sitting in for the vacationing becky quick. morning headlines. the big one being that the fed will release its minutes from its last fomc meeting at 2:00 p.m. eastern time today. a bit of disagreement, of course, among policymakers about the timing of the expected taper. that's what investors will be looking for when they look at the minutes, hints on what the fed's next move may very well be. the kansas city fed, they're kicking off their annual symposium in jackson hole. steve liesman is there and he'll join us in a couple of minutes. later, not a couple of minutes, 8:00 eastern, to talk about that. the one person, by the way, not there, ben bernanke, we'll talk about why perhaps with steve as well. also as for the markets ahead of the minutes, look at u.s. equity futures now. the dow, red arrows across the board, opened off 23 points. s&p 500 off about 4 points and the nasdaq off close to 11 points. the dow, we should note, closed down just a little bit yesterday. losing gains in the final minute, and that means the blue chip index is on its first

five-day losing streak since december. now over to kayla who has today's headlines. >> goldman sachs technical error caused erroneous options trades yesterday. many trades may be erased but it could cost upwards of $100 million. they do not face material loss or risk from the issue. maury tomhr mary thompson will join us with more. jpmorgan is reportedly close to naming two new directors with finance and risk management experti expertise. the bank identified the candidates but the board has not yet voted on them. the decision is likely to come next month. two directors stepped down earlier this summer. facebook wants to get more people online. it is called internet.org. the goal is to make internet access available to the two-thirds of the world who are not yet connected. the group's plans include developing cheaper smartphones

and using mobile data more efficiently. joe? >> thank you, kayla. what is 75% of two-thirds of the world that the nsa could then watch? what is 75% of two-thirds. if we had two thirds of the world connected and we could watch -- we're not going to miss anything, are we? we'll talk about that story later. especially in our executive edge. i wanted to ask you quickly, kayla, how is your memory? is it good? was it a quarter -- was it one quarter where goldman sachs didn't have a losing day in the enron account, a quarter or a year? >> a quarter. >> a quarter. >> i don't think anyone has done it in a full year. >> how many days are in a quarter? like 90, but not trading days. they make money mostly. $100 million. lloyd was at dinner last night with -- they had an $800 bottle of wine instead of $1500 bottle of wine, which is why scott cohn

is here, which is why eric holder is after these guys. attorney general eric holder says that he expects to announce what he calls significant matters related to the 2008 financial crisis. he made his comments in an interview with the wall street journal. senior correspondent skcott coh is here to tell us what holder may be referring to. there will be no fast and furious subpoenas or irs subpoenas to himself on this. this is different stuff we're talking about here. he didn't say he's not going to do that. we'll just have to wait and see. >> this was enough to really -- got me up early. >> this is a red letter day for you, to get the crooks. >> we looked into it a little bit. it turns out holder wasn't signaling any specific cases, but he gave the interview to pushback on this idea that with the five-year statute of limitations on securities fraud coming up, time might be running out on the dodgj.

anybody who inflicted damage on the financial markets should not be out of the belief that they are out of trouble because of the passage of time. if any institution is banking on waiting things out, they have to think again. the statute of limitations can be as long as ten years and even in the case of securities fraud there are ways to stop the clock. but i've been told there is a push from high levels in the justice department to get these cases done already, for his part, holder told the journal he expects to be there to announce the significant matters, he'll be in office and it is believed holder has been planning to step down by the end of the year, though he didn't go any hints on that. that means we're looking in the coming months. >> but holder said most of the firms are too big to jail. is this a change of course to have said that in the spring and now to be saying we're going to bring significant charges against a lot of these institutions? >> that was tape out of context. he was talking about the fact there are consequences to charging these firms and there are and something they look at. but they have been looking at these cases and the tricky part

is making these cases stick. they're very complicated cases, have to convince a jury beyond a reasonable doubt and there are smart lawyers open the other side on wall street that did a lot of disclosure when the deals were being done and it is very hard to poke through it. >> how many people are in the house? you said any individual has to -- if you had a pal, how many would that -- >> would that be 500? >> the people who left office -- >> he did not mention enablers or -- >> i don't know if he was asked about it. >> i want to understand two things. do we think he's going to go after firms on any type of firmwide basis, and do we think there are individuals that are still in the cross hairs that we thought were off the list and when i say off the list, dick fold, anybody at lehman brothers i thought was off the list, are they on the list?

stan o'neil, angela mazillo, anyone at countrywide, bear stearns. you can make the list, but most people, the expectation was, game over. >> here's the issue, and they ran up against this back in 2009, first of the financial cases that blew up in their faces. they sued two bear stearns hedge fund managers. you don't have necessarily the cooperating witnesses to work your way up to the ceo. and that's been a problem. not just that it sort of took the wind out of the justice department sales, but the fact that defendants or potential defendants were emboldened. maybe i don't have to plead guilty. maybe i can wait this out. it is go to be difficult to get the guys at the top. and -- >> are those cases over, meaning i read pieces, i talked to people who suggested months ago, if not years ago, that some of those cases around the high profile people, that they stopped investigating. they made a determine tlgs is no case to bring.

is this a suggestion that there is something else going on that we don't know about? >> it is kind of a suggestion. the idea of getting to the top is very difficult. and, yet there is this push that i know for a fact in the justice department to bring this all to a conclusion. it has been five years. >> how much of this is a stunt, we're at the five-year mark, unlikely perhaps even based on what he said you're going to see -- i thought maybe what you would see is on september 15th, you know, they decide they're going to arrest five people just for the show of it or at least in terms of the timing of it, but even that suggested forget about september 15th, forget about this, we're still pushing away and we have in some cases up to ten years to do this. >> there is a lot of symbolism with september 15th. five years since lehman went bankrupt. they're not bound by a statute of limitations in all crimes, but you got to wonder if there is -- >> will we see a perp walk that day?

>> i'll try to be around. i don't know of anything in particular. >> you have signed us up for a washington, d.c. show to go down there on the anniversary of that, to talk to barney frank and talk to barney frank and chris stein, right? >> is there going to be enough material for andrew to write a sequel is the bigger question. >> yes. thank you. >> sequel for what? >> too big to fail. >> too big to fail. is that the -- okay. you need to mention it, if you're going to bring it up, you need to mention it. >> we reported this and others did yesterday, leslie called welcalledwell will be nominated to be the head of the criminal division. she's been in private practice for the last seven, eight years. and so she knows a thing or two about public pressure to bring indictments. >> you're coming back, i just heard, we can wrap this up. we're going to come back. we're going to hammer this thing. do you think holder has been

watching a lot of "american greed"? >> let's hope so. >> a lot of people do. that's where you see a lot of -- you must think, you know, look at what's going on. i haven't done anything. when i -- what struck me today, wolves aren't the scariest thing on wall street. you know that stupid movie with leonardo dicaprio, like a hemorrhoid on history. it was a bunch of people that basically would be robbing banks if they weren't at this bucket shop. the lowest, like, lowest form of life. but the usa today says this is business as usual on wall street. these aren't the guys you need to worry about. the real guys are the ones that you're talking about at the goldmans and the jpmorgans, these guys are small but they're putting the guy that ran stratton oakmont together with the big investment banks. which is where we are right now. >> don't you worry the public

does that? >> i do. i think that's where we are. that's the optics of the whole situation. i think that's what holder is responding to, it is right in the cover of the -- whoever did the story, it says right in the top that the temperature in the country for something to get done is what is spurring him to do it, which probably isn't the best reason for an attorney general to take action. >> and i'm not sure that is, but they're conscious of it. any prosecutor you talk to, they know what's going on, they know what the talk is, but they will tell you, we go -- >> the temperature of the irs scandal must be much lower because he doesn't seem real -- like anything needs to be done there. >> or at least not doing an interview about it. >> exactly. >> maybe in five years. >> all right. >> all right. thanks for that, scott. see you back next hour. an earnings story we're watching today. lowe's reporting earnings of 88 cents a share. revenues topping expectations and it also raised its full-year forecast, comes a day after home depot reported blockbuster

earnings moved the dow up in the premarket. lowe's is seeing some of the same reaction today. up just about 1.5% in the mash et yesterday. that's a chart from yesterday's market close that we're looking at. unclear how it is trading in the premarket. but it is topping estimates by 9 cents per share. that is lowe's ticker low. mash ets this morning, we saw the futures are indicated lower. and yesterday we said 30 points, 30, 40 points of upward indication, early in the day, is not enough to guarantee a higher close for the average. once again, it was unable to hold on to those and did close down. i think some of the other averages were up. so there were things in the dow that didn't help. today, we're looking at the dow down 22 points. everyone says that the fomc minutes could indicate whether

september or december for the tapering. let's look at oil boards. we have 104.82. some people are surprised we're still over 100 given the economy is not going -- other people wondered why we're not happening with what is happening in egypt. they aren't a big oil producer, but they could shut down one of the canals over there, which one? the suez, right? >> it was a state of emergency. they didn't shut it down, but oil rose even when it was just tensions were raised there. >> really interesting for me looking at the journal yesterday, said back the generals. today, bolton, back the generals and next to that story, abrams, cut off aid. we don't seem to know what to do. it is the -- you see the deaths and you're just -- there is no way you're going to be able to

say anything positive about the guys that are in force now. you worry about muslim brotherhood and whether you would eventually have another anti-american theocracy in the least, which is the last -- what do you do? it is a minefield, is it not? >> where are you on this? i'm wondering. i want your opinion on everything. she asks me if i read too big to fail. i live too big to fail on a daily basis. >> i'm aware. >> what do you do with this? >> i don't know. i don't know. >> that was a huge buildup? >> i know. if i went one way and then -- >> when you watch the news, it is an unfortunate -- you hate to see it. then i watch someone that was fairly reasonable representing the government over there, and said, yeah, we have fired into crowds but we're firing at people in the crowds that have already -- i don't know whether that's true. >> regardless of where you stand on it, it is clear that washington needs to be more vocal on it, more than the president calling in from

marriage wmarth martha's vineyard saying, i'm aware of the situation in egypt. >> guys yelling at him, we're on the tee, let's go. hurry up. what are you doing over there, barack? you're on the phone again? you're up! sorry. let's go to -- >> we could go across the pond for a moment, time for the global market report. carolin roth is standing by in london. carolin? >> good morning to you, guys. we are in a bit of a holding pattern ahead of the fomc minutes and seeing european markets pulling back just a little bit. we're off by around .3% off the session lows. we did have a couple of earnings reports which will come to just a little bit. let me show you the markets one by one. the ftse definitely an underperformer, off by .75%. keep in mind about the stocks, hsbc trading today, the xetra dax is up by .25%. back to the earnings. we had two beermakers in europe report numbers and both were a

little bit below expectations. but the share price performance is divergent. carlsberg in denmark up by almost .9%. again, numbers were hit by weakness in russia and western europe and the outlook that the company gave us, that was fairly bleak as well. it is saying that the uptick in uf europe is going to be very, very slow. heineken off by 3%. net profit in the second quarter dropped by 16% and the company gave us an extremely muted outlook. so we're seeing a lot of pressure in those shares. finally, a quick check of the forex markets where the dollar is gaining a little bit of ground against the euro and the yen. sterling dollar at 1.5687. euro dollar back below the 134 level. and dollar yen sitting at 97.44. back over to you guys. >> carolin, you doing -- what are you doing, climate change week?

is that what you're doing over there in europe this week? is that something that is happening? >> absolutely. we have really exciting theme weeks. last week was -- that was crime, financial crime and this week it is the green week. >> yeah, green week. i saw something very unsettling that some climate warmers now are predicting cold, wet, hot, dry summers as a result of this -- of what we're seeing happening. hopefully you'll be conferring that a little bit. that's last thing we need, cold, wet, hot, dry summers. thank you, carolin. >> i don't know what that means. >> exactly. to the u.s. markets. joining us, keith springer, president of springer financial advisers and john lonski. why are you laughing? >> trying to get a rise out of people. >> whoo! did you hear the joke about this? >> no. >> never mind. >> lonski, where are you on the

fomc meeting minutes? >> the fed is going to taper. does it really matter much whether or not they announce it in september or at the end of october? i don't think so. >> doesn't matter? it seems to matter. >> i think the 65% chance they'll go ahead and announce tapering the september 18th meeting and the market has priced that in quite a bit thus far. i wouldn't be surprised if as that -- as the tapering approaches, the announcement we see the ten-year treasury yield make a run for 3% if not a little bit higher, which i think is not going to hold. i think that's a bit excessive given the fact that this remains the weakest economic recovery since the second world war. >> that's a word nobody likes. do you think the world is going to take over in terms of setting interest rates higher regardless of what the fed does? >> yeah, good chance that is going to happen. >> they lose control or will it be an orderly way? >> i think early on they're going to perhaps overdo it on the upside, but we're eventually

going to see an adverse reaction in the united states by the housing market, equity market and what not and that will bring bond yields back down to a range that might prove -- >> you mean initially the rates will overshoot and it will look like they're losing control, but will come back to earth. >> right, precisely. a painful process. more volatility, we'll have wider credit spreads, problems with the housing market. >> that leaves a lot of volatility. i don't think the fed does taper. it was a shot across the bow a couple of months ago. i think the economy -- >> no tape nerg november or december? >> i think they'll be forced not to. i think it was a shot across the bow. had it coming across as being responsible. doesn't want to be irresponsible. he's leaving. he wants to say, i'm about ready to do it, but also a student of the depression. and he knows full well 1937. and doesn't want to relive 1937. he's going to wait for, you know, he'll go the side of caution. i would imagine very strong

economic numbers are going to force him to taper and we won't get that. the economy is going to slow, continue to slow. we have seen earnings come down, earnings expectations coming down a bit. i don't think he'll have the room to do it. i think you want to say, hey, look, i'm in charge, ready to do it if we need to. >> until then, when? >> not for a couple of years. i don't think so. i think the demographics push it out a number of years. i think individual investors need to be very, very careful, because so many of them take so much risk. so many are just long roll of the dice and don't want to do that. i don't think he tapers anytime soon. he wants to give the impression he will. and in fact i don't -- i don't think they're going to do it. i don't think they can do it. >> when do you see slowing? profits are coming down definitely. gdp is expected to continue going up. where exactly do you see the metrics not adding up to this? >> gdp of 2% to 3% is not enough. you pull back the stimulus, you go back to 1% or below. the big thing for me is deflation.

they're scared to death of deflation. i think they really want that 2% inflation rate. we barely saw it with consumer prices last -- couple of weeks ago. i think they're scared to death of a japanese style inflation situation. they're afraid of pulling it back. not so much a slowdown on the economy. it is lack of inflation or negative deflation is what scares them the most. that's the real reason they don't taper. >> you were saying, doesn't really matter. what -- have you been watching the rupee? india is apparently thousands of miles away, right? you have emerging markets that are moving on the prospect of a possible taper at some point in the future. how can you say it doesn't matter september or december when the entire world seems to be -- >> tapering has to come to an end. >> were you surprised you were seeing flux in the emerging market? >> i think it is overdone. it is an exaggerated response to

an end to tapering. i don't know why they're so fearful this is about to come to an end. at one point, when quantitative easing was in full flex, we were looking at a junk bond yield of less than 5%. and if that's not speculative behavior what is? perhaps it is not a bad idea to tray to bring quantitative easing to an end, to tell financial markets you'll have to go out on your own, won't have the clutch of monetary policy any longer. i think that will help to reduce the risk of financial asset price inflation that i think worries the fed right now much more than consumer price inflation. >> should everyone get out of bonds then? >> i think they'll have a ride -- a roller coaster ride. the yields are going to go higher, then come down. you have to have a strong stomach right now to be in bonds. >> i think that's an analyst approach versus someone who is on the street every day.

analyst approach, we have to start to look responsibly. is it the right thing to do? absolutely. we have to start to taper, no question about it. the reaction on the street, the reaction of the investors, i have to deal with individual investors every day, will be feared. they want to see the fed will pump money in. if there is a fear they're going to stop, i think if he tapers by a large amount, the market comes down. a lot of it is built in, bond yields, a pendulum. bond yields bounce around, they'll go much higher because of the fear. but difference between the analyst versus -- >> you don't think there has been irreversal of damage done by all this qe at this point? >> no. i think consumer price inflation is well contained. we really didn't have all -- >> we can get out. we can get out cleanly with that? >> yeah, i think as long as we try to exit slowly.

>> the rupee and stuff like that, you wonder. >> what else bothers me, you're having problems in india and some difficulties in china at the same time in the past month, i believe industrial metal prices are up by 9%, that's scary. why are we getting base metal price inflation at the same time that we find emerging market countries struggling. >> those are bounces, though. >> i hope it is a bounce. >> thank you, gentlemen. >> thank you. >> great to be here. new details show broader nsa surveillance reach and attention history buffs. nixon tapes will be released today. let's head to the weather channel and check in with alex wallace. >> good morning to you. we have showers and storms moving through parts of the midwest, here across the northern portions of minnesota now, seeing it fizzle out, but we could see those reignite later today. this is thanks to cold frontal boundary marching through the region. that could bring us some strong storms later today. anywhere in the red, from parts

of the plains all the way to the western great lakes, we will be watching for the threat for damaging winds, hail and we can't completely rule out the chance for an isolated tornado. active storms here in the upper midwest. eventually that same front is going to march its way into the northeast and help to bring us stormy conditions. ahead of it, moisture levels increasing, feeling a little more muggy in these areas. that will add some fuel to the storms. storms tomorrow, and into tomorrow night, heading into the east coast. "squawk box" coming back in a bit.

welcome back. it is time for the executive edge, our daily segment focused on giving business leaders a bit of a leg up. that's what we're going to try to do now. first story, the wall street journal reporting that the nsa has built a surveillance network that covers more american internet communications than officials had publicly disclosed. the paper saying the system has the capacity to reach roughly 75% of all u.s. internet traffic. in some cases, the program has the ability to keep the content of e-mails sent between citizens within the u.s. and also filter domestic phone calls made with the internet technology. guys, we thought this was the case or i thought some of this was the case, this is more than what snowden ever said, bo potentially and i think more of what we heard about in reality. >> take great pains.

you looked at it. they take great pains to say any domestic calls have to be related to following a chain that leads abroad. >> start in the u.s. and end abroad or start abroad and end in the u.s. or be entirely foreign but pass through -- >> for me it not too much. >> i think it is hilarious this has been going on for it seems over 15 years. the names of the programs -- >> lithium is a station i listen to on sirius xm. >> these are the names of the programs. >> yes. fairview, oakstar, stormbrew. i had a case of those yesterday. >> just quickly, to differentiate what is going on here, there was the p.r.i.s.m. program. >> and all the tech servers they could act as all of their users communications, right. and one of the examples given is around 2002 olympics in salt

lake city saying the government partnered with quest communications, a publicly traded telecom company, to intercept communications in a six-month range before and after the games just to make sure nothing questionable was going on there. but it has been going on for quite some time. >> it is an enemy of my enemy thing again. where are you on this? i can maybe figure out my -- focus more if you let me know. are you okay with it? you know your buddy is on the far left and this is -- >> i'm not okay with it. >> matt damon broke up with the president because of this. >> i heard about that. i come at this as sort of all is fair in love and war. my view is the government can do what they want to do. at the same time, if snowden is out there who wants to expose it and journalists want to write about it, they can do had they want to do and maybe that's the life we have to live. >> it is weird. i don't -- you have to assume -- >> i think it is frustrating, nerve wracking and i want to protect us.

>> you can always say, if you got nothing to hide, you got nothing to hide. you have to assume you have a benevolent government that is not going to be interested in your political views to somehow attach irs scrutiny to it. hopefully that would never happen. then you would worry about the government knowing all about -- >> a dragnet of transcripts you can control whenever you want. >> people who haven't had their coffee yet, this is what they're referencinghow to reach the two-thirds of the world that don't have internet. >> the final installment of the secretly recorded phone calls and meetings from president richard nixon's white house, they'll be released today. the recordings cover the tumultuous three months when watergate was closing in on the president from april 9th to july 12th of 1973. that's the day before the existence of the covert reporting system was revealed to a senate committee probing

watergate. those tapes are from a period that includes the resignation of two white house staffers. i watched all the president's men years ago, i want to hear what the tapes have to say. >> it is a 40-year anniversary. >> my reference point, right? >> so many scandals. we had so many scandals that at this point, i look back on that, there was a cover-up. i remember that. it was a break in at a place where it looks old-fashioned now, down in d.c., at, you know, the circular watergate towers, it is so long ago, we had so many -- i'm not -- it is like i have no idnterest in this for some reason. i dealt with my feelings toward tricky dicky. i'm okay with it now. so many things have happened since then that i think overshadow this, it bores me to some extent. plus the technology back then, it was one of those tape

recorders with the big -- and rosemary wood probably did and you -- where were you in 1973? >> i was in my previous life. >> you worere? you were a glimmer in your grandmother's eyes. >> in my mother's eyes. >> not yet, though, probably. >> no. >> no. all right. >> close. >> all right. >> okay, guys. we have a couple of other stories we'll be talking about throughout the rest of the day. coming up, tech joint hewlett-packard set to report before the close. watch shares of staples today. they fell short of street estimates on both the top and bottom lines. the company says the retail performance is weak but it saw online sales grow. >> i again heartily accept the nomination for president of the united states.

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our commitment has never been stronger. welcome back to "squawk box." hewlett-packard's quarterly results due out later today. the question will be will the pc giant see improvements this quarter? brian marshall works for isi group. good morning to you. we talk about a pc maker probably unfair given the two biggest segments of the service business and the printer and ink cartridge business and then we spend all this time, you know, talking about the demise of the

pc. how much should we be focused on the demise of the pc? >> a lot. it is declining double digits year over year. pcs and printing represent half of hewletthewlett-packard. that's a problem for them going forward. we need to be acutely focused on it. >> if there were top two things, when the press release hits the wire, what are you looking for? >> revenue decline, the street expects high single digits. we're a little above that. that's one of the issues. let's see how they do on the cost cuts. hp has been able to maintain around 23%, 23.5%. they have been beable to mainta in margin. the key here is hp is a company that has over 300,000 employees. many levers to pull. and they can take down costs any given quarter. that's what they have been doing, why they have beaten on the bottom line. still fundamental issue remains

the top line. >> the report card on meg whitman, is she any good? is she overrated? underrated? what is the story with meg? >> she's an elder stateswoman in the tech sector. she's done a phenomenal job. >> doesn't mean you have to be respectful. go ahead. >> this year she called a fix and a rebuild year. i think she's fix something things, but i don't think they're rebuilding anything. you look at it, revenues continue to climb. the other half of the business that is nonpcs and printing, enterprise business, storage, networking, all these markets are growing. emc, cisco, but for hp, they're all declining. meg and others at hp talked about the potential for revenue growth. >> what is meg supposed to do? if you whisper in her ear, what are her options? >> i think they need to break down the company. i think that's the last catalyst that remains. look at what ibm has done over

the past ten years, got out of pcs and printing. >> she made no effort and said nothing to the effect she would really consider that a meaningful way. >> i think they said that's off the table, but i think it is something they have to tackle. there is no growth for a tech company, look at ibm, declining, hp, declining. our recommendation would be, you have to make the company a lot smaller, refocus and rebuild on some key assets that should be growing. >> what is -- >> why did she have to prove -- >> what do you mean is she any good? >> not good with this company. >> should she be running this business? >> from the tone of your questions, makes me think you don't -- you're doubtful. >> there are people who are skeptical. >> is it women in general running companies? >> oh, that's -- >> you don't ask the same questions about -- >> that's not true at all. that's not true at all.

>> marissa mayer, you're wondering whether she's any good, yahoyahoo, is it because alibaba is up? what about sharyl sandberg. >> i think she's a terrific executive. >> romney, is she okay? >> she's done a terrific job. look at the stock prices. >> it seems like your tone just -- >> i'm not getting into this one. >> wow. >> just your tone. i think she's -- you know what else, she was a republican too when she ran for office. >> that has nothing -- >> maybe that's it. maybe it is not anti-woman. did you say good-bye to -- >> i have not said good-bye to brian. i want to say good-bye elsewhere. >> didn't you hear the tone, like you're supposed to say she's got this rep, but she shouldn't be running. >> i did notice a tone. >> wow. let me ask you a different question -- >> you don't even hear it. >> i heard it.

i know what the tone was. >> what if meg was in the vogue shot. >> would have been a glamorous shot. >> one of your favorites too? disingenuous again. >> we should let you -- brian, thank you, very little. >> thanks, guys. >> good one. what do you think? >> caddie shack. did you know that was caddie shack? >> will hp meet this -- beat or miss wall street expectations of 86 cents a share. go to "squawk box" -- or squawk.cnbc.com. comeback companies, especially cnbc series. you should be doing that. series focus on the road to recovery, one household name next. alert.

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. welcome back to "squawk box." jackie deangelis is live on set with the story of whirlpool. just washing machines, jackie? >> a break from a colorful television conversation during the bra eke to talk about washing machines and microwaves. a bumpy ride for whirlpool stocks, but the stock has made a come back, up nearly 140% in two years, up more than 30% year to date. part of the reason for that is because the housing market has seen signs of recovery, albeit slow, and also as we see new home construction and existing home sales rise. now, more appliances, of course russia purcha

are purchased to furnish the new homes. the company just announced it will acquire a majority stake in a chinese appliance company, believed to be the number three manufacturer in china. the company makes washing machines and microwave and in addition, management also reiterated full year guidance for 2013 of $9.50 to $10 a share. however, of course there are risks to the story. the first is the very thing that has driven the stock and that is the high correlation to the housing recovery. it is dependent on consumer spending which seems to be recovering but slowly. and keep in mind that roughly 30% of the company sales come from its international operations, operations outside north america and they're typically more volatile. having said that, raymond james estimates that the 2014 eps for the company will be $12 a share and has an outperform rating on the stock, which means it expects the company to outperform the s&p 500 over the next 12 to 18 months. this is definitely one to keep an eye on. you talked about lowe's earlier this morning, home depot as well. some enkourmging si inencouragi

those retailers. >> whirlpool, you think about the housing recovery, there is so much focus on rent to own and rental properties. a lot of private investors, private equity firms getting into the space, buying up foreclosed properties, redoing them, furnishing them and renting them out to consumers. there are a lot of buyers who are furnishing the homes to rent them. they have the cash to buy some of these -- >> and appliances are part of that story. so definitely one to keep an eye on. >> thank you for that. >> coming up, a goldman sachs trading glitch could cost the firm more than $100 million. mary thompson will bring us the details of that story when we return. i hav

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welcome back to "squawk box." a technical error could cost goldman sachs hundreds of millions of dollars. details on what happened yesterday. fat fingers? >> interesting day. that technical error caused golden sacks to fled with trades at the open of yesterday's session. this marking the latest in a number of computer related glitches to impact the markets. in a statement saying the exchanges are working to resolve the issue and the losses won't be material to the company. the ultimate number on that loss will depend on how many of these trades are canceled or busted by the exchanges, and where gold man settles with remaining counterparties. some of the trades were canceled

after they hit the market. the nyse reportedly told traders they believe most of the trades will be busted. according to a person familiar with the situation, as a market maker goldman sax puts together every day to reference internally when clients call. it's believed that changes to the firm's computer system caused the list to be sent along with rereasonious prices at the open of trading tuesday. so if goldman put a bid ask on an option these numbers along with an order to execute the trade was sent. when there is a big gap between the bid ask and the order the exchange will bust the trades. if the order price was closer the trades need to be reviewed and can be appealed. it's not known how many of these bad trades were executed or busted but given the exchanges are working through them will likely have a better idea on that later today and then of course the final number on the

loss. we may not know that for a while. it's not expected to be material, just for example, if let's say goldman lost $100 million the bar value at risk is 81 million so it's something they could absorb. >> i don't understand. >> they have an internal list. >> individual equities? >> equity options. >> it's like somebody keeps a memo when they accidentally e-mail to the somebody? it's a spread sheet. it has to be in a system. >> it's in a system. i don't know exactly where it's kept or who references but they do have that together, they have that put together every day. because they need to know if someone calls and thinking about doing this, here is the bid ask. >> here is the issue. the issue is not that happened to goldman sachs who can afford the loss, if it happens at some other place. >> capital last summer it ended up buying a bunch of shares it didn't want and had to do a fire sale and goldman sachs is one of

the firms that ended up buying those at a profit and was able to jack up the price so they made a lot of money on the other side of that trade too. >> the goldman statement almost seemed to indicate they were blaming the exchanges. >> no. i don't -- >> if you read that it said well the exchanges are working on the issue. didn't say goldman is working on the issue. >> i think -- >> to resolve the issue? >> i'm not speaking for goldman sac sachs. i would be surprised if they weren't working on the issue w the issue they are referring to is looking at the trades to determine which ones should be canceled or busted. again, because there is a huge gap, the exchanges will flag it immediately because they know it's a bad trade. i think when it's closer then it requires more review. these things happen. >> $100 million the number? >> it could be more, could be less. >> how much more? >> you know, some reports say 100 million but that's according

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good morning. welcome back to "squawk box" here on cnbc. kayla tausche is in for becky quick. becky's not here. maybe they would be in the green. the dow is off 30 points. nasdaq open up 12 points.

>> no kidding. >> the market goes up when women are around? >> if becky were in the market. >> gender with you. >> oh, man. >> the whole world is viewed. >> we have news. s&p 500 off about 5 points as you know i love women. let's get you through some of the morning headlines. >> objects. >> we're going to watch shares of lowe's, the retailer beating estimates on the top and bottom lines as home depot did yesterday. raising its forecast for the year. more on lowe's in a few minutes so hang on to your seats and hats. the fed to release the minutes of its meeting. investors looking for clues when the fed of course is going to start or not start the tapering that bond buying program though there is increasing speculation it will happen at the next meeting in september, we're going to talk a little later to our good friend steve wiesman. and european bank officials are in athens checking in on how

well greece is doing in meeting its bailout obligations, the next batch of aid money due in october. >> attorney general eric holder saying the doj nearing decisions on large financial firms. new cases stemming from the meltdown could be coming. scott joins us with more. >> that sure got our attention when we heard about that. but turns out the attorney general didn't get into specifics and i'm told what he wanted to do was send a signal with the 5-year anniversary of the crisis not to get ideas about beating the statute of limitations. that's really what he said. anybody who is inflicted damage on our financial markets should not be of the belief they are out of the woods because of the passage of time. if any individual or any institution is banking on waiting things out they have to think again. of course holder's justice department and the obama administration have taken heat for the lack of high level prosecutions over the meltdown in 2008. there haven't been cases but the

record is mixed. in 2009 two hedge understood managers beat fraud charges. that was a setback. better luck when a cup of traders pleaded guilty and a third this year. lots of action on the civil side. the new york attorney general working with the doj sued jpmorgan and sued bank of america and standard & poor's among others. we know there is a push from high up in the justice department to move other crisis cases along. no specifics from holder other than we're not done yet. >> you know, it's interesting, scott, that this stuff is just starting to bubble to the surface even though the 5-year statute of limitations is approaching. when i was looking at some of the bank quarterly filingses a couple weeks ago they did start to disclose the doj is investigating us for mortgage-backed security cases. almost every bank in the mortgage market disclosed that. when i talk to people they said that was because at the staff level the bank had been informed that the staff had recommended that the doj bring charges.

it seemed like some of that stuff was relatively near term. are you getting that sense or you think it's going to take longer? >> there is a sense and holder said in his interview she going to be there to announce these significant actions, and if you believe the reporting that holder may be out by the end of the year, that suggests it's coming up. the other thing you have going on, remember the last state of the union speech president obama announced this mortgage fraud working group. that's been getting going. and it's a lot of agencies working together and that may be a reason why we're seeing a lot more in the area of mortgage-backed securities. interesting that it's come up so recently with the crisis happening in 2008. a lot of people saying it's been five years, set aside the statute of limitations for a few minutes, that doesn't always apply. what's going on? and this seems to be the answer. >> back to the answer for a second. we talked about this a little bit in the 6:00 hour. do you think these are new cases we have no idea about or do you think these are the the old

names that we thought were off the table? i think that's the big question this morning of people waking up reading this going what's happening here? >> the question are we going to see top executive former ceos perp walked. the answer is if you do the math and look how things have gone, and this is just me talking, that doesn't seem likely because you don't have the lower level people who have been pleading on the way up. you look back, this isn't >> this isn't dick fuel back, jimmy cain. >> don't know. holder's not saying. but there's a lot of things that have to happen before that were to take place. you have to implicate them, knowing about these deals and knowing about alleged fraud having criminal intent. >> is the expectation, we hear about these suits or whatever happens are we going to say what took them so long or say oh, we didn't know that was even in the cards? >> i think it may be a little of both. what you've been seeing on the civil side of things with civil

cases, might portend what may happen in the future. they say they can make these civil cases. the burden of proof is a little lower. and they can look at these individual deals and whether there was fraudulent intent. the other thing they have been doing is this statute from the savings and loan crisis. they may be having some success with that, it's held up so far in court. and so you may see, again, more civil cases related to that. >> are they misunderestimating what -- a good word. was that bush or -- that was bush. all right. no, hers was refudiate, which is another word that's damn good. as a decider. do you think as with fabulous fab that they got a little emboldened but that's misplaced. he is this low level nobody, i

mean, that gets nowhere near -- >> fabulous fab was the securities and exchange commission. >> that was the first that stuck. >> it was the first one that stuck, really stuck on the sec side. that's the kind of thing they are looking at whether there was disclosure. >> your dad's a lawyer. >> what would you say jimmy cain could be charged with? >> i have no idea. >> failure to supervise? >> signing a financial statement? >> related to markings? >> what about dick fold and erin calins. supposedly they new full well some of those things. >> they have to get these executives on it would be securities fraud, it would be signing off on a financial samt or sec filing knowing what that they are doing is false. that's a tough charge to make especially you have instruments

that have been gone over by lawyers and accountants. >> you have hundreds of people you could finger, hundreds of firms caught in these crosshairs. you think the government has the resources to actually find in that haystack the needle that they are going to want to find? >> that's a good question. not only do they have to find it, they have to prove it beyond a reasonable doubt. to a jury. >> you always get asked why has no big name person gone to jail. there's more people with more incentive to try to find the crime and bring the charge, right, a prosecutor wants to make a name for himself. frankly, a journalist. when i was writing my book i remember thinking if i could find a crime, wow, i'd probably sell more books. it would be a better story if you find -- ultimately, throughout all of -- you know, my good friend wrote the book "the devils are all here." and none of them are technically criminals. it's so difficult to find

intent. people screw up, absolutely. hosh mistake, absolutely. >> you know, there is a whole side of people that say that this was totally enabled by not just a government push toward greater housing ownership but a societal push. >> 100%. >> flipping houses and taking home equity loans. if you are a mortgage broker and the fed says here is more money than you ever need and you get paid by living loans. i was a stockbroker. i had to get paid having people send me money. can you imagine you sending money to people. that's a good racket. >> there is a story about a guy who lied about his income, he got sent to jail. but his broker who recommended it didn't. >> none of the major media outlets are pushing for prosecution of the dead beats that were unable to make good on the contracts that they went into. all they want is more money from the banks for the people that should have never got at any the loans in the first place. >> here is what's interesting.

>> what about franklin rains? >> the big round of accounting fraud, enron, worldcom and so on. it's not that much different. here's the biggest were these were isolated companies. nobody had seen the size of enron fall like that in a space of weeks. it was by itself. >> what do you mean. where is the similarity between a bank america or a merrill lynch and enron? >> well, if you look at all of these companies that have deals off the balance sheet, enron had deals off the balance sheet. >> i know. the way enron -- what enron was doing with those deals and the way they approached it was totally different. >> how so? >> just, i don't think it's e n even -- actual -- >> you think the devils are all there ready to be prosecuted. >> i don't think there is anything, if they could have done it i think they would have. that's what i'm saying.

i'm saying if they could have, they would have. i'm not saying that all of the devils are here. i'm suggesting there are people that made very bad mistakes. >> holder doesn't want another office, this is not a shakedown. we saw spitzer. that was his deal. he extorted firms for running for future office. holder has no reason to try to extort money, right. >> you have schneiderman, a lot of people. >> there is, everyone has an incentive to do this. my point with the accounting scandals of the decade ago is that there was also this greed and this need for companies to make their number. in the case of enron. >> but creating a product that packaged mortgage and allowed the rating agency to give it a aaa and giving it a product that they wanted is not a crime. >> that's right. >> neither is moving a deal off the balance sheet -- >> making it impossible, cooking your books.

>> i don't know. >> scott, thank you. throwing the grenade. coming up, a chemical attack in syria. richard engles that details on that next. and then lowe's is matching home depot with an upbeat quarter. and then later, a new message from the fed. don't fear the taper. what they may say and talk from jackson hole and the fed symposi symposium. steve is going to give us the inside skinny. in a world that'sg faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

welcome back to "squawk box." there are now reports of a possible chemical attack in syria. our own richard engle joins us from cairo with the latest. good morning. >> reporter: good morning. not just a chemical attack, rebels tell us a series of chemical attacks. this morning starting around 2:00 a.m. syrian rebels tell us there was a chemical weapons attacks on at least ten different towns and villages to the east and north of damascus. that this barrage of surface-to-surface missiles fired by the regime, missiles tipped with chemical warhead these claim, lasted several hours. they say the death toll is over 1,000, we've seen videos showing many lifeless bodies, many of them women and children. witnesses say that some of the

symptoms before death included constricted pupils, foaming at the mouth, syrian government denies that it used any chemical weapons. this comes at a time when u.n. weapons inspectors are actually in damascus looking into the fact if chemical weapons have been used. the weapons inspectors are staying in hotels a few miles away from where these alleged incidents took place. >> richard engle, thank you for that. this is unbelievable story. >> richard, with egypt, is this the best -- i hate to say syria thinks they have cover to try this now with the world focused on egypt? >> reporter: it's hard to know if there was direct timing between what's been happening in egypt and syria. we are focused on events the last two weeks or so the war in syria has been developing and continuing on its own pace. but they are interconnected in a global sense. you look at the pend you lum of

the arab spring, moving the last few years for a while there was mo men twum the rebels on the street, the protesters, now it seems to have shifted back the other way. the military taking over here again in egypt, a generally positive reaction to that from egyptian people. saudi arabia embracing it. kuwait, the uae, a lot of governments saying they think having the militaries come back in power is a good thing. that certainly helps the bashar al assad regime. i don't know if that g geopolitical shift had anything to do with the alleged atrocity in damascus. >> if the generals in egypt weren't pilloried by the street, then it almost embolden -- seem to embolden other government there is to put down demonstrations maybe the same way and not worry so much about a backlash.

>> reporter: certainly bashar al assad likes the fact that the military has taken over here in egypt and is turning the tide against the muslim brotherhood and other islamic groups in this country. so juz jordan, so does a lot of countries. it bodes poorly for the rebels in syria long term, makes people feel maybe a strong hand is the right kind of government when you're looking at the alternative which is the last three years of chaos. syria, however, is an extreme case where you have now alleged chemical weapons use, i don't think the people in the arab world even if they support a return to a strong government in egypt will accept what happened. >> what's the obama administration, they are getting people are criticizing you know, what we're doing with egypt, the red line has now been cross that was supposedly drawn in the sand. it's a huge, another additional

problem for how to handle it for hagel and the rest, right? >> reporter: it certainly is. president obama had previously said that the use of chemical weapons was a red line. this is not the first time chemical weapons have been used or allegedly been used in syria. this would be a dramatic increase in scale, however. if you remember, the white house promised to start sending lethal aid to the rebels in syria after u.s. intelligence had proof that small amounts of chemical weapons had been used. that was after small amounts. what about today if these reports, ten towns and villages, 1,000-plus dead, many of them women and children. if crossing the red line already happened, today it sounds like syria and the ba shar regime jumped over that red line which is going to put the obama administration in a difficult position. how do you take action and then come out and say well, we're still with the syrian

government. i think you may have -- you're going to have a policy of, well, inconsistency here. >> richard engle, thank you for that report. we're going to be watching to see what type of reaction we get around the world today. >> there's another big story in the corporate world that is lowe's reporting a profit of 88 cent as share, revenues topping exspiktations and raised its full year forecast. we have the director of furnishings research joining us with reaction. good morning and thanks for being with us today. looking at lowe's and home dae depot beating estimates and bolstering the sentiment. what are your takeaways from the report? >> they posted a very good quarter. as you said, comps 9.6%. we were in print at 5% i think consensus maybe 5.5%.

better than us on the bottom line at 11 cents showed that the sales leverage was pretty good. the beat for us came 4 cents at the -- from operating expense and 4 cents from sales and a penny from gross margin at the operating line. for depot much the same, not quite as much leverage at the operating line due to probably acquisitions last year. >> trying to read the tea leaves on the housing recovery from the reports. there has been a lot of talk how refinancings are going to slow down. that's affected by rates rising. do you get the sense some of the activity, the ceos saying the recovery is long, does that mean the purchases are going to come up too throughout the year? >> i think that both of them raise guidance for the year and frankly, in our note on depot published last night, early this morning, we actually went a little ahead of their guidance.

lowe's raised theirs as well. i don't know where numbers will come in above that versus that guidance but i wouldn't be surprised to see them go above guidance. i think people are feeling fairly bullish about the do it yourself retailers and their prospects. housing is certainly an important part of that so is the improvement in gdp though that's moderated a bit. the overall businesses of both companies look similar in a lot of ways and the outlooks look similar. >> one of the differences thatableleys talk about is the facts that low's is a bet on the discovery of the suburbs. do you see the sign that lowe's is doing so well, better han than home depot, as a sign that the small town recovery is catching some wind? >> i actually don't think it's quite that way. you may say some of that. we find a major difference in the professional customer. depot has a 35% penetration of

pro, lowe's about 20%. depot has $330 a square foot in sales, lowe's about $260 a square foot. when do you that math you see that the consumer side of the businesses are relatively similar and the difference is explained by the pro. so the pro do it for me. depot has a first mover advantage because they have been at it a longer time and the pro doesn't move easily unless something goes wrong with the existing provider. >> one more quick take away from you which is do you think valuations are too rich? what's your target for lowe's? >> well, our valuations are too rich. we don't put a target price on the stock so we don't have positive ratings on. both pretty much in lock step with the market, a little below the overall retail index so we're looking for better entry points. these are world class corporations. we would like to recommend the stocks but only do so when there is more up side to the stock as opposed to downside or equal

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welcome back. a leak at japan's fukushima plant may be worse than thought. japan's nuclear watchdog may be raising now an assessment of the situation to a level 3 which is a serious incident. the plant operator says around 300 tons of contaminated water leaked from a steel storage tank at the plant. the tank is about 300 feet from the coast, so the leak doesn't pose immediate threat to the ocean. four other tanks have experienced similar leaks since last year. the fukushima plant experienced multiple meltdowns after massive earthquake and tsunami hit japan's northeast coast back in march 2011. coming up next we'll talk about gauging the qe exit strategy. the markets paying attention to

the fed minutes released this afternoon 2:00 p.m. there is a lot of disagreement among members and the statement could help investors understand the mind-set of policymakers. we'll discuss that and more when we return. right now, 7 years of music is being streamed.

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box." in the headlines we're going to get a fresh read on the housing market later this morning. the national association of realtors out with july existing home sales at 10:00 eastern time. economists look forge a 1.4 increase. royal caribbean's celebrity cruise division has canceled an alaska cruise in mid trip. it's mid trip, due to a mechanical problem.

passengers are getting a full refund, i hope you get more than -- get a credit toward a future cruise i'm told. to me i think you would want more. they give you airfare home, canceling the next four scheduled cruises on that ship while the problem is fixed. why are there so many problems on these cruises? i'm not a cruise guy. the world also being flooded with 6-second videos. here is news, this is for carl. twitter's vine now has 40 million users up from 13 million 2 1/2 months ago. analysts have been watching these figures closely with facebook's instagram unit introducing a short form video application. carl is mr. twitter, vining like crazy. mr. kiernen. >> i have target and looks like it might be a penny shy of 96 cents. $611 million. the adjusted number, $1.19 which

would, and we normally would use adjusted. way above. what's the stock so far? it's down. we're going to see whether there is -- whether we use adjusted or not. there is also an adjusted estimate for the third quarter which is -- yes, it is adjusted. 80 to 90 cents, the estimate is 88 cents, so at first blush looks like this actually is above expectations. and $17.12 billion is slightly below the estimate of 7.264. we probably should go into the actual release itself. you never know whether analysts are all on the same page in terms of special items that would have caused the adjusted net to be so far above where the not operating but just the net number we have. >> looks like more sentiment like walmart, nordstrom, like macy's. the ceo quoted saying our u.s.

outlook envisions continued cautious spending by consumers in the face of budget pressures. that could come down on the outlook for the rest of the year. shares are down by about 1.5 -- >> kayla, doesn't make sense to me, is the company now sees the adjusted earnings per share near the low end of a 470 to 490 view. the estimate that the street is carrying right now is 432. so, 432 either is not based on adjusted or the street was already down quite a bit from where it would have been from where it would have been earlier. so you see what i'm saying. 432. saying 470 to 490 which could still be above the 432 where wall street -- >> a lot downgraded walmart. now the company's catching up with some of the expectations. >> target says this current quarter is above the range. target's second quarter adjusted

earnings per share at the top end of an expected range, despite a softer than expected comp sales increase of 1.2%. the 95-cent number which is gap was at the midpoint. it expected 21-cent dillution of the canadian segment. if we have an analyst we'll ask him what's causing the weakness in the shares. could be i would say i don't know how they are going to miss the year number. the 470 to 490. >> in the the year we had people looked at this, great year for stock market, housing up but i think people underestimate the effect of the payroll tax hike and in middle america it isn't that good. incomes aren't going up fast. people haven't gotten over the tax hike. if you are up scale or on line it's fine. but i think a lot of basic

consumers are just not feeling it. not feeling much better and aren't much richer. that's what i think is causing a lot of broad mainstream retailers to have a hard time achieving these comp store sales that they need. >> was it yesterday's quote? was that today's trading? where was it? it's up now. >> it was down 2.5%. >> i hate trying to explain when a stock is down and it's up. it should have been up. they beat by a huge amount. >> could be the comp store sales number. as best buy, jc penney owe good number, it's not a negative. >> that says something, though, in fifth year of recovery not having a negative comp store sales. >> a buck 19 versus 96 cents is pretty good too. >> that is good. >> let's get -- get a preview of the fomc minutes. stocks have been pulling back amid rising interest rates and

speculation about the tapering, whether it's around the corner or no. joining us from washington is the financial times u.s. economics and trade correspondent. david kelley chief strategist at jpmorgan funds. great to see you. haven't seen you in a long time. >> good to see you, too, andrew. >> give us the view from washington right now. if you were going to handicap the tapering, september, december, sometime in between? >> i think they are really still on the fence. so i would say a small taper in september is what people are probably expecting at this point. you know, i think the employment number at the beginning of september is going to be crucial to fed thinking. i think the hawks on the committee believe that there's nothing in the economic data the last few weeks to stop them from tapering. probably not enough evidence. we'll see what happens with the

payroll report and you would have to look at inflation. i think the growing consensus is maybe a small taper in september, then we'll see how it goes later in the year. >> david? what's your answer? >> i think they will announce what they are going to do in september. they may start it in september but that's not the important point. i think the sfed overestimating the ability of this economy to grow. so even if you get 2% to 3% growth the second half of the year we have no productivity growth, zero. we've got pay rolls growing faster than gdp and so what that means is even a moderately going economy is going to push that unemployment rate down. one of the problems of forward guidance it only works if you have a model which is correct. what you'll find is even a mediocre economy, i'm not so much interested in where it

starts. i'm convinced -- >> where it ends. >> yeah. and by next summer when they have a trillion of purchases out. >> do you care a lot about who the next fed chairman or woman may very well be? >> i do. it's not so much the personality. i want them to have a balanced view of what the capabilities of the federal reserve are. >> what does jpmorgan want? >> i'm not going to speak -- >> who do you want? who would you prefer? come on. you must have a view. who would be a better chairman or chairwoman for you? for the markets. immediate and long term? >> i'm not going to give you a name. well, i'm not -- >> miss yellin or -- >> you wouldn't preclude a person because she is a woman, would you, david? >> of course not. >> after our earlier

conversation -- >> if yellin were fed chair -- >> we're on this. we saw the meg whitman. >> this is like the way we play politics. we focus on personalities and end up with bad policies. the issue is understanding what the monetary policy can and cannot do. it cannot stimulate an economy on its own which is flat on its back. we need supply side policies which enable us to grow. and i'm much more interested in the policies enunciated by the federal reserve chair. >> neither one of the persons we're talking about are supply siders. >> i think that's a problem. >> that's a zombie idea. >> i think what we're hearing from both the current fed chairman and a lot of the candidates is that they think just more on the tear stimulus

will help and it won't. >> james, give us sort of the backroom dealings right now. the handicap is that larry somers gets the job. i hear yellen is still campaigning. you used to cover n and a. he's done a lot of back room dealings. what's happening? >> i think what you're seeing is the inner circle around president obama seems to be rooting for larry summers, but the outer circle, the broader community rooting for janet yellen. you're seeing this war behind the scenes at the moment. and president obama seems to want space to make the decision. what that means is unclear. but there is this tug of war going on. >> when we hear the answer? >> the white house has said in

the fall, technically that means after september 22 but could be after labor day. i'm not sure they would have made his decision on holiday. >> one other question. let's say they announce this person in september or october. when does bernanke step down? what is the mechanics of all of that because i think there's going to be a lot of uncertainty in the market. i'm trying to get a gauge for the timing. >> i think ben bernanke is expected to go through his full term until next year. and i think the markets would be pretty happy and pretty comforted by that. so i think the idea is to have him serve his whole term and ensure the longest transition time. what nobody wants is a

protracted confirmation battle. >> i think the important thing is for ben bernanke to lay out the tapering plan in september. whether he starts it then or not. that way who is nominated can say me too. because here is an opportunity for ben bernanke to say this is an update, this is where we are. but that way at least you don't have the uncertainty of no tapering and now a new person. >> i think that's true, but in a way, ben bernanke has already laid out the tapering time table. it's just that it's subject to economic conditions. we don't know what's going to happen. >> james, thank you for the insight. david, you're sticking around. all of this suggests to me that you don't hear about the until october. >> no one's wearing -- no one wearing white pants. another way of looking at. white will be. >> james said after labor day.

>> isn't that when you stop? >> that's where you stop. >> that's when i stop. >> through november. >> there is a winter white. >> yes. coming up, we're going to hash out the target earnings. so we are going to see this. now it's down a little again. the world premier obstacle race is coming this fall. just read about it. that will not be me. we'll talk about tragedy and success of these races. see, that you wouldn't expe expecting. we'll have joe desena next. ♪

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metallica playing during the race. if you're not brave enough for a spartan race you can watch. spartan races teamed up with nbc sports and reebok for an event.

joining us is joe desena, founder ever spartan races. you're like buffed. you're not 40 yet? >> i'm 44. >> how many ironman, 12 in one year? >> about 22 ironman now. >> total. >> who is counting. not everybody knows. how long is the race and what does it involve? >> three distances. we modeled ourselves after ironman. iron man has a shorter, medium and long distance. we did that model. three miles, eight miles or 13.2. >> along the way it's not what you would experience with an iron man. >> it's not traditional where you are running or biking. you're climbing, crawling, in some cases you're crying. >> you make men and women cry. and you take pride in this. not pleasure but pride. pride and pleasure.

>> it's exciting. it's didn't. it's primal to get out there and sweat and work the way we used to work for thousands of years. it's only the last few hundred that we've gotten soft. i was in a makeup room putting makeup on. that's not -- >> great job. >> that's not normal. >> what kind of circuit would this be, what's the prize money? this year 65 events, around the globe. 650,000 people that compete. it's extremely exciting. it's getting people up and off the couches. a gym membership which we all have done, that doesn't motivate people. if it did we wouldn't have close to 100 million people that are obese. this motivates people. they change habits, they change friends, go to bed early, stop drinking. >> no age? >> i've got 75-year-old, male and female out competing. >> what's the body count? how many get injured after they do it. >> the typical race has 8,000 to 10,000 people.

we're going to see 50 injuries, those are going to range, ankle breaking, a strain. >> you want people to think they might die. what if someone does die? >> that's the extreme we didn't talk about. we have a race called the death race. spartan race we're speaking about is a baptism it's an exorcism. >> you're going to do that too? >> we do that once a year in vermont. that's how this started. >> you call it a death race. >> that will be 72 hours, 90 hours, and you could die. but that's very extreme. that's to emulate climbing mt. everest. >> even for the normal races you have to sign a waiver saying i understand i can die. >> you can die walking across the street. this is a little more extreme than that and you need recognize the risks. >> so joe swims, a mile a day. >> you could die swimming the mile. >> i feel like that sometimes. >> how would he need to train for this?

>> says he wants to do. >> joe and i and kayla and becky were to prepare for this what would we do? >> a lot of body weight. >> we clearly do that. >> clearly. pull-ups, rope climbs, push-ups, a lot of cal a stenics. and running. >> pull hups i need to work on. there might be -- i might get stuck like a third of the way through and never finish. >> and not -- >> climb a rope. >> and so what we do, you need to finish the obstacle. >> you need to train. >> if you don't you do burden of proofes. the ultimate exercise. so it's a jump up, jump down to the ground. >> a demo? >> i would love to. i'm attached to wires here. >> for nbc what is the -- >> what they sign up for now, what's the potential. mma, people didn't think that was necessarily -- >> it's huge. >> yeah. >> i think what reebok and nbc

recognize is sports are fun to watch, traditional sports but people are not doing that on the weekend to stay in shape. people are going out and doing races like this and doing the p90x and so it motivates people and they recognize that and so nbc and reebok want to be part of it. did you see reebok sales up 11%. they contributed to spartan. >> they did. >> they did. it's in the -- >> reebok gear? >> reebok is making specific spartan gear. >> what does spartan gear look like? >> it's a little more rugged. >> not a head dress and armor. >> not like the old spartan gear. it's got like little grip on the side of the shoes so you can climb walls, special knee pads built in. >> just so you feel more comfortable next time. >> when you guys race.

>> have a wireless mike so actually do some burden of proofees for us. >> are there people who are emerging as the clear winners. >> they're serious. >> about 10% of our 650,000 are very serious threats, whether they were high school, college, olympians are coming out to compete. this year we've got the world championship -- >> 10%. 90% stuck where i am. trying to climb the stupid rope. >> 90% of couch potatoes. 30% ever female. >> i think it's fantastic. by the way, beating the men. >> gumming up all of the works. >> i can't believe you would say something aloud. >> all right. wouldn't it be exciting to do one? >> i have thought about even mini marathons. my knees at three miles and my

knees -- >> the control room is saying -- >> my window, my past, i don't know. work on a marathon. >> late 70s. a woman that looked like flo from the brady bunch going through. >> this will help. >> oh, well. i don't know. i'm signed up. >> i've got four kids. i do. >> he's only got two. >> only two. >> you have four if you start racing. >> that is too late for someone i know. it's off the table. thank you for coming in. good luck. don't leave yet. you can do a burden of proofee. >> coming up after a strong day for retail stocks yesterday investors focus on the sector we focus on target and its latest earnings next. make sure you log on to our

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target earnings are out now. after looking through the one-time factors the proper number, this is important, for

comparison is 98 cents per share, that's 2 cents above estimates, the company did break out of a 21 cents of die lugs related to target's canadian segment. analysts factored that in. revenue slightly short. >> lower guidance for the year. >> we're going to be on the low end. >> where they were before, i think. >> than previously. >> that's the lower version of the guidance if you will. we should say thank you to david kelley who spent the hour wisconsin. you wouldn't tell us whether larry somers or jack kelly. you're going to? give it up? we only have 20 seconds. >> no. i want us to focus on what the fed can and can't do. it's more important to get policies right. >> which of them would give us the right policy? >> i think both of them are talking about too easy money. i think we need to get back to a more balanced --

>> supply side is so yesterday, isn't it. aren't you frustrated it's written off? >> yes, because we're -- we're so focused on demand of the economy we're forgetting we're doing nothing to create supply. we're going to run out of workers, run out of machines. >> thank you. >> we thank davidle kelly for spending the hour with us. hopefully we'll have you back soon. we have the morning headlines up next checking the futures into the break, still lower, just about 17 cents, 17 points, rather, on the dow. [ female announcer ] a classic macaroni & cheese from stouffer's starts with freshly-made pasta, and 100% real cheddar cheese. but what makes stouffer's mac n' cheese best of all. that moment you enjoy it at home. stouffer's. made with care for you or your family.

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time line for tapering? we'll get an inside look at the minutes from the latest policy meeting at the fed and bring you live coverage from the central bank's retreat at jackson hole. >> emerging markets feeling the pain from the fed's paper talk. find out if your investments are safe. >> and a hedge fund manage here uses his financial gig to fund his professional tennis career. we're going to ask sam barnett what lessons from the world of finance have helped out on the tennis court. >> that got you right in the

throat. >> the third hour of "squawk box" starts right now. ♪ welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and kayla tausche. becky quick is off today. she has time off. glad that kayla is here and having her here probably has no influence on whether the market goes up and down. >> i'm wearing pink. it's not red. >> it's not green. >> and you said after labor day, andrew. >> only winter white which is more of a beige. we've had a lot of news. target earns 98 cents per share for the second quarter, 2 cents above estimates. the company expect full year profit at the low end of its

prior forecast. we have home improvement retailer lowe's returning earnings of 88 cents a share. revenue also topped expectations. it said it raised its full year forecast on a strong housing recovery. u.s. equity futures are in the red, raising a little bit from where they were earlier in the show. the s&p would open about two points to the down side. the dow would open about 9 points to the down side. the nasdaq would be down by just about with five. and hewlett-packard's quarterly reports are due. expecting 86 cents per share. are you a user, an analyst, just an armchair analyst? will the company meet, beat or miss, take our armchair poll. >> one of the talkers of the morning, news that people are talking about, attorney general eric holder telling the "wall street journal" the d.o.j. nearing a decision on a number of probes involving large

financial firms and new cases from the economic meltdown, they could be coming. the attorney general sending a message people and institutions involved shouldn't think they are going to beat the statute of limitations. we're coming up on the five-year anniversary. given that nobody has been perp walked the expectation was that this was over. now a suggestion maybe this is back. we have news "the wall street journal" posting a story on an outside review of bloomberg's data compliance and news reporting, you might recall a couple months ago there was that news around bloomberg and whether reporters were using inside information getting from the terminals only accessible to people who worked at the company. this new review revealing the company didn't curtail reporters' access to subscriber data two years ago when concerns first emerged due to what they call an internal misunderstanding. this outside review we should say was conducted by a prominent group and the law firm hogan

lovells. is he still there? former. and also clark hoyt, a bloomberg editor, used to be the public editor of "the new york times." there are two instances they found reporters using this data. we should highlight what kinds of information they were getting at the time. in one case, apparently journalists reported on the pricing of a mortgage-backed security offering by using data that the reporters could only get by looking at the terminals. the other a case where one of their tv reporters, and they went on the air with this, i remember when this happened, was using some information from the terminal about when people were working there and when they weren't, whether they are on the terminal or not, looking at the scandal at ubs. >> the trader that lost $2 billion in an obscure group. what they did in trying to identify who that was, they

looked at who at ubs worked in the group and found the trader that had not logged on. i think a lot of people expected this review would find that bloomberg reporters misused information whether the so called london whale had been logging into his computer or not logging in and they used that information to report on jpmorgan. this report didn't find that. >> we'll see what this means. goldman sachs came forward with this. we'll see if this report makes everybody pleased or not. >> in the meantime, the federal reserve kicking off its annual retreat. steve leaseman is there live. ben bernanke is not. >> good morning. a little monetary mayhem in the mountains where we begin this annual retreat for the federal reserve with really unprecedented amount of

uncertainty over the fed. the leadership, near-term guidance on the policy and of course the effectiveness on the policy. we're calling this a jackson hole in the fed here with as you said no bean bernanke, no drogge, and a lot of governors and bank presidents. no clear policy guidance and no clear timing when we get that as to whether there was a september taper. the bernanke successor is uncertain. there will be a lot of debate whether quantitative easing was successful. and of course the taper guidance has been murky. let's look at some of the pluses and minuses of the two big candidates that people are talking about. first there is larry somers, the former treasury secretary and janet yellen. and the pros on larry that we're hearing is his crisis management. everybody says he is a brilliant

economist and maybe another aspect is he is unattached to the current policy which mean he needs to pivot off of it he doesn't own that policy. the cons, he is politically divisive. it's going to cost president obama some political capital to get him approved and there are issues about his leadership if he is a consensus builder. janet yellen. she is known to be a leading moan tear policy expert, respected throughout the federal reserve and monetary policy circles also known as a consensus builder. she is untested at the helm in a crisis, she did support ben bernanke and she owns the current policy. i think another thing we're going to talk a lot about here is the last month and the rise in interest rates. what was the source of that, could the fed have done that differently? that's going to be instructive for mow the fed moves forward in its communications and guidance

for the tape fer it gets around to it. i think the big rate debate is whether or not it's the fed having a stock of assets that's taken off the market, is it the flows that it takes off every month. my favorite, what i think is the post parnt. market expectations. how the federal reserve guides those. we're going to have two bank presidents on from here. jim bully from st. louis, john waynes from san francisco. we'll bring in those in the next couple days. i think that's going to be friday morning. and there's going to be a lot of talk, not inconsequential. we will not get that speech that sets the tone for policy over the next cupping months. >> we've been -- your ears might have been burning. andrew and i talked about you because of the september-december discussion. and i didn't hear -- i'm told

that last week you started thinking september was less likely. and i got that from andrew but i'm worried about it because i remember that other situation t sound bite and everything and you stormed out of here. so i'm not sure whether i can take his word. did you say it's off the table >> he didn't say off the table. >> less than 50/50. >> steve can speak. >> i want to hear it. i'm not going to call you horse but right from the horse's mouth. >> you can call me horse, i'm a big handy cammer as you know. the famous mark haines, we used to do that. i lowered my odds for september taper to 60/40 based on comments from dennis lockhart and jim, both said they did not believe they would have enough information in september to make that decision. >> 60/40 against. not taper. >> right. i've also been corresponding on

background with jim. he wonders when is the moment the market will get that clear guyence from the federal reserve. the calendar is such that september is when we'll get the guidance. more likely we would get it. he said we should press conferences every month. i agree with look heart, joe, on the following which i don't think the data is decisive enough in order for the fed to make that move. i want to layer in what lockhart said. when we start this we have to figure the market is going to price this to the end so we better be sure what we're going to do here. both of those guys, i thought the fete wanted to do this. they may still want to. i think they worked hard to get that flexibility. give you want for the mft cement. this is not inside knowledge on my part. i read their speeches, they make

sense to me. >> even if they started with 5 or 10 or 15, people go to the end. so once it starts a it's a big deal. >> that's right. and you know, bull erd said, made an interesting comment, we ought to stop this business about trying to get the market to separate, tapering from tightening. basically he said we lost that battle. we'll have a chance on "squawk box" to ask him about that notion. but that was interesting what he said and it changed my thinking a bit. >> steve, don't go anywhere. we'll get more on this and want you to jump in. we are joined by bank head of regulatory affairs and former executive vice president at the new york fed and nathan sheet, former director of the international finance at the fed. do you agree, both of you jump in on this issue of the 60/40, that september is not the month. >> i continue to think it's

going to happen in september. if the fed is nervous whether the data are strong enough i think they will try to off offset some of the markets by reducing the threshold for hiking on the unemployment right. i think that will allow backer to say that we shifted the mix of tools but we're i tempting to maintain a stimulative stance. i have become totally confused by the messages out of the fete at this point. we had an argument what matters is the stock of purchases, not the flows. what matters is the guidance how long it's going to be at zero. you look at the last four years would they have ramp up all of these. 2.2%. quarter by quarter. though they ramped up different instruments, growth has not changed. how much is this having an impact on gdp.

san francisco put out a piece that tried to estimate. it was de minimis. >> then you are arguing the tamer immediately. >> so the implication that should lead you to the conclusion you should begin tapering except that they team to be impacted on the market and the impact this will have on markets. >> they don't taper in september, doesn't the market thak as a bad sign? >> i think this is a important point. the federal reserve pab hawking about since may. this has been enormous uncertainties and it's time for them to get started. they have a variety of tools to offset it through their communication and i very much agree with your point if they don't boo it's going to be a situation they are more optimistic about the economy. >> the strategy began in spring

of 2009, accelerated in 2010. we've gonen from exit to tapering. there has been on the table for several years. what's happening is that instead of sort of bringing down these unconventional -- they have been ramped up. at some point they have to pull the plug. when they do that it's going to have a min ef earthquake in the market. >> what do you have to say? >> well, i want to make one point. the alternative to the fed not tapering and the impact on credibility is the other side of that is what if they have to go back and increase the amount of quantitative easing again because the economy is not in good enough shape. one of the things worried about the sequester on the economy. that leads to their uncertainty. the other thing is there has been some reports about the lack of effectiveness of quantitative

easing. the san francisco report that there will be other papers that will discuss that outcome. but when you see the market t interest rates rise as much as they did from tapering and the market sell off, doesn't that really tell what you the effect has been on the economy, that you have the higher stock market and lower interest rates. okay, it's not led to greater than 2% growth. you had the 1% drag from the federal government so maybe it has been more effective. >> these estimates are rough. there's a big margin of error. no question about that. i think you look at the last four years, we've been in recovery for four years and we should have had a recovery that was much stronger than it has been t fed was forecasting 3%, 4% growth over the course of that period in their january forecast. we haven't had that. so you know, for whatever reason, and you noi know, other people can judge what those are, the economy has not performed.

the effectiveness of these have not work as well as expected so you have to look at what are the costs, what are the benefits. the benefits have not been as great. what are the costs. maybe that might be a good thing to discuss in jackson hole, what have been the costs and what is the mix when you weigh the costs and benefits of this policy. >> we'll leave it there. a good place to leave. steve, we gave you talking points. >> wonder who the top dog -- >> are you the top dog out there right now? like who is without baerng and dragl, you? >> coroda from japan. >> which fed guy is going to be the one that everyone's trying -- >> probably janet yellen will be the number one person. we'll get back to studying the kind of research rather than some of maybe the politics, more about the papers. >> you're studying fish.

we know what you're studying. >> we'll do that too. >> thanks, steve. >> coming up the recovery in housing, we get existing home sales later. first a read on real estate from trulia's economist and from barry habib. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. evern you open an account. ybody has different ideas, goals, appetite for risk. you can't say 'one size fits all'.

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welcome back to "squawk box." among the headlines a goldman sachs error caused erroneous option trades yesterday. many may wind up being erased. it could cost the firm up to $100 million. in a statement saying the firm does not face material loss or risk from the issue and jpmorgan is said to be close to naming two new directors with finance and risk management expertise. the bank to have identified the candidates but the board has not voted on them. >> get a read on the health of the housing market with us on set barry habib. chief market strategist at residential finance and joining us from san francisco, a chief

economist, jed kolko. we had a backup. the backup a point? is it starting to bite or people have decided that i better do it now and therefore they are deciding to before it goes up more. >> they have been strong on the purchase side. the latest survey shows that purchase applications up over 1%. they helped pretty firm. i think some of the housing numbers we've seen overstate the health of the housing market a couple of months back because people wanted to get in while the getting was good. it's norm tool see a lull. me migrate transactions forward. we're seeing it come back strong. >> try to explain the movement in housing stocks, do you? a stock market thing? >> well look. they have been very, very strong for the past couple of years, actually. >> is it a form normal pullback? >> i think so. it's a natural reaction. >> up 30 to down or whatever? >> you know, when you see interest rates -- >> gets your attention.

>> interest rates moved up faster than they have done, in the last 52, 53 years so it's going to shock the markets, pex r people try to anticipate it. it's out of the refinance side down 62%. >> so jed, this is a way markets work, right. get over, it swings, everyone gets excited from that horrible situation five years ago and because it pulled back doesn't mean we're near the end, right? is this a pause? >> that's right. where we are right now, rates are rising, they are still very low compared to historical norms. last decade around 6%. so at 4.5 rates look very low. it means that buying still looks relatively affordable in most markets across the country. we reached a new phase of the housing recovery. where we are right now, is because rates are rising, inventories actually expanding a bit, it means that prices aren't rising as fast as they were a

few months ago or a year ago. we're at the phase where inventory is expanding, rates are rising, and prices aren't going to be rising out of control the way they had been throughout much of last year and this year. >> i don't think that inventories are expanding that quickly. it depends on the market you're in. i talk to so many people on the front lines say inventory is really tight. there's a lot of pricing pressure to the up side. you look at alternatives, rents are tight, expensive, going up. people take a step back and say okay. even in the most conservative estimates home prices should go up about 6% a year over the next three years. that's compounded to a 20% return. i think that we get existing home sales where we see the median home price above 220 today. we get 220. 20%, $44,000 of let's say appreciation in the next three years. so your mortgage rate went up. that cost you 100 bucks a month more. three years that's 3600.

i take that trade any day. $3600 to get 44,000. >> you can see how aware the fed is about their actions in all of these matters and what it would do to i guess what everybody is worried is still sort of a fragile recovery. and some people think the fed watches the 10-year too much and that changes their rhetoric on what they are going to do. what number would the fed have to worry about where they really would cause this to slow down to where you would notice it? >> i think when we ask consumers the rate that consumers are most focused on is about 6%, that's where more than half of consumers told us -- we're at about 4.6. >> so we're talking about a 10-year -- can't measure the 10-year obviously but in general, rates have to go up

another point and a half at least. >> consumers tell us they would be discouraged buying around 6%. the thing is because prices fell so much after the bubble burst when we do the math looking at renting versus buying nationally, buying still looks cheaper than renting if you stay put for seven years, until rates get above 10%. that's because rents continue to rise, prices are still far down from where they were last decade. it means that kor consumers doing out the math taking into account mortgage rates, rates could rise a lot more before renting starts to look cheaper than buying. >> if you could tell bernanke what to do what would you say start in september cutting back? >> i think at this point there's room for rates to continue to rise without derailing the housing recovery. of course refinancing is taking the hit. i think your question for housing is not so many what happens to rates but the supply of credit. it remains tight.

it started to loosen. the latest survey suggest it's looser than it has been but it's still very tight. people would rather have a 5% loan they can get than a 3.5 they can't. >> the sfed going to taper. there is no press conference. december is too late. look for a couple things. one, they may disproportionately taper. more treasuries. they are worried about the housing. less refinances, less supply so even though they are going to buy less asset purchases it could be stimulative because there is less supply coming to market. the last, when the fed does this, they might throw the market a bone and say our target for hiking rates will be reduced. may make it at 5.75. that is an offset. >> someone said that. thank you. we always got to run. thanks. >> coming up, we've got a 23-year-old, sam barnett, who has started his own hedge fund,

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hp moonshot. it's time to build a better enterprise. together. welcome back to "squawk box." let's look at stocks in the news this morning. toll brothers shares, the home builder matched quarterly

procht. revenue was short of consensus and order growth slowed. also look at this. office supplies retailer staples earning 16 cents per share. two cents below estimate, cutting the full year outlook because of declining sales. a little better fortunes for rival office depot, it's stock higher after the company resolved a dispute. three executives nominated will join the company's board. star board wanted to nominate six new board members. over to you, joe. >> see what i mean. you see toll brothers. see. this makes you wonder. you got to write it off to i don't know, fast traders or something. a check on the markets. rick joins us from the cme in chicago. i think it's lucky you don't watch, i wish you could watch.

we have done the taper shuffle. when the rupee moves around based on whether someone blinks at the fed, maybe it's not -- maybe we should be doing that. >> you know, listen, joe. i really miss seeing as much of "squawk box" as possible. i miss talking to you one on one so this is unique. but i don't know. i think i'd rather concentrate on what is being affected by what you were discussing earlier. and i do think market forces have reached a critical mass, where they pretty much charted out a course. now, exactly how many highs and lows in this roller coaster course we have, obviously can be affected by things that go on in jackson hole and the fed. when you switch gears and look at the emerging markets, i've said for some time, some things i say work out well, some don't but the emerging markets has

been an easy call. we've spent some time talking to central bankers in mexico and of course we all read what's going on across the globe. when you have a fire hose of liquidity, even distant geraniums are affected. the periphery of the puddle shrinks when you pull the center plug. soy think the emerging markets have their own issues but there is little doubt, like dollar volatility and commodity volatility. the ivory tower central bankers left huge finger prints in these areas. >> rick, you talk about the distant geraniums in the emerging markets. in the times one of the ripple effects that the fact that cities like istanbul have been borrowing in dollars, a lot of these markets borrowing in dollars because of this cheap liquidity. and now they might become dubai or argentina, is that something that you fear?

>> absolutely. you know, pretty much every story on the planet that is indirectly involved by central banks becomes a funding issue. that's what it's about. today it might be countries like india, current account deficits, there's a lot of various issues depending which currency they focused on for some of the newly created structures. it could become ap tesla story. a wonderful car company, a little car company and there is a really big stock price and i'm sure will get affected by capital flows and tax policy and environmental policy so these things aren't easy. but in the final analysis. a 282-10-year tells me one thing, they can control short-term interest rates, but when it comes to the longer end of the market, at a time where we see china and japan net sellers in the treasury international capital flows, you

know, i think it's going to be a very aggressive, ongoing participation in good high quality interest rates. if they don't switch to the alternate roll of being a safe harbor or the dollar doesn't switch its role while the issues are going on, you know what it tells me, you never watch the passive player, you watch the pro active player. emerging markets were sailing down on their own you buy dollars, you buy treasuries, but when it's the latter group that's pro active player in essence the ems, the emerging markets become spectators. >> just listening to that, rick, think about how much the fed had to do with the housing bubble and we think about all of that liquidity that seemed misplaced and found its way -- >> oh, my god, joe, did you see the mayor of that california city trying to do eminent domain, i think we had him on,

what a great interview. she goes you know it's all the bank's fault for bringing those adjustable rate mortgages and balloons. let me think. adjustable rate mortgages ever in vogue again. exactly right. >> how much bigger, maybe we needed the liquidity at the start of this thing to -- that's what the argument would be. but this seems more accommodation from the fed this time around and makes me wonder where it is and how this pans out if it was so bad last time. >> you know, the way i look at it we had a crisis in this country, and there definitely was a band aid put on it but that gash has long healed. we don't have a crisis, we have a condition, the condition is called the subsidy, in every form of government from sugar to milk to interest rates to stock market and believe me, anybody who has read a newspaper that covered politics the only thing tough tear remove fron a subsidy would probably be some of the

young people living in their parents' homes these days. >> exactly. that's happening here a lot. thanks, rick. i think we'll talk about emer emerging markets. >> the fed planning to tamer its asset purchase program. we don't know when the emerging markets are paying that price. we'll talk to a specialist. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience." starts with freshly-made pasta, and 100% real cheddar cheese. but what makes stouffer's mac n' cheese best of all.

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welcome back. the prospect fed tapering weighing on the emerging markets. joining us walter morano. i had it explained to me, walter. you got a garden hose, even the spray that's hitting the geraniums next door, if you turn it down even a little it can affect. is that how we should look at the fed's actions on emerging markets? is the fed tapering actually influencing emerging markets? >> definitely except it wasn't just a hose, it was a fire hose because people didn't want to go into the core markets, people were concerned what was going on with the u.s. financial sector, u.s. housing, they were sold a lot of i guess opportunities in the emerging markets, they were young countries with high growth

potentials so almost none of the money went into the core developed markets and a lot flowed into the emerging markets. now you turn off that hose they don't know what they are going to do. >> has it got more to do with things happening over there or here? i mean, does it have more to do with china or countries affected by china or does have the to do -- or a combination of poth? >> it's a combination of both. i think that it definitely has a lot to do with what's happening here. we provided a lot of liquidity, not just us but the europeans. a lot of our savings, our monetary easing went into the emerging world. assets got very expensive, currencies became hideously overvalued. you went to an emerging market country and more expensive than new york. at the same time it has to do with things that are happening in the emerging markets world to slow down in china.

the arrogance they started drinking their own cool aid. they thought they were more sophisticated, had better institutions than the core markets so they didn't feel like they had to push on with the reform agenda. as a result then they became overleveraged, households in the emerging market world are hideously overleveraged. we have have consumer credit ratios approaching what we saw in europe and the united states, especially in spain at the height of the housing bubble. now they are going to go through the same cycle we went through five years ago. >> what do you mean? is there going to be a financial crisis in the emernling markets? >> i believe that's going to be the case. but as this capital begins to flow back as the tide begins to flow back into the developed world the emerging markets will be a field of broken dreams, i think. >> that comes back and affects a lot of the stuff that we do as well, though, in terms of selling into the emerging markets so that's not good for anyone.

>> it's not because i think that a lot of corporate board rooms really put a lot of pressure on some of their ceos to refocus business operations into the emerging world. there was a lot of pressure to go in the emerging world and they went into it agregressivel not understanding the culture, the institutions t differences, the new wangss t weakness in legal systems. so as a result they are going to be caught wrong footed as again the focus is going to return to the united states, and europe, i think that we're starting to see the early green chutes in europe of a recovery. >> thanks. that's something to -- more to worry about. whether you have emerging markets or here. appreciate it. quickly, kayla, i can't help but see insight going by. there it is again on the ticker up 5 bucks because of a pancreatic drug or pancreatic cancer that had positive survival data in a mid stage

trial with chemotherapy. >> the most deadly form of cancer. >> you never catch it seems in time. >> very few symptoms until it's too late. >> exactly. little progress with it and stock is up a lot on that. >> as it often is with some of the pharmaceutical companies. coming up on the show, we have a hedge fund triple threat. a hedge fund manager and a professional tennis player. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away.

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welcome back. let's get down to the new york stock exchange. jim cramer is with us. when we have big names i like to talk to you about that. then we got jackson hole and we've got other things. is target, was it lousy? that was a crazy number. they don't tell us about too 1 cents. >> not giving us enough yet. i got a listen. we know apparel has not been that great. we know that a lot of what they may have to say about target in terms of hard goods i don't know. lowe's did the number. this has been the most inconsistent quarter for retail. new perception who is is doing well and not doing well. walmart, target, these used to

blow it away. it's amazing. >> staples, bad. >> terrible. everyone thought that small business, look, the usa today story, clearly saying it's not coming back. if small business isn't coming back and we don't have robust housing what are they going to do in jackson hole say listen, we've got to start tapering. where is it great? business, the building index was better. i need to know where it's great. i haven't talked to a company. maybe they think it's great in jackson hole. >> real quick, jim. two things. goldman sachs, fat finger, something with this trading, 100 million loss. is it relevant? should we care? >> we got to care. night securities, night capital groom, because of flash crash. we got to care software runs amok. the machines are in control. we forget that. because the market is so thin that goldman probably say these option prints, i mean, at a dollar.

where are the units? where are the units? i guess they disappeared, too expensive. >> eric holder, what do you make of that? >> this is the new thing, these guys that we know that the statute of limitations has been ticking. we never saw a task force from holder. look, even the bush administration, they had a task force. i always think that justice is overmatched until they have a task force. he is saying all of this, saying that every bank can be arthur anderson. i don't think he means that. the president comes in, bashes him. these guys are bashing him. look out for china. there are a lot of companies that put people on the payroll to get business. that was called how to do business but i guess that's no good. >> do you short the banks? how do you prepare. >> i i that's a mistake. why are the multiples so low? i think people feel that crimes haven't been paid for, there will be reserves. going over the jpmorgan

reserves. they jumped over the 6 to almost 7 billion you think wait, maybe something new happened. the only thing new is the china story. this happened years ago but they got to get scouts. i think it's popular to get scalps. people don't like the bankers. better late than never. maybe that's the way holder feels. they woke up down there. they blocked the us airways deal, we got a justice department. they're back. >> all right. and we're -- i don't know whether we're all the better now it. >> thanks, jim. i ask how many guy, like 550 guys, none of those are getting subpoenas i don't think. the guys that left. >> no. come on they are immune. they have protection. it's a racket. >> thanks, jim. all the banks. coming up more of today's top stories. who topped the list of highest paid tv entertainers?

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. welcome back to "squawk box." they are listing their highest

survey of tv paid entertainer, judge judy. she makes $47 million per year of an ownership does pay simon cowell's stake in "the x factor" pace some of the premier. they jon stewart makes between $25 million and $30 million a year. >> jay, i guess, letterman must have taken pay cuts. he used to make it. >> ashton kutcher is the highest paid actor in a comedy and prime time making $750,000 per episode of "two and a half men." >> he was a molecular biochemist or something. >> this is only counting his actual per episode. >> did you see his speech about i always had a job shs there was never a job i was too good for. i never quit one job before another job. did you see that speech? all the right wingers were playing the speech. >> he's great. >> yeah. >> yeah. >> i know. >> you know that feeling?

>> not just a pretty boy. >> you know what i feel like, demi moore. i feel like he's young and i want him all of a sudden. not really. >> we'll let our viewers chew on that. >> so to speak. coming up, we're going to talk to sam barnett. hedge fund manager, northern western, and, yet a professional tennis player. we're going to bat it around with him after this. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. starts with freshly-made pasta, and 100% real cheddar cheese.

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most people considering running a hedge fund to be an impressive feat but how about running a fund study and being a globally ranked tennis player? joining us now is george barnett. he funded the hedge fund in february, a sophomore at cal tech. sam, thanks for being with us. we have a couple of minutes at the end of the show here. i want to know, which one do you consider your day job? >> thanks so much for having me. business comes first. i'm spending a lot of time doing research for my hedge fund, which goes hand in hand with my academic research. but i'm really incredibly fortunate to have a great team working with me so that i can also pursue my athletic endeavors and continue playing

tennis. >> most experienced hedge fund managers find it a challenge to raise the first $100 million even with a long track record. how do you do it, where did it come from and what are you investing from now? >> originally my investors came from an professioner at cal tech. since then it's been something that more people are just contacted me. so we have a wait list for investors. when we have time for an offering, then we go to the weigwait list and get more people involved in the fund. >> is it a cal tech type fund? >> yes. quantitative easing and making predictions. it's not a high frequency fund. so we're predicting things on more of a one-day to 90-day scout. >> what are you triggers then? >> all kinds of different data and we look at macro indicators and all the way to twitter feeds and unusual data from the internet that we're collecting just to predict what we think

people are reacting to. >> i wonder about the tennis career. how often do you play, how often do you practice? do you think there's any connection to your life as an investor? >> sure. so i practice about two hours a day. sometimes i have to practice late at night. i'm very fortunate that i'm growing up -- i'm living near where i grew up so my childhood club lets me play at 11:00 p.m. at night if i need to. so i practice that around then. and there's a lot of parallels between tennis and business. and i'm practicing hard. i'm disciplined with both things. but, you know, it really just t matters about taking things from practice and trying to turn them into real life applications. >> do you -- at cal tech, do you aim for things knowing exactly how much the ball is going to fall as it's moving forward like with -- or is that integral calculus? you invented both, i think, newton did. do you see things like that as a

geek? >> i don't get to take my pencils out to the court to calculate things. >> i can't imagine cal tech has much of a tennis team, do they, with all the nerds? >> one the-third of cal tech students are on varsity team. we've got a lot of -- >> sam, thank you for this. unfortunately we've got to jump because we have another show starting. >> appreciate your time. thank you. >> thank you. >> thanks. >> it's now time for "squawk on the street." ♪ good morning, everybody. welcome to "squawk on the street." i'm brian with the man himself, jim cramer. we are live at the new york stock exchange. david faber is off this week. carl quintanilla is on assignment. let's look now at your futures on this wednesday. listen, we're not implied a big down drop, folks. down slide is down about 20 points. s&p and nasdaq down fractionally as well, though. nasdaq looking a little stronger than the other two indexes as it has the rest of the