cnbc and have a bill and carl show, but that's not what we do. we don't want to do that. we spent a lot of time with (unintelligible), spent a lot of time with the cfo. we will continue to spend time with them. andrew's a friend of mine. we go way back. and what we think pepsi should do is that pepsi -- pepsi is at a crossroads at this point in time. they've got two businesses. they've got a cash business and they've got a both business. >> the cash business being the beverage business -- >> exactly. >> the growth business being the salty snacks business? >> exactly. >> and you want to merge them

with -- >> if you want me to tell you, i can -- plan a is pepsi acquirs s mound leez. after that is done, they buy they spin it off. now, why do we want to do that, okay? -- tastes have changed. people have changed. my kids don't drink soft drinks like you did. you don't drink soft drinks like i once did. all of that's changed. it's a wonderful business. but it's not growing. and when you have a growth business and a cash business, you are always winding up to borrow from peter to pay paul

and vice versa. and you can see it in pepsi. pepsi has underperformed the last five or six or seven years against its peers. the consumer staples. >> in fairness -- >> go ahead. >> -- the stock is at its all-time high, just this week. you could argue that the strategy is finally working, right? for many years, we talked about the strategy, didn't get there. in the past six months, eight months, twelve months, people suggested you might be there for the first time. you could argue that mondelez is the underperformer, which is something you encouraged kraft to do. >> you're absolutely right, we did encourage that. we created great value. remember kraft was the $30 stock almost from birth. and when you separated cash grow to growth grow and you created the run of the litter, which is the kraft north american grocery business, coffee, the neat business, and you separated that

business and they ran that business for cash, and they said we're going to give 75% of our free cash flow back to shareholders and we're going to make this the leanest food company out there, that stock today sells at a multiple higher than coke. >> so -- >> so, no, listen. let me finish. they started life, when they split up paying 4.5% dividend. the stock is now paying a 3% dividend. it's not because the dividend went down. it's because the stock went up. mondolez needs some work to do. its margins are low. as you know, we pushed old kraft very hard to buy cadbury, which was a great deal to them. it created a natural fault line to separate these two businesses. and look at the value creation from $30 to where these two pieces today trade. >> okay. let's just go back to the transaction you're proposing now, frankly, for the% time

publicly. >> all right. >> you want to merge pepsi. you want pepsi to bind mondelez, about $35 a share would get you -- >> yeah, we're dancing on the head -- >> all stock. >> all stock. >> you've talked to them about this? >> i have. >> my own understanding through my own reporting, you have a meeting planned with irene rosenfeld, the ceo in the next couple of weeks? >> i do. >> what has been the response from pepsi? >> okay. pepsi right now doesn't love the deal. okay? and i'm asking all the shareholders of pepsi and mondelez, gets your cards and letters out and send them to the board, to back this transaction. because, andrew, if the transaction is structured the way we suggest, pepsi by 2015, our estimates say, the stock is $175.

. that's what we like. we see that. now, that's alternative a. alternative b is if they continue to insist that this is not the right thing for them, then we urge them to do what we did it, or what kraft did, is separate beverages and separate the frito business. frito is a great growth business, and we see that would generate about $145 in value. this, by the way, is on our website, after this meeting, a white paper out there that will tell you -- take you through all chapters on this. >> let me try to channel him for a moment. >> go ahead. >> and suggesting why this transaction may not be the right thing. a, the company finally seems to be getting its sea legs, whether you believe that or not, i don't know. b, serious margin problems underperforming at mondelez. why do you want to buy a company that's clearly underperforming? >> okay.

>> and lastly, and i think this is key, you talk about the synergies of putting these two companies together. but there are dissynergies. there has always been this argument can you have the soda on the same truck with the snacks. there's certain parts of the country -- or certain parts of the world that happens. middle east, europe. i believe in mexico it happens. u.s. not so much. why are there not more dissynergies to a transaction like this? and isn't there an argument to be made -- jim cramer made it last night, maybe coke should be the one buying mondelez. maybe this idea of being a pure play in this market doesn't make sense. that's what i think he -- >> well, eight questions. >> take them one by one. >> i forgot them. i'm getting old. forgot the first one. but if you look at pepsi, you say they're getting their sea legs. i'm not here to bash him. he's a friend.

the problem at pepsi has not been management. it's been structure. she inherited the structure that we don't think works anymore. they reset the bar. it earned 410. this year, our estimates say it will be about 440. okay. yes, it's hitting stride against 410, but it's not hitting stride against what they were projecting in 2012. now, why did that happen? what happened is they started to earn a lot of money by shrinking the direct marketing fund at frito lay and bolstering pepsi. so what happened is frito was overearning. that's great. except market shares were declining. in the growth part of the business. when market shares decline, they

rightfully so said that's not going to happen. >> right. >> we're going to spend 500, 600 million back into marketing, okay, and that's what gets them to 410 and 440 a share, not the $5 that was supposed to have been earned last year. again, this is not laying it at feet of management. this is laying it at the feet of the structure that's changed. let me finish, andrew. >> mm-hmm. >> pepsi has a history of bold moves, okay? go back in the '60s. the cst business, the beverage business, was a rocket ship back then. coke and pepsi, you couldn't touch. but what did pepsi do? they bought frito lay. they bought this little potato chip company back in the '60s. today, that potato chip company is two-thirds of the value of pepsi. two-thirds of the value. but yet, who follows pepsi's stock? beverage analysts. beverage analysts are following the stock, and they're never going to rank pepsi as good as coke, and rightfully so.

yet two-thirds of the value resides in a snack business that beverage analysts are talking about. so they're disintermediating p/e multiples. we saw this at kraft, as well. they were disintermediating p/e multiples and irene got the joke. >> take on the distribution issue. there has been the argument, you put the snacks next to the soda, you put them on the same truck together, you can open up new markets in europe, for example, where the soda actually is very, very valuable. you can open up new markets for the salty snacks. you can do the opposite -- >> andrew -- >> -- in south america. >> -- you got your facts wrong. who here has seen a pepsi truck delivering frito lay? no one, okay? they're not doing it in mexico. because they have an independent abover they are a minority partner of, and there are no snacks in mexico coming to market with beverages. they are doing it in russia. they're not doing it in china. the two most important beverage markets in the world today after

the u.s., mexico and china, and there it's not happening at all. okay? and europe is a very small market for frito lay. but it's very big market for mondelez. so think about salt and sweet going together to market in europe. very helpful. all of the places where you might have some dissynergies, okay, when mondelez comes in, they far outweigh them. and as far as the synergies go, we've been around lots of split-ups. we've been around the kraft one. we've been around cadbury-dr. pepper. we've been around wendy's-tim horton's. they always stock about the big block of synergies. you know what good managements do, they eliminate the dissynergies, 100%. but our numbers don't eliminate the disinner i goes. our numbers are $144 a share by just separating the beverage business and the snack business,

says there's $400 million of this dissynergies that remain. it doesn't go to zero. and you still get $144 a stock, andrew. and if left to their own devices, the way the company is structured today, pepsi by 2015 will probably be $105 stock. >> you alluded to pepsi and indra as being good managers. how do you drudge irene rosenfeld at mondelez, given the poor margins perhaps at the bottom of her peer set? >> okay. i'll tell you, there are -- there are managers who are very good strategically, there are managers that are very good operationally. irene gets very high marks for strategy. she did what a lot of companies wouldn't do. she ran a dow company, a dow 30 stock. she bought cadbury. and she split the company into

its natural fault line. created great value. the kraft piece is doing a great job. my fault with irene is twofold. first of all, the name mondelez i hate. okay? i think that hurts us in two multiples of p/e, okay? and then -- >> really? >> yeah, oh, it sounds like a disease. suffering from mondelez. [ laughter ] but you're right. her margins are way, way lower than what they should be. and when irene and i meet again in the very near future, we would -- that's exactly what we're going to talk about. >> do you think it's her operation or do you think it is the underlying business which frankly is cadbury? and the reason i ask, cadbury has long underperformed when it comes to margins. >> andrew. we were a very large shareholder of cadbury. >> i know you were.

>> we had great relations with the company. we urged them to demerge dr. pepper. they did. look what dr. pepper did when it demerged. the stock was demerged in the teens. went quickly up to 40. when we got to cadbury, their margins were in the 9% range. okay? we told them they had to get their margins up. we told them the margins at 9% were 800 to 1,000 basis points lower than wrigley's or hershey's, the most direct comps. >> right. >> okay? that was in '07. the company was finally bought in '10. >> mm-hmm. >> the margins were already up to 14%. so they got 400 basis points. >> and now we're back to about 12. >> and they said -- they said in '10 that they were going to get to 18%. okay? so they were going to get the thousand basis points that we said they needed to get. now they're back to 12.

i agree. and irene has come out and said we're going to get 90 basis points of margin a year, and we're going to reinvest 60 basis points back into the business. i'm not getting any younger, and to get to 16%, that's about 13 years, okay? i can't wait 13 years to get to 16%. so these are one of the conversations we'll have with irene, because the margins are too low. i believe that she will find a way to get them up. if she doesn't, then we've got a problem. but she's got to get those margins up. she's been, as a standalone company for about three quarters so far. i think the market is giving her some time. i think they're running out of time, but they're giving her some time. and i'm waiting to speak to irene to hear what she's got to say. >> let's talk about plan b, which is if there is no deal -- >> yeah. >> -- if pepsi decides taking on mondelez, just too much, you are still suggesting they spin off -- >> most definitely.

>> -- the beverage business. >> yes. >> they are doing a strategic review right now, they've said that publicly. there have been some hints that they might be willing to spin off the beverage business in the united states, or at least north america, because of the dissynergies already, in that they're unions and they don't go on the same trucks. would that be enough? >> that's not reason enough to spin it off. that would be a victory for shareholders, and i would applaud that. and if done the proper way and the balance sheet is done -- is used properly and the productivity gains, which we call cost cuts that she's talking about, fall to the bottom line, we see that as about a $134 stock price by 2015, and that's a victory for shareholders. and i would be happy. but i'm looking to be almost ecstatic if i can, and if i can get to 175, that's better than 135. >> just to be clear, and this is just based on looking at some of the numbers of when it looks like you bought into this stock,

your basis is probably around $69, $70 a share, and we're already at $85 in the past several months. is that right? >> we are -- you're right on the current price. we bought our stock the fourth quarter last year. my lawyers don't like me to talk about what we paid for stock. but we bought it in the fourth quarter last year. >> okay. let me ask you one more question on pepsi, and then we'll move on to some other issues. when you look at the pepsi strategy -- indra nooyi's strategy, and to focus on health, the transformation and investment in dealing frankly with potentially with what you might think of as the not cyclical but secular issues in the business. >> right. >> the fact that mayor bloomberg doesn't want you have to have big gulp and what that all means. do you think they've approached this correctly? they've taken it -- coca-cola has done something, but not nearly in the same way pepsi cola has taken this issue on. >> i think coke is dealing with

it properly. if we're all going to eat fish and vegetables, then there's no place for pepsi, mondelez or frito lay, but that's not reality. but if you want to hit the problem right on, you do it, as you suggest, and i agree, 17 ounces of pepsi is bad, 16 ounces is okay. right? that's big gulp. so what you do is you get rid of your beverage business, because it's all about -- the real target is the sugary drinks. and if she gets the sugary drinks out of it and sugary drinks becomes a cash cow, which is what we think it should be, and if it's leveraged properly, which is what we think it should do, and if it's run real thin and real skinny and real lean, then you have a real business, you know what that business is, that business is about returning cash to shareholders. and now you have a frito business that gets the appropriate amount of market spin year in and year out, and that grows at 7% -- and then, if

you do that, you still can always deal with a merger of mondelez down the road if you want -- don't want to do it today. but i really believe that beverages and snacks should be separated. north american beverages out, productivity gains the bottom line, appropriate leverage, will be a victory for all of us. >> on the secular issue -- on the health issues, though. you said it's soda. and soda currently is -- there's a target on the back of soda, clearly. >> yes. >> do you think (unintelligible) would be a target on the salty snacks and potentially the sweet snacks and what that will ultimately mean? >> well, you know, dark chocolate is now great for you, okay? we found that out. chewing gum cuts down on the intake of fattening foods. we could be actually a delivery vehicle for newt

vehicle, they have cough drops, some of the things that offset the not-so-good things part of the business. i think salty snacks are a potential problem, i agree with you. i think the food companies are learning to deal with sodium better than the soft drink companies are learning to deal with sugary drinks. because the sugary drink just doesn't taste that good when you put it in there. >> and talking about philosophy. you think of yourself as not as an activist. you like to say you're a constructivist. >> yeah. >> you have been lumped in, or in the category of carl icahn, bill ackman, name your activist of the moment. why do you think you're different than them? >> first of all, they're both friends. carl is a very, very old and dear friend. i think we had dinner a couple of weeks ago when we said we knew each other about 40 years. i was 8 at the time.

but we go back a long way. look, the background is operating businesses. okay? we run businesses, we built businesses as a ceo. we ran, built, created and sold -- >> all right. we're going to step aside. the news has been made -- we want to explore it a little bit of what nelson peltz has said about his deals -- dealings with pepsi and mondelez. if you're just joining us, they're at the delivering alpha conference in new york city. he told andrew sorkin, or admitted, he asked pepsi to buy mondelez for $35 a share. but as he said, pepsi doesn't love the deal. that was a quote from nelson peltz. we want to look at this deal. pepsi and mondelez trading higher. mark schwartzberg is a beverage analyst. first of all, just your thoughts. you've written extensively about the possible scenarios that

could come out of this if pepsi wants to spin off the american beverage unit, if it wants to buy mondelez, all those things. would it make sense for them to buy mondelez at $35 a share? >> yeah, good afternoon, bill and mandy. and thank you. you know, my colleague chris, he covers mondelez. as you say, we've written about this. and we do think it would be a highly eps accretive transaction from the get-go. as we heard from nelson, it's a value-creating transaction than simply splitting pepsi into two companies. although we do think on scenario b that nelson just laid out, there's evidence that management is already taking steps to split into two companies a la snacks and beverages globally. >> would there be any sense whatsoever for coke to buy mondelez, as nelson just a moment ago alluded to? >> no. there may be -- >> none whatsoever? >> one can make those arguments on paper, and i appreciate your colleague made that assertion yesterday. >> yeah. >> we don't think that's a

particularly likely outcome. >> how much is mondelez worth? it's at $30 right now. he discussed 35 with pepsi. they didn't like that deal. what would it be worth? how do you see that company, your colleague? >> sure. so chris and i published some work a month ago, two months ago i guess, and we said at $36 a share four mondelez, which actually included a rather large cash component, we just heard nelson say all stock, that that, as i said, would be about 20% eps accretive to pepsi in year one. so that's obviously, you know, not year 2015. so i think you're seeing that, you know, our work suggests that the opportunity that nelson's alluding to is significant. but to be clear, we don't think that pepsi management is nessy positioning for this -- necessarily positioning for this, and we do think they are taking steps to splitting into two companies and purr suing the second option. >> much to the chagrin of nelson, for sure. thanks for your thoughts.

appreciate it very much. >> thanks, bill. we'll be having more from the delivering alpha conference. we welcome you officially to "closing bell." mandy joining me today on a day when ben bernanke spoke and the market yawned. crazy. we'll get to that. we have a lot of earnings to get to. the ceos of u.s. bank and pnc financial. and we'll be hearing about obama, intobam obama, intel, american express and ebay. online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine.

welcome back. the other bit of news coming out of the delivering alpha conference was our andrew sorkin reporting that nelson peltz had taken a large stake in dupont, which mr. peltz declined to comment on that. pushed the stock higher. it's up 4.75% right now. it has roughly added 22 points to the dow, so by itself, dupont is the reason that the dow is in plus territory right now. but barely. mandy? >> okay. some of the biggest names in the hedge fund world are laying out the best investing ideas today at the delivering alpha conference. so david favor has been there all day and he joins us with some of the highlights. what's stuck out for you, david? >> reporter: you know, mandy, a fan-favorite best ideas, i got to moderate that panel last year. this year, they picked hewlett-packard as the short. he was right for a little while. the stock did go down. but it's up 84% so far this year. this year, though, mr. chanos chose another u.s. iconic

company, caterpillar. here's what he had to say. >> the company has negative free cash flow the past year and a half after dividends. so it doesn't have the financial flexibility as a lot of large corporations do for buybacks and othersme men othersment. but more importantly, it took huge charges prior to the mer r merger. you know that's one of my favorites, is looking at companies that write down net tangible assets to either zero or negative when they buy a company. it gives them a certain amount of flexibility going forward, but for a very short period of time. >> caterpillar itself has a decent yield. the question is to whether they'll be able to maintain the dividend, one that at least chanos deferred on. as for lee cooperman, who had great picks last year, put up ten different names. so i asked, lee, well, of all of them, which one presents the most risk, but the most reward? >> well, basically, i'd say that

sandwedge has the potential of doubling and if the price of oil and gas move depreelower, so ri reward. >> obviously, he doesn't think bankruptcy is in the cards. he is the owner of sandridge believing it will be a significant gainer. another panelist, chris hahn, goes to edas, the maker of the airbus, porsche, which is just a stake in volkswagen, but he believes the two company also get together, and an australian rail company that was recently privatized. as for mark, he said go with the japanese autos given the move in the yen, which he believes will be moving down. and a drugmaker. but all in all, always interesting to hear the picks from some very good stock pickers. >> just very quickly, before you go, david, i know that carl icahn is always a headliner, right, and always just about to come up at your conference. what are you hearing on the big

dell battle? >> yeah, you know, mandy, things are moving pretty quickly there. what i can tell you now it does appear another index fund, from my sources telling me, vanguard, which is one of the top holders of dell, will also be voting against the deal. that's something of a surprise, particularly because usually the index funds take their queue from iss, which said to vote in favor of the deal. at this point, the math does not look good for mr. dell to prevail. we'll see. but my guess now -- and believe me, things can change at the last moment -- but right now if i had to guess, i say that meeting gets adjourned tomorrow. we'll look forward to hearing from mr. icahn 5:00 eastern today. >> it's coming up. thank you so much for that, david. looking forward to it. bill in. >> we look forward to it very much. wall street, as we move on, not loving mcdonald's today. shares down about 1% after they were downgraded to neutral from a buy rating citing concerns that the u.s. same-store sales

expectations are too optimistic. should you look elsewhere if you want to feed profits to your portfolio? or is this a rare buying opportunity for mcd's? let's talk numbers. we have ennis with risk reversal, and on the fundamental side is zach, not behind the wheel this time at least. ennis, the charts on the golden arches. would you buy them or not? >> i wouldn't. and a technical case against mcdonald's is relatively simple. from 2009 until early 2012, the stock was strong performer, very steady uptrend. since early 2012, though, it's flat. and given what the market has done, that's a huge relative underperformance. it hasn't been able to get above the so 4 level. 95 is first support. i don't like the stock here. >> zach, a surprised with lackluster sales earlier. what do you think? >> they're going to have trouble in europe. the fact is, mcdonald's won't do you any harm. they do have a yield. it's the ultimate safe play. it's a well-run company. they're not going out of business anytime soon with billions upon billions

served, including i'm sure, carl sagan. the fact is this will not hurt you in any dramatic way. i don't think the stock will go down 20%. for people looking for more yields and more plays, i don't see the stock helping you in any dramatic fashion, other than safety. >> as long as you both agree, we'll adjourn this meeting now. thank you. we'll get back to delivering alpha at some point. thank you. >> okay. 25 minutes to go until the closing bell. why don't we look at the dow there. it did dip into negative territory. it came back into the black. we heard at delivering alpha that nelson peltz has taken a big stake in dupont. that really did help the dow move higher. it's now back into negative territory, just slightly. we're keeping an eye on it. >> the banks have been in the focus as well. they say no one is too big to jail. treasury secretary jack lew said dodd-frank will be in full effect by the end of the year. u.s. bank ceo will react. and keep your eye on these

stocks. they'll be reporting the earnings after the bell. get your pen and paper out, because we'll bring you the important numbers as soon as they're released. and after intel reports, cfo stacy smith speaks first to cnbc right here on "closing bell." we'll talk about their outlook coming up. don't miss that. and we've got much, much more from cnbc's delivering alpha. coming up, carl icahn, as we mentioned, also coming up 5:00 p.m. eastern. do not go away. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550

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welcome back. u.s. bancorp beat second quarter earnings estimates today, but shares are trading slightly lower. ceo richard davis is joining us from the bank's headquarters in minneapolis. in this cnbc exclusive. richard, good to see you. welcome back. >> thank you, bill. >> we'll have to have a truncated conversation. i apologized for that. interest rates are on the rise. what does that do to your mortgage business? we've heard from other banks that things have slowed down, and they're wondering what the outlook is. what's your version of that? >> you know, interest rates have different points on the cycle, 2, 5, 10-year. as the rates have been moving up on the long end, it represses

some of the mortgage activity and refinance, and that hurt us us in the near term. as the curve moves up in the middle, and it will, basically on the beige book results we're reading about, it will be positive for banks probably in a couple quarters from now as rates move up and the entire curve starts to shift. >> i would really like to know, though, if indeed your mortgage revenue business does continue to decline over the, i don't know, coming half or maybe even coming year. so where exactly will growth come from at the bank? >> you know, mandy, the mortgage will slow down because refis are going to come to a much -- much slower progress than they have in the past couple of months. but we are more of a finance -- purchase-finance kind of mortgage company. so we weren't relying that much on refinance. many of the customers are looking for the opportunity to move up into the next house. we're seeing green shoots as far as people wanting to move around. mortgage revenue is not just about production volume. it's about servicing and about mortgage hedges. so for us, it will be negative in the next couple of quarters

but nowhere near as you've heard about some of the other companies mentioned. >> let me ask you the regulatory question. during our conference first thing this morning, the keynoter was treasury secretary jack lew. and during that keynote, he said that all pieces of dodd-frank will be in place by the end of this year. let's listen to that. >> going forward, we'll measure our progress in weeks and months, not in years. and much of our remaining work will be completed in the next five months. let me repeat. by the end of this year, the core elements of the dodd-frank act will be substantially in place. >> what will that mean to your business? >> you know, bill, we expect 92% of the dodd-frank activities to be completed by year end, and for us, that's 100% of those that impact us. i would say substantially everything that's already been vetted has already affected u.s. bank, and we're already at our run rate as it relates to dodd-frank. and we're quite satisfied with it. >> what's the biggest impact dodd-frank will have on your business? what can you point to that you've had to change as a result of dodd-frank?

>> probably the most powerful thing would be the bulka rule as it relates to the trading activities and making sure we're doing business in a transparent way. we were doing that anyway, and we're not a huge trading company. but as it relates to some of the things that affect our bank the most, it would be that. after that, other than some of the new agencies and some of the new regulations that are coming forward, we've already that built in and substantially is not a big issue. >> let me rephrase bill's question here. is it going to be any negative impact, and can you quantify it from dodd-frank? >> no, no. no negative impact from this point forward. and what little there has been -- for instance, we can't hold equity in nonbank positions, and small things like that that have been measured and evaluated in the last probably two years, and we've taken action well ahead of the final rules in order to get that out of the way, and so our run rate is what you see today as it relates to dodd-frank. >> last question on the fed, chairman bernanke reiterating they plan to start tapering by the end of the year, assuming the economy can withstand that. do you think it can?

and what are your expectations for fed tapering down the road, and what it does to your business? >> bill, i couldn't be more aligned with what the chairman was said. i was having my earnings call, and i was talking about we were seeing 90 days later continued green shoots and nice but slow, steady progress across all parts of our business as people are starting to reinvest and use deposits and start utsing their lines of credit. so i would agree by year end it would be a much healthier environment. i would expect them to start tapering. i think the economy will be so strong at that point for them to take that action, it will mute the impacts and it will be a nice, soft landing. >> richard davis, chairman and ceo of u.s. bancorp. we appreciate your time, sir. thank you for joining us again. >> thank you, bill. nice to talk to both of you. >> see you later. when ben bernanke speaks, it not only listens but moves big. but not today. >> yeah, not today. why? with us is beth ann from stand & poors and greg from the economist and our own steve

liesman. steve, why not get some background for the sake of the viewers first of all. you know, it's kind of interesting, because i don't know about you, but i was thinking why is he not mentioning tapering? is this a big backtracking, or has someone said to him, don't say the "t" word? >> no, he didn't say it. but i feel like he left the impression in place that the general drift of fed policy assuming a third quarter rebound from the second quarter weakness is for tapering in september. maybe he left it a mill more uncertain saying the policy was not on a preset course. but he started to use this new euphemism which essentially is we are going to change the mix of accommodation, or mix of policies that will lead us to accommodati accommodation. what he means is less tapering, maybe more forward guidance would be one way to think about it. >> grelg greg, i didn't hear him say it, maybe you can confirm and tell me what you think he's talking about, but bernanke was quoted as saying if the fed were

to let rates rise, the economy would tank. so i guess they don't feel like the economy could take a higher rate right now. >> well, you're right. i mean, his way of putting it is that the economy needs lots of monetary accommodation. but steve's point is an important one. he's been trying to send a message, not just today, but, you know, at the nber conference, and also at the press conference, that the way they deliver that easing monetary policy will change. less emphasis on buying bonds, so going ahead with the tapering. more emphasis, if needed, on keeping the rate at zero for longer. one of the interesting points he made today in his testimony was that if inflation fails to rebound from its current level, which is very low, at around 1%, they'll respond by holding the rate at zero for longer than their current guidance suggests. but no discussion of ramping back up the bond buying. >> right. in other words, bottom line, is it going to be flexible? beth ann, from the market perspective, what does a flexible fed mean? >> the fed, they were careful with the markets.

they didn't want to mention taper for a good reason, because it's the end of summer. nobody wants to hear it will happen, but they know it will. the fed stuck -- bernanke stuck very close to his -- very close to what he said last week. he knew that's what they wanted to hear. he was very clear it's accommodative. what he's doing is even though the question of reducing the amount of purchases, taking for example, so the fed, they might get off the highway, not going 65 miles an hour, but they'll get off the exit ramp and still driving. >> guys, the objective of the chairman today was to leave in place the market's impression of fed policy. i think he succeeded. and the question is whether or not he can get through the senate grilling tomorrow with the same impression in place. >> yeah. >> so do you think, steve, the fact the markets took this as a big yawn was we didn't hear that much that was news? like the fed's still here, guys. nothing's changed. don't worry. >> and was it because there was nobody to listen -- everybody is on vacation -- >> i was listening. the newest information i got today after three hours of testimony is what beth ann said, which is that the summer is actually going to end. i didn't realize that.

until just this very moment. >> i would like to add one thing -- >> yes, beth ann? >> i would like to add one thing, i know people are talking about a september -- a september tapering. i'm still -- i think the summer will end before tapering begins. i'm looking for something in december. >> yeah, but what about -- why would you want to put a cap on the christmas party right there? is that what you want to do? no, i'm actually serious about that. i think this is an interesting idea that you would end up really putting a damper on christmas. let's say you had a big market upset. people are right about to spend for christmas and the market tanks because -- >> do they take it into account, steve? >> i guess they could. they could signal it well enough in advance. >> greg, last word to you, very quickly. >> yeah, doesn't it start to feel like most of the tanking has taken place? all is said and done yesterday, it was a quiet day, but we're sitting here with 2.5%, up 80 basis points. it feels like the big risk adjustment has taken place, and that's the main reason bernanke is being met with a yawn, not

because it's summer. >> i have to go now. i have to enjoy what's left of the summer. >> there you go. >> it will end, steve. that much we know. okay. it will happen whether we like it or not. >> see you. what are we looking at? just over ten minutes away from the closing bell. at this stage, the dow is back in the black. you know, ever so slightly. it's been hovering around -- it's really hugging the flat line, isn't it, bill? >> exactly. part of that is the dupont story. nelson peltz speaking and investors reacting. when we come back, we have the highlights of that market-moving interview. and later, the issue of "rolling stone" features the alleged boston marathon bomber on its coverment you can see it there on the screen. one of the nation's largest retailers is boycotting the magazine and not selling it in its stores. we'll bring you more details later on on the "closing bell." (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online

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go. >> welcome back. comments from nelson peltz at delivering alpha had a big impact on the market. we have now the highlights, and he started off, of course, with dupont. and you have pepsi responding and mondelez is going higher as well. >> that, and the other big one. news that mr. peltz has made an

investment in dupont. if you could take a look at this chart, while we were talking today. the stock jumped about 5%. sources telling us that he is amassing a big stake in dupont. unclear what his plan is, because when we asked him the question -- and i think i asked it to him at least two, if not three times -- he effectively said no comment. but a little bit of news being made there, simply in his nonresponse. the other big news, of course, being that he finally after months of speculation explaining what his investment thesis is behind both pepsi and mondelez. he has a $1.5 billion stake in pepsi, about a $1.4 billion stake in mondelez. he wants pepsi to buy mondelez, all stock, $35 a share. it would be about a 16% premium. take a listen to what he had to say about it. >> pepsi right now doesn't love the deal. okay? and i'm asking all of the shareholders of pepsi and mondelez gets your cards and letters out and send them to the

board of pepsi and mondelez to back this transaction. because, andrew, if the transaction is structured the way we suggest, pepsi by 2015, our estimates say, the stock is $157. -- $175. it's 80 something today. >> he made a couple of comments about indra nooyi, mostly complimentary, but on irene rosenfelder, it's a different picture. take a listen. >> my fault with irene is twofold. first of all, the name mondelez i hate. okay? i think that hurts us in two multiples of p/e. okay? and then -- >> really? >> oh, it sounds like a disease. [ laughter ] suffering from mondelez. but you're right. her margins are way, way lower than what they should be, and when irene and i meet again in

the very near future, we -- that's exactly what we're going to talk about. >> and if that wasn't news enough, we also talked about one other stock that is in the news, which is dell. he is not an owner of dell, but a good friend of carl icahn. i asked him whether if he owned shares he would vote in favor of mr. dell's proposal or mr. icahn's proposal. he chose mr. icahn's proposal. that vote, of course, tomorrow. if the vote happens, we'll see whether that gets pushed off or not given how close things seem to be. bill, back to you. >> by the way, i don't know if you know, we asked pepsi for a comment. they gave us a three-sentence comment, which essentially said, hey, we're doing just fine with our own strategy. essentially, they're saying, we don't want to catch mondelez. >> there you go. he has a meeting with irene rosenfeld in a couple of weeks. we'll see if he catches mondelez. >> we're confident in our ability to deliver. that's from pepsico. andrew, as always, good job. thank you. >> thank you, bill. we're coming back with the closing countdown.

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all right. a couple of minutes left before the close. everything's slightly higher. we'll talk about why in a moment. let me get you set up for the earnings coming out in a few minutes. there's the -- there's those numbers. ibm will be reporting in a moment. they're expecting $3.77 on revenue $25.37 billion. intel, we'll talk to the cfo about their expectations. they're looking for 39-cent profit. american express, looking for a profit of $1.22 on $8.28 billion in revenue, and ebay, looking for 63 cents on $3.89 billion in revenue. the dow just kind of flat-lining, up 18 points. and it's been going sideways most of this day. same thing for the s&p. same thing for the nasdaq. ben willis of albert frooed, ben bernanke spoke today. he said a lot of things. he answered a lot of questions, and the market yawned. why? >> all of the big players are at the cnbc conference talking

about alpha. there's nobody left to trade. >> so it was like a tree in the forest. what happens if there's a tree in the forest and nobody hears it? >> exactly. the jawboning was tapered. the fear out of the market. but it left some indecision. so we're not seeing a lot of volume, quite frankly. the volume is frightening from a trading point of view. so the fed seems to be successful in that vein. we'll get another shot at it tomorrow to see if somebody can ask a smart question. right now, the expectation was we understood it before the market opened with the release of the text. not a whole lot more came out of it. the only thing moving stocks today coming out of the cnbc conference about mr. chanos and paulson and everybody else. that got stocks moving. not our chairman. >> one of the reasons the dow is higher is because of dupont and the stake that peltz has taken. the stock is up 5%, 6% as we head toward the close. thank you very much, ben. >> pleasure. >> so stand by as we head toward the close.

we'll await the earnings reports. we'll have the numbers and market response in a few minutes, and more from the delivering alpha conference as we get ready for the speech by carl icahn. stay tuned. hour number two of the "closing bell" getting under way right now. [ bell ringing ] and it's 4:00 p.m. on wall street. welcome back, everybody, to the "closing bell." i'm sitting in for maria, who will be back tomorrow. well, bill griffeth is walking over. he'll rejoin us in a moment. a pretty mixed picture on wall street as investors are bracing for a barrage of earnings. we're just digesting, we're just settling down now. let's see how we're finishing up the day on wall street, with the dow squeaking into the black there. it was hugging the flat line for quite a while in the afternoon trade. currently to the upside by about 17