good morning, welcome to "squawk box" here on cnbc. we're under a little pressure this morning. not too much. i'm andrew ross sorkin with joe kernen, kayla tashi in. this will be fun, joseph kernen. >> keep your phone, you know, just don't be -- you have call waiting? >> i don't even have it. >> we're going to need you over the next two weeks when becky is out. we're going to need you periodically to do this. just know that and -- >> you can tweet me, e-mail me. >> don't make any serious plans. don't make any serious plans. aren't you in again tomorrow or is it the next day? >> i am. i'm in tomorrow. >> okay. good. there is a lot of people out. >> save some of your material, i'll save some of mine. >> a lot of people out in august. i hear home depot is -- >> out. >> right now. >> as we're speaking. >> we'll look at that compared to lowe's. i don't want you to have to --

>> 11.4%. >> let's do 1.24 is the number that we're looking for, which is 3 cents ahead of expect takings on sales of 22.5 billion, which was 700 million ahead of the $21.8 billion estimate. the company is looking for 2013 of $2.60. the street is already at $3.64. since there is three cents ahead already, andrew, that doesn't necessarily, you know, they beat by three cents in this second quarter, so to boost the four-year is not that -- >> to say they're raising doesn't really help. >> depends where analysts already were, right? they do see full-year sales up 4.5%. the full-year number is 77 -- that's a big number. >> it looks like the sales are going to normalize. quarterly same store sales of 11.5% and coming down to 4.5%

for the full year. >> those are same store, not total sales. >> right. if they're adding stores, yeah, got to be even worse. and then, right? same stores is going to be different than -- >> once we saw the number western did see the sto we did see the market come down. >> it is hard to say. 72, 26, 97, widespread. we'll keep an eye on home depot. we'll have a comparison of lowe's and home depot. >> we can do that. >> you've been in both. >> i've been in both. >> i have a home and i've been in both. this is probably the only -- >> i was going to get a woman's perspective. >> i actually just moved. i've been to home depot. >> lowe's, have you been to -- that's supposedly the more feminine -- >> there is not one in new york city. i haven't been to a lowe's but i've been to the home depot on

23rd street, got some paint, was going to start painting my new apartment. >> i've been to the same one. not a bad start. >> used to be an advertising agency. >> renting an apartment in the city. >> yes. west village. >> you're not the person to go to about home depot or lowe's. >> i'm still giving them my business. >> minor little amount. you're not putting in a new kitchen or anything. neither am i, to be honest. >> what was the last home improvement project you did, joe? >> actually, i had lightbulbs too big for a lamp in by daughter's room, i had to take off the shade and raise the thing a little before i put the lightbulb in. >> it took one day? >> you know how many people like me it takes to change a lightbulb? >> i couldn't even guess. >> we have a team of people at my place that take care of -- >> you do, yeah. >> among the key factors behind pressure on -- you did it yourself -- on stocks these days, we have, of course, fed fears and spiking interest

rates. ten-year note climbing as high as 2.9% yesterday. yields have gained more than 4 percentage points since early may when bernanke hinted that the central bank may scale back asset purchases. also, the dow and s&p has declined. joe is saying this was my fault. declined nearly 4% since hitting all-time highs at the beginning of the month. >> your fault for not realizing the significance of the may 22nd number. >> why can't we give credit to you but not necessarily take credit away. if you look at -- >> i'll tell you what, we talked about how it was, like, the sixth derivative. think about this. think about it. india, the rupee, the markets over there, but it is being hammered by what is happening here with the fed and we haven't even -- not have we -- we haven't even started cutting back on what we're adding, we haven't taken anything away. all we have done is talk about

cutting back about how much we're expanding every month and already you're seeing some of these emerging markets -- that's weird. you have a choice. >> either you can argue what you have that bernanke is doing a masterful job, in which case you can't make the argument you just made. >> no, no. >> or the may 22nd date numbers are right. >> may 22nd when we started thinking the gravy train some day will end, right? but it is supposed to be ending for good reason. >> saw 6% correction, then started going -- >> we haven't really made much progress since then, just on the idea -- >> that's when the emerging markets were on a roll. >> it shows you risk on has to do with perception, not the actual numbers itself. the numbers -- nothing has changed, nothing has changed about how much they're adding, so you just -- it is like all markets. >> it is at an all-time low. >> all time? >> they reached that this morning. >> in the meantime, just take a quick look at u.s. equity

futures, see how things are setting themselves up for the day. we have a mixed picture of the dow looked like it will open up six points higher. everything else will call it close to -- we do a little bit of red, but that might turn itself around in just about a second. either way. >> the dow is starting to look a little better than it did at least about an hour ago. joe mentioned the woes of the emerging market stocks in indonesia, india, having another rough session today. currencies continue to tumble. we have adam bakhtiar from singapore with the headlines from today's market session. adam, good morning. >> good morning, kayla. the wall behind you says it all. the numbers were pretty disappointing for a better description, particularly for the asian markets you just talked about, the emerging market space. having said that, some of the equity markets that touched lows we have not seen in several months managed to bounce off the day's lows after we got encouraging comments out from sovereign wealth funds in indonesia saying that, you know, there was nothing wrong with the

fundamentals of the companies there and that valuation was particularly cheap. after falling 5.5% during the trading session, we did see some bargain hunting come back, still closing the day down, though, 3.2%. however, the sell-off we're seeing in the emerging market space took along with it the other piers in the region, thailand, malaysia, singapore, all particularly weak. in the case of india, we did see a little bit of bargain hunting come back in the markets. what was happening in the currency front here, the central banks dipping into the foreign reserve to protect the declines they're seeing in the respective currencies. in the case of indonesia, the rupiah touched the ten-year low. the indian rupee you talked about, it crossed the 64 threshold at one juncture and traders in india were saying the central bank was definitely in the markets to protect the falls we're seeing. as a result of that, we sort of did see a comeback in the equity

trading picture. we also have downgrades for the indian market. jpmorgan cut its rating on the indian market down to neutral from outperform. countering that, they upgraded china, the basket case so to speak of the emerging market space over the course of last few years and upgraded that market to neutral from underweight. even this positive upgrade did little to stem the declines that we saw on the shanghai composite. so all and all there is lots of concerns about exactly when and by how much your federal reserve is going to be tapering. we'll get a little bit more clues as to that, you know, maybe on wednesday when we get the release of the fomc minutes. a disappointing session out here in asia. back to you guys. >> all right, adam, thank you. european shares also lower, 20 currencies, 20 eamericamergi market currencies slumping because we may not do 85 billion a month starting in maybe, you

think december. >> i'm with liesman. i like to follow liesman. you want to go with september still? >> well, i'm not sure. i'm trying to get caught up with all of everything. i haven't talked to -- i'm taking your word for it, he's saying -- >> that's what he would -- that's what he was suggesting. i don't want to say off the table, handicapping against september now. >> it was september and then it wasn't and then it was and then it wasn't. >> can't believe -- >> i think if it is not september, that's bad news, not good news. >> if it is not september. >> bad news it not good news. bad news in this case is bad news. >> because you want the -- >> because some people -- some people think it is good news, we know tapering and we're still going to be pumping the money in, but if they're not going to be -- if they're not going to taper, it means we're in a whole lot of hurt. >> when you think about the buy side people, do you feel like most of them are positioning for september or do you think most of them are positioning for october at this point?

>> i would say not september. i would say not september. >> let's go to -- is this me still? they moved the prompter forward. carolin roth standing by in london. she looks just like carolyn schober, which is weird. you guys related or something? >> yeah, sort of are. joe, it almost has been a year. >> you've been -- >> almost a year i've had that new name. >> no flies on me. fraternal twin. >> i do. i do. yes, i do. but she still has the other name. too much information. take a look at the european markets. we're also feeling the selling pressure, which is, of course, tapering related, but the losses that we're seeing in europe, they're a little bit more limited compared to what we saw in the asian trading session. the stoxx europe 600 off 1.1%. the basic resources pushing us

lower today. to show you the xetra dax is off by 1.1%. the ftse 100 maybe doing a touch better, off by .2%. the basic resources are weighing on the overall markets, and this really is company related because we had numbers from glencore xstrata and saw that big $7.7 billion writedown. that was bigger than expected on the back of those xstrata assets. we knew a writedown was coming, but it is larger than what the market had been anticipating and the stock is off by 3.67%. underlying earnings were actually in line with expectations. now, the other company i want to talk about is bhp billiton. weak numbers, 15% drop in first half net profit hit by weaker metal prices. that stock also dipping lower. in the forex space, safe haven buying in the dollar yen. that's why the yen is higher against the dollar. the dollar is off by a third of 1%. the aussie dollar back below the

91 handle, off by half of 1% after a slightly more dovish than expected rba. back over to you guys. >> all right, carolin, thanks. programming note, we'll talk to the cfo of bhp billiton at 7:00 eastern and probably warn him, i know where you're going to go with that. you're going to want to talk about all of the glaxo type stuff that bhp billiton is involved in. >> may have a question or two. >> i know, i know. >> won't overwhelm the interview. more legal trouble for jpmorgan. i don't know what's in the water. the justice department reportedly looking at whether the bank improperly manipulated energy markets in the united states. this news comes a day after reports that the u.s. government would be looking into whether jpmorgan hired the children of chinese officials to help boost its business in china. we talked about that story. jacob frankel is back now, former federal prosecutor and enforcement attorney at the s.e.c. we talked yesterday about the china story. we'll talk about energy now.

jacob, good morning. >> good morning, andrew. >> what is in the water? i asked the question right before we sort of left this interview yesterday, and i said is there something about jpmorgan, is there a target on their back in some way that we don't understand? when you look at this new situation on the energy front, does it change your true where you were 24 hours ago? >> not at all. you almost wonder if jpmorgan someone had a voodoo ball and is sticking pins in it. i think it is a confluence of really challenging events all coming together at the exact same time. we're coming off of the london whale, the story yesterday, and now the energy, but these are totally unrelated within the company. i don't think it is even reflective of a cultural issue here. you're talking about independent events, each of which on its own stands and probably merits investigation when we talk about the energy manipulation, what comes to mind is back in 2004 reliant energy, one of the five

largest energy companies, was actually charged criminally, one of its subsidiaries in connection with manipulation in the california energy markets. somewhat reminiscent here. i, number one, i do not see jpmorgan itself being charged criminally. i think that's completely off the table. i think ultimately as we look at corporate prosecutions in general, if there is something that the government believes rises to the level of something chargeable, there is a resolution right away with the company, either in the form of deferred prosecution agreement or nonprosecution agreement, and the look is to charge the individuals. but, you're right, there probably is something in the water, whether it is that or a voodoo doll, the timing is terrible for jpmorgan. but i do not see the company being charged. i see these all being unrelated. >> it is interesting, though, jacob, they just entered into the settlement with ferc over similar issues. as part of that investigation,

they're banned from trading electricity for six months. so that started in april. it is obviously still ongoing right now. do these investigations have the ability to hamper jpmorgan's ability to do business in some of these areas? could that be extended? >> it certainly can be and it is a great question. one we'll be asking for some time. i think we're talking about the major financial institutions, you know, what the clients want is they want to see their financial institution, number one, not in the news. that's a reason why a lot of the cases are not fought and are settled. number two, their fundamental issue is am i still making money with this institution? and the answer is yes, they remain loyal, similar to a conversation we had regarding goldman at the time of the -- at the time of the goldman settlement. so, i mean, yes, there is some form a target, an added interest when you talk about a company of, you know, of this -- of this stature. can it weight them down?

is it a distraction? yes. >> here's the thing, just take a step back from the whole situation. people talk about these institutions about whether they're too big to fail. the question that has arisen as a result of what is going on with jp and other institutions is whether they're too big to manage. we talk about all the problems we just have been discussing as independent separate problems. and that may very well be, but what does that say about the ability to have oversight over all of this, about the culture you're talking about, the larger issue of what this firm ultimately looks like. >> i think it ties back to a question that michelle asked yesterday, with respect to how far the tentacles go when you start talking about an fcpa investigation. if you're looking at the street conduct within a segment, then you really -- the first focus is on the conduct of the individuals in that segment. and one of the things you always look at whether there is pressure from the top to cause either a cultural issue or cause

this actually to become problematic, that gives rise to the incentive possibly to, you know, to create violations. i think using the fcpa example, if we were to see similar conduct, whether in china and two or three other countries, then the focus would much more on a cultural issue. here you talk about truly and genuinely different business segments, and it does not go unnoticed whether from the outside or the inside that all these problems have come together at one time. there is certainly an issue of too big to fail. that's why i started out saying jpmorgan will not be charged, the institution will not be charged criminally, but i do think the board of directors is going to look very seriously at whether there is some type of management oversight issue. these companies do respond because there are companies of that size, of that stature that do succeed. i come back to where we started, which i think is it is a matter of timing and as you said, water

or i think the example i used was the voodoo doll with pins. >> jacob, thank you for your perspective this morning. thank you very much. looks nice on the capital now. i don't know if that's a real -- a screen behind him or if that's actual -- is that a window? a real window, jacob? >> it is the real window. it is the c behind me. >> looks nice. >> it is your wonderful studio, right across the capital. >> looks so pretty. almost looks fake. but we'll take it for real. >> the other day when john harwood was in front of it, there were big storm clouds there. unless there is someone watching it and changing the weather behind that -- >> a couple of domes in that shot, jacob. >> i'm looking forward, not behind me. it is -- it is a great majestic shot. it is a great way to start the day. >> we're talking about the other dome. you're a great -- you have -- you're majestic as well, i think. >> always a pleasure to work with you. >> all right.

thanks so much to jacob frankel. with ev been talking about emerging mash ets all morning and we have been talking about the chinese economy. we head now to eunice yoon. >> china has announced plans to form a new agency that will be coordinating the regulates her here and improving the oversight of the entire financial system. this agency will be led by the central bank, but also appears to be a way for the chinese government authorities to really get a handle on an industry that is partially in the shadows. when you first meet this man, it is hard to believe he's a shadow banker, with experience at a wall street firm, he now owns a website in beijing that matches companies that need cash with small time investors willing to lend. >> people think china banking is so scary, it is so bad.

>> reporter: many find shadow banking because they fear it could threaten china and the world. it has everything from private citizens lending their savings to incorrect or off balance sheet loans from banks. >> we see banks offloading more and more assets into these hidden channels it is difficult for anybody, the regulators, us, to really know what the positions are of banks or borrowers and i think it is a very important point that the market is missing and increasingly large share of the picture of what is going on in china is happening in this black box. >> reporter: this investment trust officer knows what is happening in the black box. she agreed to be interviewed, but only if we masked her identity. >> translator: 70% of our business is shadow banking. through trust companies, the banks change the property of their loans so the bad debts don't show up on balance sheets.

we are very afraid of the risks. it won't be that risky unless the economy runs into trouble. >> reporter: that's exactly what this banker is worried about. >> translator: i feel that at some point the bubble will burst and we will see a systematic financial crisis like the crisis that occurred in america in 2008. >> reporter: with china now in one of the biggest credit booms in modern history. and international banks value the shadow banking industry, guys, at $6 trillion. that's about 80% of china's gdp. >> eunice, that was go to be my first question, how big the shadow banking industry is, but your last guest said $6 trillion. that is unbelievable. when was the first time this started being -- >> that's right. well, they're all estimates out there.

one of the points a lot of people make is that it is so big, so unruly, and such an important part now of the chinese economy that any effort to try to really clamp down on shadow banking could have potentially harmful effects on the economy, it could trigger bankruptcies here, of companies and also have harmful effects on the overall financial industry. that's one of the reasons why a lot of people say the government authorities really are playing a very delicate game here and it is probably another reason why we haven't seen significant moves to try to clamp down and rein in the shadow finance, just because they don't really know whether or not it is going to have a harmful consequences. guys? >> okay. eunice yoon, thank you for joining us from beijing. good story. coming up, another story that a lot of people are talking about. why the guardian newspaper is now in a fight with the british government, we'll talk about that when we return. plus, speaking of disputes, this story, the connecticut residents

who are unhappy with ray diallo. we'll tell you about that when we return.

it is now time for the executive edge, our daily segment focused on giving business leaders a leg up. our first story this morning is this. the guardian now saying the british government forced it to destroy classified documents from edward snowden. the paper was a major outlet for revelations based on leaks from the former u.s. intelligence

contractor. the guardian's editor says a british official advised him a month ago, quote, you had your fun, now we want our stuff back. yesterday, guardian writer glen greenwald vowed to publish more documents. this is one of those stories where you have the government now jumping in in two ways. one, i didn't realize this, they went to the guardian to destroy stuff. on the other side, his partner, his boyfriend was going through heathrow and detained him for nine hours and wiped his computers clean. >> we knew this was coming too, right? we had a heads up on this? did you read that? >> i heard the united states government knew that when the partner was going through heathrow, that they were going do detain him and take his computers. that was a signal to the guardian that they were watching this and taking it seriously and whatever threat it was is real. >> apparently the british

regulators said if the guardian didn't destroy the files or didn't let the government destroy the files, they would stop their reporting through an undisclosed legal route so they couldn't publish anymore. >> you're from the journal, aren't you? >> ft. >> ft. you're a print reporter. and, andrew, you're a print reporter. i don't have a feel for this. do you both feel violated? can the government -- it almost sounds like a -- this wouldn't necessarily happen in a western country. isn't this sort of what they do -- >> this is what is happening in the uk. >> that's what i mean. we should think this is not a business as usual. >> this is not business as usual. this is weird. >> i think what is weird about it is not that they're asking for the shredding or the destroying of files that were used to already report on stories, but it was -- it seems like it is documents that would have been used to report on forthcoming stories, stuff not out there yet. that is unique in this situation. >> the thing i don't get, and then we'll get to the next story, is you have a situation

where we live in a global world, everyone has internet and computers. greenwald is in brazil, partners in germany. these stories, this information that was supposedly destroyed on computers exists in other places. so the idea that you're going to destroy it doesn't really make sense because the stories will come out any now. glen greenwald will be even more intense. >> i like that you became part of the story at one point, andrew, and that's why i -- that's why i'm excited about it. >> in that case, i wasn't so happy about the story. >> it is your mouth. you got to decide what comes out of it, right? i don't think you should apologize. >> you're getting me in trouble. today marking six weeks until the launch of obama care exchanges. in an interview last night, wisconsin governor scott walker warned employers can't afford the uncertainty of the affordable care act. >> we need certainty. the fact is, employers aren't

seeing it. the political pressure they push back on the employer mandate, but there is incredible uncertainty about the so-called affordable care act. i visit the firms, the companies, small businesses, we don't know what is going to happen next. we're not going to take the risk, even though we have the potential to grow our economy, we have the customer base that wants us to produce more, we're reluctant to go over the 50 mark, the full-time rate. >> where does this all go next? >> for someone to say there is uncertainty in obama care, that is not the lead, obviously. you'll hear things like that from scott. the two aspects is one, yesterday, the president, up with of his hometown papers in chicago, the tribune said, bottom line, in an editorial, bottom line, let's delay and rewrite this ill conceived law, three years of attempting but failing to make this clumsy monstrosity work for the american people, already too long. that's from the chicago tribune. the other thing we see are the competing pr machines of the

opponents and proponents of this. today, usa today says the signups with people all worried about, you don't get enough healthy people signing up, you won't be able to implement this, it is running above expectations. 8.5 million in only 19 states where they wanted 7 million total was all they were looking for. so that would seem to be positive. and then the other thing, do you guys know at this point is it going to cost more or less? we have seen new york say it is going to be much less. every other day we see ohio is going to double -- which is it? it depends which pr machine is running on any given day. is this going to be -- when this finally starts in october or then next year, it is going to be interesting to see if this is going to be done. >> i'm sick of wasting congress' time to pass more laws to repeal obama care. how many times have they done that now? >> right? you know, if you try, try again as the old expression. i'm with it. >> okay.

finally we have one final under the radar story. this has been reported by cnbc's dotcom's john carney. ray dalio's hedge fund wants to build a new headquarters in stanford, connecticut. but bridge water associates is running into serious opposition from boat people. that's because the piece of land that bridge water selected for new headquarters is a 14-acre strip gutting into the long island sound and until recently a boat yard called brewer yacht haven. a couple of years ago a development company closed it down and tore down the buildings on the property. they were outraged. earlier this month, bridge water's opponents crowded into a planning board meeting to voice their concerns. john carney described this as the 1% versus the 5%. >> those are different kind of boat people. >> the boat people aren't exactly the commoners here, but the carney piece has an interesting interview with mr. cutler, the architect of this building. he walks through some of the arguments for building this. one argument for interestingly

is that it would have less pollution than what is there now. not sure how that would work, but trying to claim it would be a good thing for the community. >> used to be a gasification plan or something. there used to be some serious industry there in the first -- >> but not for a while. >> this reminds me, andrew, of when rfk jr., the wonderful environmentalist tried putting a windmill in his view at hyannis port and see what happens. that's what this reminds me of. i'm green, just don't mess with my lifestyle or john kerry not paying taxes on his yacht, parking it in rhode island instead of massachusetts. i love the limousine liberals. and their response to some of this stuff. >> i'm not directing this at you. >> i don't know where i'll park my boat. >> i know. i'm not directing this at you. but do what i say, not as i do. >> that's your exhume edecutive this morning. home depot is higher. we'll talk to an analyst for the

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risk includes possible loss of principal. welcome back to "squawk box." home depot shares getting a boost on better than expected earnings and revenues and upbeat guidance for the year. joining me on the sgaquawk news line is brian neagle. home depot attributes this beat to seasonal outperformance. what do you attribute it to? >> they call it the seasonal category. first and foremost is investors reviewing this, they'll focus on

sales. that 10.7% comp or 4.7% comp is a positive response here. they called out a really category across their stores. >> brian there was some worry that going into this report the weakness in single family home starts would be attributing to some weakness here. also valuation. do you think we are past some of those risks here? do you think those are still waiting in the wings? >> i know there has been a lot of debate about the strength of the housing market. i will get it, i spent a lot of time studying housing indicators. i think the housing market is recovering really well here. a lot of this has been the noise, with the concerns about interest rates and such. i think the housing market is recovering quite well here. i think home depot is capitalized on that wealth. as far as valuation goes, i still view home depot shares as inexpensive. when i look at the ultimate earnings power of this company, if we're having this conversation two years from now,

we'll be talking about a much higher level of earnings for home depot as they continue to recover. that's when the stock is still cheap. >> what is the optimal valt wags for the stock. going into earnings, 19 times forward earnings and some were are aing that was double what it was at the peak of the housing market in 2006. why are you justifying valuation here? >> i think the key is what they're going to earn. as people look at the multiple now, they're saying 19 times this year's number. this year's number is still a very depressed earnings number for home depot. i think the earnings power is a couple of dollars more than where it is now. ultimately this is probably in my mind a 12 to 14 multiple stock. it is going to take us a while to get to those earnings. >> brian, thanks for your takeaways. we'll leave it there for now. brian nagel from oppenheimer. coming up, one of our favorite favorites, predictions from our fan favorite market watcher, mark grant. he'll join us next. i don't think he's going to impress us this time, but we'll

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from market commentary to invisible people, our next guest writes about it all, we know mark grant is managing director at southwest securities group, but also the author of a new children's book. and it is "lila: the sign of the elfen queen." it could be the 11 queen. but it is not. what are you doing? andrew was surprised you had -- someone that basically just watches europe and the rest of the world in horror can write a book for kids. >> the reason was i had a dinner part at my house, joe, and the people were saying there is no decent book for kids. they had monsters and vampires

and i thought about it and thought i can do this. i'm going to do it and i wrote a modern dare fairy tale that has nothing scary in the entire book. >> really? and the -- for ages -- >> 3 to 9 probably. >> 3 to 9 you can still find good night moon and a couple of the -- >> that looks like a long book to read to a 3-year-old, though. >> the book is, like, alice in wonderland, but no queen in there taking off anyone's head. >> i think it is still early at least for our guys 3 years old, hunter and max, we're still on good night moon. >> but they would like fluffy the invisible dog and the girl gets to be a princess because she has the sign of the elven queen on other forearm. >> kids will eventually want some action. i don't think hansel and greatle getting eaten is a bad thing about a fairy tale.

kids love scary stuff. i do. >> but you're older. >> i watched my kids grow up and, you know, now it is just it is over the top, watching the ring and stuff like that. but let's go on to something that is a little bit scary. are you surprised that emerging markets just with the prospect of cutting back on 85 billion that we're seeing all this -- what, if we really do something, what kind of dislocation are we looking at. >> you're seeing emerging markets get creamed, i think, for two reasons. one is the tapering. two, european banks under basel rules are cutting back tremendously. you're seeing a lot less available cash, liquidity in those markets and people are exiting in droves. that's not the headlines they're writing, is it? >> the headlines, come on. not as good. >> not as interesting. >> if it is a story about -- where is that money going? i imagine when we see some numbers out there, usually on

thursday, just a couple of days, we're going to see some massive outflows from emerging market funds and also from bond funds as we have seen yields rising. where is that money going? >> going back into cash for most part. 1% is being reinvested back from the equity markets according it data. you're seeing a tremendous amount of money go back into cash, money market instruments, and frankly to follow up on joe's comment, i think the emerging markets are getting creamed, bond yields going substantially higher. i think the equity market is going to be impacted severely coming up because of that. money is just flowing out because people are nervous and worried about what they're going to do. >> would you be positioning for tapering in september or later? >> i think you position regardless of whether it is september or later, as you know, five minutes after the fed made their first announcement, i was out saying, take money off the table. and i said for next three days,

take money off the table. and that was the right call. and i still think that's the right call. you can see further spike in interest rates, but you're going to see a very funny yield curve. short end here and on the wall up -- >> that implies that all of their actions, we had someone yesterday saying it was all ineffectual anyway in terms of boosting the stock market. you would say that a lot of what we have seen is imaginary, the moves in stock prices, it was effective, but shouldn't be at levels like that. >> i think the fed's injection of capital, between redemings and everything, is about 100 billion a month and was very effective in raising the prices. >> it was effective, but there is a piper to be paid. >> yes, the piper is going to be paid and i think as yields rise and compete with equity -- >> there is a wedge between the economic fundamentals and where the stock market is now, and the

fed. >> i would agree with that. >> someone who looks at europe in horror and looks at many times you've pointed scenarios that scare me in europe, i mean, greece is the size of delaware or something. what happens when the united states -- are we in a position where we have built up so much dislocation, nonmarket sort of influences that we're -- we have a massive -- is this going to come home to roost? >> no, joe, i don't think it will be a massive, like, downdraft. i they will will step down. i think the equity markets are going to get hurt severely. >> 20%? >> yeah, 10% to 20% i would say depending on what the fed -- >> one is a correction, one is a bear market. >> yeah, but it is going to get hurt. if you look at all the markets, commodities, copper, gold, emerging markets, bond markets, we have every market in the world -- >> the exit is going to be ugly in one way or another. >> not going to be fun because a

lot of people think the party will go on forever. i've been on wall street like you have a very long time. the party is going on, never stopping and then it stops. >> you've been on longer than i have. >> yes. much longer. >> you need hair dye, right? >> well, you know. my hair. come on. >> looks good. >> thank you. >> thanks, mark. coming up, the call on the consumer. we heard from home depot. still to come, a few other data points, jcpenney, best buy and barnes & noble. the number and instant analysis. stay tuned. [ male announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track.

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. >> elle magazine is having its largest issue in history. do you know who is on the cover? >> that's kate. >> first name basis. >> just kate? >> shackman not shackman, darren brought her to the correspondence. she had a really bad blemish. it was cute, she was 17 or 18, she could care less for obvious reasons. >> she also has a mole. >> kevin o'malley is here. is that true? kevin o'malley is the publisher and chief revenue officer, this is your biggest issue in

history. >> it is. >> it is the big moment for many magazines, for all fashion magazines. >> well, especially in the fashion and beauty categories, it's an important metric. mostly because so many of our core advertisers in the fashion beauty space, that's when they're launching a lot of new products or collection, of course, the fall collections and if designers tend to emphasize that because, of course, it carries right through the important holiday shopping season. so it's a kickoff to all that and -- >> it's like the confidence among the retailers and fashion deniers out there about the economy. it's sort of for us a little of a different metric to look at. >> well, i'd say that in our reset economy, that you talk about every day, it's a bit bifurcated in the space that we operate in, in the fashion luxury upstale prestige beauty

space, actually, business is very good the retailers are seeing very positive results. i think this consumer has reset, may be spending less, they're spending again, wisely, they're buying the brands they really love. >> you guys have done a lot of interesting things in the digital world. it doesn't seem like it's hit the magazine world yet, more and more people are wreaked print online, it's starting in the digital world, next issue which is sort of this cool app. i think we have the founder of that on a month or two ago. five years from now, your sense, people going to pick up magazines like nay always did or will it shift to a digital space? >> some will. i think we will see a continuing separation in terms of our readership. here's the story that's really not being told. it's interesting, andrew that you said magazines seem to be, you know, catching up, the headline for us since it's our largest issue ever, it doesn't

tell the full story. i can tell you one of the most significant droifrs of that is that the other milestone that we set for september, the highest total revenue on elle.com for a sing him month since it launched in 1996. and the highest ever for a magazine site at hearst. so as we continue to evolve as a multi-channel brand that is, of course, on elle.com and all of our social media sites, we have 2 million people on google plus, nearly 2 million on twitter and facebook. so this multi-channel approach is really indicative of the single biggest thing that elle is leading and many of the er magazines, which is our transformation from operating as a magazine brand to a 21st century content brand. >> you are doing data, dating? >> sure. right. >> you are also doing google glass. >> google glass, yeah. >> if i look at google glass, what am i seeing?

>> well, if you look in google glass, you will be seeing a wide variety of content. obviously, as you know, it's eye we're, it projects on to a little screen that you look at in the upper right corner of your eye, specifically for elle, what you will be seeing is you will be getting a lot of snackable content from us on a daily basis, actually our blog from elle.com. it will be the only magazine feed a part of the content feed on google glass. one of the reasons for that is they really want to connect with the influencers on both men and women and the influencer is at the heart of our demographics. so we will be serving up. >> what's the percentage of the revenue that comes from magazines. >> the percent annual of revenue for -- >> for the magazine. >> vs. digital. >> oh, we're writing at about 85% print, 15% digital right now. >> thank you for coming in. it's all very interesting. >> my pleasure. >> i want to talk about marissa

meyer that's a different magazine. >> that is. i will talk to you about kate. >> you are on a first fame basis. >> coming up, the global mining company. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

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. >> good morning. welcome back to "squawk box," take a look at futures, see how things are settling themselves up. a lot better than we were a half hour ago. the dow looks like it will close up higher, the s&p 500. >> this all could be home depot the s&p 500 biel call eight point for now. let get you through the morning headlines, the home depot the dow earning a dollar.

that's 3 cents above estimates. the revenue beat consensus. the home retailer raised its full year earnings and sales guidance, due to a rebound in the housing market. while investors look to the anticipated relows of a new iphone, next month, there is less enthusiasm for another part of the apple franchise. the u.s. sales were flat year over year, piper jaffre telling all things d that he expects max sales to be down 5% this quarter compared to a year ago. finally, we are watching shares of the auto maker tesla, that stock higher following news that its model '01 got the highest safety rating of any car ever tested by the government. if it looked leak i was about to laugh. that was because kayla was about to sneeze. >> i realize that my mic was sill on. so i covered it. >> i was trying to. >> to look away from the light.

will help. >> i smoez that works. best buy is out. i've got -- i haven't looked at it yet. >> i will check out best buy if you like. >> i don't know. >> go check it out. >> do you want. you start. >> regardless, take a look at shares, they're up just about 6% in the premarket right now. >> all right? >> a little turn around it doesn't lock like it was a good quarter for the retailer. >> i will try to do it as quickly as i can here. operating net, it says adjusted 32, but from continuing operations, 69 cents. i haven't hit up the estimates yet for bby. the estimate was 12 cents, so i'd say you used the 32 cents probably. revenue well is 9.3 billion dollars and slowly my machine is bringing up my number 92.99. so that was right in line with expectations, comp store sales

fell .6%, be you domestically, it was down .4%. overall sales were up 10.5%. >> you get a good manager in there, actually in good business. >> we don't know that. >> it was interesting, a lot of people thought he was there for the interim until the company got bought out. it turns out he is the guy. >> now, it went from 11 back to 30. >> you know, we had, remember we had one of the original guys. not the founder. the brad anderson was in. i talked to him from my experiences where i something there. they said, you are supposed to match it. they go, no, no, i go, i can take it back and boy it at amazon? they go, we'll take it. i go, why don't you match the price? i told them the story.

next thing the ceo was gone, the current one, right. >> you want to take personal responsibility for that firing? >> as you get older, your delusions get grander and grander. they do. >> largely this year, i did price match at best buy a camera. i wanted to use it in the store, to snap it and see how the pictures looked. i saw amazon had a cheaper price. i showed it to them on my iphone, i think they are banking on enough people not doing that, but it sounds like it's working out for them. >> one interesting point, we keep comparing best buy to amazon, the biggest exceptor is actually wal-mart. >> okay. let's get to mr. graham, billitin reporting a 15% drop, announcing a series of spending cuts as it battles falling commodity prices lee, so many pierce an competitors. the shares are sending them lower down about 2%.

here to break down the results is graham kerr, he is cfo. we hear this all the time, graham, you can't dictate what happens in the world. you just need to deal with it. it's a tough environment in terms of commodities. we had people say the commodity super cycle is over. do you have to take that into account at ghp? >> look, i will fight this on those results for the fy for the year. there is no doubt our profit result is down versus the previous year, largely with the drop in prices, which had a negative $9 billion impact. with the wage and control, volume grows 7% year on year. we pulled $2.7 billion of costs out of the business. at major projects, it remains on schedule and bucket. at the same time, we have a healthy margin of 33%. >> bow. as far as where we were three or four years ago, we saw companies like caterpillar deciding that

mining was going to be the place to be, you know, for years and years to come, making a huge acquisition which changed to some extent. what danged in the world? graham, can you explain to us what happened? >> i will character rietz, you know, for the time they were in 3r50e6, they were with supply, we are struggling to keep up with demand, which led to very high prices. where are we today? you know, we see more supply coming into the marketplace. as a result we see more of a balanced market. but i think it's important to the understand when you look at the emerging economies, in particular china the growth rates are 3 to 20% in long with government expectations are still very healthy, as a consequence, we expect to see continued demand for our products. >> in terms of, avery, you want to go on to your bid? >> no, i don't need to do that yet. go ahead. i know where you want to go. >> if you want to talk about it.

we all do regulatory kens for vhp. andrew and i disagree on this graham, i guess we'd characterize it when in rome, i think you need to do as the romans do. but can you comment on pending regulatory issues with bhp billitin, the glaxo type stuff in china and elsewhere? >> okay. look, we put out a press release. we are currently cooperating with authorities. we can't say much more than that at the moment. the investigation is still under way. >> how, as far as business goes, in china at this point, do you have a macro view on whether the worst has been seen there? >> i i think again, growth rate, what are we seeing at the moment in line with consensus, it's 7 to 8%, which i think is healthy by most standard. as we go forward i think as an

organization, what we consider is as time goes by, china will shift in terms of it will move away from an economy that's building off the infrastructure to a company that needs to have more energy products and more food production and as ono, we think we are very well equipped to meet that growing demand. >> graham, last week, we saw a lot of the big hedge funds here in the u.s. put out their filings from the second quarter. we saw a whole lot of them dumping their physical commodities, dumping gold, dumping copper, but actually adding some of the minors, do you think that's the right thing to do? do you see there being growth prospects for tear sectors going forward or do you think it will be a tough slog for the next two quarters? >> absolutely. i think growth will continue. the emerging commission are developing. they will still have a need for our product. history is showing the ability to supply and meet this growing demand is challenged. >> as far as, go ahead, andrew. >> so i just want to go back to the bribery issue for one

second, graham, which is this, i know you probably can't sustain must have, but if you could speak broadly about the rules, the rules about anti-corruption, the rules about the foreign corrupt practices act. do you think it need to be changed, modified? is there a way we should be thinking about it? the government is too aggressive, not aggressive enough? take yourself out of it. i know you probably can't comment on that aspect of it. as a business dealer who deals with this every single day across the negotiation they're important. >> i think it's clear there is a lot we can say about the ongoing investigation. it clearly is a company that operates in this sector. we watch developments with interest. it's not something we have a lot of influence over. >> i tried. >> graham kerr, we appreciate it. thanks for your time this morning. we hopefully will have you on in the next few quarters as well. >> all right. a whole lot more coming up next on "squawk box." we relevant come guest host

david darth. plus we drill down on home depos numbers. reporting a short time ago. check out the futures right now. it's moved a lot in just the lost hour, largely because of home depot the dow opened up 25 points. "squawk box" will be right back. .

. >> welcome back to "squawk box." good morning to both of you. i would like to start with mark for a second. i was reading the notes you put out. i was happy to see you think we are going to rally into the fourth quarter. yet, i'm a little anxious because you think it's going to be choppy between now and then. >> well, we do think that. what we think we're seeing is the market derating, if you will, given the fact that earnings expectations i think are a tad ambitious going into the end of the year, in order to get to the still $110 analysts are expecting for 2013. it would require double digit growth rate here in q 4. given our most recent experiences, seeing low single digit growth rates on a year over year comparison, it seems unlikely we are going to get there. s a a consequence, fwimp the market expansion the market

multiple, it suggests perhaps, we are due for a pullback to reconcile to slower earnings growth. not be it a deep dive in equity prices, a correction of some substance, which i think ultimately would lead investors to come in at lower levels than where we are today. >> to clarify the point, where do you see the dow or s&p, for example, ending theier. i understand rallying into the end of the year, if you think we will take a nosedive in the next month or two, we rally back, that's nice. where do we end? >> we said the number we could achief we thought we gould get to 1,800, we ned to see something with a skate velocity.

sort of that, though, barring an event. . >> david, where do you come down? >> saying 17 point 50 is a good bit ahead of itself. we got monetary stimulus. housing. you got the consumer, production. now europe is starting to lock a lot better. this latest gdp stuff in ten quarters. we'd like the way europe is shapeing up. that's an important contributor to many multi-national earnings as well. >> i know both of hate market timing. we can time it right. going into september, how are

you telling your clients to be positioned vis-a-vis whether we have a taper or not. >> we are overweight cash. we are expecting the market, the 3084 as you know is up to 380 or something. >> you anticipate it starts in september? that's our base case. september 18th. >> mark, same for you? >> same thing, andrew, we think we will be seeing it in ford gains. at the same time, we expect to see choppyies we've accepted investors raise cash. >> we are seeing it now? >> yes. >> by the time it happens, this is what we are doing now. >> what do you do with that detail? is that cash used to boy equities? >> we would be indliend add gross stocks.

if and when this tapering takes place. put some money into europe. we would add more to japan. we like yourngs japan. in the fixed income space, stay short that was the 30 year and 10 year. it's cost you 20% on the 30 year an 11% on the 10 year. so you want to be very careful about being too long. stay away from the inflation protective securities. keep plenty of cash. but a moderate high net worth investor, kayla, we would be 23% much short term. >> what is a moderate to high term investor? what does that number look like? >> a moderate investor is anybody with a million dollars and up to invest in investable securities. below that, you'd have a little

bit less in cash and short security. >> so i'd say either one, mark. when the market isn't up because of qe. when qe starts ending, it will be for a good reasons, because the fed did the job in the under lying economy, responds to all this accommodation and the market isn't necessarily just, doesn't have a huge air pocket based on just fed action. there is a reason why, it can be valid, justified, to be at cell phone 00 by the end of the 84, is that what you think? >> joe, we lampblgly think so. the '09 lows isn't just on fed manipulation. we think it's largely validated. yes, we expect to see rough waters for equity provisions in the absence of qi because those

who believe question need to see rick assets rise, are going to probably vacation the market, step back. ultimately, if it's on the back of stronger economic fundamental also, like david we do believe to be the case, that suggested you want to come back in risk assets. is there any argument anybody will be doubleing down? it happens if everyone is talking about a rally in the fourth quarter. i don't know if everybody is. there is enough people talking about it you think this swoon that everyone is talking about may never come. >> it's been that kind of a year. you've had only one month down this year, except for august. it was down 2.4, june was down 1.3. people have been in the buy the dips mode. no question about it. >> we bought the to go.

what does it money when you favor a tweet? you don't have to, when you, mark has only been unone other time. -se one of your favorites? >> when i favored a tweet? >> you said these guys are our favorites. is mark really one of your favorites? >> mark. >> do you think what andrew said. >> i'd like to think so. >> do you believe him? >> i'll tell you what happened. >> i want you for the -- >> mark, i love you, i saw david. david has been on this show many, many times. >> then to introduce. >> another guy of favorite. >> he says nobody, that's unfair.

>>. >> those favorites. >> we'll speak to david after this. coming up. >> don't listen to them. .

. >> welcome back. protests continue in egypt. is muslim brotherhood has been arreste arrested. >> more uncertainty then. that's the least you can say at this point with the news that the head of the muslim brothers. state television showing a man distraught they were charged with insighting violence back in july. will make the political scene more intense and complex as well. another news, likely to complicate the situation much further is the possibility of release of the former president hosni mubarak. now, again, as we understand

from judicial authority his detention period has maxed out. decision will come through tomorrow. people are talking about a realistic scenario. arguably, the military could ill afford more demonstrations at this point. within all of this, you have ongoing discussions to the egyptian military. the white house insists it is made, all forms are under revow with the flurry of developments. trading to the upside. for you no now, it's back to you. >> thank you so much. >> coming up next on "squawk box," we will get a retail round-up. we will see if the retailer, what they're saying about if

latest board room drama. plus reaction to home depot's earnings. find out whether or not you should be buying shares him all that returns in just a moment. .

. >> welcome back to "squawk box." phil falcone has agreed to a five-year ban to the financial industry. he admits to wrong doing brought by the securities and exchange commission. an earlier proposal had been rejected as being too leanient. he is accused of improperly using money from his hedge funds. fraud case stemmed from 15 million shares of the company followed by a billion dollar sale patent to microsoft. he announced that on this program, too. the company has been accused of knowing that stock when it is imminent. they predict it will be as high in 2008. the number of americans

traveling 50 miles or more is riseing over an increasingly positive economic outlook. >> all right. another big story on j.p. morgan today yet another day it's back on the government's radar screen. this time the doj is reportedly looking at whether the bank manipulated the energy markets. >> hey, kayla. it was another broo broad side for j.p. morgan yesterday, literally, 36 hours after another inquiry came to light. with chinese officials. now it appears there is another active investigation into another aspect of the bank's business, in this case the practices it used for winning power contracts in california and the mid-west. j.p. morgan has been down this particular road before. a few weeks ago, it settled over allegations that it used a dozen different tactics to manipulate the price between regional energy. it ended with a landmark fine

for merck. it put to rest at least concerns that merck would go over chief masters who was at one point accused of invading the bank. they said the commodity business is for sale and hoped these tremendousveils were hientd. on the day of the settlement, in an interview, they called the j.p. morgan energy probe a minor matter on cnbc. it appears to not be. the u.s. attorney reportedly opened his own case into the abuses outloinened and it is not clear anybody is off the look hook. don'tphoric, we are on the heels of yet another criminal case he brought and that is ongoing on this j.p. morgan london whale traders. >> it's certainly an interesting development. it keeps spiraling. we want to ask you a few more

questions, reporting a second quarter profit of 124 a share. reaping the benefits of a recovery in the housing sales rising nearly 10% to $23 billion t. senior research analyst joins us now with his breakdown. thanks so much for being with us, joe. interesting that the market is moving this much on home depot. we also have j.c. penney hitting the wires. stock up 2% on its earnings, we are seeing hitting the wires just now. what is your take away on the retail sentiment and the consumer right now? >> i think people are saying the concerns for home depot were the expectations too high. they came out and boat it. they did a 10.7 same store sales resolve. the street, the numbers i was hearing was like 9% or so.

they boat that. they raised their guidance and had a solid story. >> what we're looking at here is net sales of 2.66 billion. chairs with 2.302 billion in the second fiscal quarter 2012. same store sales declining 11.9%. what was your number? what was your expectation there? >> you know, off the top of my head, it's dana's company. i don't have the numbers. the expectation were low there, it's a decent result, relatively speaking. i think there is hopefulness j.c. penney will turn it around. i think on the hard line side is where best boy had terrific numbers. home depot had strong numbers. we will hear from dick's sporting gods later. >> jc penney $2.66 billion for

those revenues. joe, when you think about home depot and the consumer and a rising mortgage rate environment, are you seeing the disposable income of some of these consumers actually getting hit before we get to the end of the year? and is that going to affect tear abilities to improve their homes? >> no, you know, i think the wealth effect is actually helping to drive sales. if you think about the installed base of homeowners are mainly set. you know the new homes or the turnover of homes is a pretty small turnover of the market. probably almost 85, 90% of home debow sales come from people saying put. if they feel better about the value of their home or the jobs situation, they're investing. you see project spending. seasonal sales are solid. home depot, loes are well positioned going into the back half of the year. >> what about valuation?

if you look at 19 times right now? that's double. the last guest said he thinks eventually it's 12, 14 times earnings stock, it has room left in this particular rally. do you agree with that? >> i think there is room left. our target price is $88 as an example. i think water helping to support, if it's beyond the overall housing and macro, don't forget, they will buy $6.5 billion of stocks, buy backs. the dividend is 2%. about a 50% payout ratio. they're rewarding shareholders, regardless of what the current trnd are, they are locking to be solid for at least the next year or so from our van teenage point. >> one thing we've always admired about home depot they have a 28% of return. lowes is 14%. part is driven by the higher efficiency of home depot. they managed to turn over the

inventory, lowe's 3.3 times this year. we like home depot and lowos, we want to watch the efficiency in a market you are talking about with higher interest rates putting pressure. >> what is your take away? lowe's is similar, what are you telling clients from an investment perspective? >> we feel like in the near term, you want to be playing home depot. the trends there are more robust. they're outperforming on a same store sales basis. that said, lowe's is in the secondary markets in a lot of major areas, those outer suburbs. as they pick up, you think lowe's will start to do better. there is operational efficient sis they will pick up as well. i think a kind of a near term, long term difference between home depo versus lowes, they correlate highly with one another. so you kind of do okay with

both. >> all right. we will leave it there for now. >> it is pretty interesting. jc penney's is cranking, even though the bottom loan number was twice as bad, the loss was twice as bad on an ad justed basis. it's 13, look at it. 13.94, is that 5%? i don't know what to attribute it to, other than did you see the one comment? >> they're encouraged, in same store sales, monthly comps can improve sequentially each month in the second quarter. each month. so for that to overto him doubleing the loss estimate is, i don't know, i guess that's something. now, i was hesitantt to talk about it because of what you said earlier, you had someone tell you don't talk about j.c. penney anymore. >> they said the ackman side. i was afraid to talk.

you said earlier, there are people that said. remember mike ullman's first quarter back. some people might by a tikrit the earnings to the lagging effect, same stores going forward. >> it didn't you have quest rom when i was -- questrom out within i was out too? >> he was on up for grabs as a potential chairman for the company. now that ackman is out. i think that might be harder. it sound like he was orchestrating that situation at the time. >> allen questrom is really one, yes. i mean it. >> throw away, turn, fill time. that cheapens it. >> david is one of my favorites.

>> is he really? >> i'll give you five reasons. >> i'll give you five. up next, marcus lemonis, host of the cnbc's "the profit." . this evening's new episode, it's a cool one at 10:00 and checking the futures, quickly, home depot was good, j.c. penney is good, too in terms of the stock action. maybe we'll get a bounce today. .

it's time.

>> you have to understand if you try to change the brand of our company, somebody goes off and does a different thing. >> we made rules. >> if i made decision, no one says you can't open a file on illustrator and play around with it and come up with something you like and sunday it to the designer. >> you didn't do that. you tooing the elements we came up with, you went off on your own and ended with a product without including anybody in the

back half, robin, it's not about the bottle or the e-mails. it's about when we make an agreement and we're going to work together, i shouldn't be categorying things and you shouldn't be changing things, it violates our trust. >> that's just a preview of what you will see tonight on the latest episode of cnbc's prime "the profit." the man behind this show marcus le monis. i'm afraid to say welcome to our show. you might say it's your show too at this point? you snapped at that person, marcus. >> joe, now that i know you miss me, i'm be there next tuesday. i didn't know you missed me so much. >> i do. i like the physical side, the physicality of when you are in studio. >> i know. >> how much, she started saying my company again, that was a key thing, she might not have a company if you weren't involved at this point? >> it's not even about that, joe. you want to give people,

particularly small business owners to understand it's about us and we and not i. >> you were being nice then, that was a team word. i thought i was the boss, you better do this if you want to make money, you have to listen to me i thought you were saying. >> there may have been a little of that. i had enough experiences with her saying i, i, i, i had enough. you have to watch. i won't give you too much. >> is there a good idea, are there times it's eco-me, an all natural cleaning supply company, it sound like it makes sense. then there is times when i think about food that has no preservetives, you know, i feel i'm going to get listeria. there are times when you want things to work. sometimes cleaning solutions have to be toxic, don't they? >> you know, they don't have to be toxic. i'm not the biggest grown guy you will ever meet. i did try this product in my home. it works. this isn't an infomercial. if i didn't believe in the product, i wouldn't put my money

in it. >> at this point what are the business lessons that this particular episode will show you. can friends, i know that's one of them, that might not be the best way to do something. someone has to be in charge and nice guys finish last sometimes, right? >> there are a couple business lessons here. one packages and presentation are the most important things in business. if you sell a product on the shelf. the other big less on is if you don't have a sales team or focus, you look at j.c. pen fi, if you are not focused on seas, all this other noise isn't helping us make money. >> when i was, one thing i always had trouble with as a stock broker, everybody does, that's asking for the sale, then you can, a lot of people can have a prospect giving so many buying questions and if the client doesn't actually say i want to do it, it never happens, you need to be able to say, ask for the sale and then close the deal. they weren't doing that, i guess? >> well, there is always two

things in sales i know you know, one is asking for the sale, two is knowing when to shut up. so when the customer is about to buy something, sometimes it's better to shut your mouth and let them finish the sentence. >> instead of messing up the deal. is everything else at this company going along as it should be? do they have best business practices for the supply chain and as far as manufacturing go? >> well, they didn't, joe. i spent about $180,000 putting in all new machinery, it would take them a day to fill 1,200 bottles. now they'll fill 1,200 bottles in 20 minutes. so the orders are flowing in. we finished the episode a month ago. we made a number of sales calls. i'm pleased to tell you business is really good right now. >> really, at this place? >> at this place. when i talked to you last time. i haven't talked to you in a while. the one company you had turned around was going to make enough money to pay for most of your involvement in this whole dole, right? then this one is going to

actually be a combaen company that you will keep. >> yeah. this is one that i'll keep. it's funny, when you are on vacation the deals go bad. when you are in, the deals go good. >> look at the market, it was down 9 out of 11 days. i know, i think i told andrew, it's having a voice of reason can help, can't it at times? >> well, it can, i'm not sure if becky's voice is a little better. >> maybe so. do you watch this show yet? >> i watched a couple episodes of this show. i think it's a great motivational device for people with small businesss to see what you are doing. the new equipment you brought in and the focus on sellings, revenues are the co-. so i just love. that i think it's a very motivational experience. you get pumped up watching this show. >> bell, you know, one of the things we're finding in a lot of these small businesses, i'm getting a lot of tweets about it, facebooks about it, is that small business owners and ploy i don't see can take away one thing from this show, the most

simplistic thing and make it better, the network have accomplished its mission. >> i remember when lloyd blank said for doing god's work, it rang a little hollow, although, i wasn't as nasty as some people on the lot, entrepreneurialship, marcus, if we can somehow inspire just across the board, regardless of your ideology, i mean, andrew, i know bono said that months ago, now it's getting play. he said any aid to africa's band aid, what will do it. >> capitalism. >> you got to create commerce. you got to create event (newership, innovation. that's what lifts people from a lesser position in terms of prosperity to a greater position and, you know, if are you good at it, that's where job creation comes from, it doesn't come from the government digging a hole and digging it back up. >> joe the key to this whole thing is keeping it simple. i think what a lot of people are

doing is making it complicated. whether it's a $6 billion or $2 billion company, it's staying to the basics, keeping things simple, not overcomplicateing things. i don't like a lot of layers of bureaucracy, it adds and distracts people from their focus. buy product, sell a product, make ma gin, make profits, give distribution. >> hire people, make more demand, hire other people. >> you comment on this, they say it's the biggest crime in the world in small business to price your product too high and it's the biggest sin in the world to price your product too low. any comment on that? >> yeah, what i find in most businesses, people price to basically try to make margin as opposed to pricing to market. so as most people know on the sell side, it's not what you sell it for, it's what you boy it for. they price it on i expect a 50 or 75% margin because they read it in a textbook. what they need to do is study the market, understand what their competition is selling things for and price that. if they're not making enough

margin on that, they're either not it right or it's all screwed up. that's one of the basic things you can get these businesses fixed. >> we bought the to go. you don't know whether you've actually sold on rv that became a traveling meth lab, do you? that has never -- >> i don't think you want any part of that, joe. >> on breaking bad, right, andrew, that's how that -- >> that's what happens. >> because you sell 20% of all the rvs in the country, right? >> i do sell 20% and the fact the rvs used in the sew are from these. >> there are. but you don't really care about what people do with them afterwards. >> marcus. >> i think walter white did well, down he could have helped walter white? >> don't say anything, i'm not far enough along to. >> yeah, marcus could have helped with the meth lab. >> no, we're not going to -- >> okay. guys, get back to work. we have work to do. >> then you do, too. see you later.

>> check ought "the profit" tonight you don't want to miss it 10:00 eastern time. up next, shares of jcp, they're higher after reporting results. some thought they were ugly, the wroet reaction seems to me the opposite. in the next hour of "squawk box," they will join us with the latest investment outlook. "squawk box" returns after this. and to keep our commitments. and we've made a big commitment to america. .

s. >> welcome back to "squawk box,"

best buy soaring. the retailer reported a profit of 22 cents per share, 20% above estimates. a huge feat, results were helped by tighter cost controls, best buy did warn that certain costs such as mobile warranties would rise in the second half of the year. nonetheless the stock has been on a tear this year, it's up about 97% just in the last 12 months, onunbelievable turn around for best buy, based on this quarter's numbers. >> we are up 16. >> look at that. >> it's tripled for its lows. >> we are continuing our retail watch this morning. j.c. penney reporting a short time ago. the newsline, trying to make sense is managing director at imperial capital, cnbc analyst courtney reagan is joining us this morning. explain this to me the company loses $2.06 a share, the same store sales are down 11.9%. the stock is up nearly 6% in the premarket.

mary. >> yes, i think there is two reasons for that. one, if we look at the results, i would say they're very much in line with what we expected. comp sales were down 11.9%. we were locking for them down 10%. that's a sequential improvement from the 16% in the first quarter. so i would say the numbers are closely inlines, ebita was negative 2.24. that was worse than our estimate. again, the biggest impact on the cash quarter we estimate at 1.1 billion was due to capex which was 439 close to our 425 million stills a and the increase if inventories asourcements back into balance request more private label resonateing with their customers. also, what we discovered is that we were seeing a sequential improvement throughout the quarter. so comp sales were improving. i think even bigger than the news in the earnings this morning is the fact that a

significant investor, kyle bass, there was an article reporting they are betting on j.c. opinionny. it doesn't seem to be through the equity. it's flew the term loan. we actually have an under performed rating and an $8 price target. even though we believe in the turn around, we're assuming ebita recovers to a billion of positive ebita in 2016. we can't support current prices, but the debt, we think, is a great way to play the bet on j.c. penney's turn nd. >> hey, courtney, mr. ullman the temporary ceo, long-term ceo, nobody knows what he is anymore. but he says he is encouraged by what's going on in terms of the back-to-school shopping, it is very encouraging because of the promotions they are doing. seems to be encouraged by the progress thus far. are you encouraged? >> i'm not sure if i'm encouraged. it seems like some of the trends

j.c. penney is citeing is the improving sales throughout each of the month of the quarter is what we have heard from. a lot of the retailers, though, it's harder to say, it's a broader consumer action. whether it's weather or payroll tax increase finally settling in. is it something that j.c. penney is doing better. i'm not so sure. >> courtney, we got to run. we will talk more about this in a little bit. mary, thank you for your perspective. up next, block rock chief will join us with his latest outlook. "squawk box" is coming right back. [ female announcer ] a classic macaroni & cheese from stouffer's

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. >> electron ec best buy is out, that was right in line with expectations. we will bring you the numbers and reaction from an analyst who covers the stock. >> the fed is kicking off its annual retreat at jackson hole, we will ask black rock's chief investment officer how markets will react. >> new data on small businesses. >> my son harry and i are saving up our money top occupy u up a pet sore. >> i got worms, optimism as the highest level in five years, despoo it the slow economic recovery. more on the data first on cnbc.

the 31st i third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business world wide, i'm san drew sorkin. becky quick is off. our guest host our favorite, sincerely, genuinely, chief intelligence analyst at morgan stanley. >> we want to hook you up. >> chief capital. >> i'm saying it. >> we've had a busy morning. this morning, though, we will be working from j.c. penney, home debow, best boy, boosting levels. best boy reporting earnings of 22 cents per share. ref now also came in higher than expectations, joe kernen is kicking himself. >> we don't boy stocks,

obviously. no, i was kidding. >> i was saying that at 11:00, we thought was bricks and mortar headed to zero. >> we used to talk about it for the show on amazon. >> can you believe it is $35? >> jolly, he should get a raise. >> jolie. >> is the same thing? no, it's not. the same thing is not happening. >> no, it's not. it did report a second quarter loss 2.16 per share, more than estimates of $1.06 per share. revenue fell short of expectations. the stock is trading highner premarket. ceo mike ullman, this is his first quarter back at the helm. he said the early performance is encouraging. also, there was a report that they have taken a bullish bet. all of that is helping the stock off the highs in the morning. it is up by 3%. home depot reporting earnings of 1.24 per share. ref now was also higher than expectations. the dow component that everyone

was watching this morning for house sentiment, and the consumer will play out t. company raised its full year guidance to 3.60 a share. you can see that that stock is still up about 3.5%. it's big retail earnings day. we want to get back to courtney reagan in new york. it's interesting, when you think last week and this woke, you had wal-mart and nordstrom and macy's really setting a negative tone for the consumer. it seems like with these three companies, it's a little better. >> that's kind of a surprise, i guess, at least maybe out of j.c. penney and best buy, home depot we all expect to be good from the housing market. best boy, i was encouraged to see their online sales of 10.5 performance. they are making investments and improvements. we all know price comparison is so ubiquitous. we will seek to the ceo later this morning. i want to dig no those sales

numbers and see where that strength is coming from. perhaps it is the new shocks that they're doing with the windows store as well as the samsung store. we have to see there. j.c. penney, you know, there is a lot not so great. there is some encouraging signs there, the word encouraged, by early back-to-school, particularly those tax-free weekends. those were noted. i think that was probably more traffic than sales. at least studies show over the long run, consumers don't necessarily boy more on those back-to-school tax free weekends be you they sort of wait and hold all of their majority of their spending until that time. cash 1.53 billion. remember the company early on saying that they expected to have cash of 1.5 at the end of the quarter. so i think that is encouraging that that level do not drop from even a couple weeks ago. it was also interesting about the j.c. penney relows. they know that consumers haven't really responded with el to the

home section. both it seems in price and in a way that it's laid out. remember that was a very big nif initiative of those shops, divided by designer rather than category and it looks as if they are kind of re-visiting that, perhaps maybe putting all the couches towing and all of that some interesting things going on. >> courtney, i don't want to miss another best boy at 11 to 35. you have to really hold your nose like you did with best boy to have the, you know. >> conviction. >> courage to buy something at 11 and you'd have to have it at j.c. penney, too. i'm wondering, we choose to have kyle bass and the analyst, anna ross. she said the company can survive and then you bo i the debt but it doesn't mean the stock is going up. so she had an $8 target. is j.c. penney, does have it a chance of being another? i don't want to miss another one. >> man, that itself a big bet for me to make. i don't know. >> it's different.

best buy stunk, too. we thought they'd never sell another tv set. >> that's true. i don't think j.c. penney is disappearing tomorrow. cash is a colonel. it seems as if mr. ullman is in the stability. >> that's a $30 stock. >> it's not just cash, the fact that they've borrowed against every single dollar of cash they have. if they don't make up the sales to actually pay that back, it could be worrisome. >> that's true. let's get the key determinant. where are you? >> joe views this as an opposite day. >> no. >> i love it. >> and, therefore, it should not be -- >> i just wonder if there is money to be made there. >> there might b. i think there probably ultimately is. >> now you will short the company. >> all right. thank you, courtney, for rejoining us and for your perspective on this. >>let get a check on the equity futures. i think it's interesting that macy's and other consumer-related companies are what sort of sunk us.

you livably the sword, die be i the sword, now we are up 42 points. >> home depot is different than best buy or j.c. penney. >> we woke up in the emerging markets, almost everywhere abroad, we are selling buff because of the worries of fed tapering. even the second hour of this show, we saw asia and europe down pretty sharply, spain, greece, both down 2%. right now when you look across the board, still in the red there, the consumer at least is helping us bound back. >> here we'll see. let's check out and see if there is improvement there on what we are seeing here. a little bit. we'll see f. we had a big day today, they'd be up tomorrow. let's bring in a "squawk" market master. he is chief investment strategist at black rock. so, rorks we haven't gotten your thoughts about last week. the last two weeks, what have we been doleing with? do you think we are recovering a little bit today from that

negative sentiment we had about fen trading sessions? >> i think you recovered a bit today. our view is that it will be a much rockier september than it has been the last month or so. i think generally the market is healthy valuations are reasonable, but there are a couple obstacles, obviously, the fed is the one in the markets focused on. the 345rk9 is starting to adjust in the environment in which real rates are going from certainly a low will elf to something not normal but at lowest heading in that direction. at the same time, you lock at the economic prints last week, they're not bad, they're not brilliant, a weak industrial production number the manufacturing surveys were on the soft side so there is this anxiety the fed is going to taper. there is some concern tapering a at time when the economy is not completely healed yet. >> hmm. we hope they are tapering for good reason, in other words, right? >> if you lose that tail wind of monetary accommodation of which you won't have as much, i think what you need then is earnings

growth, it nodes to be predicated on economic growth. that's why people are focused on these numbers. if you can't see more top line growth going forward, it will be hard for companies to hit their numbers. >> september is the rubber meets the road month. as you know, ross, you got the german elections on september 22nd. you got september 17th and 18th, the fed. you got september 30th, which is the end of the fiscal year and the debt kreeblg, the cutting of the federal spending debate rears its head and you have on september 10th, supposedly, introduction of new iphones by apple. so, and as you know, september in the last 61 years is the worst acting month of all 12 months, now down about .5% or. so so this is going to be mexico has got to bring this secondary legislation following enrique pena's proposal to the senate last week to open up slightly the mexican merge industry to outside participation. this is going to be a critical

september. any comments? >> generally, i agree, you've highlighted the first issues, first of all, you don't pay attention to the calendar, september does. this is the one month with a clearly negative bias. up, you pointed out all of the headline risks. you got the fed, another budget battle. i would ask the middle east is another risk factor. so this is a month i think it will be tougher than we've seen in the summer. it doesn't mean we're locking at a huge pull back, but i think you will have more volatility going into the fall, probably an opportunity for investors, something you want to prepare for. >> it's a jelly. >> what are we thinking, the consumer? i was ready to say things are not as good as we thought last week. now, we're going to see a lot more retailers, too, as they come out. on a skim of 1 to 10, where is the consumer? >> i would say the consumer is

at 4. it's at a better spot. debt levels are more managable. lower rates have helped. there are a couple head winds. i'm definitely in the camp that i'd be cautious on the consumer names. you had some good runs today. the basic problem facing the consumer is that you still have very anemic income growth. the labor market is healing. it's not healing fast enough to create any real growth in disposable income. because of that, you can't really support this level consumption unless the labor market gets stronger. so my guess is, i think while the economy is going to grow and get better in the back half of the 84 the consumer is on the achilles heel, particularly if we get higher oil prices, which is a risk for the market right now. >> joe, of the jobs we have added this 84 so far, only 179,000 have been full-tim jobs. 1.04 million have been part-tim jobs. this is the eat, drink, get sick job creation. ie, waiter, busboy, hospital

orderly. this has not been a very ro bust job creation exercise. in september of known 83, joe, in the reagan structural reform era, september of '83, we added 1.1 million jobs in one month. you love that, 17 million jobs from '83 to 1990. >> you could address him. >> you think i -- >> you weren't there, you don't realize what a recovery can really lock like. >> let me low in there. you know what, even leaving aside some of the numbers from past decades, even compared to the last three years, this is not a great moment for the consumer. so right now, real disposable income growing at about 1%. over the last three years the average is closer to 2%. >> i tell you what scarce me. is in your bond, have you people that really know bonds at black rock as well. >> we do. >> we're nit atten the with us position right now. if we, every time the ten-84 moves to new numbers that people

haven't seen in a while, that i get all nervous and will the fed lose control? i men, do we have to worry about emerging markets and what's happening around the globe and interest rates all around the world because of the fed? if we get to 3%, are we going, this recovery, are we going to cut that off? >> i think if you let rates, the long and the curve drift too high, it is going to put some downward pressure on the market, pla recall the housing market. let's be clear the recovery is happening, a lot has been predicated on a stronger housing market. our view is rates will back up. we don't think this is a meltup in rates. part of the reason is that you still have a deleveraging of the private sector. there is not a lot of supply outside of the government. we have less supply because the deficits improve. assuming we get the taper light, which is the most likely scenario, the good news is while the fed is buying less, there is less paper to ab soreb.

>> less paper to ab soreb. >> you don't think the fed loses control. you act like they can dictate where long rates go. what if they can't dictate that? what if the globe dictates that? >> they can certainly influence it, obviously. i think, yes, is the answer to your basic question, for some reason, the long curve got away from the fed. we got there and stayed there. will peril the housing market. by extension will hurt the recovery. >> housing stocks, ross, have shown that. they have gone up 23%ier to day in may to being down 8%. they had a big swing as part of this advise in the 30-year fixed rate conventional mortgage rate. as you know, that's put great pressure on new home sales, pending home sales, existing home sales. we will get those numbers later on the existing and new home sales this week. >> there are large parts of the market, the home builders, the

utility stocks, the rates. a lot of these sectors the run was predicated on very, very low real rates. as real rates normalize, in these parts of the market, where there is premium valuation, they will be justified. >> thanks, we appreciate it. beth of those guys are two of our favorites for whom we've talked to. so genuine you are. >> coming up. >> i learn from the best. coming up, best buy out with quarterly numbers. the company boat expectations on the top and bottom lean. we will dig through those reports. then a closer look at currency, the rupe bouncing back from a record low. we will have the break down of the moves in the forex market. check out the "squawk box" market indicator. ♪

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. >> what a difference a year makes. best buy breaking out second quarter earnings this morning. the consume eelectronics giant topped and beat wall street estimates on the top and bottom lean. joining us with more on the numbers is rj a senior analyst

at morningstar. r.j., we were talking a year ago literally we thought this company was virtually left for dead. it was a show room for amazon. they get a new ceo. they thought the ceo would be here on a temporary basis, no turn around in sight. now it's 180-degree difference. >> yeah, absolutely. the company is in a much better place than last 84. just a year ago, as you pointed out the company was more or less left for dead, the progress is company has made, particularly on a cost-cutting side, getting rid of excess costs, stream lining supply chains. all very well executed and a lot of credit go es to the management team for taking care of that. >> let's talk about the cost cutting side. there has been a lot of cost cutting. when you look out over the next several quarters, how much more cost cutting can there be? how can they truly grow the top line? >> that's where my concern lies. i think they have done a great

job to this point i think what they have cut is the low hanging fruit the stuff that should have been done under the prior regime, this simple blocking and tackling. they cut 390 of 725 million in planned cost cutting. my bigger concern is on the price investment the company keeps talking about. that really has been driving people back to the stores. that's not going away any time soon, especially with amazon, wal-mart, costco. they will have competitive countermeasures of their own. that's where it gets troublesome over the longer tomorrow. >> the big issue we all identified year or two ago, you this i is very much there. is it there at $34.45 a share? >> yeah, i think the marks overshot the true recovery on this one. at this point i think the marks fully taking in management's long-term goals of 5 or 6% operating margins. i think 4 to 5% is more marginalizedlet. especially if you look at the

way amazon is working, profitability. i don't think that best buy has the cost advantages, the competitive advantages to maintain something in the 5 to 6% range. at this point i'd be able to caution where they are today. >> we keep talking about amazon as their big competitor. as we talked about earlier, wal-mart and costco and others, how do you, when you look at sort of the landscape to the extent that there are competitors out there that have the potential to eat the lunch of best buy, could we be paying attention to amazon or everybody else? i think amazon is a big player or wal-mart or costco, you need to look at best buy suppliers, companies like apple, samsung, microsoft, even though samsung and microsoft have developed stores within stores, ultimately down the road, they want to extract a greater percentage of profits of their own sales. i think that the company

suppliers, themselves, might be a bigger risk over the longer term. as they find ways to get products in the consumer's hands, especially, they find can you find traffic in online sites as well as people are going into best boy. i think that might be the longer term competitive. >> they may ultimately be the winners. rj, thank you. >> thank you. >> the ripple effects of the fed's taper truck. what will the end off easy money be in the end of emerging markets? we will ask. i can't record. plus new data. >> my favorites. >> plus new data on small business optimism from wells fargo. at farmers we make you smarter about insurance, .

. >> we are approaching labor day, more people will travel in the u.s. than any september in the last five years. that's according to aaa. the travel organization site is following unemployment, better consumer finances, rising home prices and economic growth as the boost in travel. aaa expects the average trip to be 594 miles since travelers will spend about $800 during a long weekend and check out shares of nuance communications. this is the company behind seri

technology and the iphone, that they are filing earlier this month shows carl icahn increases his stake in nuance to 16%. the shares are up 1 morris premarket. it says that any shareholder would meet board approval to have a stake bigger tan 20%. coming up, wells fargo releasing new data on american small businesses. we will bring you the numbers first on cnbc. suffering the consequences of the fed's expected tapering of easy money. "squawk box" will be right back. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ if you don't have something important to say?

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. >> take a look at this, dick's sporting goods reported a profit 3 cents shy of stills. the company is citing a sluggish consumer environment and poor weather famors in the second quarter result itself. teen retailer urban outfitters earned 51 cents a share. they're on the other side of this. the bottom line got a boost from fewer discounts during the quarter. we are watching shares of nokia as well. bern 17 performed and underperformed rating on this stock. it is now predicting a quote disastrous quarterly results for

the current quarter. bernstein says nocia's reliance on high end modems is a risky bet. joe. >> andrew, that was really urban was good, most of the other retailers, dick's was not good. it's a different area, obviously, sporting goods, let's get a check on the markets this morning, rick santelli joins us from the cme in commitment. it's been a while since we had decent equity action. my question is how much of a move in the ten year all bets are off when that starts moving again, what's the next number when people will go oh, is it 3%, you think? >> well, first of all, joe, i see 15,000 ten settlements yesterday. for me, to shake the tree on equities, we have to shape 1310, first of all, i'm not buying it, very small correction considering how much we have moved in basis points, tens are easy. the entire fixed income markets

is hitting technical points like a pinball machine, perfect. here's awe do, use 283 yield as the pivot for tens. your good support is going to be the first breakout level. what was the high close from july 5th to last week. that's 274. we have it rounded to 2.75. the next major resistance will be where the high yields were yesterday, between 289 and 291. to me the chart looks like it will take us somewhere around 335 to 340, but i don't know what happens in a linear fashion. it's a momentum trade. doesn't mean yields will go up every single day. i think the backfilling will be very small and sideways, much like that three weeks we had before we broke out to the upside in yields about five, six, trading days ago. >> we are complying with what you are saying. because you think 15101 not much of a sell-off in the dow. i guess implied in that is all

this fed action has put some of these prices at levels that have you somewhat suspect and if they are going to eventually exit, then you think that there is a day of reckoning for equity prices? i mean, am i reading between the lines of what you are saying? >> listen, what i'm about to say has nothing to do with i'm not disparaging the vehicle or the wonderful methodologies that he's used. i think tesla is your canary in the coal mine. they make a neat car. it will be a great niche car. everyone that has driven one loves it. forget the fact that the '73 vega can make it from new york, put that aside, i think when you look at the notion of what's pricing the stock, it's young people that feel good about what elon musk is doing. the pricing of the stock truly has little to do with the nuts and bolts of the auto side of their business. i think there is a lot of

stocks, world wide, that cheap capital has done wonderful things to. now, i think there is a lot of stocks at higher interest rates will help. but in the long and short of it is i think we need to see how higher rates filters through adjust capital flows and how companies need toed a stwru to that and their stock price. i think we're in the early innings of. rick, on the front page of the washington post, they talk about the bls data that came out yesterday that states specific where unemployment is concerned. it talks about how sequester is hitting the region, maryland, delaware, d.c. unemployment is up. it talks about the southeast and how some of the u.s. portions are incredibly weak in terms of the economy, do you think that will play a role at all in this september 17th date we have circled on the calendar? >> i do. i do. i would take the words sequester out of there. to me, it makes it political. the issue is more simple than that. maybe it's not the best way to

cut budgets. sometimes when you spend less, every time you spend less, the receiving end of what you are not spending is going as to potentially contract some areas of the economy. that's just the way it is. but i think that employment is not responding in a fashion that the fed would like to you believe with regard to their programs. i think with regard to many states, there's lots of air pockets of unemployment. it's going to be the nagging issue. it's going to be worse in europe. even though maybe their economic variables have stabilized. i think they truly understand a great article in the journal pointed to the german stock market, how it's strong, how their economy is supporting much europe, how the multi-nationals don't look at germany as home, i think this business of stocks moving higher in a world with less jobs is the new normal, we're going to have to physical out a way to bring more high-tech employment skills into the picture. >> all right. we will stay on this to some extent with this next guest. rick. thank you, wells fargo is

teaming up with gallup to team up the results of the latest small business opt semitism at its highest level since 2008, recession. it's like a five-year high, still below prerecession. joining us now on our first on cnbc look, senior economist at wells fargo, securities, and a lot of this, mark, has to do with the availability of credit. the banks have been saying all along that they are opened for business. but there was no demand. what's changed? >> well, it's not so much that stuff has changed in a major way. we were seeing that fewer businesses are saying they were having difficulty getting credit. fewer expect to have difficulty in the next 84. that really has been the story for quite some time. we are seeing that some of the forward indicators of the demand are beginning to improve. while we haven't seen all that

much improvement exam spending with ve seen more improve him in plans to increase capital spending over the next 84. >> we have been arguing for a while with bankers, mark. i know you wok for wells fargo, so you have to cover for emthem. have they been, you know the bank said they have been opened for business all along, then we hear different stories from people that actually try to get money, especially small businesses. >> well, we are the number one lender to small business. so we feel pretty good about it. but demand really hasn't been all that strong. when we ask companies, what would it thattic in order for you to borrow more money and expand your business? the number one thing they come back with, is we need stronger sales. the sending most cited number is we need a little bit more certainty in the business voirmt the third most cited figure in all these are over 70% is is that we would need lower federal taxes. when we ask, what is your biggest concern? the vanlt of credit is like 4%. so it's way down the list. >> can we break in one second?

we see this on the bottom of the screen. you predicted he was going to bail on this. i thought it was surprising to buy the whole thing. leonard ridge creo at one point offered to buy the physical book stores and the website of barnes and noble. he was not at the time going to buy the nook. he is now saying that he has had advised the board that he has suspended his efforts to buy that company. you are seeing that stock trade down in the premarket a little over 8% right now. it was probably closer to about 10%, so that is the latest in the book industry, but we'll go back. >> i would believe in mna stuff i take you as an actual indicator. >> contrary to other. >> in other worlds. >> in this, you said it, it came through, i believe you. mark, did you glean anything in this surveyant hiring and

about weather? another big debate we are hearing they are hearing part time, i hear from one side the government is cutting back because of the sequester. i hear on the other side, that irnot doing it, they don't want to go over 30 hours because of obamacare. any measure of that survey? >> this survey, we have been doing this ten years. the questions are set so that we didn't have a special question that dealt with whether folks are converting folks to part time. but the hiring components have improved. we seen the gap between the number of companies that are cutting workers and the gap in the number of companies increasing has narrowed. there are still slightly more companies reducing employment over the last year than increasing it. but locking forward for the last three quarters, we've had more companies say they plan to increase hiring then say they plan to dekrosse it. so the employment trends are improving. in the next 84, they lock pretty positive. >> see. what itself the biggest. when is the biggest upside

potential in terms of numbers, mark, from the small and mid-size business sector of the economy? how much? you say the world's largest of makers and routers of switches last friday, laid off 4,000 people, which is 5% of its work force, what are the numbers look leak in the aggregate to you as far as small and mid-size business' ability to create jo bs? they have been the job creation engine, am i right? >> they have been the job creation engine, but it really has been sputtering the last five years. our index is at the highest level it has been in five years. it's still a shadow of its former self. when you ask, what's the biggest upside? if we could get a little more certain certainty in economics policy, then i think we could see a great dole more improvement in the performance of small businesses. but unfortunately, i don't think that that's likely to change in a major way in the next year.

we're likely to see the performances of small businesses groind higher. when you look at cisco's earnings, the things that stood out to me were the comments they related to sluggish economic growth. they are saying in that kind of environment, you have as to pay more attention to cutting expenses. we spend a lot of time in our survey talking about financial conditions and operating margins and the biggest problem that small businesses face right now is top line revenues aren't growing all that rapidly. same thing that large businesses are seeing. they are paying an awful lot of attention at cutting costs and trying to improve their operating financials. and the good news is that they are improving. the bad news is that they still have a long way to go to get back to the point where we see strong growth in the small business sector. >> all right. mark, thank you. i appreciate your time today. for those results, those were embargo. >> first on cnbc no less or

first anywhere. >> from one of our frafrts. >> absolutely. coming up, currency markets moving ahead of this week's fed meeting. the emerging markets suffering the consequence of an expected tapering. our expert will join us after the break.

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. >> welcome back to "squawk box."

we were up over 40. 30 points hasn't been enough in recent sessions in the premarket to guarantee a positive. it's been tough, the more this sort of has been a selling total for the last ten day, you heard rick say there still hasn't been much of a real pullback. shares of tjx rising in arket trading. the parents of the t.j. maxx chain earned 3 cents above stills. the company raised its fullier forecast with sales increaseing faster than expected. another retailer that's up so far just this morning -- >> we should have asked marcus lemonis about sporting gods. meanwhile, a lot of activity. the dollar edging higher, the fed meeting if jackson hole, we could see more model currency trading. joining us is the director of strategy at b.k. assets. thank you for joining us. i want to start with the

emerging markets. that was a big sell-off especially in the indian rupe. has come off a bit. there is some speculation it could be central bank buying. what do you think is going on there? >> i think the really interesting question is you have emerging markets crashing, the feds supposedly going to taper. you have u.s. yields going up. the dollar the at multi-month lows against the euro. euro broke out while we were on the airport. a dollar yen is scraping bottom at 97. what's really going on? why is the dollar not responding to anything pro dollar. i think the reason for that is actually two-fold, one with the gentleman from wells fargo was talking about. i think the currency market is suspicious of the tapering story, because the top line growth is not forthcoming in the u.s. commitment we have a bifurcated economy, top 10% does well. you see dick's not doing nearly as well.

the second thing, currencies are very, very political assets. what the currency market issing willing on the horizon is a huge amount of political confrontation in washington, d.c. you will have a sequester. the budget battle, the deficit battle and an absolutely unnecessary in my opinion conflict over the fed chairmanship brewing right now. all of this currency in front of the u.s. dollar is creating safety bid for the euro of all things. i think what the markets are doing is taking the emerging market funds and putting it into the euros. the 2s and 4s are yielding 2 or 3%. seems to be the trade that is working. . >> i like that term, the hunger game's economy. if you think about the dollar, you raised all of those issues, have you the fed chairmanship and the debate in september. how do you trade the dollar going into the next 30 days? do you trade it at all or buy

the euro, like you said? >> if you lock at technic also, we took out 34s. we lock at 35s look very much in view. unless we have a uber hawkish fomc tomorrow, i think the market will take its time to make sure the fed is serious about a taper. i think, basically, it's the dollars again to prove right now, things are as good on the u.s. economy as the dollar bulls think they are. for now the currency market is going the other way. >> i want to get your emerging markets as a whole. risk is definitely off, brazil, south africa, india, indonesia, you are seeing huge outflows in all of those currencies, does it stay that way? >> well, you know, e.m. is always incredibly vol toil. so you have, it's less liquid, it is very emotional. you will have this massive move to the downside, i think the answer to that will have been dependent on china and japan, one of the things i sort of heard, i don't follow emerging

markets as well. i only do g-10 currencies, one of the things i heard, it's all of the movement in the boj, that liquidity in boj is having a negative impact on the emerging markets over the last month-and-a-half. we have to see how it balances out. ultimately, it will be a function of china. if they muddle through, they will come back. if it doesn't, it may be more of a blood bath. >> one more quick question. >> what is your take on the canadian dollar and australian dollar given your comment about china given the direction here. those are sort of in the middle. they're driven by china and commodities demand. >> right, very, very different story, actually, in some ways. aussie is one of the few currencies that is lower against the dollar today. for two reasons. one, because it looks like it will cut rates further, maybe in the mooekt meeting after that, they missed huge the whole mining economy, the australian economy is based on, is clearly now the game is over. so i think the market is very

negative aussie. it's not nearly as negative a canadian dollar. it basically gets benefit from north america. so between the two, i actually like the canadian dollar a little bit more. they're both lagards as you say for thetime being. >> thank you so much for being with us to discuss these issues. >> coming up, lots of retail stocks to talk about. this morning, home depot, j.c. penney reporting. we will check in and find out what jim cramer thinks about this down at the new york stock exchange. tomorrow on "squawk box," who will replace ben bernanke? and when will the feds taper the asset program? those are the key questions for the fed heads gathered in jackson hole this week. our live coverage starts tomorrow at 6:00 a.m. eastern. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550

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. >> welcome back the "jacques box" and we will go down to the new york stock exchange. jim cramer we have all of the news and the retailers and the good news and the bad news and every which way. we can start where you want, but we always start with jcpenney on this show. >> well, bill ackerman should

apologize, because this is a current quarter that is the cash position is good and the back to school season is good and the strategy of couponing is back and working. and also the kind of private label stuff that the previous guy, johnson, ackman's guy didn't like is working for ullman and this is a very good quarter and the stock is going higher. >> yes. best buy -- >> did you get positive on that or did you, jim? >> i am positive here. 13 -- i didn't miss a lot. >> on jcpenney? >> no, best buy. >> on best buy. >> when best buy, when they were 10 or 11, david straszer said this thing is turning around but then i got positive and candidly at 25, i said, double here. and i heard what you say, about the next best buy, but i am saying that penny can take off and it is no longer in a do not resuscitate or in intensive care, but walking around and in

reh rehab. >> but can best buy cut the costs, pause that is what is helping them in quarter? >> well, kayla, the online efforts are very good and the last man standing and people are pend issi insin insin insing -- nontraditional goods and we know that from home depot. and t.j.x has a good quarter. >> wen you buy best buy, you have to hold your nose at $11 and take a chance, and people are on the other side like kyle bass who said $8 and buy the debt of penny, but $8 target on the stock, so people are saying that the company lives, but the stock never goes back up. do you think that this could be a $30 stock again, penny? >> no, i don't. but i didn't think that best buy would be a $35 stock. >> no, me neither. >> and a lot of people thought that jcpenney could not get through the holiday season, and that is completely untrue.

>> right. one step at a time. >> ackman made it seem like, and the stock was down to $13 because he said that ullman was an idiot, and that is the subte subtext. i have been a believer in mike ullman who did not have to come back to take this job and take the nonsense he has been delivered. i congratulate him, because he is a good man and he has delivered. >> jimmy, apple at 507 and they have the new product day, and the mid range phone coming on september 10th, and tim cook has said that he is going to likely get the nttd dokimo, and the largest corporate buyback you said it on your show, james, and $15 billion of corporate buyback and speaking of apple, how do you speak of retailing? >> well, it is funny, david. when we heard about the new product announcements, the analysts said it does not matter

and i'm looking at the color iphone and saying, maybe i will go for it. we have not heard from it, and you and i know, david, the guys on the street, using a 440 price target will wake up and say, i looked at the product and good and i will raise the price target to 5p 70 and that is why the stock can can continue to percolate. >> jim cramer, truly one of my favorite favorites. >> so now all of the other ones are -- >> sorry, david. >> tomorrow is a new day. >> coming up our guest host, david darist, one of david's favorites the truest among others. and he will get the last word when we return. every day we're working to be an even better company - and to keep our commitments. and we've made a big commitment to america. bp supports nearly 250,000 jobs here.

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. >> we are going to get back to the guest host this morning, and we are going to talk about europe. i know you have strong views of what to be done. >> quickly, andrew. the valuations are at a 40-year low, and europe trades for 11 1/2 or 12 times the earnings versus 15 or 16 for the united states. fundamentals are improving and the eurozone, and purchasing managers index and the gdp numbers -- >> and given that, do you think that the next month or two is choppy, do you go in today? >> well, in september,

chancellor angelica americale l is -- angela merkel is going to shift from mother teresa to shakira. >> well, that is an image for all of us to think about today. >> she is going to help germany. >> and thank you for being here, and maure s tomorrow. you will be here tomorrow. "squawk on the street" is next. ♪ it is not about the money ♪ money money money ♪ we don't need your money ♪ we just want to make the world dance ♪ welcome to tuesday morning "squawk on the street." i'm carl quintanilla with jim cramer as david faber has the day off. after the fourth straight day loss on the dow something we have not seen since last christmas and things are getting better working through the retail earnings. home depot is not affected by the rising 10-year