good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick with joe kernen, andrew ross sorkin is off today. we're at the halfway point for earnings season after last night's flurry of reports. right now, nearly 70% of the companies that have reported have beat expectations. next week the stret wiet will b getting a wave of quarterly results. right now, let's look at the futures. you'll see at least at this point they're indicated a little low, dow futures down by 38 points, s&p futures off by close to 5.5. and as for the ten-year note, this is really the market the street has been watching so closely. yielding 2.583%. closer to 2.6%, that's when the street has been more concerned. crude oil at least at this hour, if you look, you'll see is down by 79 cents. still wti crude is around $105, just under at $104.70 a barrel. >> after 20 years, i'm

understanding why viewers want us to compare results to last year, not to analyst expectations. we have 70% above. what does that tell you other than the company effectively managed where analysts were. we have no idea is it above or below. >> intel, a third of their profit dropped off. >> in both revenue, and earnings, wouldn't you like to know how it compares? what if everything is down from last year in both revenues and earnings? >> was it rich who was saying what you should be looking at is the number of companies that have surprising -- that shock you by missing by so much. those are the ones who -- you haven't really seen -- >> just objectively, it is hard to do above or below last year, there is always items, they sell businesses, so, you know, things are discontinued and makes it hard. >> the stock trade is based on where the street's expectations are. if they knew it would be coming down steeply, but if you knew it was going to be coming down steeply, street knew it was coming. you're late to the game and the

trade has been made. >> maybe both would be good. maybe we should start doing that, last year, getting out all the items and in comparing to expectations. amazon, this is a volatile stock when the company reports, they're still building out a lot of the -- still spending a lot of money to do what they do. under pressure, disappointing in terms of second quarter results. lost two cents a share versus estimates of five cents. revenue just missed. and this is -- with amazon, $15.7 million in a quarter. keep that in mind. the company's forecast a third quarter is going to be below wall street expectations. that scared investors after the bell. the shares have been trading near or at an all time high for -- as you can see, for the last couple of weeks. it is almost a $300 stock at amazon. and, you know, looking into the actual numbers themselves can tell you, you know, why -- what was disappointing. a lost times not necessarily

sales, that they built them all warehouses to get them to you the next day or whatever. we're work on the logistics. tough to say anything negative for me about amazon. >> out there constantly. you don't shop online, but it is the place that gets the bulk of my online -- >> and i think whenever, you know, jeff bezos has the same response, whenever anybody, i think, discounts amazon -- >> that's one you're going to, right? >> apparently not. go ahead. >> i know where you're going. to starbucks, it was a much different -- >> you needed to make a joke. okay. >> i can't. >> yeah, i wasn't. >> let's talk about -- >> i got crickets. >> let's talk about starbucks, it was a much different story for starbucks. the coffee house chain reported profits of 55 cents a share, two cents ahead of whats street was expecting.

global sales grew by 8%. the company says the fruit beverages and seasonal frappuccino ice drinke drinks h drive profits. shares were soaring in the late trading. it is up by 6.5%. >> unbelievable. that guy. >> starbucks founder and chowar schultz will be on "squawk box" later this morning. >> it seems like -- is it even two years since they were trying to find out if there is a problem with the baristas and whether they -- the sandwiches in morning. they were lost when he was gone. he said, i got to go back. i got to go back at $15 a share and see if -- i created this great company, like $15 a share and at $75 now. that shows you -- not all founders are great when they go back. >> the ones who are -- >> $72, oh, my. that just -- zynga post a loss

of a penny a share, smaller than the four cents forecast by analysts. however, the bigger news from the social video game company is that it won't pursue a license for real money gambling. >> wow. >> hmm. don matrick, who replaced mark pincus as ceo on july 1st, remember this, says he needs at least three months to thoroughly review the company's road map. and he intends to bring the company back to basics. now, shares of zynga trading at $2.89. >> here is the big story for you too. activision blizzard announcing it will buy back nearly almost all of the vivendi stake in the video gamemaker. company will be buying 429 million shares for nearly $6 million. while an investor group led by ceo bobby codic and co-chairman brian kelly will separately buy 172 million activision shares for $2.3 billion. this deal will create a new capital structure, which the company says will drive meaningful earnings per share.

after the deal, vivendi will retain a 12% stake in activision. to this point, they had a majority control, 61%, they held for five years. really interesting structure, though, if you look at the terms of the deal, they're paying less than $14 a share for that. you can see that stock is up 10%, well above the price they're going to be paying. >> i remember when this deal happened. >> me too. five years ago. >> bobby codic could tell me, you know, he can laugh at me and make me like eat crow and stuff. it was something about the deal when it was done, or somebody valued some game at this unbelievable valuation and i thought this whole deal, it is not worth that much. that's assuming it is -- and i didn't even understand how it was working and it was a big positive, and it absolutely was. and bobby codic is going to be -- probably got a billion dollars i would say. we'll ask him when he's on, what his ez g

he's got in his checking and savings account and liquid assets. >> less than an hour. >> get all your figures ready, bobby. halliburton agreed to plead guilty to destroying evidence related to the gulf oil spill that is already three years ago. halliburton was the provider of the cementing services on the oil well. remember it ruptured. the cement did, leading to disaster that caused 11 death and the biggest oil spill in u.s. history. halliburton ordered workers to destroy papers about that design. they'll make a separate $55 million payment to the national fish and wildlife foundation. and sac capital expected to be arraigned today at 10:00 a.m. eastern. federal prosecutors filed charge against the hedge fund giant accusing the firm of rampant insider trading at an unprecedented scale. >> sac became, over time, a veritable magnet for market

cheaters. the sac companies operated a compliance system that appeared to talk the talk, but almost never walked the walk. and that is why today the institution itself, rather than just individuals, stands charged with wire and securities fraud. >> just wait until that hedge fund goes to jail. because it is not going to like its cell mate, it's going to hate the food. >> they have decided they can't get steven cohen, so they're going to go after his firm and -- >> the troubling sac case, can a criminal enterprise be headed and run by someone who isn't a criminal? when they send that hedge fund to jail, seriously, it is going to see what hard time really is. in addition to the five-count indictment, the u.s. attorney unveiled a separate civil complaint targeting all assets of sac and its funds, doesn't specify an amount.

could dismantle the firm and leave steve cohen with next to nothing. >> well, plus, any of the customers who have stood by him and been loyal because they liked the returns over the years, they still have money in the fund too. this is an effective way, it shows you what the government can do when it decides to -- >> we know that. we know that. joining us to talk about the case, jacob frankel, former federal prosecutor and former s.e.c. enforcement attorney and partner chulman rogers. he joins us now with more. jacob, what does that expression mean, the buck stops here? where -- who -- it is an entity that was committing the crimes? >> well, the answer -- the answer is there is a fundamental principle in corporate liability, corporate criminal liability in particular, which is that the corporations liability derives from the acts of its agents. the officers, directors and employees. so they don't necessarily need

to tag steve cohen directly with liability. because these six individuals, in fact, pled guilty, committed insider trading, that liability does rise up and take on the persona of the company, because in the law, the corporation is a legal fiction. that's exactly that they're saying is the corporation is potentially guilty for the insider trading, because of the acts of its analysts and traders. >> there is a guy in charge, though, and that's the guy that you -- that supposedly -- what is that saying, the fish rots from the head down. so the buck doesn't stop anywhere? or they don't have him, they don't have had on him. they can't get it on him. >> exactly, joe. that's what we're talking about on monday and wednesday. that is they don't have it on him. and instead of just stopping, now they have gone ahead and brought the case against the end take using the acts of the

individuals. you're talking before about the hedge fund itself sitting in jail, but i do think there are some other messages in here too in terms of where the buck stops. remember, galan itself was never prosecuted. it was only mr. rotman and all the people -- >> a converse of this. is this troubling at all, jacob, that, you know, they could take everything steve cohen has and, i mean, i remember the way spitzer did things, do you remember that? never brought a case that he could win and yet he -- right? and he extorted hundreds of millions of dollars in payoffs just because he could. should we ever worry about the government's ability to do things like this? or are they in the right -- are they doing the right thing sneer. >> coming more and more to the point where we need to start worrying about that. i think in fairness there is a legal basis for this indictment. i do think there is a broader

message that comes out of that, which is all this focus on the compliance systems. we have the sac administrative case for failure to supervise, which is to the notion that in the hedge fund industry, you really don't have the -- often the level of compliance of supervisory procedures that you see in the broker/dealer industry. when the indictment came out, first thing we're talking about internally about telling our clients is check your supervisory procedures, compliance policies, because that is something that they are going to look at. i think there is a real concern now, even more so, not just for the company, but as we were talking about on wednesday, the effect of cooperation. here you have an institution, again, through its individuals who are cooperating all these cases, now not only is there a criminal indictment of the institution, but you also have the civil forfeiture case that even if the government does not want a conviction in the

criminal case, you got a civil case for forfeiture, which has a different standard approved, burden of proof, and that could cause the run on the fund. >> you would hope that, you know, that someone -- wouldn't be the first -- i'm not talking about -- it wouldn't be the -- people that have political aspirations or vendettas against when he bought that art and sort of said that to regulators, that made a lot of people mad. and things shouldn't be done for vendetta, personal reasons or political aspirations. i guess it is not in this point. we have no reason to think that. but it is scary when the government has, you know, so much power to decide things. >> joe, you're right. you're right, analytically. that's one of the reasons that doj was very careful in narrowly crafting this indictment, limited to insider trading. not get creative and bring up the controversial rico statute. not try to become expansive in

legal theories as the united states supreme court shot down the notion of deprivation on services, used to target ceos and others in the sea sweep in the 2000s, the skilling conviction having been overturned with two others. i think that's why they crafted this case so narrowly. >> all right. jacob, thank you. we appreciate it. stay near a phone. we need to talk to you, like, every day on some of this stuff. poor arthur anderson, right? did you remember that? >> i do. >> wasn't a guy. >> wasn't a guy. thousands of employees. >> going to send him to -- but they didn't. all right. >> right now, time for the global markets report. ross westgate is in london. ross, good morning. >> hey, becky. good morning to you. thank you very much indeed for joining us. we got right now advancers being outpaced by decliners on the dow jones 600. we're at the low point of the session in terms of price action. around 6 to 4, 2 to 3 right now.

ftse 100 yesterday down one half of 1%. this morning, just lower again, down nearly a quarter of a percent. earnings still very much in focus, we'll get on to that. the cac quarante up a third. the xetra dax down half. the ibex outperforming for the second day in a row. the employment picture looking better than we might have thought yesterday, so up nearly 8%. you mentioned activision blizzard, and vivendi. just show you what is happening with the stocks here in europe. vivendi up 2%, will retain the 12% stake in activision blizzard. don't forget, they're going to get $8.2 billion. the interesting thing here is they also sold a controlling stake earlier in the week and maroc telecom. add the two together, they get $13.7 billion. there will be question marks on what they're going to do with that money. maybe some of the other m & a guys will be taking the view. up 13% after gaining control of the company. some other companies, renault

down .9%. it lifted its core profit, but a big sales slump in europe. they did get a rise in first half earnings only after reducing costs. lvmh up 4%, battling a slowdown in china as we know, with results still positive. the firm reporting an 8% rise in like for like sales. and angela merkel doing okay for bas basics. a pretax profit of almost $2 billion. we keep our focus on earnings. overall, equity is lower, heading toward the u.s. open. back to you. >> all right, ross. it is the weekend over there too, right? >> yeah, we get a weekend as well. >> it is going to be -- they have people, though, don't they, i'm thinking how cute it will be for william and kate to have their first weekend with their -- so much fun, you feel like such a family unit, it is a pain. >> he's taking two weeks of paternity leave. >> do they have help, ross?

>> i think she's doing it -- >> they might have a little help, i'm guessing they might have some staff somewhere doing things. >> but she was -- she made aing about deal of pushing some of the staff out when they got married. >> what's that? >> the baby nurse? >> i was going to say -- the baby -- yeah, the best money you could ever spend is a maternity nurse. >> that's true. >> in my opinion. >> that's true. the soundproof wing of the -- >> you know what, she made a big deal, when they got married, they stayed away from the places they were expecting them to stay, pushed out the staff and was making dinner herself. >> the whole country has a little glow. that's a cute little baby. they're usually pretty ugly, you know. that one is pretty cute. that one is pretty cute. coming up, thanks, ross, we're digging the seattle scene today. did you notice that his name was george costanza and jason alexander and this kid's name is george alexander? >> i didn't. >> amazon reports results after

the bell. but are both stocks a good buy at these levels? we'll break down the numbers next. more from "squawk box" in a minute. when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger.

welcome back. the u.s. equity futures are indicated down this morning. you can see the dow futures down by 45 points. the s&p off by 5 1/2. this is all coming after the

market eeked out gains yesterday with the dow up about 13%. 13 points, i should say. the national forecast from the weather channel's reynolds wolf. i'll send it to you without any salicious talk ahead of time. >> are you serious? come on. >> you won't know what to do with yourself. >> a day without salicious conversations. >> she's not going to mention the cover of the daily news, reynolds, which is same old schlong and dance. >> he can't see this and he's not in new york. >> i'm not going to show you -- apparently -- this brought in a whole new aspect of this thing to me. he got photos back. suddenly this doesn't -- there may be something to this whole tweeting. that's not bad. now i'm starting to understand. >> i did not set you up. we did not plan this. >> anthony is not as dumb as he looks -- not as dumb as he

looks. he's got 22-year-olds -- i mean, he's a perv, but not as dumb as he looks. sorry, reynolds. now. >> your forecast for today, here you go, wow. hey, guys, chance of severe storms across the nation's heart section today. may be dealing with storms in places like chicago. you get some backups there. nice conditions for you in parts of the southeast, tennessee valley beautiful. still cool for you in atlanta. chance of thunder boomers in the deep south and still have monsoonal rainfall over the four corners and scattered showers through parts of the northeast including boston and bangor, maine. new york getting a little better. not so sure about the texting now. just send it back you to guys and let you pick up on the headline. wow. yeah. crazy times. >> are you in atlanta? where are you? >> i'm in atlanta. >> you are in atlanta. >> yeah. >> he doesn't get the daily news. >> you know what's filming now. >> haven't seen it yet, but i can tell you what i'll be looking up online as soon as we're done. >> yeah, you are, aren't you?

you're just as -- you know what is in production right now? an hour away from you. >> what's that? >> walking dead. >> are they in production right now. >> that's true. that's very true. very close. >> an hour from -- atlanta isn't really all empty with just zombies, right? that was ground zero. that was just the tv show. >> just here sometimes in the early, early shift. that's the only time you see any zombies. i'm one of them, but later on today, you see people wake up. not too far from the "snl" secn, but a great place. >> before makeup, you don't look that much different than those people, right? >> you have a lip here. a lot of them -- that's the first thing that rots. >> exactly. guys i'm out of here. take it easy. >> all right. >> run away. >> you have fun with your next hit with some boring guy reading the teleprompter. if you don't appreciate this, we don't have to do this, wolf. >> bye, reynolds. have a great weekend. up next, starbucks beating

the street and raising guidance. the stock is moving higher and we have the coffee talk right after this. plus, how healthy are profits at hospital operator universal health services? that stock is trading near an all time high. we got a squawk ceo call coming up in the next half hour. and as we head to break, look at yesterday's winners and losers. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen with becky quick. andrew ross sorkin is off today. and the headlines this morning, federal investigators say that southwest jet that made that hard landing at laguardia airport this week, the nose -- you know how they come in like this and then they -- it went nose first. normally a jet, well, would land with a sturdy or primary landing gear. that hits first. southwest says that the landing described by the ntsb in its preliminary report would violate normal procedure. i thought jets landed themselves most of the time. i don't understand. pilots are there, obviously, but there is a way -- a lot of it is on instruments, isn't it? >> it still seems look a pretty delicate procedure. i talked to pilots who said it is hours of boredom pufrpg wanc by a moment of sheer terror because of the takeoff and landing.

>> and wind and crosswinds. elsewhere, toyota maintained its ranking as the world's top selling automaker during the first half of the year. the company sold 4.91 million cars and trucks that beat out general motors. google end aed a promotion related to the new chrome cast device. the promotion offered buyers of the device three months free of netflix service and google says it ended the promotion because of overwhelming demand. it costs money too. comb ca chrome cast is to compete with roku and at&t. you can see the dow futures down by 47 points. s&p futures down by 6 points. and the nasdaq is off by 13. yesterday, the nasdaq had its best day in two weeks. that was all thanks to facebook's strong earnings. yesterday, you did see the dow

up about 13 points and the s&p up by just over 4. if you look at what's been happening in europe this morning, you'll see that at least the cac is higher. up by .4%. the ftse and dax are weaker. the dax is down by half a percent. in asia, overnight, the nikkei was down by almost 3%. so some major things to watch out for there. not much movement in shanghai or in hang seng. if you look at oil prices, we have been watching these so closely, hovering around $105. this morning, down by 79 cents to 104.70 for wti. the ten-year note is the other one worth watching, because this has been the tail wagging the dog. yield is 2.58%. it touched 2.6% yesterday. if you look at what is happening with the euro, the euro yesterday up for the fourth time in five sessions, versus the dollar. it touched its highest level since june 19th. this morning, it is trading higher once again.

euro at 132.73. the dollar yen, the yen at 98.50. gold prices at least at this point are indicated down, just barely. down by 2.60. $1,326 an ounce. let's talk about starbucks which came in with numbers that sharply beat the street's expectations. howard schultz says it was the global coffee chain's best performance on record. joining us now to talk more about the numbers is r.j r.j. hovotni from morning star. these numbers are certainly something to crow about, the street likes what they're seeing. how about you? >> wasn't much more you could ask for from the numbers last night. comps are great, showed a lot of great trafficking, especially at a time when a lot of competers were barely eeking out any kind of traffic gains and trafb lofi losses. >> what do they do better than anybody else seems to be able to do right now? >> i think it really comes down

to execution. at the store level. that's where the -- clearly the highlight of the quarter was. the 7% gain in traffic on a global basis. comes down to new product innovations, revamped food platform, better use of digital and social media technology than anybody else out there. just drive a lot of people to the restaurants right now. has one of best brands out there. i think as they start to ramp up the expansion on some of the newer brands, evolution fresh, teavana, a lot of things will translate over. this is a story for the long-term. >> the stock is up over 6% on the earnings overnight. it is now trading at around $72. what do you think -- do you have a price target? >> i think somewhere in the mid-70s is the appropriate price based on what i'm seeing. even after last night's impressive gains. it may look a little lofty at 28 times, the midpoint of next year's earnings. this has one of the longest runways of growth in the consumer cyclical space now. i would be a buyer at these

levels. >> are there more stores than there were in 2009 when at 15? >> oh, yeah, yes. they're at 19,000 locations now. >> what happened between -- what did the guy before howard schultz -- what was happening? the baristas were rude? i know they had a fight with alec baldwin back here. what happened? >> i think it was just -- >> what did he do when he came back? >> it was refocusing on the customer experience. you had a situation where the experience within the stores had just -- wasn't what it used to be. now you can get through much quicker, they solved a lost through put issues, brought a lot of new product innovations to the table. i think it is really a matter of execution. and capitalizing on the -- go ahead. >> you should feel, you're paying 4 bucks for a cup of coffee, they should make you feel good about it. >> that's what they're doing. so -- >> what is the biggest risk you see potentially for starbucks

down the road? >> the biggest risk now, they have a lot of balls in in the air. they have expansion on a number of fronts. and just making sure they're executing on all different fronts because it is a lot of moving parts to the business now. but at the same time, they have one of the deepest benches in the company's history. a lot of great senior managers they're working with. i got confidence they can do it. but there is a lot of things on their plate right now, so that's the biggest risk in my mind. >> yesterday, we had the ceo of dunkin' donuts on. he talked about how they're expanding in california. at least. going to be the first push moving into that state. is that a threat to starbucks? >> i don't think so. i think they're serving slightly different audiences. starbucks skews a little more to the affluent customer. they're seeing a lot of health talk from the company last night, i think dunkin' has a great strategy and there is arom for multiple players. i don't see them as a threat.

>> mostly dunkin' now. i'm okay with that. i kind of would rather associate with dunkin' now than -- >> i like weaker coffee. that's -- so i appreciate the dunkin' because i put a ton of milk in my coffee. >> i'm not going to sit in there on my device or something in starbucks like all the, you know, like the upper west side. >> i like the starbucks food, though. >> royou do? >> starbucks food improvement. >> the scones, cinnamon chip scones are pretty good. they discontinued the cinnamon sticks and i talked to howard schultz about that and he never did anything about it. he might have listened to -- yeah. >> so there. >> never did anything about it. didn't bring them back. 19,000 stores because of what i asked for or anything. >> r.j., thank you very much for joining us today. >> thank you. >> a programming note for you, the starbucks founder, chairman and ceo howard schultz will be on "squawk on the street" at

9:00 a.m. eastern. >> one of the visionary -- like starting that thing, thinking you can revolutionize coffee and selling cds. and you walk out of there with a $25 bill. >> a bought a cd in the last six months there. >> it is crazy. a hospital operator trading near an all time high. the ceo of universal health services will get the call from "squawk box." he'll tell us how he's planning for changes in the health care industry, which are imminent. plus, activision blizzard ceo talks to us about the latest play to go solo. and investors like the news. stock is up, up almost over 10%. "squawk box" will be right back. [ male announcer ] let's say you pay your guy around 2% to manage your money. that's not much, you think. except it's 2% every year. go to e-trade and find out how much our advice and guidance costs. spoiler alert: it's low. it's guidance on your terms, not ours. e-trade. less for us. more for you.

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welcome back, everybody. the u.s. equity futures have been a little weaker this morning. you'll see the dow futures down by 42 points. s&p off by 5 1/2. joe? >> hospital operator universal health services reporting profits of 1.20 a share. four cents ahead of expectations. revenue also beat forecasts coming in at $1.84 billion. joining us with more on the quarter and the state of the health care industry, alan miller, chairman and ceo of universal health services. good morning. >> good morning, joe. >> the -- something we're told all the time, alan, is that after years of just rampant rises that there has been some slowing of, i guess, utilization. we don't really know what to attribute it to. but then recently i've seen that there are signs that that is starting to pick up pace again in terms of health care increase. can you -- where are we right now and what caused it and what

is causing it now. >> i think a lot of it has to do with the economy. a lot of people are not working and a lot of people that are working are concerned about leaving their jobs to go into the hospital. and there is also a lot of co-pay, so i think the combination of all of those has been dampening a little bit on the utilization. >> is that something that we should have assumed? if there is anything inelastic, i would think it is health care, but it isn't. do you tend to use it more and is that something we should be concerned with? >> no, i think that really what you're looking at is where people need the service. if you have a heart attack or break your leg or something like that, you must go in. but elective things, you can put off, and depending on the economy, depending on your particular situation, people have put off a lot of elective things. but i also think that when the

economy picks up, you're going to see an increase in our industry and the results from our peer companies have been mixed. we have done very well. but others have not done as well, but i think the whole industry will pick up when the economy picks up. >> i always see proponents of the -- of obama care, the affordable care act, i see them to some extent saying that the switch from fee for service to performance and different ways of compensating the whole industry, that the way we're trending to comply with obama care is starting to work, even h though it is not enforced yet. are you seeing that? >> i'm not seeing that yet. it is a law of the land. and ultimately it will be implemented, but at the moment, the implementation is not going very well. and so, you know, it has been delayed for the big companies

for a year. but ultimately i think it will come about, and i don't mind happening -- what is happening these days because i like to see a lot of the different regulations really tested out before they're implemented, which could have been done on the front end. it wasn't. but now i think it is going to be sensibly put in, a piece at a time, and a lot of things will be moderated. >> alan, how big of a problem is it that employers, big employers were given leeway and additional time? it is my understanding that hospitals had to start complying with a lot of these things a couple of years ago. that it was difficult at that point, but they figured they would make up for it once the mandate was out there and you would see a lot more insured people walking into your doors. >> we're expecting to see those people coming. it will be a little bit later, perhaps. you know, the exchanges are going to register 31 million people. and the exchanges have been uneven. a number of the states have not

put in exchanges, so the federal government will have to be doing that. i understand that there are a little short on funding for the exchanges. so it is very rocky. president said something to that effect, it is stumbling along. max baucus says it might be a train wreck but it is the law of the land. i don't see how it gets overturned. i just hope it gets moderated. and it seems that a lot of the regulations are going to be moderated. to me, that makes sense. >> how do you plan out a year in advance when you're running a business, what kind of modeling have you kind of come up with at this point to try and give your best guess as to where you'll be in a year from now? >> well, you know, we're going to be there. we are there now. we're going to be there later. our facilities are fixed. and we haven't done very much, other than look at this very carefully. you know, my company is going to be 35 years old next year. we are very experienced. the industry is going through a

transition. but we have been very successful in following along in the industry for all these years. we are very almost preeminent in the behavioral health business, which has been very resilient in this economy. and so we will do well no matter what happens. we're adaptable. we are well positioned to be flexible. and whatever comes along and when it comes along, we'll deal with it very well. >> alan, we have seen comparative studies of procedures in this country, and it varies geographically, depends what state you're in and also around the world. it is staggering to see things cost, i don't know, colonoscopy cost $8,000, can be done for, you know, $800, over a tenth of the price. why does that happen and how do we eventually rein those costs in? >> i think what you're saying is true. different parts of the country are different cost basis and different charges.

and over time, because we are going through a transition, over time it will become more transparent, and i think we'll move towards a number that will be more consistent across the country. it is not the case at the moment. >> and if -- out of all of the providers, all the people involved in the chain of providing health care, where do you have the most -- i don't want to call it waste, but where do people take liberties and where are we going to be able to cut out some of the excess? what sector is that? hospitals? doctors? in your view, where is it? >> well, i think that, you know, politicians have talked about fraud and waste for as long as i've been in the business. i'm always thinking about if they talk about fraud and waste and if they know where it is, why don't they fix it? i think what you're asking is in which area, and i think as things become tighter, every

provider will have to look to their expense level and see how they can reduce that. we're in the for profit business. so if we don't do it well, we lose our shareholders, we lose our shirts and we're out of business. we run scared in that regard. i don't think the large part of the industry that is nonprofit necessarily runs that way across the board. i think nonprofits are driven by different dynamics and different missions, and they can certainly do things better. we built hospitals. for nonprofit companies and we build at a much efficient rate than they do. as you go across the board, you'll see everybody focusing more on expense levels, and reducing their expenses. construction, i think, is a big one. we have stepped into that breach. and i think also with physicians, physicians have been seeing their incomes come down,

and i think that they're going into groups, and i think the groups will be more efficient than the independent practitioners in many cases. but it is going to be across the board. >> well, alan, just -- there are people -- a whole group of people that think that the term for profit shouldn't have anything to do with health care. and they apparently have never read an economics book that shows where innovation comes from and where accountability and minding your ps and qs comes from. if everything were, you know, maybe all society should be nonprofit so we don't have to satisfy any shareholders or be constrained by profit. >> you mean nonprofit or for profit? >> i'm talking about for profit. for profit is what the delivers innovation and what causes people to mind their -- it is a way that the economy runs. we should make everything nonprofit if it works so well and then -- >> no. >> right? >> yeah. i agree. interestingly when people come

to a hospital they don't know if it is for profit or nonprofit. they just want to get great treatment. we have great treatment, and when we're finished giving great treatment, 35% of our income goes to the government by way of taxes. so people are not aware of that. so we are very efficient. we have to be -- >> you have to be efficient. and you have to innovate and -- anyway, yeah, i was making that point because it is easy to argue that profits get in the way of, you know, that too much of it is expended there, you can be expending for care and it doesn't -- it is not implicit. >> doesn't work that way. >> i know. yeah. but got -- i tell people that every day. thank you. appreciate it. >> you're very welcome, joe. when we come back, we're going to check out the fed's short list to replace chairman bernanke. check out the price of gold right now. it is flat lining, but it is well above $1300 at $1329 an ounce. dennis gartman will be along to tell us how bullish he's feeling about the precious metal right now. "squawk box" is coming right back.

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welcome back. this is a little amended chair, we are not moving in the chairs. we are in chairs. the big scuttlebuttt today has to do with the next who is going to be heading up the fed. wow, what a brew-ha ha that covered the new york times.

here's the huffington post. i have not cleared this with larry summers for me to endorse him. >> oh, no. >> he probably doesn't want me to endorse him. anyway, can we have a shot at that? look at this. senate dems swarm against summers, roughly -- backlash. it said something like you've got to be kidding, mr. president, or something, to think about -- now there is an old saying about the enemy. i'm looking at who supports janet yellen new york times, andrea tyson certifiably. i go ahead a guide in the wolf certainlyist, dick durbin who only opens his mound to change feed and nancy pelosi. >> right. summers doesn't want your endorsement. >> then who is behind larry? robert reuben, all right. we respect him. the citigroup thing, cheryl

sandberg. >> who used to work for him. >> tim geithner who i think we still -- >> i think people look at geithner with much -- >> gene sperling. you know what, if the huffington post is slamming summers, the kind of people that write in to the huffington post and follow them and the progressives. if they don't like larry, he is the guy for the job. >> there are questions on the financial times about what larry summers thinks about qe and its effectiveness at this point. wondering how effective it is. people are blowing this up making him sound really hawkish. i think bernanke is -- sample we may be in qe infinity for the next five years. >> i think bernanke himself questioned it. >> mort tucker has a piece on it, too, i think it's in the "journal" how unceremonyiously he is dismissed with someone who should not credit him, himself, with saving him for saving the

economy. >> by august, you will hear who the obama administration will nominate. >> i hope they don't think they have to nominate a woman just for gender purposes, you know. >> you are right, larry summers does not want your endorsement. is not helpinging. anyway, when we come back, act vision blizzard bobby kotick, that stock up more than 10%. a lot more to talk about. "squawk box" will be right back. but your erectile dysfunction - you know, that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis.

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. >> the feds making their case against sac capital. >> sac became a magnet for

criminal cheaters. >> looking for any and all assets that could destroy the hedge fund giant. >> look out bulls and bears. >> i immediately regret this decision. >> we have the dynamic duo guest hosting, jim paulsen of wells capital management and dennis gartman of the dpartman letter. they are tackling the markets for the next two hours. >> the pinnacle of luxury. >> there is no substitute. >> forsh and /* /- porsche and sales, "squawk box" gainst right now. ♪ . >> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe

kernen. the futures have been under a little pressure this morning. those dow futures down 41 points the s&p futures still down by about 5 points. in our headlines today, amazon.com shares taking a hit. amazon came in with an unexpected quarterly loss and gave a cautious outlook as it invests in new businesses. the stock, however, is still up 35% over the past year. you can see in the premarket it's down by 1.25%. neighbor starbucks the coffee maker earns 55 cents a share for its fiscal third quarter, that was 2 cents above estimates. they have expanded menu offerings. the ceo will be a guest on squawk on the street. that's coming up a little later. it's up by 6%. 72.50 is the last trade there. one economic stat, the university of michigan's monthly consumer sentiment is out 9:30 eastern time.

it is expected to be slightly higher than the june reading. halliburton will plead guilty to destroying evidence related to the 2010 gulf oil spichlt halliburton accused them of destroying computer simulations in the design of the well and the rupture of that well, which led to 11 deaths and the biggest u.s. oil spill in history t. company will pay a fine. also a separate payment of $55 million to the national fish and wild life foundation. it is going to continue cooperateing with the government's investigation. sac capital will be in court this morning in connection with the insider trading charges announced yesterday. we have been talking about this all morning, kayla, that it's not steve cohen, so we talk about even in saying who will be in court. i guess the hedge fund, itself, is going to be in court and maybe the hedge fund, itself, is going to be sentenced to prison.

>> yeah. it has been a huge question that people have been circulateing around. when the government really wants to go after you, this shows the power they have. steven cohen's fortune is tied up in this. most of the money they are managing is his. >> kayla was supposed to be at the court. she's not, i hear you, rob, i hear you. relax. but apparently, i don't know, she did makeup or something or maybe she doesn't need much, though, maybe it's the shot or something, so we will go to bobby kotick, first. >> bobby kotick is the head of acquisition blizzard -- activision blizzard. an investor group led by bobby kotick and his co-chairman brian kelly, that will separately buy 172 million activision shares for $2.3 million.

joining us to talk about the deal, activision ceo bobby kotick. bobby, it is great to see you this morning. >> thank you for having me, becky. >> there is big news, it's five years since vivendi bought a stake. five years later you are buying back that stake. stock is up better than 10%. so tell us what happens now. >> well, we're now we're back to being an independent public company. this is a transaction that will benefit the public shareholders. all te acretion in this roughly ambulance this 84 will be able to with this new more efficient capital structure, we'll be able double a return on equity. i think it will give us a lot more flexibility in thinking about acquisitions for the future, capital structure for the future and importantly, vivendi retained a 12% stake so they still have a lot of confidence in the future prospects of the business

alleges. >> okay. i undersold it. i was saying it was up better than 10%. inning looking at it right now, stocks with up 1837, a gain of better than 21%. bobby, when people look at the numbers on this, you are paying vivendi $13.16 a share. again, now it's up above $18. how did you get vivendi to agree to a deal like that, where you are giving them 13.60. the stock is clearly, really likes this news, it's jumping. but that was below what it was trading at yesterday before this news came out. >> well, you know, there is an independent committee of directors that negotiated the price. but vivendi was able to drive some very significant tax benefits from the transaction and i think from our perspective, having them retain a stake, enabled them to get the benefit of the upside you are now seeing in the share price and it was a long negotiation, so i can't tell you what the

stock price was when it started. but it ultimately seemed fair to all parties from the special committee's perspective. >> you have to be really excited about this. what are you going to be doing differently at the company and we haven't heard a lot from you in recent years. does this mean you will be talking to the street a lot more often? >> well, you know what, i think it certainly does make it easier to talk to investors when you have a better sense of what the long-term prospects of the business are and, you know, as vivendi's experienced some challenges in their own businesses and they needed some financial flexibility. this worked out well for them. i think one of the things we're really excited about is being able to to be included in the indices, we were eliminated from the s&p when we did the transaction. being able to have mutual funds, in the past, weren't able to own our shares. now we have the ability to own our shares. we won't be running the business any differently. you know, as we know, i have

been doing this for 22 years. >> yep. >> we will continue to operate the business the same way. i think it should give us a lot more flexible. >> bobby, remember that deal that you did, it was some the way you did it, it was something weird, what was it? somg video game was valued at like $2 billion or something. made the deal, did it make what you were exchanging worth more? was vivendi was? do you remember when it happened and i was like wondering how it worked? >> you were right. i remember very well, joe. >> yeah. >> so here's the original deal was vivendi had a games business and they contributed that business, which was roughly $7 billion and $2 billion of cash in exchange for 51% of the combined company. >> that's what it was. >> that's how they got their majority vote. >> i didn't believe their game business was worth $7 billion at the time. it seemed like -- apparently, it wasn't at all. you knew this? are you a visionary? >> blizzard is a fantastic

business. it's been a great partnership with blizzard for the last five years. >> now this, you know, i know investment bankers put companies together just so they can take them apart and get the fees, was it worth it? did it work for five years now this makes sense? >> you know, i think the business worked great. our operating margins improved by almost 60%. and i think the business performance was there. but because of the ownership structure and all the other challenges that vivendi faced, i don't think we really were able to realize the value for our shareholders, our public shareholders in that ownership structure. >> all right. so you want more power, basically? >> my job hasn't changed in 22 years. it's just i think we're unlocking value for the shareholders. >> oh. all right. that's a good answer. >> that's a good answer. >> bobby, there are a lot of questions about the business. people have looked at this and tried to figure out how the gaming business will evolve, particularly with more people playing online. questions about social games

from zynga and other place, you know you put out your earnings gains and raised your full year net revenue outlook, raise what happened you are looking for earnings per share. will you tell us about what you are seeing in terms of the overall industry trends? >> so there are some fantastically positive industry trends, like the introduction of new video game hardware, with those transitions, can you always expect challenges and, you know, things like development costs, increases, there are a lot more opportunities for people to play free games than ever before and those things can have an impact on business model and financial opportunities, but not i think part of what we're doing in this transaction is taking a very, very long-term view on a business that we continue to see new geographies emerge, whether it's china, brazil, russia and we continue to see more microprocessors checked to more display devices, so while you

always have these challenges that come from consult transitions, there will be lots of opportunities for the long term for us to pursue. >> world of world craft i think has had fewer people subskriek online, how do you battle something like that? >> you know, i think what we've seen is the game has been around for a long time and we have a constant need to enno rate is and i think our players expect us to continue to innovate. the challenge with something like world of war craft is the cycles for introducing new content take a long time. so even though we're investing hundreds of millions of dollars against the franchise, until there is new content, sometimes people have, you know, distractions. other things they want to do, games they want to play. you know, the challenge of our success is that we see gamers go from blizzard games to activision publishers games so sometimes we cannibalize our own frmps. overall, i think there is a lot

of opportunity in franchises like world of war craft. they're very difficult to duplicate, which is why we entered into the merger with blizzard five years ago. because we realized that was a skill, it was difficult to master. it would require intense amounts of effort and investment. we probably would have got it wrong. >> bobby, i watched my son and i say, you know, son, monopoly, there is no longer a go to jail. so you can play faster and can you take these little plastic like hotels and houses on this game i like game board. can you move them around faster now with these little cars. you don't want to play world of war craft anymore, let's play some monopoly. it's not happening, bobby. this is where it's at for kids nowadays. how do you ever get anyone to do this stuff we used to do? >> it's not easy. i have the same challenge with my own children. >> you don't go to jail any more, monopoly.

you have that going for you. they changed it. >> i'm hopeful. >> you are hopeful not to go to jail. geeze. >> real quickly, before we let you go, again, with the stock moving like this, they must be looking at the structure of the company, you do point out this will be somewhere between 18 and 29% on a gap basis. in 2013 and between 23 and 33% on a non-gap basis, can you just describe that again so i understand how that structure works? >> sure. so the company bought back roughly 430 million shares from vivendi. those shares are what provide for the significant acretiont. elimination of those shares from the share count resulted in roughly 38% eps acretion. >> we hope you come back soon and join us again, bobby, thank you very much today. appreciate it. >> thanks, becky, for having me.

joe, thank you. >> see you, bobby. >> well, kayla, apparently, is ready. sac capital will be in court this morning in connection with the insider trading. are you sure kayla? everything okay? is the timing good for you now for you to do your hit that is supposed to be done at the top of the hour? >> joe, my makeup does take a long time. but that wasn't the issue we were waiting to fix our microphone, now we're good. we have a lot of trucks coming by, you want to make sure you can hear the high value. behind me, 500 pearl street, this is where sac capital's lawyers are expected to show today for a 10:00 a.m. arraignment hearing where traditionally the party is expected to address the indictment and also enter into some sort of plea, whether that's a guilty plea or a not guilty plea, we don't know at this point. up until yesterday's lengthy indictment, sac capital and its lawyers and cohen had all

staunchly defended the firm's actions as right and just if saying that they didn't do anything wrong, especially at the very top of the firm. all changed, of course, yesterday, with a sweeping 41-page indictment from the u.s. attorney for the southern district of new york who has become notorious for insider trading crackdown, yesterday showed how much hat he is pulling with this lengthy indictment of really misfit culture at the 1,000-person firm. >> the scope of illegal trading was deep and it was wide. it spanned more than a decade in time, involved securities of at least 20 public companies, benefitted sac to the tune of at least hundreds of millions of dollars. >> reporter: as to what they could potentially go after,

bharara said our aim-to-make sure that what is consistent with the criminal law interest of deterrence and penalties and disgorgement of the profits is what the ultimate number will be. the suit was filed in conjunction with yesterday's indictment says they can go after any and all assets associated with the insider trading practices that went on. at the peak, the complaint notes those assets were $15 billion. it's clear they want to wipe cohen out. they could go after every dollar that he's worth if they're successful. being to you. >> all right. kayla. i don't even know why you bother. anyway, thanks. it was worth the wait i think. >> it wasn't her fault. >> you should always blame it on audio. always. >> that's what we do. >> comments, questions, about anything you see on squawk? e-mail us. you can also follow us on

twitter@squawkcnbc is our hand him. we have a dynamic duo ready to take on the markets. will paulsen an dennis gartman, are you up on gold yesterdt? you are up on gold. anyway, two hours, we will cover everything. >> hi, jim, sorry, i'm not ignoring you. >> and we're going to talk about all this stuff. price of gold, whether the super cycle is over. "squawk box" will be right back. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection. ♪ could save you fifteen percent or more on car insurance. yep, everybody knows that. well, did you know some owls aren't that wise?

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. >> welcome back. after modest advances yesterday, you do see some declines. dow futures down by about 45 points. s&p futures off by just about 6s. >> next week will be a good one. dennis paulsen. we are joined by robin harden. u.s. economics editor financial times in washington. i guess robin, i'll start with you. these guys are going to be here for the next couple of hours. so i'm most interested in some of the stuff that's going to happen next week. is where is gdp?

i just wonder how low that will be. how low can it go? why is it going to do that? what about the employment report? >> so i think you are absolutely right to focus on the data. i don't really see how the fed can do very much when on the morning of that meeting they will get what is likely to be an extremely weak q 2 report. i think the most likely figures where most forecasters are is .4, .6 annualized on gdp. the federal government spending. there has been various weak numbers over the last few months, which are leading people through retail sales and the rest. as we know, though, it's pretty much a random number generator. it could be higher, could be lower. >> yeah. and are we at a good news, good fuse scenario yet, do you think? for the stockmarket? >> on gdp, i think that the likely bad news has been so

heavily discounted already that i doubt the stockmarket will worry too much about it. the other thing to watch out for next week is actually even more important than the q 2 gdp, there will be massive revisions. the last three years will be revised on the annual schedule. but they're also reviseing all the data back to fine between. and that could be a big surprise. there is a decent chance we may see weak gdp or the level revised up a bit. >> paulsen, your whole bullish scenario is not just based on qe and asset inflation. it's based on the idea that things are going pretty well in the economy, right? >> i really think the main thing that's driving the markets this last several months has not been earnings. it's been confidence going from giving, finally giving up the armageddon, ghosts, joe,

priceing assets for the end of the world. now deciding it's going to sustain even if it's sluggish and slow. >> slug .5 or .6 doesn't justify the move that you were looking for and the move that the markets made. >> no, but i really. i don't believe it. i think there is a one off in those numbers. it just doesn't jive with what you see on the ground. every financial story tells a different story. bond yields are going up. >> maybe qe. >> it's not a 1% growth in the economy they're discounting. i think the private economy, if you look at ectiateing 200,000 plus jobs on average the best housing activity of the recovery strong capital good orders. how does that jive with less than 1% growth? i think there is a big disconnect there. >> i couldn't agree more. from where i am. i live in virginia. we get impacted by military spending. when you go to cleveland, to des moines, to romp, restaurants are full. airplanes are full.

the highways are full. there's stronger economic activity than the data would suggest and robin i think had a very good point the revisions we are going to see in gdp going backward i think will be quite surprising. i think we are shocked when the data gets revised properly. >> i would agree with you guys. then we have a ceo of southwest airlines yesterday who was on with us talking about how government business has been weak and they've noticed it. to hear it even coming and affecting somebody like a southwest, who i don't think of as a government contractor by any means, then you start to realize, there is a bigger thing here t. government has been a huge spender and player. >> i see it where i live in southeast virginia, it's obvious, when you looked at the fed richland report the other day that fell dramatically, that was because of sequestration, that was clearly a decline in military expenditures. >> neither one of you would say long term that is a good thing.

>> frustration is a wonderful thing. >> it is not going to persist f. we thought we would have record setting in the government for five years, that itself one thing. if you think, you know what. >> no news is food news. >> i got to stick up for an drou today. >> i are in that seat. >> you got the good passive velvet rope growth going. you are still going to clubs at night? huh? do the chicks like that? >> hey, robin with me, it's kind of the opposite, people that worry about the economy doing well because it spells the end of tapering. i worry that the economy won't do well enough to end tapering and that we'll be stuck in this roach motel and never get out. that's my whole fear right now. so it would be really good if jim is right and dennis is right if the fed can exit in an orderly way on schedule instead of us going into another

slowdown where they can't justify ending 85 billion. if we stay above 7%, they won't end it. they need to end it, won't they? >> so i think that if we stayed above 7% through a very long time, they probably still would end up ending it. but i think the way to think about it now is they assess out this plan and in a way, that's kind of taken off the pressure to do something right away and now i think they can sit and look at the data and the timing, you know, maybe it's september. maybe it's october. i think, you know, they can respond to the data now is what they want to do. >> you know what, we were talking about larry summers versus janet jellin with yellen. we were talking about a huge difference. she'd never end it. he'd end it immediately. >> i think that's too extreme. i think they're pretty similar where they come from as

economists. i think it would be more if the economy were to. >> it's cable, robin. it's cable. the things are absolute here. >> okay. i'll try to make it more extreme. i think it would be quite absolute if the economy took another dip. then i think he would see janet yellen and larry summers behave quite differently as fed chairs. >> do you know who it will be? >> i would love to know. i think it's changing right now. there has been some, the political dynamic, we are seeing on the hill, with larry summers, i think that's changing the probabilities even as we speak. >> yeah, be you the guys against him are the guys that don't know how to run an economy. >> i think the president wants to appoint him. i think he will have to make that. >> that's surprising to me. >> you knew it was going to be a boy, you did not know it was going to be george, you had some insight there, right? >> you know, there was about six names they go for, so the probabilities were decent on a

george. >> were decent on a george. are you exited? . >> thrilled. i couldn't be more excited about another member of the royal family. >> i don't know what it is, i'm excited, too. i guess because whoopi goldberg is so anti-royal family. thank you so much. we will have more throughout the show. >> up next, we will be talking about gold prices and hot commodities. next, we will play small ball. plus, it is not just men who are driving forces. there is another big group of buyers on the rise. phil lebeau will tell you why more women are getting behind the wheel. "squawk" will be right back. ♪

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a ask. >> welcome back to "squawk box." samsung is reporting record profits for the sixth straight quarter. new figures from idc showed the company shipped 72.4 million smart phones during the second quarter, more than double the number shipped by apple.

samsung shares did fall, however, overseas. record profits were a little shy of president forecasts were. in euro zone, finance mensters agreed to release another aid payment for greece the bailout payments amounts to 2.5 billion euros. it follows a conference call when greece fulfilled the requirement. a preliminary investigation shows that southwest jet that landed at la guardia nose first time. it actually did happen. it broke the nose wheel. that's where they come in like birds almost. it resulted in a hard landing and ntsb investigators are still trying to determine if pilot error was determined. they land back and slowly you can feel it come down. >> yep. it didn't happen this time around. >> our next guest is making the case for small caps. he says based on his research, the timing couldn't be better,

dan barrow is with palisade capital management. he joins us with more. dan, you have interesting statistics i didn't realize, you say the number of companies currently listed 4, 916. there were more than twice that in 1983. what happened? >> you had this continuing shrinking of the equity markets. the title of my essay to the shrinking market. this has been an ongoing phenomenon. a great cocktail party chatter is to ask somebody how many stocks are in the wilshire 500 index. it's a little over 3,500 stocks. it hasn't been more than 5,000 stocks for quite some time. >> how many are in the russell 2,000? >> it's probably more than 2,000 now. >> how many in the s&p 500? >> not in the s&p 500. >> what happened? did these companies go out of business? were they merged out of

business? what happened? >> they were acquired by larger competitors. dennis, small cap companies do something very well. they do a very specific thing very, very well. they tend to be coveted by larger companies. so we're seeing a continued trend across all of our equity strategies over the last two.5 years. we've had more than 40 companies get acquired out of our various portfolio. >> we were saying just recently, source fire taken over by cisco, smithfield foods bought by a chinese company and nd energy bought by berkshire, you had all those small caps in your portfolio. >> it's not that we're looking for companies looking for takeovers. we are looking for companies that do something special, do something proprietary. look at sourcefire, cisco and source? fire, so cisco chose to buy source fire's significant

multiple ebitda. that's the kind of deals we are seeing and continue to see. >> why do you think there is a lot more reasonway when it comes to what can happen with small caps? people have been looking for a long time saying small caps outperformed the big companies. you don't think that's the case? zpli wish i had a dollar becky for every time somebody said now is the time to focus on small caps. >> they got hurt. they bottomed, right? they went for years. then after the financial crisis, small caps suffered more, didn't they? >> no, actually, they suffered less t. s&p. >> so in 20 years, they've never been outperformed by a large cow? >> not, there have been periods, i think the most recent period would be sort of the ''80s through early '90s, mid-'in the to early '90s. it's been that long. if you go back to the 1930s, large cap outperformance of small cab is an aberration. i have a chart which is difficult to see.

nuls look at it in color. green represents large, small outperforming large an red represents large outperforming small. over that period of time, there is a lot more green than red. >> how much inflation, they outperformed like you said in the ''80s, they haven't since. >> yes. >> how much of that is indpliegs? in other words, if we get inflation back, will that be a small cap game again? >> i think, yes, will you get get much more priceing flexible. it's us as been a hedge. definitely, they tend to have more present power. they're outperforming. i think we're in this slow growth recovery and in that period, we have subpar gdp growth defined by the 3.5%. small, typically, does much better than large. it's by a very wide margin. it's only when you get above trnd and the more recent above trend period would have been back in the 1980s when you had the megarecaps of the s&p

500-type companies, raiders, mna activity. that's when the small caps tended to underperform that period. it was by a much narrower margin. >> dan, thank you very much. >> coming up, hot commodities, gold and more, we will check out the trades and volatility. check out the price of crude. we'll be right back. ♪ the world is changing faster than ever, creating new opportunities for those who stand ready to seize them. in a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, our flexible, collaborative approach helps forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities

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. >> welcome back, everybody, toyota outpaced gm for the first half of the year. toyota sold 4.91 million cars and trucks around the world between january and june. general motors sold 4.85 million in that same time period. toyota overcame weaker sales in china. a territorial dispute led to anti-japanese sentiment in chosen, you may recall. set off boycotts an riots. this could be the fourth time in a row the hedge funds underreported s&p 500. for the 20 years before that, hedge fund returns beat or tied the s&p 50015 times. >> wow. >> let's get a check on the commodities markets. joining me now is ira, still

with us, commodities king, dennis gartman on the gartman letter and a market guru. >> oh, that itself not bad. >> jim paulsen from wells capital management. ira, dennis has been, what was your price in dpold? you have been tajiing your way? >> i have been buying it. >> first of all, ira, good to see you, long time no see. >> i got very lucky and bought gold when it broke hard and have been bullish since then and have been lucky. >> where are you on gold right now, ira? >> well, you know what, when dennis bought it, i had a different reason, i was on with mr. santelli in the morning. we were talking about it. it came down, it came down to the same level of november 2nd, 2009 on the day that the imf sold all that gold to india and the chinese were none to happy.

on that day when dennis was buying it, the value of gold was the same as it was for the juan on that day to an ounce of gold. seemed to be the level it has held since late june. pardon me if it was a good move. i think that gold is going to go a little higher. >> i bought it for the simple reason, every mediaoutlet, every newspaper article was manifestly. >> the opposite of 1,900. with all the media, we were putting had gold bottom. we weren't putting how low can it go? >> i listened to an awful lot of people. they were saying gold is going lower. >> what is the ultimate low? >> for now, as a trader? we saw two-and-a-half about a year. >> what about two years? >> geeze, i'm lucky if i can look out past next tuesday. >> well, it matters. it's either bottomed or it's just made a stand and going lower again. >> i think the trend is up.

people don't like to hear me say this, the trend is up and will continue to be up until it stops being up. that's the only thing i learned in 40 years of doing this in the business. certainly, three weeks ago, it will stand for a fairly long period of time. >> ira, if the commodity super cycle is over, at our delivering alpha conference, what will that mean for gold and a lot of commodity? >> it will mean everything will go lowner tandem. with that, if jim chan chanos is right, we will go into a deflationary cycle, supercycle, because we won't have the growth to sustain it. so will you have qe all over the world. and i think that gold, dennis, i'm not sure if you would agree with this, the next real leg of gold is going to come when the ecb -- wait, joe, let me -- >> if you ended qe, why wouldn't the dollar go higher and all commodities would be expressed in dollars, they wouldn't be headed higher. it doesn't mean deflation. it means we can finally get out

of qe and the dollar goes up. >> if the superpsychsome over. if the qe is over, look, it's not a matter of the qe being over to me. itself why the tapering talk is kind of overblown. because you will still have 3-and-a-half or 3.8 trillion reserves in this system. how are you going to un -- remember when the qe'01 start and qe2. the fed put in place, we will raise the reserve requirements or possibly raise interest on overnight reserves, or reverse repos. we will drain this liquidity out of the system. now the words out of bernanke and others is that, well, we can let this stuff roll off if time. so this is going to be the interesting part of the lab experiment as we go forward. how do we remove those exception reserves? believe me, if it was not a qualitative reserves of removeing them the gold will go substantially higher. >> so china doesn't dictate the commodity supercycle, jim? . >> it will for chanos. >> i think it will.

i think the dollar is being in there, too. i kind of think that commodities have bottomed. >> you think they've bottomed? . >> i do. i have. >> then they'll go up in tandem with financial assets? >> i think they'll do better from here. i think gold with underperform other commodities. i think it has an excess premium to other commodities. even if gold goes up, it might go up less. >> you see enough inflation to be healthy? >> i think we are headed over the line. we moved across the line. >> not to hurt financial assets. >> i think inflation will come up a bit. it will not be right away. i don't expect to move like we had in 2000s in commodities again, i think they'll start climbing a bit. >> i'm trying to think of some of the stuff you said in the past has been off the wall. i'm trying to think of some of it. right? >> yeah, off the wall, but right. and dennis. >> i remember some mixed stuff here. >> you traders only got to be right for like 15 minutes. you know, then you feel like you were right.

>> ira was one of the better floor traders, one of the people with a longer perspective. >> so like 20 minutes? >> 20 minutes. yeah. >> dennis, will gold, does gold needs ecb to actually create a quantitative easing program rather than just job owning one? >> do that again? that's why we play the music because we got to go. >> draghi hasn't spent one dollar in quantitative ease since '06. >> and he will. >> that will be the next leg for gold. >> all right. we will get to talk halliburton next. that's all the time i have to say. bye. when we made our commitment to the gulf, bp had two big goals:

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. >> halliburton pleaded guilty in connection with the deep potter verizon disaster. jackie deangelis joins us with more. good morning. >> good morning, joechlt according to justice department in may of 2010, halliburton established an internal group. this is part of a post-incident investigation. it surrounded the casing of the well and how that may have contributed to the accident. now, before the incident, halliburton recommended bp use 21 centralizers. bp used six instead t. evidence destroyed was part of several

stimulations conducted in its post-incident examination. the conclusion it yielded was that there was little difference between using six and 21 centralizers. halliburton will pay the maximum statutory fine. in this case, that is $200,000. it's subject to three years pro baegs. halliburton has already made a voluntary contribution of $55 million to the national fish and wild life foundation. that had nothing to do with this plea agreement. now, to put this in context for you, it's relatively slight the fees they are paying in comparison to the record 4.5 billion bp reached when it pled guilty to manslaughter charges in 2012 and also less than the roughly 1.5 transocean agreed to pay when it pled guilty to violating the clean water act. why was the evidence destroyed and will this latest development play into the class action and civil suits that we are going to see also presents a pr challenge

for halliburton. destroying evidence comes back to candor at the company. what were they trying to hide? did they hide anything else? >> that's the question. thanks, jackie. when we come back, porsche is finding huge sales and women are the driving trend. phil lebeau talks about women behind the wheel of luxury cars. >> hey, that's me. >> are you a woman. >> i am. >> that's not my car. .

. >> welcome back. porsche seeing a large increase, part of the increase is coming from women. phil lebeau joins us with more. i have to say, this surprises me. >> reporter: i think a lot of people will be surprised. is joe sitting down? >> i am prepared. >> >> reporter: people wondered how much sales have grown. one factor is we are seeing more women buying and driving porsches. as we were driving around the north shore of chicago, with i is not a hard area finding the number of women driving porsches. the sales have doubled. 15% of porsche sales in north america are now to women like here in northern chicago. >> my image of porsche was a fast car for guys to drive and should probably be on a racetrack. not really a woman's car. >> well, it may not be perceived as a woman's car, increasingly, it is, porsche has been gradually expanding its

marketing to women, by broadening the market into a number of other publications and media forums so there is more of a wider audience recognizing the brands. sales up 30% year-to-date. the dealers are noticing more women coming in to lock at these porsches. >> what we see in the last year here at the porsche exchange is that we see more women coming in not only with their husbands but on their own as the primary decision-maker. and they are evaluating again several luxury brands. >> quickly, let's take a look at the ultraluxury brands and their sales. they have been red hot. porsche is up 34%. lack borborginy up 34%. bentley almost 10%. guys, the bottom line is this, you look at the porsche brand. people say it's for middle aged guys who want to show they are wealthy t. truth of the matter

is they have the rank of the top reliability surveys for a number of years, well eng neared, great handleing vehicles, with the suv coming out next year, you will see more women discovering porsches. >> are you saying that's a perception? it has nothing to do with. i buy a lot of cars to make yourself look wealthy. >> i didn't say that's the only reason, joe. >> that's a weird perception. it purely, the steering and the brakes and everything and the way that, at least with the carerra, you know who is around you, there are no blind spots. you are very agile. i drive 80 miles a day to and from work. you are able to be comfortable get income front of cars. >> and staying in front. >> reporter: joe, if you look at the power reports, consumer reports, analysis of these vehicles, these are fine handleing machines, that's one of the selling points for them. >> and reliability.

>> reporter: reliability is also important. >> i have had seven different porsches. the first was in my 20s. they never have any problem. i'll tell you one story real quickly. i was at a supermarket and there was a beautiful brand-new gold porsche in a handicapped parking space, so i waited for the smart ass to come out and a 75-year-old lady with a cane came out and got in and i said, that is a beautiful color. she goes, it's new. i worked my entire life and i've rewarded piefl with this car. she was handicapped and got in. so, you are right, it does happen. >> now, joe, your task is to get becky into one. get her out of that minivan into one. >> i don't think i could appreciate. it's clean now. it is clean. i don't think i could appreciate it. that's been my thing. i wouldn't appreciate the fine parts of it. i just want something to get me from here to there. >> phil, you know the difference between a porcupine and a porsche owner and a porsche?

>> i do. >> you tell me. >> i can't. >> i can. because a porcupine has the spines or the prickly parts on the outside. >> on the outside. >> somebody said it. >> it's a big week ahead for -- it doesn't work with spines. >> i was trying to put at this time polite way of saying it. we're cracking down on medicare fraud.

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. >> the case against sac capital. one of the few journalists who have interviewed steven cohen. >> we will talk stocks that can protect your portfolio in a rising rate environment. it's a huge week ahead for data. plus the july employment report and a fed policy meeting. we'll tell you what to expect as the third hour of "squawk box" begins right now. ♪ . >> welcome back to "squawk box." i'm joe kern enwith becky quick. our guest host jim paulsen, chief strategist at wells

capital management and dennis gartman, publisher of "the gartman letter." . >> first off france's vivendi planning to sell 85% of its stake to activision blizzard. they will be buying back 429ple shares for 5.38 million. bobby kotick will separately purchase about 172 million shares for $2.34 billion. activision as you probably know is a video maker best known for it's call of duty games. we spoke with bobby kotick earlier first on cnbc. >> this is a transaction that will benefit the public shareholders. all te acretion in this roughly 30% for the balance of this year we'll be able to with this new more efficient capital structure double return on equity. i think it will give us a lot more flexible in thinking about acquisitions for the future.

>> the street seems to agree with bobby kotick's entire statement on that. you can see the stock is up by about 18% this morning. it had been trading at 10%. ran up as much as 22%. 1790 is the price on that, by the way, they're buying back shares on vivendi, which is even below where the stock closed at yesterday before this news came out. also, shares of amazon under pressure after reporting disappointing second quarter results. amazon lost 2 cents a share. revenue was just shy of expectations. it came in at $15.7 billion t. company's forecast is also below wall street's expectations. did spook investors a little after the bell. now, the company is talking about how it's reinvising in a lot of its businesses. long-term investors may not be as spooked. stock is down by 2%. starbucks reported profits of 55 cents a share. that was 2 cents ahead of

expectations. global sales grew by 8%. topped estimates. the company says fruit beverages and seasonal ice drinks helped drive traffic at its stores. starbucks raised its full year profit guidance the shares were soaring. that stock up by 6.5%. be i the way, a programming note, starbucks founder and ceo howard schultz will be on squawk on the street later this morning. samsung reporting a record profit. analysts were looking for higher earnings of sales from the galaxy s4 smart phone, figures from idc show samsung shipping 72.4 million in the second quarter, more than double that were shipped by apple. the electronics maker announced plans for a record display business in an effort to try to reduce reliance on smart phone sales. >> it's at 1 million, 303,000

yen. get used to it paulsen after qe3. will be the way it is here, too. oh, after qe infinity. our stocks will kors $1.3 million dollars. let's get a check, but you are happy, inflation, woo? let's get a check on the markets. futures down 59 points this morning after not a great session yesterday. it didn't look like it was going to be quite as bad as it was. and then, actually, it could have been worse. overseas in asia, mixed markets that we're seeing there. with shanghai down the hang seng up and the nikkei, which has had a great run, down a couple straight days. also over in europe, seeing mixed there as well. germany has got the biggest move. a very busy week ahead next week. along the highlights are the fed's july policy meeting. a second quarter gdp number and the july employment report.

joining us now, chief u.s. economist at high frequency xhim economic, a chief economist founding partner at rdq economics. jim, what itself the gdp number? >> and, well, q 2, itself, looks sluggish. i now have 1.7%, which is not great. >> we had a guy at .17%. >> there is always a range of forecast here, uncertainty. i'm not quite adding it up that low. this has the annual revisions. might be as much of a story as q 2, itself. and there has been this con91 drum between the druggish weak gdp numbers and what have been healthy unemployment numbers. you look at the numbers, they're kin with the 3% gdp, ultimately, something has to give. >> 200 is 3% now? >> well the last year you are up 190,000 a month. you throw in a new kind of normal productivity, you typically get 3% gdp growth.

with that rate of employment. i think ultimately the gdp numbers will catch up with employment. not the other way around. we could get a little gap closed with this annual revision as well. >> what's your number for gdp? >> not too different at around 1.5%. it's not just a very meaningful economic indicator at the present time. be i the way, these revisions go back to 1929. so, you know, it's a really opening up economic history. and that's a part of the problem with gdp. you are trying to measure a $16 trillion economy in this way by adding that spending and saying, what spending counts to xdp and what doesn't? employment counts heads. i agree the jobs number will be somewhere around 200,000, judging by what we've seen on the unemployment claims and that should give us a better reading of where the semi-is and also where the fed is going to go to, because the med has emphasized

it needs a sustained improvement in the labor market. we have most sooern certainly been seeing that with the jobs numbers since the fed began the third round of qe. >> isn't it more than just jobs, though? i mean, housing activity is the best recovery? you got capital goods orders going straight north. a lot more than just the job market. >> okay, the housing numbers are included in gdp. capital spending. a good example yesterday, a durable goods reports, the ordered were good. the shipments number was directly in the gdp were on the weak side, which is a negative for q2 but should be a%tive for q3. the bicker issue holding it back, of course, is fiscal drag. arguably, it has been as much as 2 percentage points in the first half of this year. should start to fade. the gdp numbers should look better over the next couple quarters. >> do either of you know who will be the next fed chairman? >> i know more than you do. >> what are you hoping for?

>> i haven't made a preference per se. they both obviously have their strengths. i'm reading the press like you are and i have no more insight. >> my preference is for neither of the above and to see columbia business school looking for a new dean, obviously, that itself not going to happen. so it does look like it's between summers and yellen. i think summers has the better experience as treasury secretary and perhaps a little bit broader, an economic thinker, may be a better guy to bring us back to away from quantitative easing and exit. maybe you don't want an architect at qe to be the person to get you out. >> you are suggesting a bush guy. are you talking about hutchin, right? >> i'm talking about glen hubbard. >> he's a bush guy. >> the left won't let him do a:t guy. >> there is absolutely no way. i'm just saying that that's what i would prefer, but if the

choice is in front of me is larry summers or janet yellen, i would prefer to see larry summers. >> summers is more hawkish. i would love to see larry summers as the fed chairman simply because it would make for the greatest congressional hearings imaginable. larry summers after the first 30 seconds will say you are all idiots and walk out. it will be wonderful theater. will he be the next fed chairman? nah. i don't think so. everybody is angry. >> that attitude, i kind of wouldn't mind that again. reminds me of voelker, the just chomp to see him say we will do it this way. we have been missing that for a while at that level of leadership. wooer in control. we're going to drive this thing. >> sullivan, is janet yellen goods enough at science an math to be fed chairman? that's a joke. that's about the larry zimmermaners' comment he made. if i don't say that immediately, they will take a clip of me

saying that. i'll get a thousand -- >> they may take it anyway. >> clip the clip. will be the end of it. >> clip the clip. will be it. move.org media-type things. >> so, do you say is it true qe is quicker than janet yellen, janet, she may expand it? >> she may never. >> i think that's the presumption. summers gave earlier this year. he wasn't outright against qe. he didn't think it was that effective. >> if it's not effective. you certainly don't want to do it. >> to the extent if you see eruptions in the market when they talk about taking it back. i think that could convince him not to take it back anyway. he wouldn't be as quick to add to it. >> let's all remember, it's a committee. it's not just one person. >> wow, it has been one. >> what riding? >> yeah, it's a point. remember about half of the members want to end qe before the end of the year anyway and

ben bernanke is targeting the middle of next year and then unemployment rate of around 7% ended. so this committee could be led quite easily by someone who is a little more hawkish to wind things up faster. >> well, if we believe the hillson story in the "journal" this morning, it's a completely different circumstance. they will take it to 6% before we see anything. >> it's not clear, i think. they turn that out in terms of, that's ending, it's a changing race. for qe, it's a different story. they will start tapering in september. will you get that fomc statement. they will try to soften the blow. i don't think they'll change the threshold 6.5%. they're talking when they get 6.5%, they may not tighten. they want to see what the labor market looks like. qe is not a function of the threshold, qe will stop in september it would appear unless something happens. people will start winding it down in september unless something happens. >> john ryan, thank you.

>> it's a green tie. >> are you irish? >> i grew up if ireland. >> osullivan, irish? how weird. >> thank you very much for coming in. we appreciate it. when we come back, we have an update on the government's case against sac capital. plus insight into the culture at sac from brian burrow. he is one of the few journalists who interviewed steve cohen. he will be joining us in just a moment. the most free research reports, customizable charts, powerful screening tools, .

. >> welcome back. sac capital will be in court. kayla, good morning again. >> hey, becky, good morning, lawyers will come here to 2500 pearl street around 10:00 a.m. to answer that indictment that came yesterday from new york southern district, allegeing they fostered insider training. cohen, himself, is not expected to appear. yesterday, he was at the firm's connect headquarters trying to restore confidence after that lengthy 41-page criminal diernlths alleges insider trading was pervasive. it still could be very damaging

for his business and his net worth. the civil suit claims the southern district could go after any and owl assets associated with insider training. wall street banks are still doing business with sac. they still can. they're citeing low leverage and liquid positions as reasons why they want to do business with them. a spokesperson noting that the u.s. attorneys office did not intend to shut down the operation. it's not what they're intending to do and they

securities industry, i don't know, why can't he still be trading his 9 billion.

at some point, they always seem to be. whether it takes years like michael milk? in or whether it takes months. i would guess he eventually coughs up a few billion dollars and does his bleft to stay in business. >> they paid $616 million apiece. >> that was a side show base. that was exactly right. >> stop dancing around this, do we take. should we be pleased, is there something we should raise an eyebrow to the government is overreaching? is it something we should say the government and regulators are doing what they should do? should we feel gratified? some of the motivations you mentioned are not noble motivations for why they would do this? >> it's just the way government is. it's the way the machine works. look, i don't think this is overreaching. i think there is a case there to

be made. >> even though, you wouldn't think that because you got, you didn't nail anyone in the financial crisis because you couldn't, so let's go after somebody else, i mean, that is not a noble or a reason to do something. >> he's on to something there. i think that's exactly what's going on. the people on the countryside wanted to serve somebody up. >> these are the cases that can be made. and you know over the last three years, bharara, the fact is he came on after gallion, who essentially, that case was made. you know, this is his case, sac. they can make i. you will see if they can or not. >> you think the odds are very high, though? >> something gets made. they've got the best lawyers in the land. so there will be some type of settlement at some point. >> part of that settlement will be ultimately black listing cohen from the business? >> that's the question. is, is he able to still beat steve cohen in some new guise as

a family office as sac2? that we don't know. >> it's not personal. it's not envy, it's not a vendetta. but the way the system works, all those things can't be divorced totally, can they? there is no political aspirations here? >> i think in the end we can talk and smile as much as we want. i think this is a hedge fund that went over the lean. i think there was a pervasive culture, not unlike. >> even though you don't know the differences between channel checks by an analyst and channel checks by a trader? >> i don't think that this, that the future of sac will turn on the nature of channel checks. i think the line, while there are legitimate questions to be made about what is and isn't a crime, i think in the end, that's going to be clear here. >> it is. okay. brian, thank you vrp much for coming in today. i really appreciate your time. >> coming up, we're going to check in on our daily look at news affecting bacon.

which might be the most pressing issue of the day. members of congress raising concerns about the sale of smithfield food to a chinese firm. you will be interested in what the new details are and why there are concerns when we return. yeah, but why? still ahead, our what's working series continues. we'll bring you a list of stocks you want in your portfolio when interest rates rise, keep watching "squawk box" on cnbc. first in business world wide. [ male announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy.

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. >> here's something that, you got to consider these things. in bacon news, yesterday, we told you that the sale of smithfield foods to a chinese firm would be subject to additional 45 days. they are looking at the security implication of the sale, becky. we have details on those concerns. members of the house energy and commerce committee express concern over the safety and availability, not of bacon, of heparin. >> why? >> because it's a blood thinner used in heart and kidney dialysis. it's derived from pig intestines. the committee wrote a letter to smithfield earlier this week asking for the information.

smithfield is the major supplier of crude heparin. this is just something that you'd want it to be safe. this is not evenny conspiracy diabolical taking over the world theory where this virus they made over there. they put, you know what they did, they put a swine flu together. they're doing experiments on that over will. >> which has outraged ethicists. >> they published the papers on this. it exists somewhere. hopefully, it doesn't get out. hopefully, it doesn't get into our bacon. >> come on. >> we were not allowed to buy them. >> we're not bringing any pork over from chosen. >> why wouldn't that do i that? >> because they're going to demand more pork from us. >> so we won't have any pork? >> we may be shorter of pork, of course. >> that will bother you? >> it doesn't. american farming will go up. it will be a great thing. >> they might use it as an entry

to exporting chicken to us? >> no, we will be exporting chicken to a chinese firm. >> can we buy a chinese firm? >> not right now. >> why should they buy one of ours, if we can't boy one of those, quid pro quo. >> we have capitalism. we embrace it. >> they don't. they embrace certain kind of capitalism more than we do. >> we are free traders, should with stop being free traders when somebody else doesn't? >> when it comes to bacon, yes. it's a big week for our pork chop, right, steve? >> i am not with you, joe. i do not believe pork is a national security issue. >> is oil? >> oil could be, chemicals could be, certain chemical processes. >> oil is more important than food? >> bacon, joe, barely qualifies as a food. you know that, i'm looking at you. are you not a big bacon guy. >> i eat anything when i want. >> you can't be. >> you got to exercise, that helps your mental, too. >> bacon?

>> it's a big week ahead for data the jobs report, gdp in the second quarter, steve liesman is here. >> i was surprised my comments on bacon. the chinese want to take our pork out of our garages. >> the senate and some members of the states where smithfield foods, they're totally serious about this. >> i know. i know. dennis. >> i know. >> dennis doesn't know enough to look at you and know you are half kidding and half serious. >> exactly. i'm 50%. >> you guys have talked about the data. we want to go through it day-by-day and show you there is a little of a problem here. which is the more important data, the july data comes after the fed meeting. judgment, of course, being critical for figuring out, is tapering on in september? so let's go through it. monday is kind of an easy day, pending home sales. what's kind of interesting babt it, by the way, it's the rubber match in the home sales da that right? we had food stuff, bad stuff,

pending home sales. it's a leading indicator. i like that. move on to tuesday the case schilling number 1.2%. ho hum. wednesday into a good day. adp comes out in the morning. 182 is the estimate. then you get gdp. i got a 0.25 estimate in there. number is not updated now on a quick basis. this is some of the old data, if you data that i put together. a lot of guys are height in that half a point number. critically, we have the revisions where movies and movie production. >> are going to go into gdp rather than as an input into business, it will be seen as an output. so hollywood will make more of a difference here. of course. >> after the lone ranger, it might be a .2. >> it might be negative. >> i like the way chris dodd yesterday was sticking up for the industry. very funny. >> it does matter. >> that's your problem, are you

too dead pan. >> i had a guy earlier from a for profit hospital thought i was trashing for profit hospitals, saying, why don't we do everything in society. maket not have to worry. >> what happens, joe, what happens is, the signal from here goes up through the atmosphere into the satellite and comes back down, all those particles in the air filter out the sarcasm. so they don't get i. they don't get it t. sarcasm. >> it's a list of losers. i don't engij in that. >> let me move on to thursday and friday where the data starts to get, remember, that's after the announcement. initial claims, that's a current indicator. ism. that's the big overall national economic number. that's up for manufacturing for the month of july. 51.5. auto sales, with ealready had some indications they will be strong. look at that number, ticking up towards the 16 million benchmark number. finally friday, we get the estimates, the unemployment rate at 7.5%. a bit of a disdance there, too.

it's up one. we'll check that. >> i had 7.4. >> down pun one, 7.6. it would be down one tick. that's what we'll be watching in terms of next week and how owl that stuff will sequence together. >> how that will affect the whole tapering plan. >> i think if you have weak data in july, you can write off tapering in september. io eng the federal reserve is looking strictly for hitting the target in its forecast, which would require, i calculated last week, 3.5% on the back half for the fed to hit 245. will you not do that. what the fed would be looking for i think almost certainly is a sense that the economy has rebounded from the second quarter weakness, that the second quarter numbers are essentially from the hard hit, hardest hit part of the government spending reductions on the taxes and that the economy is on a trajectory to strengthen. i think the fed wants to taper.

it will not do so without evidence. july would keep that in play if it's strong. if it's weak, you can write it off. >> do you think the revisions that could come the past revisions, do you think that could end up affecting this debate more than the july day that? >> an obroader basis, yeah. one of the things we want to know is how far off the trajectory are we? right. so one of the arguments bernanke has had, two arguments, one is that we have to have our foot on the pedal because we're so far below the level that we should be if we have been on this same path t. other one is, if i'm wrong, i have lots of room to be wrong, there is plenty of slack in the economy. gdp number could change the sense of potential as well as how far up the trajectory we are. >> do you, knowing what you know, back to summers and yellen again, when it first came out it has to come from people that are

in the administration thinking about doing this, are these trial bloorngs when you see the senate say you got to be kidding, mr. president. you see the far left, whatever they talk about, could they be, if they wanted to do it, could that be dissuaded by the reaction they've got fourteen the senate democrats? >> i think what you first started off, your question, is it a trial balloon? yeah. >> could they be dissuaded? >> it's come from reporters. >> right. >> and here's what i know. i know the president believes that there is no candidate who would come across his desk who would not be strong on inflation. in other words, it's a self selecting process. there are no candidates for fed chairman who aren't essentially in their bones officers. . >> does that include janet yellen? >> that includes janet yellen. >> is it true she has never been in the private sector? >> that goes back to ben

bernanke. >> i remember when we had a bad fed chairman. >> william g. miller. >> we had really good ones, across the board, i would call alan greenspan, bernanke is great, voelker is great. >> here's one of the things that has happened over the time i covered the federal reserve. it has become much more of a technokrat's position than a political position. i wonder today if paul voelker would qualify for running the federal reserve. >> after paul voelker would paul voelker in the early days would not have been? >> ewan at the new york fed. he is seen as a mon they're expect t. way janet yellen is seen as a monetary policy expert. i don't think she presents anything on larry summers. i think they're both in that same vain. >> when will we know? >> i thought the comment was interesting, did obama cut the rug out? i think he let it slip that bernanke made his intentions clear he didn't want to stay t. so the question is.

>> you don't have to be inside baseball the world didn't look very great. >> obama made a mistake, that's clear. whether it was an intentional mistake and meant a in a mean spirited way. >> i don't think he meant a anything seriously. i think it's how the outside world perceived it. >> the president can appease the progressives on the left and he can also maim a woman. i can't see him not doing that. >> why are they bothering? >> i don't know. i think he'd like to -- >> i'm not sure appointing janet yellen is the appeasement to the left that the left thinks it is from not apinting larry summers is. >> that is true t. other side is not true. i think janet yell isn't a strong monetary expert. within i have wanted good sense of where policy is going and why, janet yellen has always provided. and she's already gotten through a confirmation hearing. >> she's gotten through a confirmation hearing. larry could be out there. it's a balloon floated by the

white house. in general, the white house likes appointing somebody who has spent time inside the white house. remember they brought bernanke in six months. >> and who has been on a crisis like that. >> the other thing that obama wants is somebody who has international stature, who has the expertise and that would tend to say, well, i kind of like summers. now, janet is well regarded among the central bankers. >> remember what he did with -- >> not necessarily a political leader. >> remember what he did with susan rice, they didn't get what they wanted with her t. right hated her. i'm putting her in an even more important position, which i hope he does with summers. >> i think by the way if i can point out the left is dead wrong about. tell me something they're dead right about. and win fifty thousand dollars. congratulations you are our one millionth customer. nobody likes to miss out.

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. >> welcome back, everybody. let's take a look at the stocks on the mover in the pre-market trading. zynga lost one cents per share. revenue was above consensus. the current forecast calls for a wider loss than the street had been expecting. the online gaming company has

lost efforts to build a real gambling business in the united states. stocks are down 17% this morning. expedia reported a second quarter profit of 64 cents a share. the online travel service was hurt by a weak performance at its hotwire unit as well as increasing expenses. wow, that stock is down almost 22.5% today. plus, natural resources reported second quarter profit of 82 cents a share t. street was looking at 58 cents. that was a big beat. analysts expected cliffs to be hit by weaker ion ore prices. still, it's all about expectations. when we come back, we'll have more from our guest hosts jim paulsen an gen dennis gartman, plus, preparing your portfolio for rising interest rates. we will continue next with the co-founder of good haven, the good haven fund. [ kitt ] you know what's impressive?

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welcome back, everybody. let's get some stock picks that may have your portfolio protected. joining us on set is keith connor, the founder of the good haven fund. fund is up, slightly outperforming the s&p 500. she also the former portfolio manager of fair holm spare home fund, keith, thanks, for coming in this morning. >> my pleasure to be here. >> you are looking at rising

interest rates. you are on board with that assumption, correct? >> we just don't think zero interest rates are a permanent position. >> q infinity, we will see higher rates at some point? >> at some point we will. we like companies that have cash that, generate cash or represent a royalty on somebody else' cash. when rates are falling, the big benefit is to people who are levered and could refinance at lower rates and things like that. when rates are going up, you want somebody in the other position. >> let's talk about the other stocks you like. microsoft is one of the names out there. there has been a lot of questions raised about the restructuring. what is your take? >> we started to buy microsoft in the low- to mid-20s when everyone was calling it dead money. over the last decade, they had grown triple the revenues. they're sitting on about $75 billion in cash. we think they have a lot of

franchise pieces of the business and, you know the company soultd do just fine. there are areas that are in distress. there are others doing very well. >> it's a bank with a software company attached to it, isn't it? >> a real franchise company. the faces enterprise in both office and server areas. >> you like other tech following names, too, including hewlett packard? ? hewlett is also an interesting situation. hewlett generates a lot of cash, hewlett obviously had some real issues, real management problems. we think those are on tear way to being resolved. if you talk to people inside and outside the company, customers, employees, they like what meg whitman is doing. and they have a lot of resources. we also paid a very inexpensive price for hewlett. >> what did you buy? what did you boy it at? >> i think our average cost is somewhere in the $18 area. >> back to microsoft, do you think the restructuring there works or does it need to be another step down? >> i think we are a littling a

nostic. there are a lot of levers microsoft can pull to enhance share value that they haven't yet. so wearing a nostic, but we like the fact that they generate a lot of cash and the key ploy it in ways to help the shareholder. >> you do like google. you don't have any position when it comes to apple? >> google i think we started in the high 400s. we thought it was one of the best interests we have ever seen. i think google has after automatic money they've spent has over a hundred million in cash and continues to generate gobs of cash every quarter. apple, we don't own. we've looked at i. our biggest concern is that it makes a lot of hardware, that it has very high margins on. ultimately in technology, high margins an hardware don't go together. >> keith, when you are a fun manager, you have to look. you are always being compared against the s&p 500 or some other index, is it harder when the market is doing so well on

its own? do you get pushed to try to find other ways to find outsized gains? >> it's interesting. since we started. we probably averaged 25 or 30% cash since the day we started. and, yet, i think we're up about 40 vs. 28 since inception. so it obviously hasn't killed us to hold cash. i think what most people miss is there is tremendous optionality value to having liquidity in a mutual fund structure. if you have cash and you don't have to sell, when other people are panicing. >> you can buy at that point. >> you can buy and the value of what your cash multiplies in a real downturn. so you can buy a lot more of what you leak. so, you know, we like that structure. we will always have some cash. we're at the high side of what we'd prefer. eade always like to have some cash? what's high side? in there plus 30%. >> oh. >> i was wondering. i fet the approach. you look for high crash companies right now in a rising

rate environment. the flipsided overendebted on falling rates. doesn't that approach also potentially take you to companies that don't have prospects, so you got cash or you have a risk of that? >> well, we're not interested in as a general rule in directing draconian businesses and we don't like really, really bad businesses. what we are trying to do is to find a few and we only need a few to do well, and few good situation, and we would rather be roughly right than precisely wrong. >> thank you very, very much for coming in. >> my pleasure. >> when you come back, do you need some fun reading? how about the latest edition of "the squawk box." we will have one senator's exposed body, and you can get it at squawk@nbc.com.

hold on tight. we are just a weekend away from a huge week of economic data. wednesday, we will get private payrolls and the first look at the gdp in the second quarter, and friday, the all important jobs report, but wait, there is more. the fed kicks off a two-day policy meeting on tuesday. how will the fed's message line up with the economic data? you will have to watch squawk box to find out all next week starting at 6:00 a.m. eastern.

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someone tweeted this picture, and i just want to know if there is a place to get a pair of these. people don't wear is a lsalad s and what other food do you see? >> i have seen bacon earrings. and jim bbo, if we need to gras at something, pep rin -- heparin which is used in dialysis and blood transfusions and the company is needs it to make

heparin and they need to make sure there is no supply disruption for heparin. >> well, it is important to spend as much time analyzing this, because it is not like the chinese have played fair or had any record in health or safety issues and 170,000 people are going to die from the respiratory illnesses in china just because they don't care about the air quality even though they claim they are trying. let's just keep it in front of us. keep it in front of us. >> i'm just thinking of the weekends and the smell and the sizzle. i mean, if that was out of my life, is there any reason to live at this point? what else happened? what else is going on the radar here? >> well, starbucks and last night gill yard and vertex seems to have a problem with the toxicity of the hep c, and it is a moment, joe, where people are saying is housing going to lead us down? and the people are saying the torch is pass ed ed to the industrials and i'm going with

the latter camp, because not enough negative here to hurt the market. >> and do you think that just the -- it is like the sixth derivative on housing some day there is a tapering and people sell the housing stocks because of that? >> well, the housing stocks are down 30% for the year, so it is clear that this is the pause. does it refresh? i keep thinking of carl's unbelievable interview at alpha with the other paulson, and he says look, you will get the tail off and then it will come back again, and a lot of people didn't realize when the rates went up, they had not locked in and walked away and this is a moment to pause in the business and accelerate later on. >> yellen or summers' person? >> well, i wanted to -- i think that yellen is more of a peace ma peacemake er, and i think that the idea of summers coming in a bull in the china shop is not right right now and i didn't like the criticism in april of what bernanke was doing, because it is the type of thing that you should not do. stay in the tent and play on the team. >> together on bacon, but may not be together on the other stuff. thank you, jim.

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. thanks to jim paulson who wants qe to end. and you can't leave the house if you have an i.v. pole. long on gold? >> long on gold. not a gold bug. >> long on gold. >> okay. thank you, and have a great weekend, everybody. join us monday. right now it is time for "squawk on the street." made it to friday. good morning and welcome the "squawk on the street." i'm carl quintanilla with jim cramer and david faber here at the new york stock exchange. futures are struggling again as we wrap up a week of earnings, and starbucks and amazon and zynga are some of the names we are watching. and looking at the market driven by japan as the end rallies and some worried that the bank of