week the prime minister of canada. follow me on twitter and google plus. don't go anywhere because fast money begins right here. stay with cnbc. >> live from the nasdaq market site i'm melissa lee. here's tonight's line up. dc shut down six days and counting until possible u.s. debt downgrade. why your best trade might be a con trarn one. >> and twitter's hottest trade is the hottest stock. some are calling it the netflix of china. and stocks gone wild. . a company that let's you touch swipe and tap your devices. we're talking to the ceo of emersion. our traders are dan, josh john mike guy, and mike. first, worried about what may kill this rally?

it may not be the fed or the looming government shut down. it may actually be you the consumer. one retail name grabbing headlines after a report claimed that walmart is cutting u.s. ordered dure to inventory backlog. is this proof that the consumer is tapped out? >> one more metric. i love the way it traded that day. obviously this news took a lot of wind out of the saleils. they may be getting into the same bad habits. my best trade will continue to be mastercard and visa. i think that's a name that if you believe the tape is going to bounce, which i don't really believe is going to happen here. i think you can trade gap stores on the long side. >> we saw pressure across the board on this news.

is it a walmart specific problem? is walmart dead money or is the retail sector dead pressure? >> first of all, walmart refuted the report and we have seen the false alarms about walmart this year. and more importantly we are not getting confirmation who continue to raise guidance. i can't tell you that it will last forever -- >> how can you say that? we had a stream of disappointments. don't forget apple missed on

their ipad number in 3 million units. i do think, you mentioned kors that is is a stock specific situation. the data is not conclusive. >> you are a bear on the markets. >> right now u.s. stocks are highly over valued. i can't imagine us having multiple expansion given the economic picture. i know it's a wishy washy answer. but that's where we are. >> i asked this because what you said about walmart is there are stocks that you like within the sector and that is reflective of your overall, reflective of the bearish overall market. >> here is the thing. it is stock specific in luxury. i think there are so many that are doing well right now.

i don't think it's random. >> i was surprised and you and i were talking back in the green room. i think the bloomberg reporter totally got this wrong and that's not because i am a cheer leader for walmart. but when i read the e-mail from walmart to various providers of goods to walmart it seems to me something you would use to get leverage against those providers in other words saying boys q 3 and 4 we may have to cut back. it was not we will cut back. it was we may have to cut back. that's what i would use if i were trying to get a better deal for myself if i'm walmart, just keep in mind a one or a 2% makes a lot of money for them and all of the shippers that we have seen that are exploding up 80 to 100% in the last 60 to 90 days.

that means they think the u.s. consumers are going to be buying. it's not the way i want to discount things. >> this is the second time that bloomberg has reported about an e-mail that brought walmart stock down. is this a buying opportunity? a play into a holiday season. walmart's dividend yield is 2.5% today and that is higher than the s&p 500 and higher than the dow jones industrial average. >> that's certainly true. one of the things that has supported walmart stock is they have had a lot of repurchase programs in place and the walton family has accumulated a bigger percentage of the company as you go there. the u.s. consumer is not in such great shape. and i hear what john is saying about rising freight rates.

that's very speculative. these are companies that are still hemorrhaging. they are nowhere near where they were. i think all of those things are concerns. the employment numbers are not stellar either. the numbers that are going to walmarts and targets, you do need to be exceptionally concerned. >> you had a funny tweet today that workers are being replaced by robots who don't need q-tibs and arizona iced tee. >> let's not act as though what is happening with the consumer is anything new. the high end has been great. qe is a boon to people with fortune 500 employment. you can see examples of it everywhere. so when you see stats like unemployment, it's like 8% for

grads. >> last word before we bring in our guest and that is what are you most concerned about the s&p 500, the longest losing streak so far, five days. shut down right? or the taper or consumer? >> i think the government is going to focus on it. i think the consumers on the list is third on the list of the three things you just mentioned. i'm not saying we will. you have to get concerned again because we might break an uptrend. we will see what happens from there. >> chris, thanks so much for joining us. appreciate it. your coverage is pretty diverse.

dick's, office max, williams sanoma. are you hearing similar things from the retailers that you cover as walmart? >> i think it's a minority of haves and a majority of have notes. i have been surprised that the market forgets about it on a consistent basis. the stock retraced after they missed the second quarter and guided down. home that's 3.5 billion dollars of sales in the second quarter. apparel has been weak. i think that is part trend, part weather. everybody is getting touched by this 2% payroll tax increase. wages are up a little over 3%. anyone who earns less than $60,000, that is being offset by 2%.

>> and in your downgrade of walmart, you have a rating on the stock that you pointed out was slow to react to the payroll tax increase. are you still seeing that misstep? haven't they gotten the story right so far? it has been months and months and months now. >> i think that is part of the inventory story. there is a little bit of heaviness on the food side. there is a lack of inflation. walmart was slow to react. they took the guidance down mid year. it does become difficult. >> bed bath & beyond the quarter was strong.

the guidance for the fourth quarter was a little questionable. should i be concerned that operating margins, 13.8% are better than what you are looking for. >> there is a correlation to home sales. as some of the home sales moderate the home category is likely to see some deceleration. and the final thing you do have to be concerned about is groez margin continues to be down and they are feeling the pressures of the amazons of the world. they sell you know how much a kitchen aid should cost and exactly what color you wantd and you can buy that everywhere. >> thanks so much for joining us. what was the options activity in

walmart? anyone willing to get in here? >> i didn't see a lot of accumulation of calls. i didn't see a lot. and then of course the stock more than cut that in half. do i think that walmart is out of the woods? i don't know that they are in the woods. those of you who have access, look at that e-mail and tell me that you don't see the same thing. >> before we head to break, let's check on a move in the afterhours session. first quarter guidance came in a bit light. coming up next, the latest as he speaks out in a rare interview while the company launches its third generation of kindle tablets. plus a shut down show down. could a u.s. downgrade be right

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>> amazon launching a third generation of kindle tablets. a very rare interview. john? >> melissa, it's interesting. they are coming out with a new line of tablets. they are keeping the hd around lowering the price on that to $139 which is the cheapest we have ever seen a brand name tablet. the justification for raising the price on the high end tablet to $379 and it had been $299. >> for people who really want the very best hardware that's the right tablet. the 8.9 inch form factor is useful for brouswsing the web and e-mail and tv shows look great on it. for people who are, you know buying a tablet for the family,

who are, the $139 kindle fire hd has the same display quality that our high end had last year. it's at a breakthrough price point. >> he was very clear that amazon's strategy here is to drive digital media sales that overall tablets and mobile are a tail wind to the business. people who are leaning back on the stock are doing more stuff but kindle users do that even more within amazon's eco-system. that's the play within these devices not to make a profit at all on the hardware. >> all right. thanks for that. let's trade this. we have known for a long time that amazon is willing to lose money in various products in order to make it up in others. >> the guy is a genius. he has built a phenomenal business. i don't know that they are creating a product on the tablet side not on the e-reader side

that is that compelling. they said they are not looking to make money on the hardware. they are looking to keep people in the eco-system buying digital hardware. apple is making a lot of money on their hardware and they're getting people to buy a lot of media. i don't think it's a strategy that is going to bare out. but the stock is at all time highs here. >> clearly it's not a buynaryinary trade, is it? >> the more he pushes into tablets rather than e-readers is that is a higher end product. the components in there are several hundred dollars. the fact that he has moved down the price point, or whatever, that means that they are losing in the neighborhood of 60 some on dollars per tablet in my mind. that's a losing strategy.

i don't like that. i liked the e-reader strategy. not as fast not as good? i don't think that's the way it goes. >> how would you trade? >> now it's headed back down. it trades 300. we will see what happens. people get apple-plectic about our love of amazon but the stock has performed. when it stops performing hopefully we will be able to tell you that it's the top. i get the whole story but the stock has been impercenteous to anything. >> let's get back to dc here. gridlock out of congress and the looming shut down show. if the shut down actually happens and the ratings agencies follow suit what's the trade?

how many days would you say a downgrade is more likely? >> every week it's about an eighth of gdp. i think here is what happens. you remember back in november or december, the market bottomed so we got a deal in december. the market bottomed first. the near term has been richening. i think this is pricing in a lot. lot. funds the government for at least 40 days. >> this monday. we get the deal. so the markets should rally into that. the market always figures it out first. and then we get this deal and we have to deal with the debt ceiling on the 15th of october. they are going the take it right down to the wire.

>> so they got a rally. you fade that rally. >> you fade that rally around the 8th or so. and here is what's going to happen. the president is going to cave on the individual mandate. he already caved on the corporate mandate. the president is also going to cave on keystone. so those three things are really going to pound the table and take it to the end. the president is going to cave with the deal and that's the beginning of a grand bargain. >> do we have an inverse trade on the bond side as we are seeing this rally on the 15th? >> bonds have rallied big. i made a volume call around 2.9 to 3%. i think bonds rallied a little bit more and then start to fade as we get towards october 15. >> so it sounds like you're saying tactically for people who are nimble there is going to be an opportunity to fade a rally,

but you are making the case that if obama caves on some of the individual things in obama care and excel keystone goes through it's a really good buying opportunity to be bullish on? how nimble does one have to be to play that fade. >> for the long term investor watching us right now, i'm talking to clients. they advised hedge funds. this is the advice we're getting. we think that we get a pump between monday and the 15th. not going to get this out of the president until you really squeeze him and he's going to squeeze back. with that said that's in play ahead of this. then you see rallying to new highs. >> if we get a deal, the relief of this the one thing that we have seen over the last year is

that the power of that qe is always there. so you get these stresses. once the stress is gone you just get a natural pop. >> if november vols are getting pumped up you will revise this thesis? a lot of it is based on the vol premiums in october? >> yes. >> all right. thanks for coming. coming up next tonight's street fight head toss the not so friendly skies. could it be time to take profits on the airline trade? it's a smack down street fight 10,000 feet above. we are trading the hottest names blowing up the twittersphere.

♪ >> that is one of the greatest songs, don't you think? >> you're a sinatra fan? >> isn't everyone? >> she just shot up eight rungs on a ten prong ladder. >> she was a two? >> delta airlines recently touching all time highs. 90 seconds. >> supply and demand. we both know that's what moves market. there is less supply of these seats and there is more demand.

that's one reason to really like these. that is up 67% year-over-year. 100 million people go through a new york area. delta has really doubled down on fixing that up. that's what they need to compete with the high end traveler. the refinery some people say what a crazy purchase. it locks in prices for them. they don't make jet fuel there but they barter it out. >> it sounds really interesting but this is one of the worst industries that has ever existed. here is a company in 2008 and 2009

2009. it's about ten or maybe 11. this industry is bill to fail like crazy. it's the most amazingly cyclicalry duckcyclical ryidiculous industry. taking out the weak ones and consolidating? great. to me this is not a entry point. >> double dipping. >> i'm with dan in terms of the industry's train wreck but the industry is getting better and the stocks are starting to indicate that. they may have gotten ahead of themselves. until delta reports mid october, i think you have got to stay

with it. >> how about you, josh? >> you know what the most bullish thing is just talk about the stocks. when you talk about last lack of capacity, there are none left. the most bullish thing to happen is the cancellation of the airline etfs. i think the buyers of these stocks like the scarcity factor. i have got to weigh in on dock's side. >> tell us who you think won the street fight. results at the end of the show. we want to go and see. >> there has been quite a lot of activity. i think john was referencing some of it. it was more of a bearish tenor i think. more than $7 out of the money. that's really more of a bearish

punt than it is a bearish bet. i sort of see where they are coming from. if you're going to make a speculative bet, maybe cheap puts is a good bet. >> we are continuing our stocks gone wild theme. the ceo of the company behind every touch screen device you own in your home. live right after this. [ indistinct shouting ] ♪ ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ ♪ all on thinkorswim

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>> welcome back to fast money. we are live at the nasdaq market site. it's a technology that is used in just about every touch screen device you own but you have probably never heard of it. we have the ceo of this which is up more than 80%. including the new sam sung smart watch. thanks a lot for your time. appreciate it. >> thank you for having me. >> obviously you think about touch technology and you go to

any mobile device a smart phone, a smart watch. but what are some of the new devices that are not on the market that are growth markets for you? >> well as you mentioned, the smart watches are just starting to roll out. we add a lot of value in that space. we are excited to add haptics to video consumption. imagine engaging and listening nd feeling an advertisement. >> does that mean that the technology will be in a tv? or in a labptoplaptop? >> definitely in smart phones and tablets. you will be holding your tablet watching a movie on the tv. we think we can provide that sensation while engaging that media. >> you license the technology and we had a staggering stat in our introduction to you.

what are the terms of your licensing agreements? does it make a difference? is it a flat licensing fee or does it actually matter that more watches are sold than had been anticipated? >> we have a number of different markets that we go after in the mobile space that you're referring to. >> we help them import the technology and have the best experience possible to their projects. >> you reported last quarter, was it august? you're going to earn about 26 cents a share. what is the right eps growth for the industry you're in right now? >> i think we're pretty excited about the business model. today we're growing the business

about 50% year-over-year. we're adding new platforms, new products including as you said the sam sung smart watch. we are expanding existing agreements and entering into newer agreements. >> we're going to have to leave it there. appreciate your time. >> thank you very much ch. >> the ceo of emersion immr up 91% so far this year. what's the trade on this? >> i certainly like his stock. i mmr. i wish i owned it. i don't. but i think the technology is just as he described and the fact that people want into the space, josh that they want to make any device that is big for these guys for years into the future. >> i would point out two things.

this is not a fly by night brand new company. it went public in 1999. there is a lot of excitement because of that. hedge funds have been nipping this thing up. this is a fairly small company to see that kind of support. so i would say that the big holders will probably be buying on dips. very rarely that they would be in on something like this for a short term trade. >> so if you are a believer that there could be a hiccup in demand, then perhaps the earnings story may get a little bit choppy. >> that's the rub. if things continue on the current path it's not a crazy multiple. and you know what tells me it's not crazy? to josh's pointd people are not shooting against this.

sit a pretty interesting story. >> time now to hit today's top trending trade. first up yahoo! hitting levels not seen since november 2007. now planning to list its shares leaning towards a u.s. listings. >> they are talking about a market cap between 10 and 120 billion. yahoo! owns 24% of this company here. to me i think you follow dan. back to the company at $29 a share. he has got 20 million shares left. when you see him out you get out. >> a small cap company generating big buzz today. up again extending a 110% gain in the past month. when we say small we mean small. let's be clear. market cap with the bounce today. >> this is is a really

interesting story because it sits at the intersection of a lot of hot things right now. this one actually does panel displays. they have just signed agreements with the largest mobile phone companies that revolve around licensing their content, etc. so there are a lot of things happening and as a rul, the momentum guys are all over the stock. i hear it everywhere. i have no idea how much longer this continues for. that's the kind of thing that gets momentum and attention. maybe put this one on the screen and watch it a little bit. >> finally, mako will be acquired. other names moving in sympathy

as well. and you saw suspicious activity today? >> yes. beginning august 27. it continued august 30 then september 9 and then september 20th. there were multiple trades here. a stock that only averages ss a thousand calls a ss a day. the fact that this much traded and people kept taking larger and larger profits from those calls as the stock continued to march higher tells me that the secret was not very well kept. >> all right. time now for pops and drops. >> this is probably the coolest thing to happen in the market right now. basically anything that ships iron ore is moving. lifting off the ground for the first time in probably three

years. up 78% just this month alone. all of these names are moving. that's what is happening here. they typically last longer so this is something you should pay attention to. >> daily rates is five times last year. it's amazing. >> so it's not just the price of iron ore that moves this stuff. >> drop for carnival. >> this is the second horrendous day for the stock. concord ya which was one of their ships, that thing may be upright but it's still sitting on its keel. they have been lowering their capex for years. they will probably continue to pay that price. >> pop here for mobile. >> they will be splitting into

two companies. some folks came scrambling into the stock today even on a down day. >> drob here for blackberry. >> for all you guys just wishing this one would go away, it's coming soon. they need to get a lot of things to make the deal happen but at this point it has a $1.3 billion enterprise value. people don't see any value in this thing. it's sad but it will be gone soon. >> and a drop here for deutsche bank? >> the ceo expects the third quarter sales to decline significantly, which is an interesting word to use. they said they are taking additional litigation reserves. i thi it goes down again over the next week or so. >> after the break with big names rebalancing should you be doing the same? your fast adviser take is next.

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welcome back to "fast money". how about a little bed bath & beyond. we actually do have the time. reported earnings and sales that beat analysts' estimates. comp store sales were better than last quarter. that's why you're seeing some of the movement to the upsite. >> always time for you. always. let's trade here. this is the outlier this is the anti-walmart and i say that only in what was reported that walmart said about its inventory levels. >> supply and demand there is apparently more demand than supply over here and it looks like that is going to be the case going forward like the stock. i wish i owned it. i don't. >> into the holidays would you buy bed bath & beyond?

>> it's not expenseiveexpensive. the quarter was fine. what concerned me are the gross and operating margins. i hate to say that but that's the way this stock has traded. >> i would go the other way. i agree with everything you said. >> in what way? >> i wouldn't chase it. and i actually think that this thing could put in a blow off top. it tends to trade with housing names and news. the news flow is just not fantastic. you saw pending home sales drop off in july. i got to tell you, the remodelling and the buying things for the moment goes hand in hand and pending home sales is actually the number that is closest to reality versus existing homes which are much more delayed because of the contract process.

>> everything josh said is 100% spot on. this has happened at least three quarters that i can remember where it has these ridiculous moves in the aftermarket. it has not given you the chance. this might be the time that it does but that's what makes markets. >> many of the largest pension funds expected to take tens of billions of dollars out of stocks. a look now at whether you should do the same. michael, always nice to see you. >> this sometimes creeps up on people. where the markets have gone. >> no question. you know melissa, this reallocation or need to take a look at your portfolio is a nice problem to have. it is at least this time.

as we have seen since december the bond portion really hasn't, you may have much too much money in stocks. it's very hard to do particularly when an asset class is not really performing particularly well and stocks is. so you have to take some money from the winners to not maeb the losers. which sectors would they be? >> i think i would take a look at areas where you have seen greatest multiple expansion. i might take a look at the banking sector right now. i think they're under a lot of

regulatory scrutiny. i think we may continue to have more difficulty in housing and interest rates if those move up. so some of the consumer discretionaries have done very well. i might take a look. things we have seen multiple expansion. >> and within bonds. >> this is really important, melissa. within that allegation so i probably want to stay short. you're not going to get paid very much. you're going to have to wait it out. the yields aren't going to be there. there are still opportunities if

you do your home work. >> nice to see you. >> is that an area you would trim? >> yeah. i think the bank has got a lot of that, you know off the bottom as far as the earnings growth and i think the multiples did expand and i think they will be hard pressed to continue to expand. ♪ ♪ ♪ ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪

my customers can shop around-- see who does good work and compare costs. it doesn't usually work that way with health care. but with unitedhealthcare, i get information on quality rated doctors, treatment options and estimates for how much i'll pay. that helps me, and my guys, make better decisions. i don't like guesses with my business and definitely not with our health.

innovations that work for you. that's health in numbers. unitedhealthcare. >> you tweet it we trade it. josh, buy at these levels? >> i have been watching this company chug along for 12 years. i like it here. it has backed off from the 80s. i think you got an opportunity. nice support. i have thought so forever but it has not mattered. >> phenomenal chips. >> he's the man. he has been on the show ten times.

likes the blue ones. >> any ideas i bought more today as an earnings play. >> it seems as facebook has gone into ascention. that to me is the bottom of the name. i think you want to start to add to position. >> better foreign autos? >> i'm going to keep this really simple. i don't know anything about any of the others but ford. >> at least you're honest. >> 10 15 20% over the next three years. trades at a very reasonable multiple. this is a stock i think you want to buy on a pull back. if larry's scenario plays out,

this will make a new hoe. >> every single time the thing is trading at all time highs. that said this is a company where the fundamentals while good are probably not as good as they are for a place like price line. similar levels of growth. >> we have got your first move tomorrow when we come right back. stay tuned.

>> guess who won the street fight tonight? dr. jay. >> he is a doctor. >> it was not a medical stock. >> true. >> time for the final trade here. >> ton of activity in j.c. penney options. predicting a 20% chance that the company is bankrupt by 2015. >> a small speculative play i took some profits up. >> i don't like the way the banks look. i would do so now. they did not make a new high in september over the july high.

>> doc? >> vorotech. >> thank you. "mad my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a workable summer and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cray cramerica. trying to save you money. can you, i'm asking you, can you -- washington-proof a portfolio? [ buzzer ] is it possible to ensure yourself again