. 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 japan may slow down

accommodation. the road map begins with the third best quarter ever for starbucks, and chairman and ceo howard schultz will join us. we will break down the numbers and see what is brewing for the future. >> and amazon's negative surprise as they have a quarterly loss loss hit by big spending at the company. >> and plus, we are an hour away for the arraignment of steven cohen's sac capital and we will take you live to the courthouse when that happens. first up, starbucks up sharply, and the coffee chain says it earned 55 cents a share in the fiscal third. and same sales remained the same as the expanded menu offerings drove traffic and rose the year guidance and we will have an exclusive interview with the starbucks ceo howard schultz, and jim, the metric of the day, 9% comps in the u.s. people -- it is hard to get your head around that. >> well, these guys have 19,000 stores. i know, 19,000 stores, and

glob globally they did fantastic and the operating margins up 25% income points and 13% increase in revenues, and increase in europe, but the united states is incredible. a lot of this, by the way, they were very careful to say that we may not be able to repeat this and we probably won't repeat it, but they are rolling out this food business is just so exciting for them. that is a non-coffee beverage which is evolution and then doing teavana and they had adam rotman on the call, and he is the media expert, and they are doing 10% of the mobile phones and -- i'm calling this perfect. i'm calling this a perfect one. >> you are not alone. and goldman sachs calls it impeccab impeccable. >> i like impeccable. >> remember, this company last year at this time when howard visited and came on, and okay, the stock was at $43, and people doubted him in china, and doubted h him in europe and

thought there was saturation in america, and they could not have been more wrong. congratulations. now, on the call, you know how you get to the point where you are not supposed to say congratulations anymore. >> have they finally stopped that? >> well, they are back on starbucks, and i join them. >> well, maybe when it is actually worth giving the congratulations and the rare instances that this one is. >> yes. that is what this is. >> and we will talk to howard schultz in a few moments, but a legitimate question about the menu extensions and greek yogurt and sandwiches an tea, and a point at which starbucks is no longer starbucks and people stop going there because of that? >> well, it is always a good question, because howard is trying to push the envelope at all times and the pushback is that you have to have faith in it, because i have executed, executed, executed. they roll it out in a considerate fashion, and the teavana at a few stores at a time, and evolution, and we will

have whole foods decides to take the product. so the answer is that he is a great businessman. >> better quarter -- facebook or starbucks? >> versus expectations. >> well, the facebook was a quarter company that the gang thought could not shoot straight, and turns out they are really smart. the starbucks in tend, everybody thought they were great and just didn't realize how great they were. >> and are we going to hear more of emerging markets as well and other international opportunities? >> for starbucks, you will hear more tea in india, and remember that they will have 1,000 stores in china, and they could conservatively, they could use 10,000. >> and you mentioned having faith in me, and that is what schultz is likely to say, and amazon shares falling in the premarket, and the retailer is reporting a loss as it invests in new businesses, and the stocks are up 35% in the past year, but is there a point, jim, at which the investors are like,

we have given you enough rope. when are you going to? >> no, this is a pinky in the brain story and difficult to take over the world. when you take over the world, it is going to cost money. the most interesting line is that it is going to drive you crazy is that spain is great. >> no. >> spain is great, and don't go there. >> above seven. >> this is a company that has decided to dominate international like we have dominated domestic, and frankly, it costs a lot of money to do that, but i think that amazon in a couple of weeks will be higher than now. >> and listen, you can answer the question by looking at the stock price and the day that the investors give up, we will know. we will know unless of course, there is a day that they start to turn the switch, and that's the question, when they do turn the switch, does the switch go on? >> well, they have saturated the globe, and they make a commitment to alpha story. >> and the refrigerator warehouse on the sun.

>> and there is no inventory for them as alphacentori. >> and this is a sam gerard situation, carl, when richard kem ba kemball professes the innocence, i do not care. this is a 27-page call, and the contention for the street, you are a bunch of jokers and one day, you will figure out what we are up to, but good news for the amazon and bad for u.p.s. one reason that people are talking about u.p.s. that they don't need it anymore, and amazon doesn't have the ship urgent anymore from the west. >> and you will get it a day or twot the latest. amazon prime is a great product. >> yes, a good quarter. >> and now increasingly a video offering product as they go to video kcontent and rights and n mirror goes -- >> i am raising the target right here.

i am taking the price target up, right here. >> and for a company that lost margins unexpectedly -- >> did you read the release? >> yes, i did. >> they are talking about the world domination. what are you talking about? are you a nitpicker and like that? you insist on rembrandt? this is a rothco. >> well, there may be questions of whether it is a sustainable strategy to dominate the world and whether it is going to occur. >> margin 8.5%. >> well, you can't have everything. >> no. >> you have to lose some money and have some bad gross margins if you want the take over spain. >> some like it hot. nobody is perfect. >> this is netflix, okay. >> nobody is perfect. >> yes, joey brown. this is a netflix situation, look, you have to trust us and then people do. the two stocks not bound by the earnings per share in the market are netflix and amazon. they are given a rare exception, and i don't know any other companies who don't have to play by the earnings per share rules but those two.

>> well, amazon believes. >> isn't it interesting that what are the two favorite products? i swear by amazon and netflix, so a peter lynch, and i'm sure that is kind of an extension of peter lynch that he may not like, but i love the product and i want to own the stock, and so far, they are right. by the way, a third company that is i own the product or want to use the product on the stock and it is developed right here, right now, and the answer is -- it begins with the letter "t" and has five letters and a fast car. >> tesla. deutsche bank joining the fray saying they love tesla. by the way, what is the fundamental of the upgrade? it is the best car. people like it. >> and consumer reports. >> and provocative. >> yes. >> nice car. >> yes. >> as we said earlier, we are a few moments away from the live and exclusive interview with starbucks' howard schultz and a lot to talk about clearly in a few minutes. and later on the golf superstar who is the british open champion

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starbucks saw an increase in sales with the profits rising

25%. it is the company's best third quarter in history. joining us now for the exclusive interview howard schultz the chairman and ceo of starbucks. howard, i rarely do this, but can you explain to people how in the heck did you do 9%? you are not a junior growth company, and how did you get this done in america? >> well, jim, as you said it was a remarkable quarter and result, but it is really a culmination of long term strategy to make starbucks more relevant throughout the day. and what happened in america in terms of the 9% comps global ly and 7% traffic is just a stunning indication of the relevancy of starbucks in the peak period in which people are obviously coming into starbucks for the coffee, but what has happened is that we have begun to really satisfy customer's needs throughout the day and the day part of the culmination of

starbucks' business is so different than it was a few years ago, but on the basis of the stores the do 9% in the u.s. given the economic issues is a stunning indication of the power of the starbucks' brand. >> i wanted to ask you that, because there are a lot of companies reporting that they have a weak consumer. you did cut prices for the consumer products in the store, and belange and these are not just if you get it right, people will pay more or infinity that people feel like they are a member of a club and willing to pay up for it? >> well, two things happening. we are now serving more customers at starbucks' stores in america than any other time in our history, and that is being driven by more frequency of the core business, but driving new customers into the stores and you are right, one of the primary reasons is the affinity of my starbucks rewards product and the fact that we have cracked the code and lapped

all of the peers in terms of global. >> translator: action and we have 5 million mobile transactions a week at starbucks and speed of service and affinity and customers have indicated to us how satisfied they are with that kind of technology and customer experience at starbucks, so it is not one thing. the other thing is that we are literally the only consumer brand in the world who has a global retail footprint, and cpg business and loyalty card and mobile platform and the fly wheel effect is creating an ecosystem for starbucks domestically and around the world that is just getting started and we are ready to open up the 1,000th store in china and 1,000 stores in japan and began to see positive comps in europe for the first time. so i don't want to hype the company or the stock, because, i will say that i really feel that some of the company is firing on all of the cylinders and i did say on the call yesterday that it is irresponsible for us to

believe that ewe can replicate % comps again, because it is a stunning performance by the company. >> and before i turn it over, howard, forget the next quarter, because you are abject about that and you are firing on nine cylinders on an eight cylinder engine, and the teavana and what will new products make starbucks look like three years from now? is. >> well, we have an opportunity to open up 1,000 stores over time with teavana. and the big store will open up in the upper sidef of manhattan and it is $40 million globally and outside of america. and we believe we have a global opportunity with teavana and evalange will be in chicago, boston by the end of the year, and then that in and of itself will transform the food at starbucks and evolution fresh is a health and wellness brand and

not only juice, but we announced the relationship with denone a week ago and we will be bringing in yogurt into the stores and evolution fresh cpg brand. so what we are going to do, and we have said it from the beginning, we are going to introduce and create brands and categories inside of starbucks' store and leverage that off of the digital card and mobile platform and bring it into the cpg and domestically and international internationally and create a fly wheel, but nobody should be misunderstood about one thing, we are a coffee company, and experiencing fantastic results in the core business, and we are creating adjacent opportunities to create long term growth and value for the shareholders, but the foundation of the company is that we are a coffee company first and built around the guiding principles and culture of the company. >> that is a key point to make, howard. good to talk to you this morning, because some are raising the issue of kitchen complexity and issues that you

are no stranger to, and is there a line at which the menu extension and menu innovation goes too far and you start to run into the efficiency problems of the year past? >> sure. i think it is a good point, and we have to be mindful of that. but let's understand one thing, the customer today is going through seismic changes in terms of behavior and no company today in any business can embrace the status quo. we must push for reinvention and self-renewal but not at the expense of the core business. we have multiple tests going on including the carbonation test in austin and these are things that compliment the starbucks' experience and anything that we do in the stores goes through the lenses does it enhance the coffee experience? enhance the sense of community in starbucks and take advantage of the power we have to reach over 70 million customers a week, and we are now the most frequented retailer in america

in terms of how often people are coming back to starbucks. >> do you feel any heat from the extension of dunkin' out west, howard? is that the somehow on your radar? >> you know, we respect all of the competitors, but i think that dunkin' and mcdonald's are in another business, the fast food business. no, there is not anything that dunkin' is going to do in california. california in a sense is starbuc starbucks' largest country with almost 3,000 stores, and we are still opening up stores in california. california is one of the strongest regions for the company. i'm not losing any sleep over dunkin' doughnuts. >> howard, talking about other markets and there are analysts out there taking it from you, but i'd love to get the take that the forecast is over 6,000 units and emerging markets by 2016, and that would be, what, over a quarter of all of the units around the world. is that a reasonable target? >> i think that it is a

reasonable target, but the real question is that over time, it is very possible that there are more stores outside of north america than here at home. you know, i have been traveling all over the world over the last few months and the opportunity that we have in asia pacific region, it will be literally thousands of stores in china and 16 stores in india and one store in vietnam, and i came from a trip in indonesia where we have 150 stores, and these are the best performing comp markets for starbucks. so we are just getting started, and the most encouraging thing for all of us at starbucks is the relevancy and the unaided awareness in markets of starbucks that we had not been in for years. but again, the most encouraging thing is 9% comps in a market that we have been in for 42 years with almost 10,000 stores to have that kind of number dri b driven by the most important

metric is the increase in global traffic and it is unbelievable. >> howard, a year ago and actually this week, you came in and the stock was 43 and people were concerned about europe, and you made a promise. you said that europe would get positive and you did plus 2 in europe which is as monumental as you did in united states. how did you do it? is europe stronger? something that you have worked on to make it more profitable? >> anybody who is doing business in western europe has to maintain a fair amount of caution. certainly, we are very pleased to see positive comps in the m&a region and the largest region of the uk. i don't think that a couple of quarters make a trend yet. i'm positive and optimistic about the long term future, but there are so many things out of our control in terms of the eurozone and the economic issues, but i am confident over the long term that we will

succeed there and leveraging all of the tools and the tra transformational things that we did in the u.s. over the last five years on to the platform of europe. i think that the early signs are positive. this is not going to be a short term story. it is going to be a long term effort, but we are confident that we are going to succeed there. >> and howard, no stranger to twitter and the power of twitter. we did solicit some questions and i will throw them out to you, sort of rapid fire. first up from a twitter delottio, and when is starbucks going to buy green mountain coffee? >> well, we have established a fantastic relationship with green mountain and brian kelly, the new ceo. our new agreement extends for many, many years and it will give us a new proliferation of additional skews, and we just shipped our 1 billionth k-cup, and we have strategy to get stronger between starbucks and green mountain and that how it will continue. >> and ivan writes, what is the

plan for teavana and when i order a hand crafted tea beverage? >> well, it is twofold, we can build 1,000 stores in north america and bring high quality, really elegant teas and loosely form and in the beverage form hot and cold into the starbucks' stores and you will see it in calendar '14. >> ralph, what is the status of alcoholic beverages? >> of what? sorry? >> alcoholic beverages. >> oh, okay. we are testing that evening part in about 25 stores and the results have been positive, and we are probably going the increase the number of tests maybe to 50 between now and the next six months or so. now, again, this is an example of starbucks being able to leverage our existing cost structure, labor, real estate on to another day part and we believe we can establish a evening/day part of starbucks complimentary to the core

business based on the fact that people all over the world use starbucks as the third place between home and work and we are bullish on the day part. >> interesting. howard before we say good-bye, i hope that you let my mad money people go with you the teavana when you open. >> well, we are going to open up in the fall and nothing would please me more than to serve you the first cup of teavana tea on the upper eastside in the fall. >> thank you, howard schultz. after this unbelievable quarter, for coming on to "squawk on the street." thank you, sir. >> thank you, jim. >> how wad, good to talk to you again. the ceo and chairman of starbucks. and what else is going on? dave kote from honeywell, and also phil mickelson and we will wrap up this incredible week.

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overnight. >> yes, and some things is when you have a good quarter, it is not constrained overseas. and watch gilead to see if it will give up the gain, but that is the tell of the day. >> it has not stopped some strategists from upping the target. and jpmorgan goes to 17.75 by year end. we will talk more about that later on. there is the opening bell, and a look at the s&p 500 at the top of the the board, honeywell, and chairman and ceo dave kote celebrating his selection as ceo of the year by "fortune" magazine. >> deserving. >> and then over to the nasdaq, e nanta who is a pharmaceutical company recognizing world hepatitis day. and after they blew it out yesterday, what would you say about this opening trip adviser

stock? >> well, they have trip adviser known as metaand expedia did not spend a lot and priceline is doing better than expedia and may bring it down, but expedia shot itself in the foot here. when you go to the trip adviser site you almost always went to expedia to book, and look, that was the single source, and peep went to trip adviser and went to expedia to book us. expedia is one of many, and you have to scroll down the trip adviser, and expedia needs to spend more, but it is expedia's fault and not travel. travel is very, very strong. >> that is a tough one. zynga, a one cent loss versus a four cent estimate. too soon? >> well, they told you that they would do gambling and we got all excited about the gambling and then they take it away. what zynga takegiveth they take

away five times. >> and what about -- >> well, down 18%, you are talking about a 2.2 million market cash and it is not insignificant for the company. >> well, it is activision who has the gaming attention today. >> we should talk activision and aven di, and this is enormous with 8 billion being exchanged between activision blizzard of course and what had been or the majority owner bavendi, and 12 million shares bought back by activision directly from the company, and by the company i should say from them, and then bobby coatic along with the co-chairman brian kelly are personally investing $100 million each in what is a special purpose vehicle to go out the buy 172 million shares from bavendi for 13.60 a share.

>> this is a player. >> he is a player. he has good inventions of games, but this guy knows the way around the balance sheet, and that is the the greatest strength is in fact the financial acumen, and we had him on earlier on "squawk on the street," and this is what he had to say about the accretion from activision about this. >> this is a transaction to benefit the public shareholders and all of the accretion and there is 50% accretion for the balance of the year will be able to with the more efficient capital structure double the return on equity, and i think that it will give us a lot more flexibility in thinking about acquisitions for the future. >> so it helps the capital structure to go out the borrow a good deal of money at incredibly low rates and accretion, and he

talks about the future opportunities. he is free now. free and clear of avendi which is interesting story of what they will do with the cash and the telecom morocco, and what they have going ob there. >> a lot of stuff happening. >> yes, we mention ed this increase of the target by tom lee over jpmorgan, 17.75 is the high on the street by year end, and the second time this year he has increased the target. earlier in the year 15.80 and then may 17.15, and the argument, guys is that europe is turning. one of the key lines more than a few clients have expressed interest of finding companies with exposure to europe. >> he is right. >> is he taking the early data points too far? >> well, a lot of the people feel that he is too bullish, but he is vindicated. he is right in europe, and spain. amazon said that spain is good, and that is pretty amazing, but there are two banks that reported better than expected nu numbers and the bbva in spain, and spain was the absolute epicenter of the second round.

if spain turns, you want to be in europe despite what siemens said last night. by the way, they are bouncing today. >> by the way, black and decker up 52%, and are you looking for more signs that the housing is not completely or building is not falling out. >> my charitable trust sold them because they had fear that europe would hurt them, but it was wrong. more upside. >> and more longer term on the builders. >> well, that is why, frankly, the whole cohort, the home depot cohort was spilling over to them, the lennar and the horton and the p&h and maybe i'm cautious that the market is doing well. >> well, there is real questions of the affordability line is, and whether we are still far away from having to be concerned about this despite the significant move up in mortgage rates, but still historically

incredibly low. and is gilead the key to the market? i am watching the market up 3%, and $96 billion market value. >> look at vrtx, check it out, they had disappointing results from the liver toxicity to the heprin, and this franchise is unbelievable to gilead. they are a well run company, david, and you could argue that they have the holy grail. if you can solve hep c, because it is the biggest killer that we have the chance of stopping maybe in our lifetime. it is going to be gilead. >> they have a low cost structure and not like pharma based in some strip mall out there. >> they are out of reach. >> no, my point is that they keep it -- >> gilead is well run. >> cost contained. >> and great american company, call it that. as is celgene and biojen. >> if you had to pick one? >> why do you hurt me, carl.

right now, celgene is the cheapest. >> interesting. with that, the dow is down 70, and we go the bob pi ssani on a friday. hi, bob. >> going into the derek and happy friday, everybody. we were flat on the week, and the biggest thing that we had was not erp earnings, but interest rates. three days this week the 10-year yields move to the upside and three days the stocks have struggled with the dow. we are now into negative territory for the week on the s&p 500. and no great rotation. i keep watching the weekly mutual fund and etf flow numbers to e see the signs of the great rotations of the bonds into stocks, but it is not happening. we are getting sig nnificant amount of money going into the stock funds again this week, and every single week this year, but money is going back into the bond funds and june is a di s disaster, and all of the money went into money market funds. it didn't go huge into the stock market. now we are seeing the outflows into the money market funds, and

inflows into the stock market funds and inflows into the bond funds. however, they are high yield. a lot of money came out of the high yield market now into the seeping back in. so slowly but surely, money is coming out of the old school bond markets an into high yield or stock funds here. let's talk about what has been moving around here. great numbers out of starbucks, and i loved the interview that you did with howard. a couple of points that howard mentioned, consumer products is a different division, and they sell things out of people out of the grocery stores and it is growing fast and higher markets is 13% of the ebita numbers. and starbucks, how many people want to go in there and the cell phones are dying and this is

great example of the innovation. and i was happy about stanley's black and decker numbers and construction and the do it yourself, and the main people buying tools, and they had 16% organic tools and that means that construction guys are buying tools and the industrial segment which is heavier tools is growing nicely. finally, who pays the biggest commissions on wall street? maria bartiromo and i were talking about this talking about the sac indictment, and a lot of the traders believe that they are in the top five or six commission payers, but most of the guys feel that fidelity and wellington are the top commission payers, but sac is in the top ten. that is one of the reasons they are worried about it, because wall street does not make any o money on trading, and any less trading makes it tougher for business down here. guys, back to you. >> thank you very much, bob pisani. time for a faber report.

i have been watching the situation in health management associates because we don't see a list of recommendations to replace the entire board of directors, because that is the case for this hospital operator, and its board of directors in which glenview capital management which owns 15% of the shares is running that con senless consultation, and at which point they get 51% of the shareholders to agree, hey sh, directors have been replaced by the eight directors that we have nominate nod the board. as part of the continued focus on the hma though, there is a great deal of conversation, and mum murings in the market of a potential sale of the company. why? they hired morgan stanley to explore the alter nnatives, and hear that as community health will try to acquire hma and in fact, maybe an announcement in

the not too distant future, but one thing that people need to keep in mind is that if we do see a deal between community health, and hma by which there are a lot of arguments that it would make sense certainly from the potential synergys in the deal, but is this the idea to also see a potential below market deal were it to actually happen? when you apply the multiples that tenant paid for vanguard and look at not stellar earnings from anyone in the group of late, although, hca actually had pretty good earnings, and lifepointe for today, down lowering the guidance as well. i has been a difficult environment for a number of the companies including community which is fighting off charges from the d.o.j. and if you were to see a deal, many say i can only imagine it being a below market deal at least at this point given the multiples that we have seen thus

far, and four trans transactionn the problems going on and we will see if we get anything. even if they put up a definitive agreement with the breakup fee, the 70% of the shareholders has to agree to it. and so that is a high threshold and unlikely to have 70% of the shareholders to say, we want to be sold in a below market deal. so if they go the consentless solicitation, and come in with the new board and put in new management and know about it, we can revisit it for a year. let's keep an eye on the hma and expect the earnings on this company next month. >> throw the bums out strategy. >> i wanted to come back to air products that put in a poison pill. that was done, because they believed that somebody has been accumulating their shares and the speculation is that it is

bill ackman. that may be the case, but when you revisit the whole idea of a poison pill trying to buy -- >> they were slaging air gas saying that poison pill is one of the most horrible things, and isn't that something. >> i have one more full screen. >> and air gas fought them off and ended up with $40 more. >> and the defensive measures deployed by a corporate board are often compared to defensive measures deployed by the medieval castle dwellers. and they went on the say that the defendants' approach appears to be a premised on the notion of the poison pill is a normal exercise of board judgment like the adoption of a board. >> that is outrageous. >> until it made sense of our product. >> until peter causeland said when you can do better than the bid, and the stock up $40 in the

initial bid. terrific report. let's go over to the wobond rept with rick santelli. >> you look at the intraday chart, and we go into the weeken weekend, we are seeming to be losing some altitude on the yields. if you open up the chart to a couple of months, it is very telling whether you believe in the ek a technicals or not, this is playing the range so to say. this is in the mid-40s and yesterday we dabbled with the low 60s and clearly the tops and the bottoms of the recent move that are significant. and if you look at the 10-year boon, it is giving up ground, and the french consumer confidence improved but from historically low levels. tra traders don't make more than one set of data that is hugely important especially after a trend of softness, but i can't tell you how they are looking forward to the employment numbers next week not only here,

but in europe. and the two-day chart is losing ground. another technical scenario with this and if you open up the jar for the next several months you will see what we can talk about and if you look at the name off of the chart, it is testing heavy. and speaking of data, hey, japan should celebrate getting a little inflation. we will talk to them a couple of years down the road, but it is an odd response, because we see that the dollar/yen, and the dollar is losing ground but yet the stock market was down 3%. if you open up the chart again, you can clearly see that there is a bullish scenario going on with these levels. back to you, carl. >> kelly evans is here at post 9 talking about the fed meeting on a day when "the new york times" is like a friend/family tree among who likes larry summers and who likes janet yellen. unbelievable. >> if you had to guess who would make the front page, you would

say sac, but it is the fed. we have seen speculation of larry summers being the next chief, and yet he is the guy who raised questions about the qe3. and the hills and wrath, the "wall street journal" came out to talk about what is going to happen at the fed meeting next week and say they may reiterate the targets. what do we mean by this? they will call it forward guidance which is a fancy term to talk about the targets to make them more explicit. so that the fed may be saying, hey, right now, 6.5% unemployment rate before we stop the low rate policy, and maybe move it down to 6.25, and when it comes to inflation, they may spell out the bottom of the target range and say something below 1.5%, we will stay out there. why would they do this? in part, because there is a sense that the fed wants to taper.

they have a massive balance sheet, and buying all of the security s th securities that may be causing disruptions or dislocations to the market. the idea is can the fed while pushing ahead with the so-called taper offset the neg i.v.tive impact of that and say, oh, by the way, we will stay easy until the market sets the prices, and that is why we are back to 6.2, and now into the 5.2 range this morning. >> the feeling that summers is more hawkish than yellen at least as a consensus builder. fair or not? >> well, now that he has made the comments of whether qe3 is worth it, and the negative interest rates are distorting the economy and theories that you would not expect to hear from someone who shares bernanke's ideology, he will have to come out to explain those, if he does feel differently. >> one thing that a lot of people are buzzing about is yellen a consensus builder, and this morning on "squawk" tell

the senate and the congress, you guys are idiots, see you later. >> that is the appeal and part of what the white house likes about hill. >> okay. see you soon. >> all right. >> and the latest winner of the claret jug, the british open champ phil mickelson will pay us a visit. there is a reason that 61 is not a good number for him, but first, it is cramer's "6 in 60" coming up next.

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all right. 6 in 60 with jim. open table. >> well, people are feeling helpless eating the lunch, but i like them. >> and buy due? >> i have one stock, and baidu has the game, set, match. >> and what about raytheon? >> well, right after the report, they are not helpful research. >> and credit suisse upgrades campbells. >> well, it is very good. >> and how about southwest? >> i don't want to slam the whole airline, and usair with unbelievable quarter and so was delta. >> they say they are the weakest, and do you agree? >> yes. >> and 20 seconds, leer.

>> well, if you sell into autos, you are doing well. and i have 14 seconds, halliburton after admitting they destroyed records, and they did not do it, they would have been down. >> and the maximum fine was $200,000, and they did make a voluntary donation to the national fish and wildlife. >> and yeah, like if you destroy records and you are a hedge fund manager, and preet would you put you in jail, but here, they pay the national wildlife $200,000. excuse me, sir i'm gonna have to ask you to power down your little word game. i think your friends will understand. oh...no, it's actually my geico app...see? ...i just uh paid my bill. did you really? from the plane? yeah, i can manage my policy, get roadside assistance, pretty much access geico 24/7. sounds a little too good to be true sir. i'll believe that when pigs fly. ok, did she seriously just say that? geico. just a click away with our free mobile app.

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welcome back to "squawk on the street." rick santelli here with the final read for july on the university of michigan sentiment index is 85.1. that is 85.1 and that usurps the may read which was 84.5 being the best since july of '07, and this is now an even tighter comp going back to july of '07 which you had a handle of 90.

so call it is a six-year high on university of michigan sentiment survey, and it is all yours, carl. >> rick santelli, thank you. we will see how the market digests that on a day, jim, you it it is not acting like you would say. >> well, we do have a little bit of a hangover and the stocks have been moving tremendous, and they are taking a breath here, but i don't believe that, you know, this is confoundingstanle home builders are a bad group which led us, but maybe the retail, and david mentioned that maybe people are doing stuff in the retail and the earnings of retail are going to be predict the next leg. >> and the numbers are on the way. >> what about "mad" tonight? >> well, we are doing a kind of what to do here with a handbook sh show. i feel that people are lost and feel they have missed the move. >> and the market loves to the change the stripes and that is

confound i confounding. >> well, looking at amazon up, and they were down 20 points down, and now they are up. facebook, and people are like shorting facebook and now they love the social media and at the same time they thought that pulte and horton were bargains, but it is looking overvalueded. boeing is amazing quarter and then two days later, we sell it down, and don't get discouraged, because the ultimate trend is u up. >> jim, have a good weekend. "mad money" at 6:00 and 11:00 p.m. tonight. meanwhile, the criminal case of the s.e.c. against the sac capital is under way, and we will have a live report from the courthouse in a moment. the pursuit of perfection.s is clients are always learning more the pursuit of perfection.s is to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way.

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welcome back. breaking news, the arraignment in the u.s. government's case gai against sac capital starting a few moments ago in lower manhattan and kayla tausche is live outside of the courthouse with the latest. good morning, kayla. >> good morning, carl, it is a busy at 500 pearl street and not only the arraignment of the sac and the ongoing trial of zez against fabrice tourre, and that has led to long lines to get the arraignment under way. what is happening is the lawyers

for sac coming and basically answering to that lengthy 41-page criminal indictment that hit yesterday alleging widespread culture condoning insider trading for over a decade at sac capital. steve cohen is not expected to appe appear. as of yesterday, he was at the firm reporting for duty and business as usual and trying to restore confidence in the firm in the wake of the charges, but the lawyers for sac are expected widely to plead not guilty. they have to offer a plea whether guilty or not guilty at the arraignment, and saying the word words and putting that out there is important for sac, because they are working with the feds on a protective order to continue to do business with the counterparties on wall street and to redeem funds for investors who want to pull the funds out of sac, and to be able to do that the funds have to be protected, and that is what the order is for. if they plead guilty and it is a slim chance, but of course, anything is possible, then automatically, a lot of firms

could not do business with the sac. they can do business with the firm that is indicted because the outcome is not clear and they could be exonerated in the case, but if they plead guilty they could not do business , bu we should vote that a not guilty is going up against preet bharara who has a 100% record against the insider trading cases he has brought up. and he won a case against a swiss financial firm, and secured $58 million and this is a bigger scale and going up against a guy, carl and simon with a guy who has a perfect record here. >> and thank you, kayla tausche. no major financial firm who has had a criminal indictment has ever survived. let's bring an attorney and no stranger to high profile criminal and financial security cases, and given that the government in this case does not have enough evidence to charge

steven cohen personally, are you surprised at the boldness of the language and the case that they have set up in general against sac as a corporation? >> no, i'm not. i think that the united states attorney feels like he really has more than enough evidence to go forward here. i think that now that he has indicted the firm, there is not a lot of loyalty left inside of that firm, and i have a feeling that there is a line of opeople if it has not started already, there is a line forming right now of people from sac who want to speak to the united states attorney and the fbi. >> why would you say that? why do you believe that is the case? >> because there is nothing left now to lose at this point. i think that, you know, look, you work for a company that has been accused in a wide-ranging indictment with a lot of evidence behind it, and echt mails and other information there that you are working for a criminal organization, and in these type of circumstancesb c see employees jumping ship and

they don't want a part of it and they don't want their reputations tarnished and the united states attorney has a pick of the litter of the people who want to talk to them, and turn state's evidence. >> well, tom, i know a number of people at the firm, and they view it as too late to jump ship, because you are tanlted if you are there and very well paid for a long time and you have the prospect of course that if you were to lose, they become a home office for mr. cohen who houses perhaps $8 billion which leads to the next question to you, so i don't know fiing a with you that you will get so many people jumping ship. >> well, you know, they said the same thing about enron and once they were indicted that the people would be tarnished and not able to get jobs, and the people who were tarnished are the people who were actually indicted, but those people went on to get jobs at other oil companies and one of the oil and gas traders went on to trade and become a multibillionaire down

in houston. and it is the same thing with arthur anderson and they would be without jobs, but it is not true. there is still a need for talented people, and there are a lot of people who are talented who are not dishonest at sac. >> well, they are, and they have been paid well sh, and it is no job market though right now. and i want to get your look at the government's desire to bankrupt mr. cohen, and going afterf assets that are not connected to any insooider trading. what is that about? does that maintain throughout the period to come, or do they change the forfeiture? >> well, they will adjust it a little bit. what they are most focussed on, and of course, only the u.s. attorney knows for sure, but what they are most focused on is any proceeds made or profits made through the illegal activity, and that is what they want to go after. but at the beginning, they start with a broad net as they have here, and a broad request. i suspect that you will see it

taper down as we move forward. >> tom, you have skipped over what seems to be one of the fundamental elements of the trial, and that is the 34-year-old trader who is turning states' evidence richard lee who said that yes, he did run 1.25 billion fund and traded insider information on for example yahoo! and there is a stretch of taking that information to what he did, and saying that the organization overall is a magnet for market manipulators and there is a link there that is quite difficult to establish? >> well, yes, but as the u.s. attorney has said, at least eight convictions or prosecutions so far of other traders, and they have information that the compliance department was not doing its job and according to the united states attorney, the compliance department is part of the problem, so it is more pervasive than mr. lee. i am happy that you raised lee, because he was not on anybody's radar and we were not talking about lee. then out of left field we heard

about lee who has not only plead guilty, but cooperating and you wonder how many more people out there like that that we don't know about right now. >> okay. you made the point. i have a feeling that we will talk to you a couple of more times over the coming days. tom ajamie there outside of the s.e.c. now, amazon shares are down after reporting a loss of two cents a share falling shy of expectations. our next guest is maintaining a buy on the stock. we have jordan rohan who is joining us on the phone. thank you for coming on and calling in. >> thank you for having me. >> and i want to focus on the reoccurring frame, they missed and the profit margins were not great, and they are investing so we forgive them, and does this firm ever stop investing or just a way to spend money? >> well, another way to look at it. the margins in the u.s., operating margins of 3.4% are

quite good. they are investing in spain and go deeper in europe and china and such where the growth is higher some day. this is similar to walmart in the '90s. decent margins and great inves t ment in the u.s. and working on the global. i think that amazon follows the same plan and gets profitable outside of the u.s. that is what the investors are hoping for here. >> you have no concerns about the size and the scope and the pace of the investment here and are willing to either overlook it or reward them with potential investment down the line. >> well, i look beyond the bottom line earnings and you have to look at what they are buying and selling. the gross margins are up, because they are pricing the inventory correctly, and the third party market has been increasing as a percentage of the revenue, and it is a real

monster and powerhouse. >> jordan, while you are talking, lefty is in the house, and phil mickelson is joining us, and he is about to make his way to post 9 and just an fyi if you are wondering what you are looking at. we are talking to you and watching phil mickelson. >> okay. my congrats. amazon is a company that is growing retail over 100 billion in volume. it is growing that 29% in units and 25% in revenues and compare it to walmart, costco, and target and they grow in the single digits if they are lucky. and that is why the people hang on to the stock, even though the earnings numbers are cut on a regular basis. >> any adjustment, jordan to the earnings estimates after this call? >> well, i can't speak to everybody else, but i earnings went down marginally for 2014, and next year my earnings went from 2.96 down the 2.92. that is to me okay for entering

europe, and a company with this kind of reach. >> we see them down about 1% today, and what is the price target for the shares, and how do they get there? is. >> okay. i have a 335 price target and look at free cash flow yield earnings and the multiples going out to 2015. i feel quite confident a that at some point the profitability of international markets will flow through and the profitability of the amazon web services will flow through and the spending that they do on content-related i initiative will flatten out or we will see higher margins there, too. >> okay. thank you very much, jordan rohan. >> all right. go, phil. >> and as we said british open championship phil mickelson is here, and we will talk about last weekend and the latter half of the career as he takes it up a notch.

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>> wish you could hear the traders yell "way to go, lefty." we'd like to welcome legendary pro golfer phil mickelson and

the ceo of xexxonmobil raising o awareness of sips education. and phil, we know you could have had your pick of causes to promote and why this one? >> well, the last two weeks in scotland were two of my favorite weeks and winning the scotland and british open was great and sharing wit amy and the kids was awesome, but the favorite week is this week after the british open, because it is the ninth year that we come together at the liberty science center and put on an academy for fourth through fifth grade math and science teachers because we are losing the kids' interest in s.t.e.m. fields, science, technology, and mathematics and the students are not interested in the fields to have the qualifications to fill the jobs of the future. >> and we see it, phil, with the advertising where you focus on the engineers and characterize your level of concern, and your

level of certainty that it is doing to be fixed in the long te term. >> well, as you say, i mean, science, technology, engineering and matt are core to all of the businesses. we are a high-tech company. in the idea that we don't have the next generation of american youth with strong credentials in science, math and engineering is a concern to us, and not only personally for the company, but also for the nation's economic competitiveness. so doing what we can to bring the best teachers to the front of the classroom where those students can get turned on about science and math and engineering early, as phil said third through fifth grade and if we can hook them on science is cool, and math is cool, and we will see that they will stay with the science and the math careers longer and great work for us in the future. >> phil, dare i ask if this is beyond thinking of golf and hard to think in a month where you have come off of a couple of wins like this, but thinking

longer term about it. >> well, math and science is huge for my success. winning the championship and the one thing that has really changed my game and it is the 3 wood that i have been using, because i'm a high spin player and the 3 wood takes off half of the spin that i was putting on it, which gets the ball boring through the air and consequent ly i hit two of the best 3 woods of my career to make the birdie and win. science and technology and engineering and mathematics play a big part in the game of golf and a big part in my success, and i want to see the kids enjoy it and be motivated. after nine years we have had 4,000 teachers through the program impacting almost a quarter of a million students, so we are making the impact and slowly and surely, but we need help from the public and the private sector to do this? on behalf of everybody here, we are so happy for you and your family and for bones, because it was an amazing weekend to watch. and a lot of people wonder how the game is changing. you are known for the aggressive play, but people wonder if a

right-handed player could have made that shot at 18. do you see the next 10 or 20 years different from the past 10 or 20? >> well, i have had a big turnaround in the game in that i have been saying that i have been playing the best golf of my career, and that is absolutely true. two reasons for it. one i'm putting well sh, and th other is that i have been able to drive the ball much better, and that comes down to technology. what has happened for me personally is that as the larger heads and drivers have gotten bigger and bigger, the center of gravity is moved back causing an increase in spin, and to counteract that, i have been decreasing the loft which is harder to hit the driver. this new technology on the interior of the club takes the spin off of it which allows me to have more loft and make my normal swing. so using the engineers and the science and the technology of it, i have been able to improve my game, and hopefully play some of the best golf in my career not just at the open, but in future years. >> 4 of the 5 majors have happened since you turned 35 and bones was interviewed after the

open and said that you have gotten stronger, and he argues more disciplined since turning 40, let's say. do you agree with that? >> it is true. and really the wakeup call for me is a few years ago when i was diagnosed with soriatic arthritis and i am losing a pound a month and two or three years, lost 23 pounds and stronger and fitter and resuming my career to play at the highest level, but i have had to make changes to do it. >> it is a great cause and we will watch the closing bell, emil, and with exxonmobil, and phil, thank you for coming on. >> carl and kelly, thank you for having me on. >> we have breaking news, kayla tausche is outside of the courthouse in lower manhattan. >> carl, two of the sac entities

pleaded not guilty on all five charges brought in the criminal indictment by the southern district of new york and those were four counts of securities fraud and one count of wire fraud and the lawyers pleaded not giuilty to every one of the charges. it allows sac to continue trading the $14 billion under management, and continue to make good under investor redemptions close to roughly $5 billion so far by the end of this year. now we know etted in the early hit that the sac is working with the feds on a protective order to make sure they are good for all of the business relationships and the counter party interests, and that continues to happen, but as of right now, they are pleading not gi guilty to all of the charges brought against them by the u.s. attorney's office. carl. >> all right. as you suggested, that is the likely outcome, kayla, as we talked to you before and the response to the charge. we will keep an eye on the

arraignment, and what happens later today, kayla tausche in manhatt manhattan. >> and the deepest discount of expedia offering could be shares of its own stock. look at that tanking 25% after the second quarter results. what does that mean for the company's future? sfw we will have more when "squawk on the street" returns. to discover a hybrid from the luxury car company that understands that one type of hybrid isn't right for everyone. 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. because what you don't know, can hurt you.urance. what if you didn't know that posting your travel plans online may attract burglars? [woman] off to hawaii! what if you didn't know that as the price of gold rises, so should the coverage on your jewelry? [prospector] ahh! what if you didn't know that kitty litter can help you out of a slippery situation?

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>> welcome back to "squawk on the street." i'm josh lipton and we are watching solar winds the network management software maker getting hit hard this morning and the second quarter revenue misses and third quarter results are missed be i what the street wanted to see. they missed with the lie ens sensing, and given the weak growth trajectory they lowered the price target from 45 to 38. simon, back to you. >> let's talk about another

stock that is brutalized today. and that is expedia that has lost capitalization after the results disappointed and the worst of seven years and possibly at this rate the worst move they have ever had. and the issue here, guys, and many of them, but actually the main issue is the degree to the online travel agencies may be slowing down fearing europe, and the fierce battle for the united states market, and expedia is effectively defending hotel hotels.com, and hotwire.com, and you have seen the trafalgar adverts there, and they have spent half a billion in that quarter to try to maintain or grow market share at a time when priceline is fighting back with the brands and booking.com and reportedly trip adviser is doing me metasearch, and their growth has skyrocketed. >> isn't it to be aggressive instead of sitting back, and are you surprised that the investors are punishing them to that

extent? >> well, the cost of rising and you have a more of a problem than that. you will have hotwire a discount site, and one of the biggest parts was car rental, and the car rental is consolidating and hertz buying thrifty and avis buying thrift car. and so when it hit, they have decided to consolidate the supply in car rentals and the discounts are not as much as they were. incidentally, hertz will be on the program monday when they report results. so it is a perfect storm for expedia and maybe still a buying opportunity and some would say it is now, these are volatile stocks, but what is going to be fascinating is what priceline and orbitz come through with when they report their earnings in a couple of days sglc days. >> trip adviser has schooled everybody. >> yes, and they have gone into metasearch, the same as kayak,

and orbitz is doing from tr trivargo. >> why didn't daraa come in to talk about expedia? come on. >> that always works trying to book on live tv. thank you, simon. good stuff. straight ahead on the program, we are halfway through the earning seasons and we have seen some big beats and of course, some big misses as you is seen. with e pl g we are going to get a status check, and see which companies are holding on to the most cash and why. we are digging inside of the co corporate treasurer's hold when we come back. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office,

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one hour into trade and stories squawking about is 10:29 on the west coast and 8:29 here. shares of starbucks are up 7% to fresh record highs on the coffee chain's better than expected quarterly results and upbeat outlook. you can see the interview with

howard schultz from earlier this morning later on in the program. and celgene and gilead with record highs. and looking at the markets for the moment, it is a fairly broad basted markdown and 36 members of the dow are in negative territory led by coke. it is relatively broad, but what is clear halfway through the earning season is that a lot of the companies are holding on to more cash than ever. so which sectors hold the most cash now and why? courtney reagan is back at hq and analyzing that. >> it is almost like the corporations are hoarding cash and that is at an all time high to data from roeuters. so overall, the cash held is 99.3 billion which is the same as last year and the highest on krekd. so when you break down the cash hoarding by sector, and technology accounts for the

highest holders of cash moves to two behind industrials, and why is this this case? many think that it is the reflection of the lack of profitable investment opportunities in the industrial space or a protective move of anticipation of uncertain times ahead. apple far and away has the most cash on hand at $145 billion and followed by microsoft and google at $87 and $86 billion respectively, none of the three fall into the top ten companies as a cash assets and proposals. and lin near comes in at 72.7%. and followed closely by intuitive surgical is one that we talk about a lot. and altera. >> cash levels are high, because of a great deal of uncertainty. corporations are feeling uncertain about the future direction of legislation, and sequester and what the federal reserve might be doing, and individuals are feeling insecure, too, about what is

happening with some of the interest rates. >> and the investors, too, holding on to the cash and pulling the money out of bonds and not necessarily reinvesting them into equities. it is good to have some cash in the proverbial piggy bans to be used for capital expenditures and m&a. and buybacks and dividends have increased only slightly. so many wonder exactly what these companies are going to do with the cash and when. back to you. >> and it is actually quite cheap to have a lot of cash around. you can raise it cheaply and the cost of opportunity to have the cash isn't that great. a lot of individuals are carrying cash, too, and it seems to be the right thing to do. >> yes, all of the uncertainty, and nobody is sure what is going to happen when we look at the legislative measures or the federal reserve and makes us feel better after the financial crisis. and perhaps the opportunity cost is not so high, but at the same

point, people want to put the cash to work, but not sure how to do it the best way. >> spend some of it, courtney. >> like we need to tell her. thank you sh, court. and for more op the earnings and what to expect on the second half of the season, we will have christine back on from the beginning of the season when you said that even though the expectations are flat, the street will beat slowly the expectations, and you are right about that, and are you on track of what happened? >> well, analysts have been conservative with the estimats.s before earning seasons we will see them 2 1/2 or so from where they were. the big misses from google and microsoft changed it up a little bit. we should be at 5%, but it pulled it back a little bit to 4.5. we could eke out 6%, but it is touch and got a this point.

>> directionally? >> well, we have been up about 1.7 percentage points from where we ge again at the -- where we began at the beginning of the season, but it is lofty to get to 7%. >> we start out with one of the strongest sectors and financials have done a lot to the growth we have seen, and i wonder as we go into the season, if the best days are behind us. >> well, financials have gone up 10 percentage points, and all of the big banks are done reporting and the financials are up 25% which is wonderful, but we are 60% of market cap and about 50% of the way through the earning season, some of the heavy hitters have yet to come out and we have utilities and discretionary spending, but the big bang in the middle is going to fizzle out. >> far fewer companies have met the revenue estimates, and does that bother you as a

professional? ah, it does not matter? >> well, 66% of the company needs to be earnings and 32% for the revenues and the second half is positive and looking for growth of 4% and 5% for the third quarter. >> on revenue or profits? >> on revenue. the profits are 5% in the third quarter as the expectation for third quarter. >> 11%? >> i know it is difficult to see how we get there, but you know the game, and those will come down, and we will be slightly down. >> and then we will beat them by a couple of percentage points. >> exactly. >> and you talk about a google and microsoft being the outliers in terms of what has been reported. >> right. >> is there similar outliers in guidance where they are instrumental to the mean. >> well, the guidance and the negative/positive ratio was 5 to 1. so for every five companies that gave negative guidance, one gave positive which is the worst

since 2001, but going forward, third quarter, a below normal guidance, so in a positive aspect. for every two companies that have given the negative guidance one has given positive. so it goes along with the press releases that we have seen where the companies say, we expect the second half to be stronger in comparison to the first half. >> do you think that the market, when you boil it down, will the market rise or fall from here? >> well, it depends upon which way we will go for earn inings. right now, we have not seen the market react too much to the earnings, but in line with what we have expected. if there is a huge blowout for the second half of the year, sure, i would expect the markets to trade on that. if we fail miserably and don't get to the 5% or 6% range -- >> i love that you think it is about the earnings and it could easily be about the fed. bless you. >> we see the earnings as a secondary indicator, and not seeing the investors trade on

that and not news driven, but fed driven. >> is this always called a proxy for profitability, but we are not seeing nit imore? >> the needle is not moving that swift for earnings anymore. >> thank you, christine short. it looks like a split between janet yellen and larry summers to succeed ben bernanke for chairman. which is better for the economy? we will take a look at a that when we come back. [ female announcer ] what if the next big thing, isn't a thing at all? it's lots of things. all waking up. ♪ becoming part of the global phenomenon we call the internet of everything. ♪ trees will talk to networks will talk to scientists about climate change. cars will talk to road sensors will talk to stoplights about traffic efficiency.

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announcement of taper iing. >> detroit is the largest u.s. city to declare bankruptcy. >> 100,000 creditors. >> the index is the best month since october of 2011, and what could possibly derail this rally? >> europe could send a curveball at the market. >> and the existing home sales are down 1.2%. this is a miss. i a big day in wall street and in court. we have more on sac capital and we go the kayla tausche in lower manhatt manhattan. kayla? >> simon, sac's lawyers and legal team leaving the courtroom at 500 pearl street after an arraignment with the feds that was somber. the fed was listening accident intently as the prosecution gave them an update on what would happen from here, and i tried to ask questions of peter nussbaum

who is general counsel on the way out, ap he said he would not answer any questions, and that s is it from there. and the next 60 days is a discovery process for the southern district, and reviewing wiretaps, e-mails and any kind of electronic communication and also consensual recordings that were carried out by cooperating witnesses in the case. the prosecution also said that they reached out to former employees of sac to potentially participate in the discovery process and potentially at the grand jury trial that is expected. they have contacted some of the companies involved and they are doing a discovery to see if there which in other potential companies or anymore in addition to the 20 listed in the indictment yesterday. they have been reaching out the contact contacts at those companies to talk about their dealings with sac, and the prosecution said that they expect the volume of this communication content is expected to be very heavy, and they expect that this will take a very long time, and hence 60

days' time for the next hearing which is september 24th taking place in the afternoon at 3:45 and until then, they are going to be combing through any information they can get their hands on. back to you. >> yes, kayla tausche from a busy courthouse this morning. thank you very much. the buzz over who is going to be bernanke's replacement are circulati circulating. this morning in the there is a comparison of yell lep and s summers -- yellen and summers. we will have two economists now to talk about this controversy. it can be summed up a petition to the white house in favor of yellen, because it is so clear that summers is the inside favorite. is that right? >> well, what is interesting, kelly n the last few weeks up

until the last round of speculation, the public betting had been that yellen had a lock on it. i don't think that it was a fair representation of the odds and what has happened is that the people who have gotten hints from people inside of the administration understand that summers was never out of the running all along, but with that said, the choice has not been made. there is a lot of pressure from obama from outsiders, especially as you were mentioning the senate democrats to pick janet yellen for a variety of reasons, and also, summers is the known quantity not just to obama, but a number of the closest adviser s. >> one of the points in favor of yellen in the petition, and some of the points is that she is a female, and people would like to see obama's circle have more diversity in it, and there has never been a female fed chair, but also, what is the extent to which more supportive pick for the markets playing into this, do you think? >> well, it is fair with respect to the market's view, that sis

fair assumption, but i would pushback that she is a front-runner because she is a woman. this is a open and shut case in favor of christine row mmar. and she meets both of the criteria, insider, and as is summers and she is a woman. if that is the criteria that matters, there you go. >> sorry, this the job to be the head of the most central bank in the world. is that really ultimately, what it boils down, and the talent set to run monetary policy across the world that could startle emerging markets is what it boils down to, and i am astounded and you are being sarcastic, surely. >> well, that is not the pure question, but as kelly insen waited in the question, that it is something that people are talk about obama has the opportunity to nominate the first female head of the fed,

and it should not matter one bit, but it is part of the equation, and that is why it is asking. >> it will not be an overriding distinction, but the difference of summers and yellen is important. summers is well trained and just like ben bernanke, and extremely technical and creative, and she talks the language of the central banker, and communicates with crystal clear fashion, and summers is a brilliant economist, but in the mold of alan greenspan with a holistic view of the markets, and this decision is what tile style of leadership do you prefer, the technocratic bernanke style or the more open summers' type? >> what we do know with respect to larry summers who has said little is if he favors the fiscal policy.

>> that is right. but if you go to the speeches and understand where they are coming from, in the case of yellen, it is because she has examined it so carefully flu the highly stylized modern base of modern economics, so anybody who comes out of the top ranked economic school and talks the language that he can understand to. and summers can take second seat to nobody in terms of the academic economics is going to bring a little bit more of the world view and skeptical view that the world does not work the way our models is supposed to. >> it raises a point, dan, as best we can tell at this stage, whoever is taking the job is taking it at a point when fed is in pivot mode. so what degree that it is a prerequisite that they will continue with the pattern that bernanke puts in place as he is leaving. >> i don't think it is -- go ahead, dan. >> i am sure that greg and i are not going to disagree. it is not the sole requirement, and at the end of the day, you

are going to be doing what is right or at least view what is right for the economy, but i would introduce one observation here. we have tried this a couple of times here in winding down the fed stimulus, and ended qe1 and qe2 and things were getting in the way. the assumption to wind down qe3 to have nothing to get out of way has not been borne out in history. >> well, want it to add what dan says if everything is going as bernanke and the fed ex pekts, this is a perfect time for the transition, because he has laid out a systemic pattern to dial back the qe2 and taper down the zero in a year from now, and i can't imagine why yellen or summers would deviate are the the path if the economy is behaving as we expect, but the question is what if we stumble again. there is an interesting test and yellen is inclined to stick with and perhaps ramp back up quantitative easing and the numbers are not so much. >> greg, who is at fault here?

yellen at number two for some time here, and the fact that she has been at the white house and summers has been for a couple of dozen years, that is evidence that the white house does not know her and they are not as familiar with her as they want to be with the next fed chairman and you can debate they want to be, but is it yellen's fault or white house's fault for not having more meetings frankly between the two of them. >> well, kelly, it is a question of fault. remember, yellen has been vice chair of the federal reserve board, and it is that they don't w wander over to the white house every week. and even bernanke has not been a regular visitor, but summers is looked to with advice because of the long tenure, and one of the close advisers and the fact that there was not an overriding reason for yellen to be there. insofar as if she wants that job, they have to get the face time up there.

the last thing i want to make is that i don't think that obama will make this decision primarily based on the closeness to the individual. by the way, when it comes to senate confirmation, being too close to the president is not necessarily something in your favor. so you need to weigh that both closeness to the president and partisan independence. >> thank you, both. we have to go, and thank you for sharing your views on that this morning and it is the beginning of what is a drawn-out consideration of who will succeed ben bernanke. coming up on the program, find out what ceo howard schultz of starbucks had to say. we spoke to him exclusively on cnbc this morning. "squawk on the street" will be right back with that. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550

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point 1677, 1672 is seen by a lot of technicians as resistance or i should say support. if we violate that we could be in for some interesting action. let's get to rick santelli at the cme with "the santelli exchange." >> when it comes to data, we all know depending on what country that you're studying and how they calculate the data, even the best of countries, and i think it's pretty safe to say the u.s. is in that camp, you have to really be suspect of the accuracy of data. some is more accurate than others. next week we're going to be getting a boat load of very significant data. not only from the u.s. but abroad as well. we've seen some stabilizing numbers out of europe, whether it's french consumer confidence. we've seen some stabilizing issues in japan. yeah, i never thought i'd say this, but countries going, yeah, more inflation, more inflation. they're probably going to get what they wish for, the problem with inflation is the time line,

how long it takes to incubate, the velocity of money, but i want to concentrate on one area in particular and that's gdp. if there's one area that's lacking in terms of showing us growth, it's definitely gdp and we can all argue whether it's the best way to measure growth. but one thing i can tell you, how we measure it is going to change extremely large. there's huge, huge calculation changes an revisions going back to 1929 in gdp. but the long and short is the president said something in his speech the other day that really hit me hard, and that was, you know, in his first term he said he was going to lower the deficit by 50%. well, obviously that didn't happen. i think increase would be a better word. but in the current speech he was talking about how he's reduced the deficit "x" amount as a function of gdp. the president never says anything in my opinion that isn't important in the grander

picture. it's just putting the pieces together. many believe that the new way to calculate gdp is going to cause the u.s. economy to be basically 3% larger. so all metrics of deficits as a function of gdp will change. i don't like rising deficits but at a time when there's so many question marks, i couldn't think of a worst time to take the gps of the measure of the economy and throw it topsy-turvy. >> it's no secret that steven cohen is a very wealthy man, but how much money could cohen lose in the s.e.c.'s case against him? we will find out when we come right back.

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because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. one of the big questions heading into the weekend surrounding the government's case against sac capital advisers in court is what will happen to steve cohen's fortune and how much is it? $8 million, $9 million, billion? robert frank is looking at what's at stake. do we know how much he's worth? >> they say he's worth around $9 billion, and it's way too early to tell exactly how much money he would lose in this case, but let's paint two sort of broad scenarios.

the first is that he could settle or be exonerated in court. that would leave him as a multibillionaire with a family office and most of his assets. if the government gets everything it's now seeking, cohen could lose most or all of his $9 billion fortune because the government has a civil suit where it's seeking forfeiture of all the assets in the fund, not just the money made from insider trading. that's put a spotlight on his vast personal empire. his real estate collection got bigger in march with the purchase of a $60 million beach home. he owns two in the hamptons. he owns a penthouse duplex in manhattan and it's on the market for $150 million. now, his main estate is in greenwich, connecticut, 35,000 square feet with an ice rink and a personal zamboni. the estate said to be worth more than $20 million, but cohen's real wealth, well, that's his art collection. dealers tell me it's worth well over $1 billion, the most recent being a picasso purchased for

$150 million. he also spent $137 and his most famous piece, the pickled shark. fe put some of the assets in a trust, they could be protected but given how long this investigation has gone on, that is not likely. >> $1 billion of $9 billion in wealth, that's a lion's share of your wealth. >> and it could be even more than that. >> robert, thank you so much. dow is down 140. simon, we'll talk europe in a few minutes. if you're just joining us this morning, here is what you missed. >> welcome to "squawk on the street." here is what's happened so far. >> now we're back to being an independent public company. this is a transaction that will benefit the public shareholders. how did you get viv vendee to agree to a deal like that. >> enabled them to get the benefit of the upside you're now seeing in the share price. >> is there a point, jim, at which investors are like we've given you enough rope.

when are you going to -- >> this is a pinkie in the brain story. it's difficult to take other the world but when you've decided to take over the world, it's going to cost a little bit of money. >> the day investors give up, we will know. >> yes. >> stores will do 9% in the u.s. given some of the economic issues is a stunning indication of the power of the starbucks brand. >> a lot of people wonder if -- how your game is changing. you're known for aggressive play. jive had a big turnaround in my game in that i have been saying how i have been playing the best golf of my career and that's absolutely true and there's two reasons for it. one, i have been putting well, but the other is that i have been able to drive the ball much better. >> defense lawyers for sac capital, two of the sac entities pleaded not guilty on all five charges that were brought in a criminal indictment yesterday by the southern district of new york.

good friday morning. we're live here at post 9 at the new york stock exchange with a check on the markets. a friday that's not looking to end well. the dow is down 145. s&p back into some support territory at 1676. nasdaq is off some 22 points. speaking of which, shares of expedia tanking this morning down over 20%. the company's second quarter earns missed estimates and expenses in sales and marketing grew faster than revenue. today's drop for expedia puts shares at the lowest level since early 2012. tesla rallying today comes after deutsche upgrades the stock to a buy. puts is $160 price target on it saying it's can tallizing on the inherent advantages to electric vehicle. a tough surprise for amazon posting a $7 billion loss in the latest quarter. why isn't the stock falling more? we'll get you the answer. plus a blowout quarter from starbucks. shares soaring after betting estimates. you'll hear from howard schultz in just a couple minutes.

and sorry, larry. according to reports, senate democrats are pushing president obama to nominate janet yellin, not larry summers, as the next chairman of the federal reserve. we'll tell what you this means and walk through the implications for markets. want to take a quick look at the s&p 500 heat map. obviously a lot of red, very narrow breadth in terms of gainers. one stock that's bucking the trend, amazon in the green despite posting the surprising loss, of course, as we looked at operating margins around 0.5%. amazon managing to hang on. again, discussion, kelly, about the long term. it's a cash flow story for now. if they eventually do trim back on spending, their margins will literally explode. >> this is what people have been saying about this company for 10, 15 years, and what's so interesting is amazon has done so well despite the fact they keep spending, they keep investing, and they never actually pull back. >> no, it's true. you're talking about investing in refrigerated warehouses all around the country, in video now, in original content and who

knows what other kind of hardware projects they have on their radar. >> you like to see people rewarding these companies again for doing this, trying to stay on top of all these different aspects, but they're spending a lot of money. >> the editor of cnet joins us to talk about more of that. >> good morning. it's amazing the degree of patience investors have had. >> yef doesnjeff doesn't care e. how long does that dynamic stay intact? >> well, i think as long as amazon is doing credible, well-executed moves that are going to go to these services that we see are absolutely part of the future, one would be revolutionizing what we call television. that used to be an experience tied to a device on the wall. we know that's being blow un. amazon is positioning well for acquired and new original program in that area to bring people into a new mentality of television. that may sound like a lot of

fuzzy stuff but it's a key project to work on. i like the fact their brand in my estimation has expanded and it's been very elastic into new ventures. from books to garden tools to then huge retailer second mart retailer of cars and now into the various ri tailers. but the brand stays credible. a lot of companies couldn't pull that off i don't think. >> brian, you make the point speaking of same-day delivery. a lot of retailers may rue they won the case about amazon and local sales tax because it removed a big barrier from them entering the market and now they're taking share. >> some verse say that may have been a win in the short tem for a lot of brick and mortar retailers but taking nexus off the plate takes a big barrier away from amazon saying we can kill it in same-day regionalized delivery. that's a major new wrinkle that

amazon can i think educate consumers to be comfortable with. >> of all the things that are obviously disruptive things that they have in mind for the near future, cloud services, right? hardware, phones, streaming content, groceries, what do you think is going to be the first home run? >> i think the biggest thing is they are not being -- they're very device agnostic. google and apple are doing very well. but they're all working in device areas that are more focus in religious wars. amazon isn't in that. they are pan device, pan platform, they are very much focused on the fact that consumers are right now starting to realize a smartphone is a smartphone. a tablet is a tab let. if it's a connected screen, it's the same as any other within bounds of size. and that's where they're positioning almost everything they do to be universally appealing, and i like the durability of that going forward.

>> finally, do you think, you know, people are beginning to notice the taxes on their amazon order when they click it through. is that going to push any consumers to the side? >> yeah, i imagine it has, but that's, of course, a very value conscious consumer. as i look just as a regular consumer and i experience the amazon collection of tax and i use other online merchants as well, it hasn't dissuaded me because i realize that that's where the baseline is going for any of the really large online etailers and i think the universe of amazon conversation makes it worth going there than going to more mitch onlinichon player. i don't believe it's been a big deal. >> brian, always good to see you. >> thanks, guys. >> from amazon to zynga. shares sinking after second quarter earnings were a huge disappointment. investors concerned about the company's decision to abandon real money gambling in the u.s. let's bring in doug kreit.

doug, how much hope for zynga moving more into gambling was there in shares? does this completely change the investment thesis? >> i think it definitely affects it. you know, this is a company that had been struggling but i think a lot of the bulls on the stock thought there was a big opportunity there. zynga appeared to be getting into it. i think it was a wise decision on the company's part to not get into it. they have been really struggling and they need to focus on their core business and not get caught up chasing other opportunities that may or may not pan out. i think it was the right decision but i don't think it's helped the stock today. >> isn't the trouble you have to hope for a couple big hits when it comes to games? isn't it good for them to diversify into something that may be a little more reliable in terms of earnings power? >> well, i'm not sure real money gambling would have been any more reliable. that's a hit business, too, just like the game business. but you hit the nail on the head.

the bull case for zynga now is basically down to that they'll come up with a couple of hit games in the next six months, year, 18 months. obviously they have a new ceo who has a lot of experience in the games business and i think he's a very smart and talented guy, but his experience has really been on the console side, and i think the free to play business that zynga is in has a different set of business and creative xen tcompetencies. i think it's possibly going to be a feature of the free to play business for a long time. we are seeing with some games in the free to play segment with the monetization is getting broader, and i think there will be evolution as people in the u.s. and europe get more used to the free to play model. you will see more sort of casual spenders as opposed to just the big spenders. but at the end of the day you

will still get a lot of economics from people willing to spend $100 a month, that kind of money. >> and they're going to need some big hits in order to deliver. thank you very much, sir. >> got some breaking news on the economic front. our steve liesman is at headquarters with that. steve? >> carl, thanks very much. a senior white house official telling cnbc that president obama has not made a decision about candidates for the federal reserve chairmanship. i wanted you to notice the word candidate. they're trying to back off from this idea that it's already being decided as a one or two-horse race and no announcement about the fed chairman is imminent and likely will not come until the fall, carl. so i think the way to read this is white house to fed watchers and to markets, take the summer off. i think they're trying to defuse this situation which has become a little bit troublesome for the white house. kelly? >> i was just going to say, steve, we were mentioning the tree on the front of the "new york times." you would argue maybe the message got out ahead of them?

>> i don't know that maybe they didn't bungle this a little bit, carl. they let this -- you're right. they let this sort of spin and did not get control of the message. it began with the president i believe making an off-handed remark in an interview with charlie rose and it never felt like they got in front of this thing. it's summer and there's not a lot going on. you know how they talk in washington. it's spiralled in a way that i think the white house at the moment is trying to get on top of and i don't know na they can do that at this point. >> steve liesman with the latest out of the white house on that one. thank you, steve. stocks are selling off this morning, down about 130 points on the dow jones industrial average. loss of about 0.75%, nearing support level, about 1677. we'll get you more on what's moving in just a moment. but first, rick santelli meanwhile is keeping an eye on commodities this morning. rick? >> we are keeping an eye on commodities but i think specifically my guess dan "the man" stechich wants to talk

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the lengthy indictment from the u.s. attorney of the southern district of new york with the very short plea, and that was not guilty. all four entities that were named in yesterday's indictment pleading not guilty to all five charges -- all five counts rather, four counts of securities fraud, one count of wire fraud. took about 20 minutes to start to finish where the defense lawyer said basically we don't believe that we have reason to support your indictment, and they pleaded not guilty. after that the prosecution said that the next 60 days will be a discovery period. they will be looking through e-mails, from phone records, consensual recordings as well as wiretaps and interviewing cooperating witnesses as well as former employees ats ac capital. a guest earlier in the show was talking about how anyone who has worked at sac might consider whether or not they will work with the feds on this, but the feds are going to try to get them on board and trdrum up as

much support as possible. they're reaching out to some of the companies that were in the crosshairs of some of the insider trades. we tried to ask the lawyers questions, they walked around for about five minutes looking for their car. a lot of reporters tried to peg them with questions about whether they would try and settle, the state of their businesses as they try to reassure investors as well as employees. no questions answered. but that's the latest from here at 500 pearl street. guys, send it back to you. >> okay, kayla, just a couple blocks north of where we sit as she said. thank you very much for the latest. drama over the federal reserve report saying senate democrats are pushing president obama to appoint janet yellin as the next fed chair. the white house says the president has not made a decision yet. we'll have more details when we come back. it all year for summe. ♪ this summer was definitely worth the wait. ♪

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street" we talked to starbucks ceo howard schultz. >> tea is a $40 billion category and more relevant outside of north america. we think we have a global opportunity with teavanna. that will transform food at starbucks and then evolution fresh is a health and wellness brand not only juice but we announced our relationship a week ago. we'll be bringing evolution fresh yogurt into our stores as well as creating an evolution fresh cpg brand. i think what we're going to do, and we said this from the beginning, we're going to introduce and create brands and categories inside starbucks stores, leverage that off our digital card and mobile platform, and bring it into cpg and create this fly wheel, but no one should be misunderstood about one thing. we are a coffee company. we're experiencing fantastic

results in our core business, and we're creating adjacent opportunities to create long-term growth and long-term value for our shareholders, but the foundation of the company is we are a coffee company first bill around the values and guiding principles and the culture of our company. >> that's a key point to make, howard. it's good to talk to you this morning because some are raising the issue about kitchen complexity. issues you're no stranger to. is there a line at which menu extension, menu innovation goes too far where you start to run into some of the efficiency issues of years past? >> sure. i think that is a good point and i think we've got to be very mindful of that. but let's be -- let's understand one thing. the customer today is going through seismic changes in terms of behavior, and no company today in any business can embrace the status quo. we must push for reinvention and self-renewal, but not at the expense of the core business. we have multiple tests going on,

including a carbonation test in atlanta and boston. these are all things that complement the starbucks experience. anything we do in our stores is going through the lens of does this enhance the coffee experience in our stores? does it enhance the sense of community in the third place of starbucks and does it take advantage of the power we have to reach over 70 million customers a week? we're now the most frequented retailer in america in terms of how often people are coming back to starbucks. >> do you feel any heat from the extension of dunkin' out west? is that on your radar? >> we respect all our competitors but they're in another business, they're in the fast food business. no, i don't think there's anything that dunkin' is going to do in california. california in a sense is starbucks largest country with almost 3,000 stores, and we're still opening stores in california. california is one of the strongest regions for the

company. i'm not losing any sleep over dunkin' donuts. >> howard, talking about other markets, there are analysts out there and i think they're taking this from you, that you forecast you will have over 6,000 units in emerging markets by i think it's 2016. that would be a quarter of all your units in the world. is that a reasonable target? >> i think it's a reasonable target, but the real question is over time it's very possible there will be more stores outside of north america than there are here at home, and, you know, i have been traveling all over the world over the last few months and the opportunity that we have in asia-pacific region, there will be thousands of stores in china. we only have 16 stores in india. we only have one store in vietnam. i just came back from a trip in indonesia where we only have 150 stores and these are the best performing markets in the world for starbucks. i think we're just getting started. i think the most encouraging thing is the relevancy and the

unaided awareness and interest in the starbucks brand in markets we had not been in for many years. but, again, i think the most encouraging thing, 9% comps in a market that we've been in for 42 years with almost 10,000 stores, to have that kind of number driven by the most important metric and that is 7% increase in global traffic. it's just unbelievable. >> howard, a year ago actually this week you came on, stock was at $43. people were very concerned about europe. you made a promise, you said europe would get positive. how did you do it? is europe getting stronger or is there something you've worked on to make it more profitable? >> anybody doing business in western europe today has to maintain a fair amount of caution. certainly we were very pleased to see positive comps in the region and positive comps in our largest market in the uk.

it's a good sign, but i don't think a couple quarters make a trend yet. i'm very positive and optimistic about the long-term future, but there's so many things out of our control in terms of eurozone and the economic issues, but i am confident over the long term that we are going to succeed there and we're leveraging all of the tools and the transformational things we did in the u.s. over the last five years onto the platform of europe, and i think the early signs are very positive. but this is not going to be a short-term story. it's going to be a long-term effort, but we are confident we're going to succeed there. >> good interview this morning with howard schultz and our thanks to him. the ceo and chairman of starbucks. got a lot more on that breaking news we just brought you. the white house saying the president has not made a decision about candidates for the next chairman of the fed. steve leaseman is back at headquarters with more. steve? >> carl, thanks. let me remind you what the headlines said. the president has not made a decision about the candidates for the fed chairmanship.

he hasn't narrowed it down is what the white house is trying to say. there won't be an announcement likely until the fall. i think that's important, they're trying to quiet the speculation, pretty rampant speculation in wall street and in washington. there's a sense among some in washington that the obama administration is in the process of bungling the fed chairmanship. right now the question is why would the white house go with yellen and not pick summers and what that means for yellen's credibility if she's chosen. now you have congressional democrats starting to lobby publicly against summers. it's all taken on a life of its own and the white house wants to dampen the fed head speculation. i think what they're saying is no yelling about yellen. >> steve, it was around this time, meaning september, that bernanke's name was officially

put forth, wasn't it? >> it was september/october. but i think it all began, kelly, with that offhanded comment by the president that mort zuckermer in the journal said it was an insult. i'm pretty sure it wasn't intended as that. the white house has sort of gone out of their way to compliment bernanke when they've had a chance to do so publicly and privately but it leaves the chairman hanging out there without a graceful exit. then you have these two other candidates that are up there and it becomes red meat in washington. you know how these things work. then people take positions. i don't think the white house wants the process to happen this way. they want it to be an internally deliberative process. >> two fed exits they're trying to gracefully orchestrate right now. how is that for a pun, metaphor, analogy? >> very well done, kelly. >> have a great weekend, steve

liesman. a huge development in the gulf oil spill. halliburton pleading guilty to destroying evidence. next, the bell is about to sound across europe. we'll get you details on the close. it seems asia is taking more mine share here. simon will be back on the floor after a break. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price --

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the european markets are closing now. >> you know what that sound means. simon hobbs is here to tell us

what's been happening across the pond. >> the closing figures for the session in europe bear m mind that the eurozone has given greece 2.5 billion euros or it's promising that for monday and a nice bit of wiggle room as well. $1.5 billion in profits from the ec b on their greek bonds. that should knock greece away as a problem until after the german elections at the end of september. some of the industrials have disappointed. that market down. france is doing well. vivendi selling off art of activision. in the meantime, let's just pause if we may and reflect on what mario draghi said one year ago today. >> within our mandate, the ecb is ready to do whatever it takes

to preserve the euro, and believe me, it will be enough. >> and so ultimately after six weeks of deliberations, they launch the nuclear deterrent that is the threat to buy -- to buy peripheral bonds in europe at the short end and, of course, that has really allowed all world markets to put the eurozone to one side as an immediate systemic risk. the fallout for assets has been phenomenal. people on wall street, people around the world have made a huge amount of money as it pushed those long-term rates in, say, spain and italy, which we were so worried about 12 months ago down to a manageable level. the immediate gains were on the french banks. remember when we used to talk about the french banks and their holding of peripheral eurozone debt? in one year up 125%. in the meantime, of course, major stock markets in europe and here were able to rise significantly. the top gainer over the last

year is, in fact, greece, with a gain of 48%. then ireland, then spain with gains of about 30%. in addition to that, of course, the euro was able to move substantially higher, and we have now an 8% move for that year against the dollar. in the meantime, guys, as far as the next couple trading weeks are concerned, i can tell that you angela merkel has gone on holiday despite the fact she's got an election in september which kind of indicates that everything is going to be okay for now. >> or it won't if you know murphy's law. simon hobbs, thank you very much, sir. both sides of the atlantic by the way are keeping an eye on the trial of fab tourre. the testimony he's given is just finished in the case against him. mary thompson has the latest. >> of course, tourre stepping down after what was essentially 2 1/2 days on the witness stand. the s.e.c. alleging that mr. tourre deliberately withheld information to investors about

john paulson, the hedge fund titan's role in a synthetic cbo called abacus which netted paulson a billion dollars. the investors on the other side of the trade losing $1 billion. tourre's defense attorney foc focusing on two things today. she focused on subsequent e-mails sent by tourre to the members of all the involved parties showing preliminary term sheets that contradicted an earlier e-mail that the s.e.c. focused on. in that earlier e-mail basically there was no one taking an equity position in the subsequent e-mails it showed -- excuse me, there was someone taking an equity position. in subsequent e-mails it showed there wasn't. it goes to the fact that the parties should have known there was no one taking an equity position, ie paulson. they also focused on another e-mail written by tourre describing as surreal a meeting he had with aca and paulson. repeatedly he said he didn't

really why he wrote that. he was shown documents by his attorney and he seemed to remember why he thought it was surreal because paulson was asking to buy protection on the banks because he was concerned about his counter party risk to the banks, something the banks found surreal because they were the ones who were usually buying risk or they were trying to hedge themselves against the hedge funds. some other things we found out today, first of all, that tourre found out he was charged by the s.e.c. when he was sitting in front of his bloomberg terminal and a headline crossed. he said to the jury when asked what he did after he was put on paid leave, he said i had to take a step back and think about what i was going to do given that my nine-year professional career had been destroyed. also, of course, matthew martin is the s.e.c. attorney ending the last question to tourre with how much did you make when you were on paid leave by goldman for a year after those charges were filed?

tourre told the jury essentially he was paid the equivalent of about $750,000. back to you guys. >> wow. a lot of information there. thank you so much, mary thompson in manhattan. >> let's bring in bob pisani with a look at what's happening here. we've seen 130 points. >> we're halfway through the earning season and we're running out of steam a little bit, and i think there's a couple specific things that happened today that's causing some weakness and maybe some things that started in the middle of the week that's causing additional problems. take a look at the dow jones industrial average. i think the important thing is we started the week and then in the middle of the day about 10:30 eastern -- you see that dip down we dropped to the lows of the day? called around on that. i think i know what happened. the imf came out with i would say a slight criticism of the way the federal reserve is con duthing some of its policies. i don't know if we can pull up the full screen. but the im f basically said you need to be more transparent. you need to improve your transparency at the fed. here is the key phrase that

moved things. they said a premature fed exit could cause 125 basis point spike up in ten-year bonds. in addition to where we are right now. i think people saw that. it was about at 10:30 and that caused a little bit of concern. there's one issue i think is affecting the market. the other is overnight, remember we started down here, china announced they were cutting production capacity. this is very interesting. you think there's a market economy there you're kidding yourself. 1400 companies reportedly have been ordered to reduce excess output by the government, told you must stop producing because they're concerned about excess output. that's put some pressure on copper, for example, which is down almost 3%. we're also seeing pressure on big material names, too. they're down 1% or 2%. century aluminum, freeport-mcmoran, all to the downside. i think that's affecting things a little bit. the market topped out on tuesday night. caterpillar wednesday morning from that point on when they

started warning on the second quarter, on the third quarter, things started moving to the downside. i think a confluence of various events is causing things. we're now at the 50% mark right now. >> just to build on that point about china destroying capacity. a pimco tweet saying inflations must be defended from the lower bond. this is what we're hearing from hilsenrath. pair this with china destroying capacity, buy tips he says. >> the market is getting okay and not great earnings. >> bob pisani. >> let's get to rick santelli in chicago to talk more about what the future might hold for the fed. >> this is going to be friday with dan. let's ramble with everything. i love steve liesman. my hat is off to you. he said that i think the successor to ben bernanke in this process is being bungled. let me think whether it's the debt ceiling, tax reform, tax issues, labor issues, the keystone pipeline, i don't know,

i think there's not enough bungle to go around. what do you think? >> well the fact they're playing this out in the public arena is totally wrong. it's something that should be done in private where they can make reasoned decisions not biased by somebody saying this is the person we should have as any policy should be. >> i think out in the public should be things like how we're going to work health care, how we're going to work taxes. we don't get that out in the public, we get this. the traditional media, cnbc does a great job, but traditional media, have you listened to some of these channels talk about what the fed does, what quantitative easing is? >> they say what they think is going to get the public i can sighted. often times it's not exactly how it should go. it creates more of an issue than it should. >> everything has to be tea leaves. that's the problem. there's no like order to things where you just know. even gdp, who knows what it's going to really mean. the last recession is going to disappear they say with the revision. >> well, the other thing on numbers, too, you can't get so focused on one number.

that's the other thing. people hammer this, this month was bad. what's it been like over the past two, three months? what's it's going to be like in the next two, three months? look at that. don't get the outliers because things change over time. >> i know we were supposed to talk about nat gas. keystone pipeline may be a rider on a bill many conservatives don't like. the long and short of it is we need to get this nat gas situation moving. you have a couple reasons why. >> biggest one, you look at what oil has done since the egypt crisis, it jumped $8. we haven't lost that premium. egypt is not a problem. if we can eliminate that by using natural gas and our fleet can be converted relatively easy, every 10 cent saving on a gallon of gasoline is about $10 billion over the course of a year to the economy. >> we're short on time. if gas is going to be a transition fuel, stop subsidizing the things you think we're going to transition to and let the market work. i have to problem calling it a transition fuel. >> we watched you convert a vehicle on live tv.

>> i'll tell you what, you know what? wait, carl, that is a great point because i continue to think that, listen, i think tesla is a wonderful company. but if the answer to bad battery innovation is taking the darn thing in and out when you visit a gas station, it's got to be a flowers.com in 20 years, i'm sorry. >> we know you know cars, rick. we'll see you a little later. rick santelli in chicago. markets taking a dive trying to claw their way off the 1677 level which we did bounce right off of. the one and only art cashin will join us on set in just a minute. 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.

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this is the pursuit of perfection. coming up next on "the half," we're trading ahead of a huge weeks for stocks. it's liesman and the traders breaking it all down. plus, built to win or about to crack? it's weiss versus murphy with the fate of the home builders on the line. and the bull bet on europe is right now the best time buy. carl, we'll see you in 15. >> sounds good. thanks. we are off the session lows but the dow was down more than 140 at the intraday low. we haven't been down 140 in about a month. art cashin joins us. good to have you back. >> thank you. >> starbucks blows it out, jpmorgan takes their year end target up, confidence at a

six-year high, what explains today? >> japan. there was some concern, you saw that the japanese market, their inflation figures came out. they looked good with the headline number and then when you dig down and take energy out, which was where all the costs were, they were deflationary again. they were down. that spooked the japanese market. it dropped the equivalent of about 450, 500 points in the dow. the yen spiked against the dollar. now, you will recall that everybody and their sibling in the hedge fund community was known to be long the nikkei and short the yen, and so when it went against them and knowing that the big players are there, that immediately sparks both concerns and rumors that somebody got picked off base. will it spill back into this market? will they have to sell something else to raise the money? so that made the markets more than a little nervous. i think we're trying -- the

other thing to remember is next week is fireworks. july 4th may be over but you have a lot of things coming up. you have the fomc coming out on the same day you will get gdp. the day after that you will get the bank of england and the ecb and to finish off the week you will get payrolls. if you're sitting on a little bit of a gain and you got up here and as i wrote a couple days ago, market looked like the check engine light came on, so maybe you want to just ease back. so the combination of all those things i think is what put us there. >> and you haven't even brought up the fed which we have been talking about in terms of the personnel movements but do people need to be focused on that or can we kind of ignore it if we know we're not going to hear from the white house until september? >> i think you will see it become more active conversation next week. traditionally bernanke would go up to jackson hole. he would make the keynote speech that would lead off what strategy might be.

we haven't heard who is going to replace him in that manner, and with the summers/yellen debate the place am might become very interesting. that's yet one more thing for people to be a little edgy about. >> we know there's going to be a protracted legal battle between the fed and sac. we got a not guilty plea. people are contemplating can the market withstand a liquidated sac. is it long-term capital redux? >> well, it is a lot of money and it can be a problem. right now it's short-te-- its sm negative is reacquaint people with their concerns. you get the news two seconds ahead or five seconds ahead. if you're john q. public out there, you got to say maybe i want to be a little careful

here. >> be careful tonight with the ice cubes. >> i will. we have a high storage for the weekend. thank you. >> thanks, art. >> great to see you. another big day for earnings with top companies reporting before the bell this morning. our earnings squad is here to break it down next. [ male announcer ] what?! investors could lose tens of thousands of dollars in hidden fees on their 401(k)s?! go to e-trade and roll over your old 401(k)s to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments. e-trade. less for us. more for you. that's me... i made you something. ♪ i made you something, too. ♪ see you next summer.

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welcome to the earnings squad where we dissect the earnings story everyone is talking about. help you trade the stories you may have missed. i'm melissa lee with herb

greenberg and josh lipton. to the scorecard, 52% of s&p 500 have reported so far. 68% beat their ep s targets, 9% have met estimates, 23% of reports have come in below forecast. we are watching temper seely. >> this is a company that preannounced back in june. not only did they miss that number, they guided lower going forward. what you really need to pay attention to and this is the story, take a look at gross margins. it's a margins story. gross margins, 39.6% a year ago, 50.7%. operating margins, 6.5%. a year ago 14.4%. this is a company that's changing what it is. it's going to traditional bedding market. >> is it cutting its prices because of competition? >> tons of promotions going on. they're talking about the promotions, trying to roll out new products. they say all will be well. base product, the demand for it isn't what it was.

>> will you go into your rant about how this isn't a read into the housing recovery, blah, blah, blah even though it is in the philadelphia housing index. >> it doesn't matter -- >> i'm just stating fact. >> this is a replacement product. >> thank you. done. let's move on. decker's outdoor missing second quarter. as demand for ugg andt teva brands fell. the stock is really selling off today. there are still concerns that it has been whipsawed in the past about higher costs, particularly when it comes to sheep skin. we had an analyst this morning credit suisse cut this stock. but jany is saying that in the third quarter, second half of the year, sheep skin costs will come down. in 2014, the ugg pure line will help cut costs. i asked myself, what is a pure line?

what the heck is that? apparently pure is a wool pile process that replicates the feel of the fur part of the face of sheep skin. >> the face of sheep skin. so they are going to be able to manage their costs better. >> and i do think it's important to note the company says this is typically their smallest quarter. this is important for uggs. this is going to be a back half of the year story. by the way, the way the stock is performing -- >> back to school. that's what you're going to get herb for christmas. >> i have ugg slippers. >> no comment. >> i'm just mentioning. >> let's get to weyerheuser. >> a timber company, all about timber. they own or control something like 7 million acres of timberlands. they beat but you see the stock slipping. if you talk to analysts, they point out wood product prices have been volatile. overshot in the first quarter. you saw more supply come online. now they have stabilized but at low levels. also some people say obviously a

lot of investors thought of this as a play on a strong housing recovery. but everything has its price. some argue valuation is no longer as attractive. >> they own party homes which is a big builder in southern california, especially in san diego. and i have to wonder, people were thinking, they've talked about spinning off the real estate operations. you really didn't get a sign of that on the call. >> which was disappointing to a lot of people. >> i'm wondering if that's going through some people's mind. >> down 2.2%. that's earnings squad for this morning. tweet us. we're all on twitter as well. tweet us individually. we'll be back with more during street signs. we've got the details when "squawk on the street" comes right back. g at all? it's lots of things. all waking up. ♪ becoming part of the global phenomenon we call the internet of everything.

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plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company." a blockbuster story. government officials say halburtop has agreed to plead guilty to destroying evidence related to the 2010 gulf oil spill. jackie deangelis has that story at the nymex. >> hi, carl. it's been more than three years since the deepwater horizon disaster in the gulf of mexico. that left 11 people dead and also contributed to the biggest oil spill on record in the u.s. history. now halliburton pleading guilty

to destroying evidence in connection with the incident. the relevant evidence was part of their internal post incident examination. several simulations they conducted looking at centralizers on the well and their contribution to the accident, those were destroyed. now, according to the plea agreement, halliburton will pay the maximum fine, that's $200,000. that's a figure subject to court approval. the company is also subject to three years probation. keep in mind that halliburton has already made a voluntary contribution of $55 million to the national fish and wildlife foundation that had nothing to do with this plea agreement. i have spoken to several attorneys on this issue. the consensus with respect to the damages here is that this is small, especially when you compare it to the record $4.5 billion that bp agreed to pay when it pled guilty to manslaughter and also less than the roughly $1.5 billion that tra transocean agreed to play. there are questions out there

despite this plea agreement. number one, why did they destroy that evidence? number two, would it have been relevant in the class action in civil cases that are pending? number three, if halliburton destroyed this, did they potentially destroy anything else? we are watching the stock today. it is trading higher because investors feel that this was a small sum to pay to put the criminal side of this behind the company. >> oh, my gosh. a couple hundred grand. it's a sliver of their overall expenses and the stock is up as you said, jackie, almost 4%. thank you so much. watching halliburton, watching the markets at large. s&p and dow are on track to end the weekly winning streak at four. it will be the first negative week on five. watch gold today. >> july -- just before we get to that, all month we've seen little moves largely to the upside. now we have a triple digit day ending to the downside. here is a look at gold. it is down 1%. it's been up nearly 10% in the last three weeks. that's the best gain in two years. the extent to which that short

covering versus people pricing in more perhaps shall i say it easing, qe. that's going to be the conversation. >> i tweeted bernexit. we'll be talking about that over the next few months. >> months i was going to say as well. >> good weekend to you. >> thank you. >> see you monday. let's get back to headquarters. scott wapner and t"the halftime" thanks so much. welcome to "the halftime show." four hours until the close. it's a red day on this friday on the street. got the dow down 108 points at this hour. here is what we're following on "the half." the europe trade. is the best opportunity for your money now across the pond? a growing number of people think so, so we're going to ask paul richards for the real story. solid foundation or about to crumble? what should you do with the home builders if rates remain high? it's weiss versus murphy in one big debate.