in detroit ♪ good morning, welcome to "squawk box" on cnbc. i'm becky quick with joe kernen, andrew ross sorkin is off today. we'll have a live report in a moment, but first, a look at the markets this morning. the dow, the s&p and the russell 2,000 all closing at record highs yesterday. the dow was up by 78 points. even more notable, the dow industrials and the s&p 500 hit intraday highs for the first time in nearly two months. but the picture changed after the bell. there was a lot of high profile news, you can see the futures are indicated lower this morning. dow futures down by 28 points. this came after some earnings misses from google and microsoft. not to mention that detroit news. joe will have a recap of those earnings reports after this, but, again, the u.s. equity futures, now the dow futures down by 27 points, s&p 500 off by 4 1/2 points and the nasdaq down by close to 30 points. general electric, the dow component set to report quarterly results before the

bell. analysts are looking for ge to earn 35 cents a share on revenue $35.6 billion. >> new orders are supposed to be the thing to look at for ge. is that below -- i want to look into this. saw some people saying that maybe -- we'll look at the ref new and the eps number, but there are other metrics to look at today. a number of tech names reported after the bell yesterday. google second quarter earnings and revenue was short of wall street estimates. among the reasons, falling ad rates, people worried about mobile, also widening losses from its motorola mobile phone business. shares of google had recently risen to all time highs. huge market cap, but then you can see they fell significantly in after hours trading. talk to an analyst for google early at 6:20 eastern. victor anthony will talk to us. then microsoft, which had been trading in multiyear highs, looked like getting ready to break out again, balmer talking about all this -- the new microsoft, but same old story in

terms of another disappointing quarter with pc sales now something like 20% earnings and revenue missed the mark. those slowing pc sales hurt the windows business. meantime, the company took an unexpected 900 million charge for its inventory of unsold surface tablets, another in a list of products just that consumers don't seem to want, when they come from microsoft. probably nobody knows more about microsoft than rick sherlund, he'll join us with more on microsoft. we had him coming on before the numbers came out, and now it is really going to be good to be able to talk to him. and he did not pull any punches. they whiffed on every major business segment. >> what about the restructure? i want here that day. what were his comments? >> all wondering whether he's the guy to lead a revamp of the company and he doesn't, you know, i don't know how many fans he still has left in shareholder

community, or in the media, but he has -- >> i heard questions. >> he only needs one fan, though. he still has that one fan. >> i heard questions raised by customers with this restructuring too who are confused about who they talk to at this point. >> you know who needs -- you know who is behind him? >> bill gates. >> i would like bill gates behind me if i was a ceo of nobody else matters really. i wonder if, you know, in years, years and years and years, still a highly profitable company, huge icon, not carl, but an icon, i wonder if anyone else -- bill gates is focusing on a lot of other things, philanthropy and such, and you wonder is it ever time? advanced micro devices posted a smaller than expected loss. revenues inline with wall street consensus. a famous company. we still talk about it. i guess in light of -- there is a competitor to intel, but it

becomes less and less significant. $3 billion market cap company in a $4 stock. amd offered upbeat revenue forecasts and expands into new game consoles, but the shares fell in after hours trading. this is one where you say, use the percentage, they were down 25 cents, but down 5%. gross margins will fall as it seeks a foot hold in game consoles. a number of other stocks that we're going to watch this morning. we'll get to them in a few minutes. first, though, one of the stories that every newspaper has as the lead and that is bankruptcy in detroit. how much money? >> $18 billion. >> and it is not going to be restructured. the obama administration, won't be like gm or chrysler, this is going to -- you're on your own. >> these are some significant numbers, detroit is the largest u.s. city ever to declare bankruptcy, the city's emergency manager kevyn orr on the kudlow report last night. >> this is a problem that has been more than 60 years in the making. there is $18 billion of debt

total. even if we took $200 million a year out of a $1 billion budget, which we can't do because we shut down every pothole, another street of know or anything else, it would take 68 years to pay off that debt. even if it is just $11 billion in unsecured debt, that's almost 52 years to pay off the debt. i beat debt. >> costly court battle is now expected. brian sullivan joins us now from the motor city with more on detroit's dire financial situation. and, brian, the numbers are pretty unbelievable, looking through the numbers. this was a city with 1.8 million, just back in the 1950s. now talking 700,000, that means 40% of the tax base is gone. >> i think you hit the main point, becky. the numbers are very, very staggering, it takes up the whole front page of the detroit free press. a major story. let me go through some of the numbers, guys. as i dug in the emergency manager's report, the bankruptcy filing last night, the magnitude of the problem really begins to hit home. as you noted, 18 billion.

that's a conservative estimate. there are some numbers as high as 20. you have a deficit of $327 million, and this is probably the most staggering figure of all around this bankruptcy, 100,000 creditors are listed, 100,000 entities, organizations, and people listed as being owed money by the city of detroit. that is monstrous. obviously the story is going to become the pensions. the reason this is more than a detroit story is that this case, if it is allowed to proceed, and, remember, there are people that will fight it, could define how pensions are handled in the creditor structure in any potential other bankruptcy in america. that's why this case matters so much, not just for detroit, but for the united states. and the numbers are huge. in fact, according to the emergency managers report that came out of june 14, the underfunded liability for the grs, general retirement system, is over $800 million, and the underfunded liability for the police and fire retirement

system is more than about $147 million. so the question is, where is that money going to come from? and, guys, we're going to be here all day, we're going to be talking about this story. as we learn more about detroit, i think we start to understand what has happened in this crumbling of what was the richest city in the united states, 60 years ago. so i'll leave you with this. the average response time by detroit police officers is 58 minutes. the national average is 11. it is not their fault. they know half the cars break down so consistently, they simply cannot make it there on time. that's the magnitude of the problem, guys. >> brian, i looked at that, i looked at another statistic that showed that only 40% of the streetlights there work and only a third of the ambulances work. so response time -- >> the city, becky, is physically large. it is 137 square miles, so you got that shrinking population

base you referenced, you've got blocks where there is literally one home that is occupied. in fact, a recent report said that an analysis -- i cut my lip shaving because i couldn't get cold water in the hotel. there was no cold water, only red hot water, so i dry shaved, and i sliced my face up. on an analysis of 77 blocks, only one home per average paid taxes. >> wow. and it just -- i had been to detroit a few years ago, i was in that area downtown, where, you know, the pretty water front and some of the areas there, i had no idea things had gotten this bad, the services had been slashed like this. just wonder how you can ever turn something around once it hits the critical numbers. >> you file for bankruptcy, that's the hope. you heard the sound bite last night, 68 years to pay off the debt, and i've already spoken to a number of people as i got here to the airport, airport workers, people like that, the hotel,

that work for the city or around the city and they don't believe the city is that dire of a strait. they say, oh, they're hiding money, that sort of has been the very brief back of the envelope conversations that i've had. but we'll have becky moore today, i'll get off the street corner, head downtown in a bit, go see some of the issues that are going on. that's what we're going to do. we're here all day. happy birthday, yesterday, by the way. >> thank you very much. >> get some of the -- i'm glad you referenced that, because, you know, it is so obvious, i was going to ask you whether you made someone mad, woke someone up with one of your reports and they smacked you or something. but you're, like, 6'3", i don't think anyone is messing with you. that's a tough town. >> don't undercut me. don't undercut me. >> 6'4 ". >> that was ten years ago. you mean tall, not wide. i thought i was getting bigger here. way too motivated. slow down. going to be hot. >> buy a braun. can't cut yourself with an

electric -- it is close enough for government work. i feel bad for you. >> usually can't get -- usually can't get hot water in a hotel. can't get cold water. it was boiling hot. i did the old military style dry shave. i'm sure it is real attractive on national television. >> somebody just -- a little bird whispered in my ear. is today your birthday? >> today is my birthday. >> that's weird. >> happy birthday. >> you yesterday and -- >> thank you very much, becky. >> good luck with the lip. >> we'll be here. >> we'll check back in with you later. >> good some of that -- people used to use that shaving stuff that white -- >> that you kind of like automatically -- >> crazy glue. then he might be -- you know, won't be -- don't want to do that. >> the numbers in detroit just if you look at the bear numbers, it is 18 billion and the guy who knows what he's talking about says it could be as high as $20 billion. if it is $18 billion, 700,000 residents that's $25,000 for every resident to pay off what they owe from years and years of this buildup. >> mare dieredith whitney got 2 closer to her number,

unfortunately. a long decline. just in movies and things like that, you've seen the decline basically. eight mile, whatever that -- some of the things that have been filmed there, just a -- i remember true romancing looking at where dennis hopper lived and it is, like, wow, that is a city that just -- a lot of cities have had the move back by the yuppies into parts where they redo all the brown stones and it just doesn't -- i don't know if anyone has moved back to the burbs in detroit. >> brian is right, the big battle will be between the pensions and the debt holders, the other debt holders who say if you're a secured debt holder, they believe they should be first in line. pensions are claiming they have a constitutional right to be protected as well and that's the battle that will play out and that's what people will be watching so closely. >> journal's take is immediately, you know, years of decline and the u.s. automotive industry, obviously, but public unions, it is going to be hard

to talk about how the public unions, how big a role they played in this because you'll feel bad for everyone who is losing the pension. but, you know, you can't -- this is -- you feel -- you want to help people and give them as much as you can and they work for years and this is the flip side of that, okay. when you promise too much and you don't allow, you know, you don't allow the tough decisions to be made, because of empathy, this is what happens. and then people are left with -- >> if they're going to bankruptcy, pension holders will have no more health care support and they'll be getting about ten cents on the dollar. >> would have been better to do something 15 years ago, wouldn't it, to make concessions 15 years ago. and look what we had to do with the -- auto industry, same deal. we ended up restructuring because of the same thing. too many things promise that -- whole country now promise way too much, and hopefully we don't face anything like this. i hope this isn't an ail gwire

for what we're all headed for. >> we'll have more from brian in next hour and talk with a bankruptcy expert at 7:00 eastern time. let's check on the markets this morning. another solid day, well off the highs yesterday. well up over 100 for our close up, down 27 points today. the nasdaq is an index that is much lower levels than the dow and yet bigger point loss. that indicates how much google and microsoft are going to play into the nasdaq today. let's check out energy. we're still at what looks to be, like, $4 gasoline at 108. i don't understand why we're down. the ten-year has gotten quieter and quieter. below 2.5 yesterday. i was trying to think again, just -- such a geek and nerd that i wonder what is the downside to all of this. and i wonder what would happen if we slowed a little bit, the

economy, which precluded the fed from ever exiting and then if the bond yields started going up and couldn't pay all of the debt service on everything. i wonder if that's the way it ends. just scared, wondering how these things can end badly, but if you lost control of the yield curve, that's why even at 270, which wasn't very high, people were wondering, is this going smoothly or -- but think of the economy was slowing and rates still went up. right now, bad news is still something that traders like because it means the fed is going to stay on track. >> i think we're in a transition. >> what if bad news gets to the point where it is bad news. >> we're at a transition point where good news is going to be good news. >> what if we don't get good news? then in -- and rates don't stay quiet and you get the worst of both. higher rates and the economy not recovering. we haven't really -- we hear the term pushing on a string, but we don't think the fed has pushed. seems like it worked. they had other tools. even at zero, they had other

tools. >> you look around the globe, people still look at the united states as the place where they feel a lot more -- >> they can affect us too. thank god it is a national ice cream day as the one good thing. i've got some -- got some bone marrow with wild cherry. >> are you making that up? >> no, there is a bone marrow and garlic chip. >> i tried garlic before. gilroy, california. >> nova scotia lochs. >> i haven't tried that yet. >> do you know who declared national ice cream day? >> only because you told me. >> ronald reagan. george washington had a favorite. it go all the way back to alexander the great. >> everybody has a favorite ice cream. >> they do. mine is yes pecan, ben and jerry's -- only one president has had a -- this is all on the blog, by the way, though i'm not promoting it, but peace, love, profits, on huffington post too. but what was i saying? >> your favorite is yes pecan. >> yes pecan, the only president

who has an ice cream named after him is barack obama, president obama. >> oh. >> ben & jerry's. >> i get it, yes pecan. >> sunday, if bloomberg is out there, sunday is a more important day. >> because. >> it is national junk food day. >> is it really? >> get yourself a large -- it is the more important -- have some ice cream and wash it down with a 40 ounce coke. 40 ounce coke and mcdonald's. time for the global markets report. i think louisa can be ready. you can do it once and a while. you don't have a weight problem. if you want something sinful, you'll do it temporarily, right? >> are you kidding me? i do it every day. are you kidding? i have to have my sweets every single day. but my favorite ice cream actually dark chocolate with caramel and then the surprise element, little bit of sea salt. >> yeah, yeah, yeah, i had

something with sea salt. it is weird that salt is good with sweet -- >> it is really good. >> why did i know that about you? i don't know. >> another secret, try a bit of salt on banana. >> never heard that. >> i know. you don't believe me, but try it. >> it will stick right in -- the peanut butter i already have on the peanut butter. >> now i can't speak, now my mouth is watering so much. the stocks are up 600 now, a little lower, so yesterday on the close, we closed slightly higher note. this morning, opening with some slight losses, we just moved a little higher here, heading towards noon time on our european session. we're looking at the sector story, and our main european markets being relatively unscathed at the moment. we're looking at some slight losses on the ftse, the cac, the xetra dax, all trading down by a bit. the ftse over there in the corner, the italian market higher by .3%, reversing the early morning losses that we initially started out with. the sectors, just to show you what's going on here on a friday, utilities, telecoms

higher, basic resources, and technology off by a bit. not a big surprise given we saw the weakness in the numbers from microsoft and google in the overnight session for us. and then coming on to tap this morning, sap, for example, trading lower in the tech space. that's pulling down technology. speaking of the telecoms, though, let's talk about vodafone for a moment. this is the second largest world telecoms operator. they posted results, quarterly rilts. little higher on the session today. and they really have been hit by regulations and they have been hit also by the european recession. but with regards to the regulatory environment, they have been forced to really see a big cut in prices, especially in main markets. and in the southern bits of europe, we're looking now at huge drops, double digit revenue falls for spain and italy, spain seeing revenue falls of 11%. italy seeing falls of 18%. and it is not just in the southern part of europe, it is also in some main markets, more stable traditional markets like germany and britain where

they're seeing a lot more competition and a lot more instability as well. that has had an impact too. vodafone trading higher. bucking the trend today, having had a little bit of a downturn here in -- over the last couple of weeks. guys, i need to go eat ice cream now, no other way around it. >> i think we're all well on our way, louisa. talking -- >> it is hot. good time to do it, in the summer. >> perfect. >> louisa, thank you. we'll see you next week. when we come back, google shares being punished today after the company's quarterly results missed the mark. an analysts will offer his take right after this. but first, another earnings report crossing the wires earlier this hour. schlumberger earning of $1.15 a share, beating the street by a nickel. revenue came in line. we're focusing on detroit this morning.

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welcome back. appliancemaker whirlpool out with quarterly earnings. the company earned $2.37 a share for the second quarter, excluding certain items. that is 5 cents below what the street was expecting. revenue was slightly above consensus. but whirlpool raised its forecast citing strong underlying trends but the stock looks like it is down 1%. we'll track it as we get closer to the opening bell. google shares are under

pressure after the internet giant missed expectations. victor anthony covers the company for topeka capital markets. victor, thank you for coming in this morning. >> thank you. >> the good news is that they were actually able to raise revenue, the bad news is the amount they're getting on the mobile ads that dropped pretty precipitously. good news you're getting more mobile ads, bad news, can't charge as much for them. >> mobile is part of the story. the bigger part of the revenue miss came from the network partner sites. just as this is a business where they deliver search results to companies like aol, ask.com. late last year in the fourth quarter, they went through a process where they were cleaning up the network, what they call changes. you saw lower revenues coming out of -- >> is that good if they're focusing on the user as they say they have been trying to do? >> you hear companies like facebook talk about user experience is paramount. same thing for most internet companies. the switch in costs for most

consumers is very extremely low, practically nonexistent. what keeps you on a particular internet company site is the experience. are you getting the right results, are you getting the right path delivered to you. google wants to make sure that continues almost indefinitely and so they're willing to sacrifice near term profits for the longer term profitability. >> stock was down 5% yesterday in after hours. i guess some of the shareholders don't have that same long-term attitude. you think this is the right call for the company overall? >> i think it is the right call. i think bullish investors will look at the fact that paid clicks, the way i view it, the first order of derivative for the business, that grew by 23%, solid number, accelerated off a very tough comp and so that's what i look at. and overall, i think google is a company, an innovator in technology. it is a date factor -- a gold standard in advertising. i think, you know, this is a stock you want to own over the next three, five years in the portfolio. >> there has been a lot of

questions in the entire space about mobile ads and whether you could convince advertisers they were a good thing. they were able to get more mobile ads, but the amount they were able to bring in for him has dropped and it has continued to drop. how does this all weigh out? >> yes, so, the mobile app monetized as a much lower rate than desktop. over time, it is going to -- the gap between the two is going to normalize, meaning that the mobile cost per click will catch on the desktop. it will take time. >> you buy this stock or not today? >> buy the stock if you're a long-term investor. this is definitely a stock you want to own. near term, though, i think it will be some volatility. going through a platform transition on the advertising platform. may want to stay away, but for next month or so, or until that happens. longer term, you can buy the stock all day. >> victor, thank you very much, appreciate you coming in today. >> thank you. coming up, general electric is going to report quarterly results within minutes. last year the company earned 38 cents, indicated they earned 35

is the estimate. for the year, 1.66 versus last year's 1.52. this is the only quarter expected to be down. revenue expected 35.55 billion. we'll have those numbers and instant analysis next. every day we're working to be an even better company - and to keep our commitments. and we've made a big commitment to america. bp supports nearly 250,000 jobs here. through all of our energy operations, we invest more in the u.s. than any other place in the world. in fact, we've invested over $55 billion here in the last five years - making bp america's largest energy investor. our commitment has never been stronger.

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a one night stand ♪ good morning. and welcome back to "squawk box" here on cnbc. a huge choice of musical options with motown, bob seger, eminem. i'm joe concerni inkernen with . andrew ross sorkin is off today. we're waiting for numbers from general electric. the futures at this hour are down about 30 points. and ge, it looks like it is hitting right now. company is reporting operating earnings of 36 cents a share. that is a penny above the 35 cent estimate. and as we said, it is down a little bit from last year. the four-cent restructuring and other items of charges was more than offset two cents in positive items, but the operating number, earnings per share, 36 cents a share now. revenue is $35.1 billion.

company says industrial revenue was in line, the reason that the 35.1 is below the street, 35.55, is due to faster than expected shrinkage of ge capital, something we have seen again and again over the years since the financial crisis, the companies decided to shrink that. the things that the company is highlighting are infrastructure orders up 4% globally, to a record back lock of 223 billion. never been that high for services and that backlog. u.s. orders up 20%, so we'll see how the -- how the market reacts. >> we look at general electric not only for what it says about general electric, but what it says about the broader economy and ceo jeff immelt makes comments on that. they executed in a business environment that was slightly improved versus the first quarter. he says the emerging markets remain resilient and in the

united states, as you pointed out, they saw strong growth orders. europe is stabilizing but still challenged and they expect margin expansion to continue in segment profits to grow in the second half of the year. >> revenue, 4.1 billion versus the year go quarter, down 4%. for people that point to the problem in trying to grow revenues at these major multinationals, that's an illustration. though there are specific things that ge is trying to do as well, in terms of, you know, restructuring the business, which caused revenue and at some points to be below the year ago period. who was talking about that yesterday, it is sometimes not necessarily bad, it is the revenues that are going away are not -- are low margin or businesses you don't want to be in. you better focus on the more profitable -- >> we were talking about a company that lost 30%. which one -- >> i don't know. a long time ago. anyway, the market this morning is --

>> which company was it? one company -- it was an analyst i was interviewing. i was talking to them about it because he was saying it was the numbers, but it was intel, right? intel had 30% decline. that's what it was, in profit. >> you should remember. >> it was my interview. takes a minute. it is good news because they're getting out of -- >> commodity type business. for whatever reason, the stock is up. people knew it was 35 cents. to jack degan, owned ge for a long time as chief investment officer and portfolio manager at harvard advisory in boston. why is the stock up on this, jack? what do you see positive in these numbers? >> joe, i think it is better than i was expecting. i thought the emerging markets would give them more trouble with the real weakness in their currencies, especially brazil and australia. and i think that the order number in the u.s. is pretty

amazing. >> 20%, yeah. >> and, yeah, and, you know, that's an anecdote on the economy as becky points out. and, of course, the shrinkage of ge capital is -- that's a good thing. the quicker that goes down, the better. so i think it is positive, better than i was expecting, joe. >> and the -- i guess about a year ago, jack, ge capital, announced they would start paying dividends back to the parent -- i don't know if we have the timeline right. 1.9 billion ge capital paid back in this quarter in dividends. and for the year, 6.5 billion i that accrue back to the big ge is something that for years they wanted to get back to. that's probably positive too. >> you bet, joe. and that's going to go right into the capital allocation

plan, which, you know, also got the proceeds from the nbc sale. so it is going to allow them to buy back more shares and by the end of the year approaching the 10 million share count that we were at in '07 before the crisis deluded the daylights out of the company. and, of course, the dividend increase which i think we'll get next quarter probably from 76 to 84 cents. so that's a good thing. >> you think -- what would that be? over 10%, right? yeah, that would be -- yeah, that would be more than a 10% boost, a 3.2% yield, right where it is now. and 24.45 is the high. looks like it will open somewhere close to 23.85 is the bid, 23.95 is that. so, you know, unlike some numbers in the past, jack, people don't seem to be focusing on lower revenue than a year ago period or missing a little bit. they're looking -- actually we said that yesterday, maybe be more important to look at the

order growth because a lot of this was already known about the company this quarter. >> and, joe, the revenue short fall is for a good reason. we all want to see ge capital slim down. and be a smaller percent of total earnings because that will lift the multiple. >> they closed on lufkin too. see the debt -- it is interesting the way the company has been repositioned. we mentioned it many times, they're no longer a media company. for years we would report on the nbc side of things and now it is just a much more focused it seems like industrial company, even shrinking the financial part of the business as well. a lot of aviation, a lot of oil and gas, a lot of, you know, power plays, railroads -- or locomotive engines, things like that. >> those are very big, long themes, joe, as you know.

the backlog of commercial airplane deliveries is absolutely enormous. and g ex-has e has engines ther. and we know the oil and gas boom in the u.s. is enormous in the last decade. so those are very good areas to be -- >> one other -- in the past, people have looked at margins too, for the industrial side of the business and said, to compete with, i don't know, semens or whatever, if you see any weakness in margins, they point it out. it was a 50 basis point rise in margins. that probably -- you wouldn't normally think it is that big a deal, but on a company that does $35 billion and a quarter, 50 basis points makes it margin. >> it was enormous. they were hoping for 70 basis points gain for the whole year and lost ground in the first quarter. so they're digging out of a hole, but, you're absolutely right, industrial margins is one of the key metrics we look at. >> all right, all right, jack degan. kenney chesney is coming to

boston in, like, a month. i can't go to the concert here, but do you know anyone, you know the crowds or anything? i think it is in foxborough. >> joe is asking if he can crash at your place. >> i'm not in those circles. not in those circles. >> he's looking to see if he can crash in your place. >> where do you live? >> you can always crash at my place. >> you got a pool? >> no, i don't have a pool. >> you got a pond. >> i wish i did today. >> you got a pond -- >> we do have a pond. it is full of lily pads. >> good for me. leeches. i like going in and coming out -- thank you, jack degan. >> thanks for having me. >> all right. see you later. jack and jackie, never thought of that. that's weird, isn't it? >> it is easy. >> it is. >> very easy. >> wife's name. known her since merrill lynch. >> really? >> 1981. amazing, isn't it? >> it is. looks like ge shares are up about 40 cents. >> yeah. >> initial reaction on this. >> people are listening to

degan? >> i think they are. >> amazing. >> that's great. we talked about microsoft and google earlier today. now other after the bell movers from yesterday and stocks to watch today. first up, chipotle shares getting a boost after the mexican chain reported better than expected earnings in revenues and same store sales. investors though are punishing intuit -- intuitive surgical, a disappointing demand for surgical robots and procedures. it also said that regulators issued a warning letter after an inspection of its facilities in june. you will remember herb greenberg has been raising red flags on intuitive surgical for a while. that stock is down 13%. >> you can't buy -- how would you like to come in and have one of your stocks down $55. >> yeah. you would be a little bit of a heart attack, you walk in the door. capital one's earnings in revenue topped expectations and those shares gained in the extended hours trading. you can see up by about 15 cents. >> alec baldwin still their

spokesman? what happened after that? >> what was the latest tweet? >> i can't repeat it. >> really? >> yeah. it was awful. >> i follow -- >> someone said his wife was tweeting during it and he was, like, said all this anti- -- tweets, but he gets a free pass because he's -- is he still an nbc guy? yelp shares also take tire after the bell. the business reviews website said it is going to acquire seek me. sorkin is not here. i don't know what this is. it is a web and ipad app-based reservation provider. the deal is small, worth $12.7 million in cash and stock. he would know about that probably, right? >> crazy name. >> seek me. >> yeah. >> what is your filthy mind

translating? ♪ >> i didn't say that. what are you talking about? >> semiconductor -- that's how she does it. she gets me to -- >> i said nothing. >> you did. semiconductor company -- they did know what they were saying with that. >> yes, they did. that was their -- they were intentionally -- >> all right. semiconductor company skyworks announced a new $250 million share repurchase program. announcing it is selling gulf of mexico shelf operations and properties to fieldwood energy, a $3.8 billion deal. apache shares up sharply on that news after the bell. still to come this morning, china is widening its drug industry probe after accusations of large scale bribery by glaxosmithkli glaxosmithkline. a live report from beijing after this. if you have young children, you are probably familiar with this company, or at least the toys that are going to be featured in our american made series this morning. the ceo of step 2 will be joining us to talk about

business at 6:50 eastern time. that was pretty cool.

welcome back. china accusing glaxosmithkline of wide scale bribery. eunice yoon has more. hello. >> hey, becky. the government crackdown on alleged corruption is certainly unnerving to international business community in china. this isn't something you see every day on chinese tv, this week state run cc tv featured an interview with an executive of british drug giant glaxosmithkline, being

questioned after detention, shocking the international business community in china. >> what is going on with gsk is really unprecedented. i've never seen the government go so strongly and loudly after one company. and make such a big deal out of it in a criminal way. >> reporter: the alleged crime, bribery, of doctors, officials and hospitals, in the hundreds of millions of dollars. for glaxo executives have been detained, the finance director, a foreign national, ordered not to skip town, part of the crackdown on the first foreign firm to be ensnared in beijing's anti-corruption drive. it is like catching a big fish, this lawyer says, it is a warning. one industry in need of a cleanup, health care. walk into a hospital and dysfunction is evident right from the start. this is where people buy tickets to see the doctor. they normally cost a dollar, but there are scalpers who will sell them to you for 85. the salary of our doctors is

about $1,000 a month, he says, commercial bribery and china's drug sector is very common. it is an open secret. big pharma has faced trouble breaking into this market, complaining the local drugmakers are entrenched in the hospital system. now glaxo scandal is feeding the perception among international firms china is even less welcoming. >> what may be happening is that they're going after foreign companies right now to soften up the political ground because they're going to be going after state enterprise later in the year. >> reporter: a tip-off of possibly even bigger change. and government officials have been visiting other drugmakers as well as part of this widening investigation. >> eunice, thank you. this is an incredible story and one that we are watching very closely. thank you for bringing that to us. again, that's eunice yoon. coming up, more than just child's play. we'll talk about the big business of toys with the ceo of

step 2 next. and then at the top of the ho , hour -- >> more on detroit, dan gilbert will be calling in at the bottom of the 7:50 hour too. >> bottom of the hour. >> at the top, we have brian in detroit. >> top of the bottom. >> at the bottom of the hour -- >> top of the bottom. >> we have a lot more to come. stick around. "squawk box" will be right back.

. >> it's "squawk box" in toyland, a company started 25 years ago with five people. the company is called step two. if you are a parent, you are very familiar with the products t. company ceo joins us this morning. jack, it's great to see you. thanks for being here. >> good morning. it's great to be here. >> this is a fe tom nal story. back in the early 1990s, you started with five people. now you have over 800 people working with your company in the united states. >> that's right. 800 people are two plants in perrysville, ohio and streetsborough, ohio it's been a gait year. we've grown 10% t. spring and summer stuff is selling. we're gearing up for the fall. >> we know your products pretty well. we have some on set. these are new products out. these are products for kids to play with outside.

they're kind of rough and tumble. things out there that kids can use that are hearty products. what is it that you have seen with the american consumer over the last several years? >> i think you hit two of the biggest trends, parents of children are looking for are toys that are very active that the kids could the parents know the kids will be safe, that kids could really test their limits. they could play with their friends, i think that's a part of the trends, they have to ply together, work together. and have fun and enjoy travelhood. >> you have seen parents more value conscious over the last few years? >> oh, certainly, in this economy, i think parents not only want affordable toys and safe toys, they need a lot of information about the toys. they want to look at different ways to obtain the toys and so it brings us challenges. >> you are american made. that's been a big part of the company. are you now looking at an

international expansion in china and saudi arabia. >> sure. all of our toys are less. 90% of the toys, even more than 90% of the toys sold in the united states are probably made in asia. in asia, you need 3c certification to sell toys in china. step2 was one of the first companies to obtain three cs certification. we're not only selling here in the united states but in china. in the middle east, we saw a lot of our products with the made in usa flack on each of our boxes. >> does that help when you are selling in the middle east? the made in america flag, i can see that helping here. >> absolutely. absolutely. i think the parents of the kids want to know they have innovative safe great toys, say the toys our kids are playing with in the states. i think it sells well. >> jack, what is the biggest challenges you face right now?

>> i think challenges, resin prices are the highest costs we've seen if three or four years. in a sustained period of real high resin prices. we talked about international expansion. there is toy standards that we have to meet through all the international standards, the asa standards here, the end standards in europe t.gso standings in the middle east. i mentioned the three c standards. they are conflicting. they do the same thing. it's a conflict in the rules and how we get there. >> jack. we want to thank you for joining us today. your son has a birthday coming up, seeing stuff has given me ideas. i appreciate it. >> definitely have fun with our toys. >> thank you again. coming up, a live report from detroit t. morning after, the city filed for the largest municipal bankruptcy in u.s. history, plus, dan gilbert will joan us with his take. he is pushing for the

revitalization of detroit. we'll see what he has to say. he sure looks good. he does. it's hard to believe he was ever sick. but the bills, they just keep coming. you remember the life insurance you bought years ago. it has living benefits that you could use for times like this. ( whispering ) mom, is he sick? no, honey, he's fine. ♪ don't worry. your hair will grow back. ♪ mine did. [ male announcer ] state farm puts the life back in life insurance. with benefits you can use when you need them most.

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. >> good morning, everybody. welcome to "squawk box" on cnbc. i'm beingy quick. andrew is off today. we have been watching the futures. take a look, you see the dow futures are off 30 points. s&p futures down by 5. remember this comes after the

gains for the market. the dow up 78 points yesterday, all of those numbers closing at record levels yesterday. let's take a look at your global market. the nikkei falling from a two month high overnight, investors taking a chip off elections over the weekend. as for the rest of asia, the hang seng basically flat. down 1.5%. in europe, weak earnings weighing overseas, including google and microsoft. with le have both of those earnings, more on that in just a moment. here's where europe stands right now, in germany the dax is down .4 of a percent. that's same in france and london. a weaker yen, stek speculative buying into japan. has gold trading higher this morning. in fact for the week, bouillon looks to gynehalf a percent. adds to last week's gains of 5%. you are looking at $1,288 an ounce. >> general electric is out, the dow component with the quarterly

numbers. 30 minutes ago, the company earned 36 cents a share, excludeing certain items, which was a penny above estimates. revenue was slightly short what the street was looking for the company attributed it to faster than expected shrinkage of the g.e. capital unit. there was things like a 20% positive rise of orders in the u.s. in the industrial segment and margins rose up about 50 basis points, as a result, even though the earnings per share number and the revenue number were below last year, the stock is up nicely on the news. a big miss from microsoft that reported a profit of 56 cents a share, 9 cents below estimates. revenue was also below. it was $19.9 billion. people were looking for 20 points. $7 billion. slumping pc sales hurt the company's windows business. it also took a charge for unsold inventories of those highly

advertised surface tablet computers made really very little headway in trying to challenge ipad there, even with all those athds. i thought they were annoying. >> the ads? . >> yeah. >> they go around the table, do the break dancing. >> i kind of get it. i'm somebody doing a blackberry, i'm doing an actual keyboard on these things. >> i saw it this morning, working on that with your num thumbs. >> i can type faster with it. >> you know what you cannot do on an iphone, can you not use your thumbs. >> no, i'm a single digit typer on an iphone. >> you never hit it. continues. anyway, you know who is going to joan us? a tech and software analyst, the axe the an list that has the most juice on microsoft for 20 years. he will join us to talk about

the latest quarter. >> google reported a second quarter profit of $9.56 a share. that was well below what the street was expecting. the estimate was for $10.78 per share. the whisper number was up higher. another 22 cents. the shortfall resulted from falling ad prices and steeper losses in google's motorola phone business. that stock down about 3% right now. it was down as much as 5% in after hours trading yesterday. on the positive side of earnings, we got chipotle mexican grill, a penny better than the street was expected. revenue, we are above conconsensus after a better than expected comp store sales. whirlpool's latest quarterly earnings excludeing certain items, that fell 5 cents short of estimates. the appliance says sales are rebounding and the european and

north american economies are staging encouraging recoveries. you can see that stock is up by 3.8%. after months of speculation, trepidation and worry, years, really, detroit has become the biggest u.s. city ever to file for bankruptcy and the filing puts the city on an uncertain course that could mean laying off municipal employees, selling off assets, raising fees, pension plans in jeopardy, brian sullivan is in the motor city. he joins us now again with more, hey, bri. >> reporter: joe, thanks very much, man. for decades, detroit has been living on borrowed time and borrowed money and yesterday it ran out of both t. biggest municipal bankruptcy filing in history as you noted. i think if you go through the numbers, you will recognize the magnitude of detroit's fiscal problems. take a look at these numbers, $18 to $20 billion in obligation, a roughly $327 million deficit on the bug this

fiscal year. about $131 million in uncheckeding thes because people simply aren't paying them or the city doesn't know how to get them. 100,000 creditors are listed on the 3,000-page bankruptcy filing. yes, that is an accurate number. 76,000 abandoned structures all within the city of detroit, of course, if nobody is living in a home, nobody is paying taxles. now, that's the magnitude of the problem. how big and how fast can it be resolved with the bankruptcy filing, which, by the way, is still being not by the people that are against the bankruptcy filing. well, emergency manager kevin orr, appointed by the state was on "the kudlow report" last night. here is what he said about the debt. >> this is a problem that has been more than 60 years in the making. there's $18 billion of debt total. even if we took $200 million a year out of a $1 become budget which we can't do, because we shut down every pothole, plow

another street of snow, it would saik take 68 years to pay off that debt. that's almost 52 years to pay off the debt. i'd be dead. >> so there you go, of course, detroit, obviously, is the home to a lot of great american corporations here. we know the auto makers that we've reached out to them, ford, among others issueing statements, ford saying basically a good detroit is good for michigan. they got confident it will be resolved. something to that effect. is the statement from the big companies here. everybody is trying to put a brave face on. why wouldn't they? it's a city that's been kicked around a number of years. people are saying, hey, this is what we need to get through this if they took one-fifth out of the budget, it will take 68 years. there is talk that perhaps pensioners can be looking at getting 20 cents on the dollar for every dollar they are owed by the city of detroit. they're obviously fighting that. this story has just begun,

it-will go on for months if not a year or more. >> you wavender, brian, just what you are seeing. . >> that's why this indication is so important. people say it's detroit, they've had their problems, who cares? no, no, no, no, no, this bankruptcy could set the tone for any other future bankruptcies of perhaps large mid-western cities with heavy pension and debt obligations. you can figure out some of those names. if those things were to happen, joe, this case could probably go to the supreme court. that's what some people have talked to or suggested about determine who can is owed what, who is forced to pay. will the state have to step in? does the state even have the money? you are looking at a billion

under funded pensions, by the way. >> i will be alive in 60 years. tell kevin orr that. i may be a cyborg. i may be plugged into something. i will tell you about it, brian, the singularity, i told you about that. 68 years is nothing. i can do that standing on my head. anyway, your limp is better. he may die. i'm worried about you bleeding to death. much better, you are looking good. a manley man, isn't he? i wasn't mess with him in detroit. joining us now with more to tell us what's at stake in the high profile bankruptcy, a fundamental credit opportunities co-ceo and chief investment officer. hector, i hesitate to say detroit is unique, with you it is unique and perfect storm is overused, too, so many things seem to converge to cause this. >> it's been a long, slow train wreck. they had a massive deterioration

in the city's economic base. you know, the use of services of the city, the population of the city, it's been a long process by which we ultimately got to this difficult place. distress in municipalities is in uniform, what's going on in the cities in california and what's happening, what happened in jefferson county, what's going on in detroit are all different and how we got there and conclusionings we will draw in the after math will be all different. >> as the city's foot print, as you point out, how would you have shrunk government commensurate with the services that were needed by a much smaller population. it's impossible to do it? >> it's a hard thing how to do it. instantaneously the math is simply the proportions are half. >> half the government services were needed. >> if the city population is declined by half the school attendance and demand in

education services has declined by, i don't know 30%. i heard vacancy rates are in the high 'teenings across the city. those proportions are big. >> even though government was the same size. >> it's not like they shut down half of the space. this is spread out all over. >> i think it's an important lesson to be drawn from this. is cities have to constantly be looking at what businesses they are in. what are the services, what shouldn't they be doing? maybe not every city should be in the zoo business. >> but what was the problem. >> going back and forth with people on twitter who have talked about it not being the union problem, they were responsible for 17% of this how do you physical out the math? >> i think the worst thing you can do is describe one single catalyst to the problem. this is a long, slow decline to the city. everything involved with the city, that means services. it means the debt. it means, you know the payroll, the pension obligations that

they had. everybody's got, everybody's contributing some problem to the skill. >> why can't you point to the public union, though? because you can't shrink the government with way you have to? a public union can elect the people to government that they want that will awill you them to stay entrenched. is that not the way it works? >> they're not the only part, contributor to the stress. it's also the scale of the debt. >> did the public unions, the non-public unions of the auto industry have anything to do with the demise of the auto industry, which added to the demise of detroit. >> it tloos do with the leadership. >> crappy cars, everything else. >> that's an important conclusion, governments have to move slowly the process of recalibrating takes time. it takes leadership to say, this is what our city should be doing. >> to care about what's happening down the road on your own terms. they make promises 20, 30 years down the road, they're not in charge at that point. >> the anchor of the economy of

detroit was the auto industry and then there's no beings in that city, no one is going to stay in a burned out city, right? that's why no bohemians have moved back to remove the brownstones in detroit, have they? >> i think the point of detroit it's a very interesting process. one of the things the state has to be commended is all the stake holders, not just creditors. all the stake holders can come together and find some consensus restructureing. should be the silver lining. it's hard when it's a big dark cloud. this is a chance for the city to find its purpose, finds how it will make itself viable, how it will make itself attractive. it isn't as simple as bringing back one industry. it's the scale of services. >> it's unique. it is so big. there are cities in massachusetts that used to be into leather. there are places that no longer have the economy that they had

50 years ago. is this just the biggest one? >> that's really what it is. it's a proportion around. the fact that it's an actual interprices it's not a single asset, it had many issues associated with it. it was basically a sewer asset, a waste water. this is very different. this is a city with, you know, multiple dimensions. i do think there is another set of unique attributes to this. we will see some important points. they were brought up there. i don't know the conclusions here, we have to wait to get contested in court. where do important stake holders sit visa vis each other? you are a senior? >> we done have legal precedent around it. >> one is secured. one is unsecured t. people unsecured are saying they have a constitutional right to be put first. hasn't been decided. >> i think we use terms. i think the emerging managers do what he needed to do which is to

force people to sense the urgency of the problem and create an impassee so a chapter 9 can be acceptable to everybody. the language we use, i don't know, that's a little kind of perpendicular to what everybody's understanding is. the terminology and legalese of bankruptcy is different than we understand a credit risk to be. >> we have to go, though, who would you put first? >> listen. i think it will be very interesting. if we have an infrastructure problem in the united states, it will be very interesting if debtors, creditors, providing needs for services of the city are put below unfunded pension. >> they cut out of the same cloth, that fair? >> i'm not sure. i'm not going to venture a concluchlths i'm wrestleing with it myself. >> hector, thank you very much. we appreciate your time. >> when we come back, from pandora to netflix, not much that richard greenfield doesn't

cover. we will talk media trends and names you should be considering for your portfolio, also the news that's out, last night about time warner and cvs. we'll be right back. .

. >> it now sees a profit of 45 to

495 a share. the estimate, though, on the treat is 495 at that lower end. another record high for the dow and s&p, stocks getting a boost as bernanke reaffirmed the fed's accommodative policy. on set is larry cantor, barclays head of research and managing director. do you see, it's good to see you, how would you describe the last three months in terms of the market action in responding to bernanke? >> i think we're finally getting normalization here. the story here, emp everybody is confused about what the fed is doing. the economy is weakened, if anything, why is the fed doing this? if you think about qe, it's supposed to work by raising asset prices. anybody would argue that they're done. i mean, stockmarkets more than doubled. we saw record lows in mortgage rates. even how prices are going up at a double digit rate.

the experience of the last two business cycles. we've seen what happens in the after math of an asset bubble. it's not pleasant. so it's time to stop the qe. that's not the same as tiening. it's not the same as tightening. i really think. i think bernanke hinted at it in his last statement, we are doing this, because in the future it can be unpleasant. they don't want to sigh that, that risk a sell-off that's how qe works. >> when were you on last? how long ago was that, do you remember? >> when i was on last? on this show, a couple months ago. >> because you need them to stop so that your call meet have a chance of being correct. because your call last time you were on was that we had all the gants right here. they weren't going up anymore. >> no, i did not say that. get the tape. >> what did you say then? >> you didn't say it was

fundamentally different the last time you were on, prior to that and the gains have been made. >> that's true. >> so it will be a tougher environment. we actually think stocks are going to be doing well, but it will take stronger growth to get them up significantly from here. it will take stronger growth. when that happens. i don't think it will happen the next couple months, bonds will sell off. that's what's different. this isn't going to be a rising tide. we get the votes if here. so it is going to be a tougher environment from here than it's been. could you think about it? what hasn't gone up a lot in the last four years? everything. now, now, if the fed's not adding to the bathtub here, what we see is if you get strong growth, i think bonds will go down a lot more. >> i deliberately pressed you on the last time you were on, what was different about your -- >> you did. >> you definitively said, it's different now, we are no longer

as bullish. >> that's true. you are absolutely right. >> you are getting a little of a break. as of may 22nd, nothing happened for at least a month, five, six weeks. we went down 5 or 6%. looking at new highs. >> you are right. more than a couple months. ut are right. i did something from london. i said it is different. remember, in march, '09 -- >> it's not like an emfant, people decide to make a definitive call. >> this is the difference. if you look, march, '09, we came out with green shoots. that was the title of our outlook. we have been bullish on stocks and you are right, this is a big change. it's going to be a lot tougher from here, we think. >> all right. you can still be right. like you said, you need the fed to stop. >> you are right. absolutely. that's true. >> who knows? you really think the only haven't because of asset.

i thought they were denying rates low. you think it's just clearly confusion assets? >> you look at the fed's forecast, they're expecting three-and-a-half in the second half. >> three-and-a-half gdp? >> yeah, good luck. >> 3%. it's pretty high. >> thanks, alfred. >> no, that was alfred. >> thanks, alfred, larry will be. thank you, alfred. it's like harvey, the invisible rabbit. you have some very good comments there. larry will be with us for the rest of the show. >> thank you very much, larry. >> and andrew will be reading the next -- >> people are sparring over fees in three major television markets. six local cbs stations could go dark for 3 million cable customers, new york, los angeles and dallas starting on wednesday. at issue is how much time warner cable pays for retransmiting signals, joining us to talk about this is richard greenfield

of bgit. what does the money? >> are you at a point in time where this battle is not occurring during the nba basketball or in the midst of football season. this is occurring in the middle of summer. i think that gives time warner a very unique position. there is not a football game. there is not an nfl game on cbs with a local new york team until december 15th. >> so they could go dark until then? >> i think that's the leverage point that time warner has is that there isn't great programming right now on cbs. their biggest show under the dome, available four days later right on amazon at no cost to samson prime subscribers. the big event between now and then, the u.s. open finals. that's still in september. there is not a lot of great programming right now. for everyone in the new york area, becky, if you lost service

in the new york area, which is currently, you know, fight income lawsuits against cbs but is legal, they will provide you one click access to getting back on to cbs, even if it gets dropped by time warner cable. >> that is the interesting part in this. the battle takes place over the retransmission rights. who has the upper hand at this point. they have won the last couple battles in the courts. >> aria has gone three for three. they won a victory against broadcasters seeking a rehearing at the circuit court. we think there is a good cannes they get summary judgment in their favor in the fall. if not, this won't go to court. this doesn't go to court until probably early 2014. so they are going to be legal in the new york area. and another point, you mentioned three markets where this battle is going to take place. it's new york, l.a. and dallas. they are planning on launching in dallas in the next few months. so a lot of the subscribers that

could be affected be i this cbs carriage interruption could find an easy and low cost alternative. >> how big an increase is cbs asking for? >> we don't know, if you read what time warner is saying last night, they're saying a 600 percent increase. we don't know the base, whether that includes show time or what other networks are involved. >> my guess is, yes, they would be including all of that. if they are putting this out on their website. >> i think it's fair to say this is a significant battle the will take place over the course of the next week. >> rich, how does comcast do something like this? they say to nbc, we want some more, they say no, we want more, nbc says, here have some more? it seems like a different modem, doesn't it? >> i think comcast is very conflicted. >> what do you mean conflicted? they can do whatever, i'd like to be on both ends, wouldn't you? >> sure. if you think about it, the amount of money that nbc could

get from retrans, that's only one network, pales in fairson to all of the retrans that comcast cable systems will pay for all of the networks. remember, cbs, fox, abc and uni56, not to mention if cw gets better, comcast should be in favor because reducing retrans would be a net positive to comcast, it would be bad for nbc. i think they're trying to prove the nbc acquisition really had merit and retrans is a critical part of that. >> well, stocks are 45. i mean, there is some pretty good proof already there, don't you think? >> cable business is on fire. look at time warner cable space. charter is flying. cable business, system business has never been better. that's the primary driver of why the entire group. if you look at the charts of every one of these stocks, cable is on fire, now there is mna speculation coming in, there

will be large transactions. >> real quickly, we got netflix earnings out on monday next week. what can we expect? >> i think the strategy is clearly working. when you look at what happened at the emmys, it's not so important to driving subscribers, yes, it's nice free marketing. it tells talent, this is a place you want to work. it's no different tan working at hbo ar amc or fx. can you get paid the same amount. great programming is what netflix needs to create to continue subscribers over the next few years. if you look at house of cards, those stack up with a lot of the shows you see on hbo, et cetera. >> rich, thank you. >> thank you. >> when we return on "squawk box," oil touching a 16-month high, prices at the pump on the rise, we'll get an outlook for isle oil prices in our trading block. then microsoft likely to put

pressure on the stock today. is it a buying opportunity or should you be taking stocks off the table? we'll speak to rick in a few minutes. .

. >> welcome back to "squawk box," everybody in our headlines this morning, ford, chrysler are out with statements for the city of detroit after the city's bankruptcy filing. ford says it is optimistic government leaders will be successful in leading an economic rebound. chrysler says it is committed to playing a role in detroit's revitalization. plus, best buy is cutting the price of two of apple's pro book computer models by $200.

students can get further discounts by registering with the retailer. lower student loan rates is expected to come up with a deal next week. that would undo the doubling of subsidized loan rates. also, china's central bank is making a number of announcements in that long awaited interest rate reform structure. michelle cabrera joins us to explain this. some of this stuff is confusing. >> reporter: it is, becky. what we understand is that the chinese central bank has announced a small but significant changes to their banking system. they're going to scrap the floor on the price that banks are allowed to charge for loans. up until now the interest rates the banks charge for loans have been fixed by the government, mandated lending rate of 6%. deposit rates are 3%. so if you are a bank, you always make 3% on your money. you have a fixed profit margin, now today with this change,

remember, they're scrapping the floor. means that banks can give their stronger customers a lower price on their loans and there will be more competition. it appears they are scrapping the floor, not the ceiling. so they still can't charge more for riskier customers. but still this is a big step for them. a babe step for the rest of the world, a big step for them. they have been clamoring through this for years. it was considered one of the failures of the last government in china. we know that ultimately the goal is to have complete legalization. so here they come out, they say, okay, we know there is a fixed lending rate. we're not going to let it float and let you do what you want. right now, we will deal with the floor. we can assume at some point the ceiling comes along as well. >> wow, okay. makes it a lot easier to understand, michelle, thank you. >> all right, up next on "squawk

box," before you hit the beach this weekend, we will tell you what is hitting oil and currency markets and how it could play out if you own any of it. let your mind rest easy this weekend knowing you watch the "squawk box" trading block. you know this stuff, it's coming up next. those trucks that we remember fondly from our childhood, but this is microsoft, windows 8. the surface tablet and steve ballmer's moves to invigorate the company. we'll talk about that with a leading an lith. "squawk box" will be right back. ♪ love this guy. so sorry. okay, does it bother anybody else that the mime is talking? frrreeeeaky! [ male announcer ] savings worth talking about. state farm.

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. >> get a quick check on the oil and gas. joining us is steven shork and mark chandler, i don't know, stephen, you tell me, the global economy is not gang busters. i think we are well supplied. why is oil so high? >> well, at this moment, joe, we have three drivers. first and foremost it is very strong demand for crude oil. u.s.ry finers are pushing

through more crude oil tan any other time since 2005. this is translated into a record drawdown of 27 million barrels of crude oil over the last few weeks. now, when you juxtoppose that with the train disaster, that puts more canadian oil into east coast refineries, we do have a fundamental case for this rise in price. in fact, over the last year the structure of the phone curve has gone parabolic. this would seem to indicate the market's growing concern of an imbalance going into the future. now, of course, wall street has recognized this open interest over the amount of months, the money has surged to an all time record. the net length by hedge fund ctas is the most bullish since the libyan civil war in early 2/2011. you put in the third event of

flow of oil through the suez canal in egypt. you certainly have a template for this rise in oil prices. >> it sounds like gobblety gook. it's not qe. natural gas, we got more natural gas. we will start replaceing oil. it should be selling for 50 or $60 a barrel. what was that, black swann, a train wreck? >> we have two more events. oil prices are up $15 a barrel over the last month. the rule of thumb is a 2 or 2.5 cents per dollar by labor day. >> the low -- europe is problem. we are growing the u.s. economy is not gang busters. the demand isn't there. >> no, it is not. >> ten why? >> we don't know. the demand is there. according to my studies, the

price elasticity of gasoline demand is approximately $4.75. we have been below. gasoline, i don't understand, but oil, gas should be higher, oil should be lower. >> didn't this start when egypt -- >> it was sort of egypt. >> nothing happened. that's the suez canal, they're different. >> is the states different than the suez canal? >> yes. well. >> see, i know geography. >> they have choke points. they're both essentially choke points. >> one of them chokes off only a couple barrelings. the other one, i don't know, you love higher oil prices. >> a lot of oil. >> i like a high oil. >> how come gasoline prices aren't higher, though? i don't get that. >> gasoline prices, no, becky, they are moving higher. given that $15 rise by labor day, gasoline at the pump will

probably be at left 30, maybe 35 cents higher. the aaa average higher is 3.60. on the national average, we are looking at 3.90 you guys up in new york. >> i don't know, these guys in the oil field, i trust you more, i'm kidding. mark, can you translate? can you help us on currency and oil, mark? >> i don't know if i can say anything about oil. i say when it comes to the dollar, we have been a consolidative phase all this weekend. i think it will persist. you talk about the strengthened u.s. economy, the federal reserve meets at the end of this month. the same day the federal reserve concludes its meeting. we look at second quarter gdp. a consensus has been cut. we look at the federal reserve meeting shortly after we learn the economy grou by less than 1% in the second quarter. >> the fed again. that's all we care about is the fed. what's happening in currencies and what's happening in oil, does it have to do with

bernanke, mark? >> i think it's all about bernanke, not this week as last week. in effect, i think, bernanke is telling us something like this he has a way of saying it, after this happens, this is what we will do. the market emphasizes one part of it or the other part of it. i think most recently, we emphasize the conditionality. is saying he doesn't want to taper unless the economy improves. our judgment is the economy will not improve sufficiently to allow the federal reserve to announce a tapering. >> will the economy improve next year? >> we think so. some of the underlying strings in the manufacturing and housing can continue. >> my biggest fear is the economy doesn't go like everyone is thinking it will. the fed is here for the next five years, which would be not good. >> you got i think history on your side, joe. the federal reserve exited qe 1 and qe 2 early prematurely in the sense it had to give us qe3.

i think the risk is the fed repeats its misthey again, it's forecast is more optimistic on the street than the economy. >> that means they keep going oup up, shork will still be smiling. coming up, shares of microsoft will be in focus this morning of disappointing earnings after the bell. we will talk about the company's miss next with rick sherlund. we will look at the plans for restructureing in detroit. "squawk box" will be right back. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's 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.

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. >> microsoft hit a bysmal quarter. rick sherlund is thegy to talk about this. looking at some of the stuff are you on record of, four straight quarters, missing on all major segments of the business. you call this one surprisingly bad, a live across every major business segment. why was the stock up in the mid-30s all of a sudden?

>> i think in the last quarter, investors got over the fact pcs were bad for the business. it's a quarter of the company. but the rest of the business was pretty good, good enterprise business. the company was transitioning to more of the prescription models, good, stable, predictable business. we didn't know what was the cost of moving from up front revenues to longer term consistent recuring revenues. we found out yesterday, that's not going to look so pretty over the term. >> you don't see moving the stock on brewing activism? >> there are two reasons, the primary reason is the pc business is not the whole company. it's a quarter of the company. it can still grow apid single digits. the second is, value act took a 1% interest, started articulating. but you see long term in nature, the first reason why you want to own the stock now isn't a good reason to own it right now, you

realize this transition is going to be a lot rougher than you thought our estimate went down from $3 per earnings this next year. it is enhanced at this point. which is the opportunity for shareholder activism is much better now. >> which will be aimed at maybe ballmer and maybe gates to a lesser exten. he doesn't own as much. >> he owns about 5% him ballmer i think it's around 4%. so i think value act that owns 1% has an opportunity during the month of august to come out and announce they're going to be seeking a board seat through proxy solicitation that has to be done during the month of august. at that point they begin to market to investors and iss, who advises companies on proxy votes and i think the first thing that they'll articulate to make their case is that you've got $66 billion of cash locked up off shore, borrow against it and

repurchase stock. you could boy back 22% of the company's stock. second, if you provided tax on the foreign source income and brought that cash back, you will pay more tax on it, you could double the dividend, you can have a 6%-year-old vars 3%. then i think you raise management issues. so i think investors are terribly frustrated. it locks for a while the stocks were going to work. >> it did. this has happened before. can braum ballmer stay? >> i think plan b now is shareholder activism, value act gets aboard with an inside voice, they can begin to make their case to independent directors. i think everything will be on the table. i think this is going to be very exciting for the stock. that's why i would like this stock at this point ahead of event weight if, indeed in august they file for proxy solicitation, i think the stocks will respond favorably.

>> what about this crappy tablet, do they keep making it? >> battery life is not good. >> $900 million. >> did anyone know that was going to happen? >> they've written down other things, didn't they? >> they talk about a devices and services company. you cringe now. it's like, in the press release, yours said a $900 million charge. we are doing new devices. >> so you might boy it if they think they can transition? >> i like the stock for reason number two now. reason number one is you will, like ibm did years ago, they didn't have much of a pain frame business, so they transitioned to services. microsoft is moving in that decks. that's a longer term region. >> thanks for playing along with sharknado, also with your tie. your tie is covered with sharks. we are, nbc, comcast covers

sci-fi. we will do a sharknado when it hits new york city. i'm not joking. thank you for playing along. don't mention that. >> i'm in it for the royalties. thank you. >> thank you. >> coming up, dan gilbert, dam, he looks good on a lot of the pick. chairman of quicken loans on the bankruptcy of detroit. and in the next hour the ceo of electrolucks on global sales the consumer and do you know a lot about detroit? >> yes, he does. ♪ [ male announcer ] you wait all year for summer. .

. >> our guest is larry cantor. we talked about a lot of things, one thing definitely front and center is detroit. it brings a spotlight on problems we have been worried about for some time. where should we look at this from a national perspective right now? >> i don't think this is representative of what's going on with state and local governments nationwide. you know, one time, a year-and-a-half ago, we were loseing 40,000 jobs a month with state and local government. now that's flat. so the big cutting there is pretty much over. we estimate that that took a percent out of gdp. i'm talking state and local government. sort of tightening up tax increases, spending cuts. in 2011, 2012, this year, that's not what's happening.

so i don't think -- >> there are big problems that exis exist? >> if you look at this, hector was saying this is a small train wreck. the interesting thing is who pays what, who gets what. i don't think anybody is too sure at this point. >> there are questions about long-term provinces, while our immediate situation may have improved, there are still these questions that exist that have we promised too much? >> there is no question we have. nationally, we have a social security system, a medicare medicaid and precipitation drug system that given the dem gravengs, we can't pay for. so people got all upset when somebody came out with paul ryan and a new plan. you may hate the plan, but we need a new plan. the thing is that this thing hits something like eight years

down the road. you know how government is, they don't want to deal with it now because it's unpleasant. >> it is, but it is, who will bail out, if we don't find another planet inhabited, who will bill out the united states? >> social security. >> not social security. just to the dar would have it 30 cents of what it is now, our standards of living would go down? >> i think standard of living will go lower over time. >> if there is no one to bail us out. how will you bail us out in. >> they have to change the system. >> you are absolutely right. in fact, the health care act expanded coverage. >> that's a new entitlement. >> you are right. this is one thing people are missing about the united states that's not true.

this is a country based on imgrachlgs we sort of closed the door after 9/11. >> when we come back, we will talk more about dan gilbert. he moved the company's headquarters. he is believed to be the single largest land holder. we will talk about bernanke's fed policy and vac couples, microwaves and more, electrolucks, the company ceo will join us ahead of the investor meeting in new york. "squawk box" will be right back. . i need help selling art. [ male announcer ] from broadband to web hosting

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>> the city of detroit filing bankruptcy. >> i declare bankruptcy! >> we will talk exit strategy with president alfred brottus. >> the ceo chief executive from electrolux. >> changing into a gigantic made with a vacuum cleaner. >> it's megamaid.

she's gone from suck to blow. >> that's the second largest maker of home appliances. and the third hour of "squawk box" will start right now. >>m & m? we did bob seeker, no kidd rock yet. we dade lot of mo-town. mo-town is the story. first on cnbc world wide, our guest host is larry cantor, first, though, becky has your morning headline. >> dow component general electric earning 36 cents per share, a penny better than the street expected. revenue was slightly sort of consensus, the company attributes to faster than expected shrinkage of the g.e. capital unit. that stock is up.

a big miss for microsoft, tow, that dow component reported a 56 cents per share excluding certain items 9 cents below estimates. revenue fell short of the $20.7 consents sus still. slumping pc sales hurt microsoft business and inventory of the surface computers. the action is weaker. down 7.3% in the free markets. stock now at 32.85. down about $2.59. google disappointing the street. it reported a profit of $9.56 a share, excluding items, and it was even further below the whisper number about 22 cents higher. revenue slightly short a consensus, ad prices and steeper losses in motorola's phone business. as joe said, detroit is the story of the morning. it is the largest u.s. city to

declare bankruptcy. brian sullivan joins us live. brian. >> becky, thank you very much here. you know the headlines, detroit filed the largest bankruptcy in the history of the united states. this is a big story. guys, they cite $18 to $20 billion in obligations of a deficit of $300 million bucks. this is some big numbers involveing the motor city here. when we talk about the story. what exactly has gone on here? what's the impact on the people who live here is, it is very clear. take away the numbers, you are talking about the city the 4th biggest in america a year ago has lost over half its population, lost most of its tax base. it is now struggling to provide essential services for its people. for example, from the emergency management report issued by the manager kevin orr, look at some of these numbers, the average response time for a detroit city police officer is 58 minutes.

the national average is 11 minutes. just 8.7% of all cases are solved and at any given time, only about 30% of the city's ambulances are actually running. why is that? it's not a knock on the police force, the emts, the fire crews, which, by the way, are operating out of 80-year-old fire stations on average. it is because there is no money to upkeep the cars, the trucks and the buildings. in fact, the emergency manager laying out this story, simply put, everything, i will paraphrase it, the cars are so old, many 300 plus miles on them they break down so much, they simply cannot provide essential services. the story going forward all day today the next weeks, months, a year plus, guys, is very simple. this case, which is by the way, there have been pension funds that have sued to block the bups the suits are going out there. this case could decide how all

future pension obligations are held through municipal employees. chapter 9 bankruptcy which is what this is does not provide for the forced liquidation of assets. the violation of the 10th amendments. they can't sell stuff like art or buildings to pay the pensions. they can't force it. that's the difference between a muni bankruptcy and a corporate bankruptcy, so where the money is going to come from is a big question. some retirees are looking at potentially getting 20 cents per dollar. we are here all day. we will head downtown, move around, continue to tell the story in the way we can. back to you. >> brian, thank you very much. right now for more on detroit's bankruptcy, we are joined by dan gilbert, the owner of the cleveland cavaliers and chairman of quicken loans, which moved its headquarters back in 2010. dan, you now have 9,200 employees in downtown detroit. you are believed to be the

single largest land holder in detroit. you put a billion dollars into the city. you own more than 30 properties downtown. what do you think of this latest news? >> i don't think this news is unexpected. we closely believed this would be the end result. it was a matter of time. it's painful for a lot of people, i think it's a pain, we're going to have to go through. this whole year if not decades in the coming here. i think finally when we get through this pain, detroit is going to really have an opportunity to start with a clean slate and start operating a city like we should have been operating it for a long period of time and i'll have the ability to operate it getting from underneath this debt. i think it will be optimistic in great times for detroit moving ahead, although with ehave pain here and a lot of noise in between. >> dan, i have been stunned. i was following this from afar. looking at the numbers out there, in terms of the population decline going from

$1.8 million back in the 1950s to about 700,000 today, how does the city ever adjust and keep up with these things? even with the debt gone, how do you handle a massive change like that? >> a lot of those people, or most of them moved to the suburbs. the metro area has grown, not hugely, it has definitely grown since that time frame, since 1950. so it was a shift. it wasn't booem people leaving the detroit area. it was leaving the city, itself. yes, it's true, we got land, more land than the city needs, obviously, for 700,000 people. there is a lot of ideas and a lot of concepts and philosophy and strategies that the city and the business community and others have. i think one of the biggest things we need to do here through this process is remove all te aban donned structures and the blight. there's people that have started doing that already. there is something like 120,000 buildings, commercial and residential that need to be removed. once that happens, i think there is going to be opportunity, to have open sectors of land and

open sections where developers and people can make investments again, i think that's an eye on both the mayor and managers an kevin orr. so there's a lot to do. again, it's kind of unique. again, there is a bankruptcy here t. biggest one in history. a lot of noise. there is a lot of optimism over what's happening in downtown, mid-town detroit. sort of a tale of two cities. hopefully, that scenario, you know, spreads from not only the downtown and mid-town areas, also the neighborhood. >> dan, there's some things in the, obviously, that, you don't want to necessarily talk about when you are right in the middle of all this some implications for the way this is handled. i wonder if you thought about it. some people were talking about -- other people involved in the pension side of things and then you look at the bond holders of general obligation municipal bonds, if the pension

plans, if the g.o.s were to be subordinated to the pension plans, how do the states raise money again in the municipal market? this is very dangerous ground that potentially you are treading on and with all good intention of trying to help people going into retirement. it could affect municipal fundraising and raise the costs for an entire country. >> i think you are touching on an parn important issue. one that will be debated over the weeks and months ahead. i don't know exactly of what the specific position is or will be of the bankruptcy court. i don't think anybody knows, even a financial manager for that matter or the governor on those exact matters, you are dealing with a limited amount of assets and resources and people who are owed more money than obviously there are. so there will be pain on probably all sides. i think sometimes, you know, people may overstate what happens in one city is going to happen in 10, 20o100 cities. we seen corporate bankruptcies

with the same kind of views on things. people say that was the risk that was involved. when you buy municipal obligation, there is a risk. a lot of people like to believe there is no risk. apparently, with see there is some risk to it. i don't know exactly how that works its way through. hopefully, you know the pain will be spread in a way that people deal with it somewhat equally. >> do have you thoughts on who should be put first? >> you know, i think we're business people, involved in downtown detroit and investing in our sector. we're not obviously the mayor involved in government and haven't examined those issues exactly and understand what the actual contracts say and who is the secured and unsecured. we leave that up to the bankruptcy courts and the local governments and the financial manager and the governor, that's their job. but all we can do is continue to invest in the things we invest in. once this is cleared out, we believe it will be a clear slachlt again, there is something that probably should have been addressed long, long

ago, that's why we are in such a quandary here. that's why it's so severe, it was put off so many years. >> do you think there is anyway the obama administration takes look and finally says the autos, we helped them out during their bankruptcy, there was wall street bailed out. almost everything. i'm sorry, dan. go ahead. >> i'm sorry. i'm on a little delay here. my understanding is that those inquiries have been made and that they have been turned down. again, that's second and third hand, i've heard that. we saw that with new york obviously in the 1970s and there is certainly a case to be made for. that but again, i don't have any more information than probably up guys do on things like that. >> can you see what they're going to say, goldman sachs, not goldman, i don't want to pick on goldman, that's the one the left hates more than any of them. the banking sector gets bailed out the poor pensioners in detroit, the burned out city,

they get nothing. >> yeah, they can probably throw aig on top of that and several others. >> that's what i mean. take your pick. >> yeah, you know, when we fry to point people to, chrysler and gm, when that happened as well, we saw government support. people don't even talk about that anymore, right? we got auto companies doing real well. the auto industry is doing real well. it's another boone to the future of detroit in the area. so maybe there is a case to be made for that. it will work out, with guarantees of loans paid back. again, i'm not as close to it as other people are. i don't have all the details to make a full judgment on that. >> dan, let's leave this on an optimistic note. you again powered a billion dollars into this. what have you seen that has worked best just in trying to revitalize an urban area like this? >> well, to tell you, there was a spirit in the city. even outside the city, specifically of young people like you can't imagine.

they've almost taken this detroit thing as their generational calling. young people in their 20s and in their 30s who feel they can impact the outcome and impact change. we have 1,100 inturns in the city of detroit from 157 colleges across the country. not only in the state, harvard, yale, princeton, ucla, you name it. there is almost a calling to this young generation of people who want to work and be a part of the comeback for detroit and the impact the positive outcome. ones who want to open up companies. entrepreneurial activity and venture capital pouring into the city. there is something like 80 or 100 companies formed-to-city in the last month alone. so you are seeing incredible -- it truly is almost a tale of two cities at this point. i think as you get through this bankruptcy, things start looking more towards the positive end of that whole scenario. >> okay.

great. dan, we want to thank you for joining us today. obviously, this is not the end of this story. we hope you will be in touch with us as it goes along. >> absolutely. thanks, you guys. >> thanks, dan. when we come back on "squawk box," markets rising, up next, we will talk to former richmond fed president alfred brottus. a-a-a. f-f-f-f-f-f-f. lac-lac-lac. he's an actor who's known for his voice. but his accident took that away. thankfully, he's got aflac. they're gonna give him cash to help pay his bills so he can just focus on getting better. we're taking it one day at a time. one day at a time. [ male announcer ] see how the duck's lessons are going at aflac.com (announcer) at scottrade, our cexactly how they want.t

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broaddus, our former fed chairman. larry cantor continues with barclays head of research. it's great to see you mr. broaddus. can you give us general comments on the testimony from the cramer this week? >> i think the key thing is to compare the way this one went with what happened in his press conference after the june fomc meeting, joe. and there was one really striking difference, that was the way he addressed the inflation issue in the press conference a month or so ago. he acknowledged that inflation

has been lower than target, but he almost dismissed it, talked about transitory factors causing expectation and soon in both the prepared statement and i think some of the q & a at this session over the last couple days, he talked much more strongly about the risk of inflation moving too low. you know, over the last year, by their preferred measure, it's risen at 1%. a full percentage point below their 2% target. he focused on that. i think i'm correct in telling you in the prepared statement, he used the word deflation. it's the first time we have seen that for while from the chairman, i don't think he said it's an imminent risk. that's a key difference, of course, that would suggest other things equal that the tapering might come later rather than sooner. >> is he mentioning that, deflation because the fed

president has been talking about that lately too? >> he hasn't. i think his dissent, which i thought was a good one to remind, he felt the committee needed to pay more attention to the inflation target along with the unemployment target. that's not really a target. but the concern about unemployment. i think that got some attention and i just had the sense that maybe that had some influence on the way this testimony was prepared. >> is that unemployment number, should we really believe that's where it is or with the participation rate where it is, should we look at it as really kind of not as, we shouldn't be as satisfied with it? i mean, maybe it's even worse? i'm just trying to justify the fed being so accommodative at this point. i mean, you know, a 2% growth rate with the sequester so let's say it's around 2 and we're, you know, we're at 0 interest rates

and then we're doing $85 billion a month. what would we do at 0 gdp? what would we do if this five year recovery, what if there was another recession just blindsided us from europe or china or good knows what? some negative externality. what do we have? if we go to zero, it seems like things are going well, we have all this aecom takes. what do we have left if things really got bad? >> i tend to agree with you. i think the economy, it's been a long, slow, healing process, but it's far along now. you know, you mentioned the unemployment rate. it's a hard number to interpret now. there are lots of things like labor participation. that's one of the reasons that they had some communication difficulty recently. i think, my own bern personal bias is we need to move past, get to the taper soonts we can. the inflation issue is the one

thing that i think so me is a substantive reason to hold being on. >> al, it's larry, the numbers are coming in here. >> hi, larry. >> for the second quarter, looking awful weak. in other words, it's about a half a percent. i'm sure the fed is seeing this. is that something that's going on and the markets are taking it like they're going to delay this tapering, so everything is rallying? >> well, that could be a factor. you know, some of the most recent data points, larry, have been on the stronger side. so maybe that will change the picture. the markets are focused on when is the first real tapering going to take place? i think the consensus is it's still september. the inflation data if it were to persist like this would put that consensus back a bit. >> al, if we knew it was good to do this, if we couldn't physical out what the bad part of it is, it's almost like, you know, on a fire, just keep, it's pour it

on, pour the wood on there or an engine, keep giving it lots of gasoline, if there wasn't some reason not to do this, we could do $85 billion a month for the rest of eternity and get our economy up. what, is there an end all, be all for the size of the fed's balance sheet where something bad happens? is 10 trillion, would that be a problem? what's the downside to this? what's the -- >> the downside as you know is that some, this is not a normal situation. we still live in a paper money system. inflation, i have been talking about the inflation being too low, deflation being a problem at some point. down the road, somewhere, unless the world is completely changed, we will see the opposite problem. the more money you pump in now, presumably the more is going to have to be drained later on. so that's the reason to be

waushs about this to whatever extent you k. i guess -- >> if we're talking deplation, it's not time then. it's not time. the thing that scared me is if we lost control, if, let's say the economy is isn't on this nice path. let's say it slows down where the fed would be justified in keeping qe going, let's say we had a slowdown or a recession. ten rates went up. we just were doing 85. we never end, you lose control of the long end and the economy doesn't improve and you truly are pushing on a string. that's what scares me. if that were to come. we'd be in the roach motel, never check out. >> i think that's the big risk. this is distorting prices. 85 billion a month. >> it's not going to happen, is it, al? >> i don't think so. >> okay. >> i guess it goes back to something you said earlier. i think the economy does have traction now. it has momentum. you may get a weak quarter. i think we're on the road to recovery. i'm looking forward to a better outcome.

>> great. let's all hope for that. for some reason, on tv, worrying is always better than being happy. al broaddus, thank you, we appreciate it larry will be with us for another 37 minutes. >> coming up, the "squawk" ceo call, electrolux, the second largest maker of a vacuum cleaner, i don't do. he will join us to talk earnings, europe the constrain on squall caps on a roll. we will continue our what's working now series with the small cap names that can help you make money. ♪ looking at covered call strategies to generate income? with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform.

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. >> welcome back to "squawk box." whirlpool earning $2.37 cents a share. that was 5 cents below stills. but the company raised its four-year forecast, pointing to expanding profit makers. they posted a quarterly profit excludeing certain items. that was 10 drents above estimates. it was helped by lower costs and rising sales of high end merchandise. and slumberge reported profits 5 cents above estimates. the north american business was weaker. the oil services provider was

hemmed by stronger rums overseas. giant electrolux is out with 4th quarter results today as well. electrolux is the second largest household maker by revenue. stock is up about 22% over the last 52 weeks. let's get more on the country's global growth story. heath mclack land. he is president. thank you for being here. whirlpool, you are doing the same thing, particularly, are you looking at the using, you are raising your outlook on what's happening here. is that what's happening with the housing industry? >> yes, exactly. we are seeing the continuous and gradual recovery of the housing market. as you know, both housing starts as well as resales of existing homes, stimulate supply and demand. there is an increase driven primarily by the housing market, yes interest we heard from coca-cola.

they talked about during the quarter how it had been a wet quarter, they hadn't sold as many soft drinks as they expected. i guess things like air conditioners are closely tied to things like that. so it was a cold spring, a wet spring, man, if you are in new york, you know how hot it is here, do you see a direct correlation to sales on the weather? >> for the types of problems like air conditioners, we see the direct weather. as you said, directly the first half has been slow for air conditioners, down about 20% with the cool, wet first half. i can tell you right now in new york where i am, it's quite hot, air conditioners are selling. >> wow, you doubled down in 2008 with your push on the high end, the electrolux line. that's a crazy time to be doing that in the united states. you have actually fared well with it. can you tell us how things are going, particularly on the high end? >> we are seeing a recovery and an increase the in the more premium segment of appliances as

people trade up and custom homes get built. we are seeing a gradual. i think the key word is gradual improvement and recovery in the premium market and for electrolux, launching the premium launch of appliances in the u.s. has turned out to be a good thing. we're seeing the benefit of that. we started a new campaign this past week to let the consumers know in the u.s. about the beautiful design and functionality of the electrolux brand and products in the u.s.. >> how is the american consumer faring overall, though? do you see a push for values at different levels? >> i think you always have to bring good value to the consumer t. consumer is very smart, information is totally transparent in a digital world we live in. so consumers walk into a store doing a lot of research. 82% of consumers have been on the website, on the internet and narrowed down what they're looking for, so you always have to bring value to the consumers

at all secments at all price forms. >> you have a new partner shift with home depot. how does that work? >> essentially, home depot gave us the opportunity to be a key supplier for them. we are very excited about that. they're a good customer. they have a good representation on the floor of both our electrolux and fridge dare products. so we're excited and pleased with the opportunity to earn more of home depot's business. >> does that mean you don't sell on lows or is it a different type of relationship? >> we have a good relationship with lowe's as well. the home depot relationship is relatively new to us in the past year. >> we appreciate your coming on. congratulation on the earnings. >> thank you. coming up, google's earnings are short of expectationsch up next, we will dig through reports with an analyst and look at the tech giant's third quarter, what a great stock it has been. you can buy it cheaper today.

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. >> welcome back to "squawk box," cbs and time warner cable are in a dispute that could result in some channels going dark federal government week. as usual, it's over retransmission fees. if it isn't resolved by next wednesday, customers in new york, dallas and los angeles can loads local cbs stations as well as the showtime cable network. oh, man, you don't want that. they better get this settled before homeland comes back. this dispute has become more common and is often but not always resolved at the last minute and we'll see. but it's an issue that keeps rearing its ugly head. we don't know how to feel about it here. i guess because. >> because we're on both sides? >> no, because comcast could make more than they can. tell me how to think. tell me what the big muckety mucks want me to think? >> i don't know. >> i will figure it out this weekend.

>> shares of google, profit and revenue both missed expectations. joining us is security senior analyst ben schecter. here's what i want to ask you. i don't really see microsoft stuff area. . i don't see windows. i guess i see it here. at home i go to max. google, i use it every day. it's such an incredible name. >> it is the tech stock if you had to own one. it was in the last year, it was 5 ex-. now it's over 900. so i wish i owned it. i'm not allowed to. i wish i did. it's going down $30 today. is this when people are not in say i'm buying? >> we think when we have upside, absolutely. >> buy at 885? >> absolutely. 1175 with potential upside from there. as you said, you don't see microsoft objects anywhere. you don't say, hey, i wish i had

a new microsoft phone. a lot of people are anticipating and excited for the goggle phone. >> what happened? they do have profits, probably, a lot of these people. is there something of concern? >> i think what's happening this morning, people are concerned about the cpc the costs per check. how much they are getting per click, per ad. went down more than some people expected. they are concerned about the partner revenue, which again, we don't think these are fundamental problems. there is nothing fundamental that says let me step back. maybe i don't want to buy here. i say, yes, of course we want to buy it. we think it's just getting going. who i like to tell investors, the ambition of the guys that run this country. it's almost cartoon like. it's a positive. they really do want to change the world. they're going to head into markets, we think the have enormous potential beyond just the businesses they're in today. >> and people say, well, mobile is adversely affected. how sit adversely affecting

them? how do they finally first half gait to make a lot of money there? >> ily the it's a short-term view to say mobile is affecting them, they're in response to the cost per click on mobile very desktop t. reality is you have the internet available to you more often than on devices, that's generally a good thing. they will physical out how to make more and more money over time. if you pay less per click, you have the internet around you all the time. >> they are doing it at home. i guess that's what you'd say to someone that says, oh the screen is so small to watch anything. fine, don't watch it. if you want to watch it. there's all these different places you could. >> specifically to goggle, a small screen doesn't prevent you from having information. you still need to find where you are going. you need a product. that search in particular can work on mobiles that a traditional display advertiseing may not work. google is uniquely positioned in that. >> just a question. we have seen two of the giants

in the tech sector, google and microsoft disappoint the earnings, how does this bode for people, the economy looks like it's doing better. does the change that or not? >> again, in general, we didn't see anything that was a fundamental problem at google with the numbers. what i will say you have ebay and google talking about weakness in europe. google that you u calling out the u.k. they blamed it on weather, it's never a high quality miss. the reality is europe is soft. >> they blame that on the weather? >> the u.k. less frequently? >> they say if it's warmer weather, you are outside more, are you not in front of your computer more. >> if are you mobile. >> you are using computers less often. >> so it was warmer weather they are blaming? >> warmer weather. >> coke blamed colder weather. >> well, when companies are blaming weather, that's never a good sievenlt i wrote that in the note this morning. >> that's weird.

aside from that, does that give us things we worry about with facebook. >>. >> i think facebook faces different challenges. it's about the mobile number. investors are so miopically focused on that number. it's difficult to get to it with accuracy. like google, we think facebook is one of the few companies that can make money on mobile they are well positionedt in the near term, it's a tougher call. >> weather, i can't get over. >> if you are not in front of your computer, they argue -- >> if you have a computer. >> you told me that. >> not everyone has a great smart phone yet. it comes out in august. >> can you internet away from? >> i have an ipad. i googled. >> you have a mini. >> i have a mini ipad. >> not a maxi pad. >> no. >> careful there. >> yeah, i know. >> let me just note, i'm going to start marking down every time

i use that joke. i mean, it's really sad. >> it never gets old. >> not from me, apparently. maybe for others. thank you. >> when we come back, our what's working series continues with small cap news that could make you money. don't miss "squawk box" next week. it is a huge week for earnings. we will get news from dupont, travelers, at&t, boeing, caterpillar, 3m amazon and a lot more. we will see how many of them blame the weather. .

. >> everybody, small cap stocks have been on a tear lately. they hit an all time high yesterday. index is up 23% today. small picks could make you money right now. joining us is the manager at turner investments. he overseas assets under management. small cap growth fund has seen returns of 22% so far this year. bill that is better definitely than the major averages have done. it's right about in line where the russell 2,000 is for the year. take a look at some of the picks you have. the first is 5 below. i know the pre-picks are not in the top ten holdings.

are these companies you are seeing, slowly investing in? >> yeah, this time of the year, the 2000 growth happens, we do see ourselves moving out of the big names we held and getting newer names, getting bigger positions in names we started over the past year or so. i would characterize all three as emerging names, very strong ideas in all three sectors of the portfolio. >> by below, what is it that you like? it's like a dollar store, but an upgraded version of it. >> it's a combination of household consumer products and a fantasy island for the ''tween and pre-'tween, it's where you get all of your one direction stuff. >> that's candy, too. >> oh. candy. yeah, but the thing about five below which is interesting, oh, they must source all this from china. they don't, it's all locally sourced. a fast fashion approach to the dollar stores. they don't set trends, they chase them.

the important thing about five below, you think about the traditional dollar stores, dollar general, dollar trade, for years, procter & gamble never mace i made a crest toothpaste, maybe we can make a 99 cent tube of crest. now you see whiffle ball, speedo making products specifically for five below, which is increasing the quality of the shopping experience for the customer. it's primarily northeast region but lots of room to grow and a differentiating concept we like lot. >> i'm sewer the easter bunny and santa shop there. you can book a vacation rental home. tell me more about the company. >> i'm actually going with my two boys to puerto rico with a home away rental and using the network effect. you are starting to see a whole lot of smaller specific verticals.

this is the vacation rental business. it's been an efficient way to get the product out there. there is almost three-quarters of a million listings on home away and vrbo. the way is if you own your own property, it's a way to get better economics. as you read it, you get better ratings. it feeds on itself. they have been doing a paper listing. they will now move to a pay per booking model, have both available. depending on which works better for you, it's still very early days here, a traffic aggregator across multiple platforms. >> finally, you have a line technology, i have used every single one of the products you are talking of today. >> there you go, it's always good when that happens. >> invisalign, they're like braces for adults. >> becky, that itself the important point when you think about braces, teeth, fixing your teeth, you know, for adults,

having traditional braces, it's hard to do, when you open invisalign, adults want to do something about tear teeth. not only great growth here in the united states, great international growth. they recorded great numbers in the invis is align business. they won a patent lawsuit in germany. they obviously want to protect this i.p. and continue this franchise globally. the other thing i would say, it's a higher price point product. obviously, in a difficult environment, you don't see as much demand. economy is getting better. people are feeling better where they are. i will got my teeth fixed. >> you never seen them? >> why are you pointing at me? >> i have seen them. >> because of my gap? >> joe, she uses them, that itself the whole point. she uses them, you don't see them, which is great. >> they're like off the rack? >> no. >> i didn't see them when they

were on you. >> i don't have them, they're invisible. i don't wear them during the show because i can't talk very well. >> you can take them off. >> you can take them in or out. i can't believe you never noticed. >> i never saw them. >> i will show you upstairs. bill, thank you very much. >> always a pleasure. >> i need, you know, this color with mine and i've had them dyed where i'm sitting in the chair. i felt like i was>> george cloo with jones. >> i was like a mayor on theasn is it safe? then coming up the stories to b. we will talk to g.e.ill talk g. with jim cramer when "squawk box" returns. every day we're working to be an even better company -

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welcome back. we will get down to the new york stock exchange and jim cramer joins us, and jim, this morning we have spent a lot of time talking about detroit, and the numbers are phenomenal and the population laws going from 1.8 million down to 700,000 from the 1950s and over the course of time since the 1950s and lost 40% of the tax base and looks like a bleak situation. does it present them a fresh slate? >> well, i don't know how you get a fresh slate. i do think that there is a scramble. we don't know, because the federal bankruptcy court is a total black box and people are telling you, here is what is going to happen. they don't know what is going to happen. i do think that is what is odd here is that this is the first time that i have seen government obligation bonds may not be as good as certain revenue bonds backed up by the sewer and the water and that is a difficult situation for investors faced with what to buy in other

cities, because gos are usually better. >> and g.o.s were the best, jim, and they didn't need bond insurance and they were always aaa, because they were g.o.s and who should get -- and who are the seniors pensioners or the g.o. bondholders senior? >> well, again, if you look at at the obama administration, and we know that which, and just in terms of the reflective of the mood of the country, we know in general motors the pensioners were senior to the credit holders and anybody who believes it is not the case in the particular bankruptcy has not looked at the big bankruptcies and gms based in michigan, and this country has a policy right now that favors pensioners over credit and we have to be mindful of the fact that if you get a very liberal federal bankruptcy court, the pensioners win here. >> and what does that mean for other cities there? >> well, look, i'm sure that people are going to say, do i want to be in the chicago paper? i want to see what chicago does. i think that what becky said from to get go though is that the declining health of the city

is long-term. i don't want to lump in chicago with detroit, because chicago can still be very much of a growth city, and much more disciplined. if chicago g.o.s get hammered people should look at them. >> as a potential opportunity. >> yes. >> and remember, that the rates are so bad almost munis and if they go above 5%, okay, but right now they are bad and i don't want to own them. >> larry, you are bringing up a good point that the government will kick in some money. >> i think that the government will kick in money to help the pensioners to avoid that, because it is too dangerous for the muni market to hit the investors with the g.o. >> and $18 billion, jim. >> not much money. >> this morning the fed has done $18 billion and what's $85 billion a month and this is 18 -- that is like -- >> a drop in the bucket. >> couch change. >> the federal government will help, but as i mentioned gm and the federal government is not inclined to help credit and we know that or the krcredit peopl would have been bailed out in

gm, and that didn't happen. >> who is going to win the british open? >> i don't know, man, because i am too busy trying to figure out where g.e. is going to open. >> it is going to open higher. >> yes, it is, because good news here and margins are higher than all segments and the homes are hi higher with the cap return and much more con i if dent on the call. i liked it my charitable trust owns it and it is frustrating, but joe, this is the beginning of something good because the infrastructure was good oil and gas. >> yes, 50% orders in the country. >> really strong. >> thank you, jim. >> thank you. when we come back the guest host this morning is larry canter, and we will give him the last word. "squawk box" will be right back. and former auto czar steve rattner will weigh in at 10:00 a.m. eastern. when you do what i do, you think about risk. i don't like the ups and downs of the market, but i can't just sit on my cash. i want to be prepared for the long haul. ishares minimum volatility etfs.

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>> welcome back, everybody. if you want to know what is going on behind the scenes at "squawk box" you can go to squawk.com.cnbc. >> and larry, the last word? where are we? higher at the end of the year or have we seen the high? >> i think that we will, because if we don't see a recovery by the end of the -- and if the economy does fot do bnot do bet

is not going to happen, and the fed will have zero rates, and the fiscal tightening will be gone, and the housing boom is not going the last forever, but it is going to be gone. this is it. better see it now and better stocks bs stocks, but the bonds are going to be clobbered more. >> thank you, larry. time to leave, i mean, time to leave the show, and make sure you join us monday. "squawk on the street" is next. ♪ work hard play hard ♪ we work hard play hard ♪ keep partying again like it is your job ♪ good friday morning. i'm carl quintanilla with jim cramer as david faber is off today. the tech earnings are disappointing and this time google and microsoft and watching the bankruptcy filing in detroit, but the industrials are holding in. g.e., and honeywell and whirlpool among the bright spots and crude oil is in the spotlight near 109 after