the equity in the economy that wins the cup grows 3.5% in the month after victory. three months later, the winning team apparently of the nation underperforms the global market average by 4% over the next year. and things are even worse for the runner-up. on average, the nation that comes in second in the world cup underperforms the global average by 5.6% in the three months following the game. brian? >> message -- dear america, lose today to ghana. >> yeah. "closing bell" is next. good luck, america. welcome to the "closing bell." kelly evans down here at the new york stock exchange. >> hey, kell. i'm scott wapner. bill griffeth is back tomorrow. iraq looms as the market struggles to find direction. what is weighing more on equities right now, the troubling and still unresolved situation in iraq or the fed's meeting this week which will culminate with janet yellen's news conference on wednesday? you're going to see that right

here at this hour, by the way. we also have both covered with a live report from iraq and our pros weigh in on just what the fed may do this week. also, a very special and exclusive interview after the bell, traveler ceo jay fishman in a rare one-on-one. he is widely viewed as one of the most respected and effective ceos in the corporate world. fishman will weigh in on the state of his business, the overall economy and much, much more. you don't want to miss it. all right, we can't wait. in the markets right now, take a look at the dow. it is down about nine points. the situation in iraq is certainly weighing heavily on the minds of investors today. the fed meeting, which is looming, which begins tomorrow, is as well. the nasdaq holding on to a gain of just under four points. and the s&p 500, we can call that flat on the day. joining our "closing bell" exchange right now is rob stein of astor investment management, joe tanias, kim forrest of fort pitt capital group. wow, i got that right, finally.

>> thanks. >> and our very own rick santelli from chicago. kim, sorry about that. >> it's okay. >> on that note, kim, i'll begin with you. >> okay. >> what's weighing more on the minds of investors today? is it the developing situation in iraq or is it the fed meeting, which is looming? >> i think that's a tie. i'm probably more looking at the fed and their decision about how they're going to discuss whatever they're going to discuss. that's a big focus for us. but also, the iraqi situation is very important, especially to anybody that drives a car. >> joe, what happens if argentina defaults on its debt? >> you know, i think it's a problem, clearly, but i would say that what's going on in iraq right now is probably weighing on investors' minds just a little bit more. we continue to watch, you know, the risk premium in oil, and we've talked about this in the past. if oil prices really do go through the roof, that can have a significant impact on economic growth, not only economic growth, but also on the capital markets. >> we have merrill out saying in

the worst-case scenario, oil could jump $30 to $40 per barrel, that's if isis heads further south into the country. how likely is that scenario in your view to play out? joe, sorry. go ahead. >> that's okay. it's difficult to tell how this is going to materialize as far as the situation on the ground in iraq, but it is something that we continue to monitor. i guess you have to ask yourself as an investor, is it likely that you end up with a sustainable increase, a rise in the price of oil? you know, i think we look at these opportunities and say it's going to create volatility, it's going to create some dips in the markets, but so long as the underlying fundamentals remain intact, those dips represent buying opportunities. >> yeah, rob stein, your thoughts are pretty interesting on the market. what you say, the summer could be time to set it and forget it. even with the unknown of what's going to develop in iraq, even with what's going on with the fed and what they may do? >> yeah, well, i think the fed's being pretty transparent. the imf came out and lowered global growth forecasts, but

nothing too surprising. i don't think it's going to impact the fed. as far as what's happening in iraq, we're much more energy-independent now than when the drama there was heating up a few years ago. the economy's doing okay, not great, but enough to not concern myself if there's some short-term volatility that creates a speed bump, if you will. and so, we don't see anything looking overly exciting, either, where you would need to reshift your portfolio as well. so, it's kind of boring, right? a little volatility but nothing that would derail the expected return for equities between now and the end of the year, end of the first quarter, and nothing overly exciting to want you to change on the positive side, either. so, i'm kind of a boring guest today for you, scott. >> but no, but you echo the markets there, rob. in fact, we've had 40 sessions in a row now where the s&p has failed a post of plus or minus 1% gain. i think that's via goldman, and that's the longest stretch since 1995. so, actually, what you're saying is pretty historically important, because if this trend

continues, you know, we're going to each successive day that we have this oasis of calm be in further uncharted waters. >> yeah, it's kind of a good thing, though. you know, i think at the end of the day, the fed, the treasury, they like to take the tails off. you know, they don't want down 30, they don't want up 30. they want to kind of bore us into this slumber of being able to focus on other things, and it's kind of working. so, you know, at the end of the kay day, stick to your knitting. >> mike, i just want to ask about the word complacency and what the fed might do on wednesday, because even as we're discussing this, if you tie together the article from jon hilsenrath from "the journal" a couple weeks ago, more comments today from the imf, is it possible in your view that the fed will try to sort of wake up markets here? should we be braced at all for some kind of event come wednesday? oh, sorry. we don't have mike. well, rick santelli, let me ask you, then. >> well, to me, everything you've said thus far disputes all the conclusions you're trying fog come to.

we've had so many days with a lack of volatility after a 30% gain. that's abnormal. and the markets are abnormal because we have abnormally low prices on capital because of interest rates. complacency? complacency can't be addressed by the fed. complacency will leave with the fed. and in terms of iraq or the weather, i just don't see it. as a matter of fact, i see interest rates -- let's look at the s&ps. we're what, 13, 15 points from our closing all-time high, and that's including the entire month of june, where iraq has crawled into it. not saying it isn't important, but if you didn't know there was an iraq and you looked at stock prices or you looked at interest rates pretty much around the globe, you wouldn't think something was wrong. and if you look at crude oil, and we could argue about brent, but the crude oil contract gained what, a bit less than $4 throughout the entire iraq episode. to me, all of this says abnormal. the markets aren't normal, i

agree, but i think the reasons is where we're going to have a dispute. >> so, mike balkin, who's finally with us from william blair, what's more on your mind these days? is it the fed? is it iraq? is it something else? >> well, you know what, i don't really focus on what's going on in iraq or over in russia and such, because i can't really control that. what we're really focusing on is trying to find great small-cap companies out there in this low interest rate environment, easy credit and strong m&a cycle. i think small caps are the place to be. you know, the old adage that size matters? well, in this case, everybody's been talking about large cap. i think small cap's where you want to be going into the end of the year. >> so, you think this correction that we saw in the russell's over, then? >> i don't know if it's over, necessarily, but i do think that we needed a little bit of a pause that refreshes here, and i think the valuations had gotten a little stretched. but i'm really excited about what i see from a lot of our companies into the back half of this year. and with the strong earnings growth coming out of small companies, that's where i want

to be. >> kim, were you trying to get in there? >> i am. i'm very intrigued by small cap companies myself, but i'm finding it really difficult to be able to buy them because there's just no liquidity. if you look at how much shares have traded, they've just completely dried up, even as, you know, the prices have dropped. and that, to rick's point, is not the sign of a well-functioning market. if people were trying to get out of this, if the prices are decreasing, then liquidity should have been up, right? so, what's happening? >> and kim, what would you say about all this? how unusual is it in your experience for this little liquidity across the russell to be the case? >> it's very unusual, i think, especially, you know, where there's been such a change within the year about, with the prices. >> wow. >> so, i just wanted to see if rick has some kind of thoughts on what's happening with the markets, specifically small cap. >> mr. santelli? >> i do! as a matter of fact, i'll tell

you what, it isn't just certain sectors of certain types of stocks. take a look at the cash markets of some of the biggest fixed income markets in the world. look at italy's cash market. look at the japanese cash market. sometimes the jgbs on the cash side don't trade until noon, and the italian cash market isn't trading in a liquid fashion either. the futures markets of all these fixed incomes are doing very good, but remember, fixed income, the cash versus futures trading card, we can create all the supply we want in the futures market. so, the answer is, is that the fed, by giving everybody a tailwind for free capital, has made a market that nobody wants to challenge. the longs don't want to get out of stocks. why should they? so, i think you just have this unchallenged equilibrium in the markets that it's going to take a fat tail to shake people loose to realize that central bankers will not be able to control this perfectly when normalizing interest rates begins to occur. thank you, mr. carney. >> so, joe, where do you want to

be, then, to set yourself up for the second half, which we're basically upon? >> yeah, we are basically upon the second half, and i think, you know, everyone's asking, what's that catalyst that's going to help move the markets a little bit higher? i suspect the back half of this year's going to look very similar to what you saw in the first half of this year, meaning i don't think there is going to be that great catalyst that's going to help multiples expand. i think we are looking at a slow, yet bumpier ride ahead. i want to be focused on developed equities, and in particular, i want to be looking at some of the more cyclical areas of the markets, because i think that will unwind itself. >> kim, one last question here, because you absolutely nailed it. the "ft" is out with a headline just in the last couple minutes, saying the federal reserve has discussed imposing exit fees on bond funds to avert a potential run by investors. of course, moving ahead a little bit to think about what happens in a rising rate environment. but does this not speak to not only the issue that you've raised across stocks and that rick was just talking about in the bond market as well, but

this very kind of talk could only exacerbate the situation from here? >> i think. i mean, a well-functioning market is a reacting market, and we're not having that. as i'm only one of many market participants here, and what i'm looking for is some kind of return to normal where prices change with information and where the market moves with information. and i think we don't have that yet. that said, i still want to be a holder of equities, and i look every single day for mispriced securities, and that's my job. >> rick, you'll get the last word on this and what kelly was talking about. >> well, i'll tell you what, if you're not nervous about central banks, thinking there's going to be a tax or commission to get out of the position of the most liquid and revered fixed income security market in the world, that makes me much more nervous than i was five minutes ago. >> do you expect that sort of thing to occur? i mean, if it gets -- >> this is corporate debt, not treasury debt. >> oh, yes, it's unintended consequences! they've created collateral

shortages. they own boat loads of treasuries. they forced everybody into less-than-perfect securities and more risky positions. now they're worried about the world they created and how it will normalize. there's no way any of this is smooth -- >> global interest rates are pretty weak, rick. global growth and global interest rates are pretty weak. i'm not sure interest rates are overly -- >> to keep low and they're low on their own. does that make any sense to you? >> you could argue that it's a plus that the fed is thinking like that couldn't you, rick? rather than being asleep at the switch, they're thinking of all of the scenarios that could possibly take place within the markets. >> they can't think of all the scenarios. what you're describing's called a free market. free markets think all the scenarios, not janet yellen, ben bernanke, allen green span, draghi, they can't possibly, and there's no way they'll price it correctly on their decisions. free markets need to price all the pieces, not bankers. >> all right, that's a good last word. thanks so much. >> thanks, everybody. we've got about 45 minutes to go

into the close now and the dow's off about five points. the s&p, though, has turned slightly positive. it's at 1,938 right here. or is that 6? 1,936. the nasdaq up about six. how would the potential collapse of iraq impact america? michelle caruso-cabrera joins us live from iraq next. and later, travelers' ceo speaks to me about insurers with better returns than the banks. what does that have to do with regulation? you won't see travelers' ceo interviewed anywhere else today, so stick around. plus, another glitch at target. this time, the retail giant blaming a systemic issue for delays at registers at some stores across the country. we'll talk to target pros about what in the world is going on inside that company and if it can regain the trust of consumers. ♪ ♪fame, makes a man take things over♪

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troops being deployed at the u.s. embassy in baghdad today. our michelle caruso-cabrera is in iraq and joins us now with the very latest live from the country. michelle? >> reporter: hi, there, kelly. yeah, that's one of several key developments happening in iraq today. first, yet another city in the northwest of the country falling to the insurgent islamic rebels. at the same time, however, they have not been able to overtake baghdad as they promised they would late last week. so, that's a little bit of good news for the iraqi army and the iraqi government. one of the reasons why the world is so focused on this region of the world and the battles going on here is because iraq is a major producer of oil. it's a member of opec, and the second largest producer of oil within opec, second only to saudi arabia. this year iraq was pumping as much as 3.6 million barrels per day at one point. you can see from this chart that we're showing you that it actually had finally started to recover from the war years.

i want to show you this map. so far, when you look at the oil production in the country, it's in the northeast of the country, in and near kurdistan, where i am, and also in the south of the country, an area near basra. all of the fighting, however, has occurred in the northwest, about 50 to 100 miles west of where i am right now. so, thus far, the vast majority of production and almost no exports have been disrupted. ben lando, the founder and editor in chief of something called "the iraq oil report". it's an online magazine, he knows quite a bit about the situation and believes that despite what's going on, production could actually increase in the south. he thinks iraq could hit 4 million barrels a day by the end of the year as long as the fighting doesn't reach down there. that's because many of the major oil companies have done massive investments down south, they've spent a lot of money, and to get that back, they need to keep pumping oil. final major development today, secretary of state john kerry not ruling out working with iran when it comes to fighting these rebels in the northwest of the

country. iran and the united states see them as a common enemy. just a few weeks ago, it would have been inconceivable that we would be working with one of the united states's longtime enemies, but kelly and scott, that just goes to show you how the situation in iraq has really turned geopolitics on its head. back to you. >> yeah. michelle, any insight into where you think we may be heading here and what those on the ground are saying right now? >> reporter: the vast majority of analysts that we've talked to are deeply skeptical of the insurgents' ability to get to the south. ultimately, they think that oil production continues, maybe at a little less of a pace than we've seen before because some of the oil companies may remove some workers. but bottom line, their incentive is to keep pumping down there, and as long as the rebels don't get there, it should be fine. what is the longer-term issue is, do you keep putting money into the south? there was a time when they

really thought 9 million barrels per day was possible coming out of iraq. whether or not investment will keep flowing in light of the violence to make that impossible, pretty unclear at this point. >> so, i'm wondering, do you think people are starting to think about the real possibility, michelle, that iraq just completely falls, crumbles, whatever you want to say, and then what the repercussions look like on the other side of that? >> reporter: yes. >> i mean, we are at a point here in the united states where we are good mornibecoming more independent. that has to play into the equation in some respects. >> reporter: yeah, absolutely. i mean, it certainly gives the united states less of an incentive to get involved, but keep in mind, oil is spongeable, so ultimately, iraqi oil is critical to price stability or keeping prices lower. predictions that iraq is falling apart before our eyes? i would say the majority of people i talk to think where i am right now, kurdistan becomes a separate state at some point and that, perhaps, the sunni and

shia parts of iraq also split. there was a map in the paper today in one of the kurdish newspapers showing that, calling that the new iraq. that's wishful thinking by the people in this part of iraq, who have long wanted their own country, but there are many predictions to that effect. back to you. >> all right, michelle, great reporting. thank you so much. that's michelle caruso-cabrera live from kurdistan, in the evening there. crude oil prices spiking as iraqi tensions have flared here. jack jackie deangelis has more on how prices are affected. >> that's exactly right. certainly, we've seen prices spiking over the last few days, but what's interesting today is we actually saw west texas intermediate close down a penny, although we were a little higher with the branch price here. so, the market's leveling off a little bit as traders are taking a wait-and-see approach, watching the situation in iraq very carefully. let's go over those prices. we've seen wti up 5% in the last month or so, trading just under $1.07, a nine-month high. and brent right now hovering around $113, about 3% in the

same time period. what does this mean for gas prices, though? that's the big question. what traders tell me is that if we do see more volatility and we do see more instability, you could see gas prices at the pump go up another 5 or 10 cents, and that is pretty significant, because we haven't seen a big increase in this summer driving season so far. actually, the national average for a gallon of regular is about $3.66. pretty much in line with what we saw last year at this time. so, traders are saying they're watching this very closely, but there's a few things to think about. you're going to see gas prices go up a lot faster than they come down. and when people are spending more on gas, they're certainly going to spend less on other things. so, this is going to have a broader impact on the rest of the economy. guys, back to you. >> jackie, thank you. we've got about 40 minutes to go until the close here. markets are slightly negative, at least for the dow jones industrial average, now the spaep joinis&p joining it, just turning negative. still positive, but it's a day where utilities are the

out-performer. >> hard to believe, kell, another target mess. up next, we'll speak with the pros about what's going on at the retailer in the a tech glitch that had customers waiting and waiting and had twitter buzzing. plus, who wouldn't want to pay lower taxes to uncle sam, if it were legal to do so? the $43 billion buyout of covidien allows a medical device maker to do that. medtronics plans to take a legal address in tax-friendly ireland. we'll have a special report coming up.

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welcome back. target still trying to win back customers since a massive data breach last november and december that ultimately cost gregg steinhafel his job. >> now they're blaming a system glitch for delays at registers at some of its stores this weekend. courtney reagan, what in the world's going on? >> reporter: i know, can you believe it? another problem with credit cards for target. this time, target says it was a defect ain a network device responsible for a widespread outage that prevented customers from using credit or debit cards at stores across the country. target is not giving us information as to what the

defect was, who makes the device that had the issue. and while this has been resolved and the system has been restored, this is a video that shows what it was like at several california target locations during that outage on sunday night. the big-box retailer says in some cases, the credit card processing system was totally offline, and others, it was just very, very slow. it did take about four hours for the problem to be fixed. it was ultimately fixed at some point after midnight. now, target isn't quantifying the number of stores that were affected, but we do know it was in at least five states. now, this picture from twitter user taylor gowan shows long lines, and the twitter user says "i keep shopping with you and your computers keep crashing/failing." then, "i left the target checkout line, put all my items back, drove to walmart, bought the same items and it saved me some time." now, target tells me that some of its locations that had problems issued store coupons. others gave out some free starbucks drinks to keep guests

happy while they worked through the glitch. apparently, it was up to the store's discretion, but you can imagine, this certainly doesn't help target's brand image at this point. kelly and scott, back to you. >> courtney, thank you. what's going on at target? are shoppers bombarded with bad news about the retailer likely to look elsewhere as some of the tweets just indicated? >> with us now, bert flickinger from strategic research insight group. bert, welcome. nice to have you back on the show. >> good to be back. >> how damaging ultimately do you think this will be for target in the wake of the other problem they had? >> very damaging, scott and kelly. target's lost a lot of consumer confidence. customer counts were down almost 3% last year, over 5% in the fourth quarter. as courtney reagan referenced, california's the most important state in the company for target. the problems go from there to minneapolis, where the company has the effect of garrison keelar, a superiority leading to rudderless retailing and it's going to be a long way -- >> bert, wait a second, shares

are up almost 1% right now on the session. >> kelly, i've been a shareholder for a long time. this stock should be -- it's great to see it trading closer to $58, but this is a stock that should be closer to $80 to $85. >> wow. >> so many management mistakes the last five to ten years, and it's going to take a lot of corrective action. >> don't you think getting a new ceo, when they eventually do that, one that's put into position for the long term, male or family, whoever it ends up being, is going to have a pretty good impact on where this company goes from here, that it's too early to write the death of this story? >> definitely not a death notice, scott, but it has to be a better search firm than the search firm that found the board members that iss, institutional shareholders services voted against recommending at target. you need a strong ceo. carol mire wits from tjx, mickey drexler from j. crew, frank blake from home depot, a transformation ceo.

>> every one of the s&p 500 wishes for one of those folks. >> exactly. >> and quickly, i'm not suggesting the death of the company. i'm simply saying, from a stock owner standpoint, you have to make a decision whether it's a good opportunity to get into this name for long-term appeal. and some may say that with the hiring of a new ceo, that that could be the chance, that they're going to throw everything, they're going to kitchen sink everything, take the necessary charges they have to take, the mea culpas where they need to be taken, and then the future could look pretty bright. >> future is definitely be bright, because no company has a better record for philanthropy and community goodwill in its first 110 years as target has, but as courtney reagan reported from the post that she's read, that customers are very dissatisfied. they've switched to kroger, costco and tjx, walgreens, a number of other competitors, in addition to retail competitors and it will take time to get them back. typically, when the customer's

dissatisfied, it takes half a year to a year to get them back. but you're right, kitchen sinking this could be a value. >> just a question. some of the ceos you mentioned to, frank blake, the ceo of t.j. ma maxx, for example, how expensive would these ceos be to hire? you're talking -- you'd have to throw, talk about a kitchen sink. i don't know what you could throw at them to get them to target right now, and would it be worth it from a shareholder perspective, or is it exactly what they ought to do? >> home depot paid $235 million in total compensation to bob nardelli to see the stock just get eviscerated. the enterprise value under frank blake has been phenomenal. when ben cammarata brought her back to t.j. maxx, same thing. whatever the price is paid there, mickey drexler even buying j. crew to beat out fast retailing in that "e" positiacq. it's worth it because target doesn't have the internal talent and there's a lack of great

leaders out there, and those are just a few. >> your point's well taken, but look, jcpenney seems to be, i guess on the road to recovery. it's hard to tell, but certainly doing better than the company was. best buy is doing better than it was. people like to lean on these things and then they turn out 6 to 12 months better than anyone expected they'd be. >> scott, you're right. definitely an opportunity, but in the last ten days, 28 retail and restaurant stocks have hit 52-week lows. in the last month, a quarter, a total of 60 have hit 52-week lows. so, retail's having a tough time going into back-to-school in the second half because of higher taxes, health care costs, declining disposable income. so, it's going to be a good value, as you're referencing. it just depends on the timing. >> and just to be clear, you said you're a long-term shareholder. you own one share of target, right? >> one share, because as soon as they reported the computer glitch, i dumped the other shares within ten minutes. >> wow. all right. >> one share. is that even possible?

>> how much did you dump? how much did you own? >> i dumped about 110 shares. >> all right. >> thank you, bert. >> thank you. >> holding out hope with that one share. all right, we have a half an hour to go before the bell rings. dow's down 11. really, the market's eyes are cast elsewhere today, on the fed in d.c., which meets tomorrow. >> absolutely. >> two-day meeting, yellen with the news conference on wednesday and then iraq and the developing uncertainty, really, that takes place there. someone here saying the federal reserve may have to raise interest rates sooner rather than later to rein in the stock market and wall street. yes, a controversial debate we'll have coming up. and while you were gearing up for father's day weekend last friday, the internal revenue service said it lost e-mails to and from lois lerner because her e-mail crashed. she is the key figure in the irs tea party controversy. she pleaded the fifth, as you'll recall. but are e-mails ever really gone? we'll speak with the pros to

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home depot, mcdonald's, disney, coca-cola are all in the green. and travelers, interestingly enough, was in the green. it is right now hugging the flat line, but you have an interview, a very rare one, i might add -- >> yes. >> -- with the ceo coming in the next hour of "the closing bell," correct? >> and that company, if you want to talk about what's happened to financial firms, how they've traded over the last decade? even insurance at the top of the list, travelers. >> all right, maybe it was just a coincidence or maybe it was part of a late friday summer afternoon news dump from the internal revenue service. >> the news once again swirling around lois lerner, a central figure in the alleged irs targeting controversy. this time, e-mails being sought for the investigation are gone due to a 2011 computer crash. eamon javers has the details. >> reporter: that's right, remember, lois lerner declined to testify on capitol hill, taking her fifth amendment rights, saying she's not going to offer any answers to

questions that republican investigators want. so, that's why they're anxious to see these e-mails and that's why they're so frustrated with friday night's news from the irs that, in fact, the irs has lost e-mails from lois lerner from january of 2009 to april of 2011, citing a computer crash on her computer that she used at the irs. the irs is defending itself, saying it's made unprecedented efforts to get information to congress. they say they've produced over 750,000 pages of documents and 250 irs employees have been working more than 120,000 hours and the investigation internally has cost the irs nearly $10 million. all of that an effort, they say, to produce some of these e-mails and documents that the committee wants to see. meanwhile, up on capitol hill, you can imagine republicans very, very skeptical here. ways and means committee chairman dave camp said, "because of this loss of documents, we are conveniently left to believe that lois lerner

acted alone." congressman darrell issa also said "it's awfully convenient that this e-mail outage has happened" right at this time. so, we might see some action up on capitol hill, guys, as republicans try to get an answer to just exactly what happened to lois lerner's e-mail, and is there any real way for the irs to recover some of those e-mails that have apparently gone missing, guys? >> eamon, thank you. lots of people on wall street and corporate america, by the way, are watching this story, wondering if e-mails are ever lost for good. alex george is director of d.c. operations at immunity, a cyber security firm that serves major fortune 500 companies. alex, great to have you with us. >> my pleasure. >> first of all, does a computer crash mean that these e-mails are gone forever? >> well, it can. i think one of the interesting things to look at with this story is if you look at the amount of e-mails that ms. lerner sent over her time that's under question, we're talking tens of thousands of e-mails.

having been an e-mail administrator in a previous life, one of the things i can tell you is when you get a user that deals with that much e-mail, you call them a power user, they're constantly exceeding quotas, so one of the strategies for dealing with that is to configure their computer to pull that e-mail down and store it locally so they're not taking up space on the server. so, it is possible that ms. lerner found herself in such a configuratio configuration. however, you have to say, when you do that, it's always standard practice to insure that the computer that now has the only copy of those e-mails is properly and regularly backed up. >> so, on the surface, right, at face value, does this make sense to you or not? >> it doesn't. i think it's possible but not plausible. ms. lerner's status in the irs and her importance to that organization, seems to me that they wouldn't make a mistake like that. they wouldn't forget to, oh, gosh, i have to back up, we need to remember to back up her computer.

she's not someone that's working in the mail room. i don't find it a plausible explanation, but you can't rule out the possibility based on what we know now. >> if they haven't turned up yet, i mean, how many more things can be tried before we know, you know, before you put the nail in the kof coffin and say, okay, it's done, i mean, there's nothing we can do? >> sure. all right, it's sort of interesting. as they mention in the story, they're able to recreate lots of her e-mail by looking at the inboxes of other irs employees. and they say, the problem is, once they leave our system and go to places like treasury, the white house, other government agencies, they're out of our control. that's completely true. however, those same agencies are under the purview of congress, and congress has the power to say, all right, any e-mails you receive during this window from ms. lerner, we want to see them as part of this investigation. so, i think there's still more to do. >> alex, the last question that i have, actually, going back to a lot of the experiences people have had in corporate america, is that their difficulty is that

these e-mail traces follow them around. is there nowhere on servers that these messages, even if they're stored locally on her computer, bob able to would be able to be recovered or stored? >> remember, you're talking about from 2009. i find it highly difficult to believe that these e-mails are not on a backup somewhere. that's just good enterprise policy. you know, it's difficult to say how the irs does business from an architecture standpoint, so it's possible that, you know, e-mails, data from 2009 has been overwritten on a server. but you would think that they would have backups from that era that they could just pull from and then grab these e-mails. like i said, it doesn't make a whole lot of sense, and it seems, frankly, just implausible that there is not a copy of them somewhere. >> well, and that's coming from a guy who's know much more about it, certainly, than we do, alex. really appreciate your perspective. >> thank you. all right, we have about 20 minutes to go before the bell rings on this monday after

father's day, and the dow is in a holding pattern. it's been another one of these tight ranges for much, much, much of the day. >> it has. we'll see if we can turn positive again as we head into the close here. that is the case for the s&p and nasdaq, although slightly. coming up, why dragons that disappoint could be a nightmare for dreamworks. dreamworks animation's "how to train your dragon two" opened up with a poor take. that isn't lighting a fire under the stock. the story when we come back. we're moving our company to new york state. the numbers are impressive. over 400,000 new private sector jobs... making new york state number two in the nation in new private sector job creation... with 10 regional development strategies to fit your business needs. and now it's even better

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just because the averages aren't moving a lot doesn't mean certain stocks aren't making big moves. >> and mary thompson is keeping an eye on the standouts here for us. mary? >> hey, kelly. it's m&a monday on wall street. four bigs to report on. medtronic buying covidien for $49 billion and cash and stock. you can see covidien up 21%, medtronic down about 1.1%. network equipment maker tw tell clom was bought by level 3. tw telecom trading at $39.27. level 3 up $1.79.

sandisk is buying fusion-io. the price tag $1.1 billion in cash or $11.25 a share. fusion io trading at $11.26. sandisk also higher. lastly, williams company paying almost $6 billion to buy 50% of the energy producer access midstream partners. access midstream up 1.75% and williams company up over 18%. tesla is at session highs right now. the "financial times" saying its electric vehicles rivals nissan and bmw are in key talks with the company to talk about testing models. they are testing the crossover vehicle next year and shares are up bottom almost 9%. nuance communications was surging earlier this afternoon. dow jones reporting the company held talks with samsung and private equity firms about a possible sale. nuance is behind a new voice recognition application that you can use to place your domino's pizza order. our own domino, dominic chu will

be trying out that app next hour on "the closing bell." nuance stock up over 9%. scott, back to you. >> all right, mary. thanks so much. we have about ten minutes to go before the stock market closes today. it's been in a tight range all day and we're down just a couple points on the dow. after the bell, don't miss it, my exclusive interview with jay fishman, ceo of the travelers companies, which is the only property and casualty insurer in the dow jones industrial average. a strong performance. he joins me next hour. peace of mind is important when you're running a successful business.

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all right, welcome back. we're approaching the close here. markets have been in somewhat of a holding pattern, watching iraq, watching the fed. the meeting tomorrow. jordan waxman, hightower advisers, managing director, and anthony chan, chase chief economist. great to see you guys. jordan, what's the market fixated on more at this point, the fed or iraq? >> well, i think half of it's iraq and i think the other half's not necessarily the fed but how much equity capital has been sucked out of the market through mergers, stock buybacks, equity tenders, merger activity at an all-time high. i think this is great for the market. and it shows you companies are looking for areas to grow. >> anthony, how do you feel about things right now? >> i think if you give me those two choices, i would take iraq, and the reason for that is if

you look back historically to the 1980s, every time on average, when you get a 28% spike in oil prices, you typically get a slowdown. and some of the slowdowns associated were recessions. i don't think we'll get that this time because i think we've got the strategic petroleum reserves and i think there's a possibility of a deal, but that's certainly a concern. >> the imf is pretty negative on growth here, then you have oil prices rising, gasoline prices rising. it's not like we're going gangbusters here in the economy. >> it just means that this profit expansion could turn out to be one of the longest in history. the market climbs a wall of worry, and if you have more tepid growth, rather than the economy growing 3.5%, maybe it's more like 2%, that creates a very long profit expansion with low interest rates and low inflation. stock prices should appreciate. >> give me the imf number of 2%, still stronger than last year for the u.s. >> the wall of worry, unless you get to the top of the wall and you're like humpty dumpty, then you go overboard. >> usually, markets get topee when bad news creates buying opportunities for people.

they don't believe that the market can go down. i still think this is a very tepid market. the bulls and the bears are evenly matched. >> yeah. do you expect anything, anthony, from the fed this week? >> i think the federal reserve will continue to stay on target. if things were to unravel, i don't rule out the possibility of them slowing down the taper, but the situation in iraq or even other factors in the economy, not serious enough for the federal reserve to announce this week that they're going to suspend the taper. >> although you know, there has been a lot more pickup in talk about the economy, right? goldman sachs saying for the first time since the crisis, you've got normalized growth rate returning, and then you've got the imf now leaning against that. i don't know where that leaves you. >> the imf number was revised down primarily because of the first quarter. we all know the first quarter was down minus 1%, but might end up being as much as minus 1.6%. so, when you average the entire year, you get 2%, but that's still giving you 3% or better average for the next three calendar quarters, including this one. that's not bad. >> and they were talking about

above-trend growth, just to be clear. where do you want to be, jordan, then in the market? if you're optimistic on where we go, where do you go? >> we're in a late cycle. industrials, sickcals, consumer staples. it's a slow growth, low interest rate environment. that tends to do well for blue chip stocks. >> thanks. good to see you. >> good to see you, too. >> we are back with the closing countdown. after the bell, don't miss kelly's exclusive interview with jay fishman, ceo of the travelers company. dow component as well. later in the show, it is dom versus dom. dom chu taking on dominos, or at least its new pizza ordering app named dom. we're going to see just how long it takes and if the app works and if dom eats all the pizza he gets. in a world that's changing faster than ever, we believe outshining the competition tomorrow quires 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.

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it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. all right, we're back on the floor for the new york stock exchange for the closing countdown. first, however, we want to go to scott cohen with breaking news regarding a general motors recall. scott? >> yes, another recall, a big one, 3.6 million vehicles being recalled for an issue very similar to the 2.5 million vehicles, the chevy cobalts recalled over the ignition issue that's now famous. this is work that grew out of their investigation of that. gm now recalling the following models -- buick lacrosses from

2005 to 2009, chevy impalas from 2006 to 2014, cadillac devilles from 2000 to 2005, cadillac dtss from 2004 to 2011, buick lucernes from 2006 to 2011, buick regal ls and gss in 2004 and 2005, and chevy monte carlos 2006 and 2008. as part of this, gm is increasing its charge. it had already announced a $400 million charge as a result of the recall issues. that now goes up to $700 million. you can see gm's stock is still slightly higher on the day as this news comes out. scott, back to you. >> okay. scott cohen, thank you so much for that. an additional 3.6 million vehicles recalled by general motors. bob, as we take a look at the stock here, the only thing i can think of at this point, as the bad news continues to come out, let's just get it all out. investors are taking the view that at least they're just getting it all out there, and then you can start to rebuild from a credibility standpoint and from a stock standpoint. >> let's bring up a longer-term

chart than the intraday. the stock got hit obviously on the earlier announcements of it, but now that it's had a little bit of a time, it's stabilized a little bit more. in fact, the stock is trading up today. i'm not saying this is good news at all. certainly, it doesn't seem to ever end, but i think a lot of investors are getting the idea at this point that they might be able to get their hands around how big this is. what's not clear is the liability issues. that's been the major problem. >> you walk around the floor every day. you talk to the people down here. what are they thinking of iraq now? >> as long as oil is not going through the roof, the problem is earlier on, when we saw brant, not west texas, moving on the up side, the markets move down. if oil is calm, the markets are calm, and that's how they're looking now. i don't think this is settled by any means. >> far from it, probably. >> i want to point out, there's been enormous volume in a number of etfs today, energy, industrials, technology, health care, eight or nine times normal.

somebody is moving money into the stock market using etfs. >> well, energy is a space that everybody keeps talking about, bob, especially for the second half. >> good point, but tech, health care, industrials, big movements today. >> all right, that's the word from down here. kelly evans has the second hour of "the bell" and the travelers ceo. don't miss that. thank you, scott, and welcome to "the closing bell," everybody, it's monday. i'm kelly evans. the dow jones industrial average, in fact, everybody just eking out a gain here, adding about five points. the nasdaq managing ten into the close about 0.25%, the s&p 500 adding just 1.6% as things shake out. 1,937 is the level. just to give you a sense of where we stand in markets after last week, we're just shy of 200 points for the dow off the all-time closing high. let's get right to it with today's panel. joining me, cardiff garcia, cnbc contributor and "washington post" reporter elon wee and our own kayla tausche and.com n dom

chu along with fast money trader guy adamie. great to see everybody. a lackluster session today. waiting on the fed? concerns? >> lackluster. but i have to tell you, that spot with your father on friday. i've got to tell you something, i'm a gruff guy, but that actually brought a tear to my eye. that was sweet. >> we are a gruff bunch. >> that was really something. >> thank you. >> so, what is interesting to me is a continued move in these chips. the chips names continue to move to the up side. look at micron today, intel, obviously. i think this nuance story's probably not being covered enough. i think there's a lot of value there. it's not a rich stock. there's a big short interest. and i think after that disastrous quarter and announcement back in november, this stock flushed everybody out, and i think that's headed higher. and a continued strength in energy. i know you want to talk about m&a as well, but those stuck out to me. >> actually, energy and utilities battling right now for the sector leadership of the

year. dom, either one of those, though, kind of a late cycle, late-stage leader, aren't they? >> well, what's interesting about the utilities trade is we've been talking about it for quite some time, but the other thing that's interesting is if you look at the energy trade, there's a point at which you don't maybe want to see energy leading the way higher for a bull run. oftentimes, a lot of traders say if energy really is leading the way higher, eventually, those oil prices that are driving some of the energy stock trade surges are eventually going to become some kind of a headwind for the overall economy, so maybe there's a little bit of caution to be thrown into the mix here when you're talking about energy. but on the utilities side, there is still a demand for this and geopolitical risk in places like iraq of all places is going to contribute to that safety bid, and maybe that's why you're still seeing utilities as a big part of the picture. >> kayla? >> it's also a move on the back of the interest rate play. earlier in the year there was a sell-off in utilities because the expectation was interest rates and yields would start rising, and utilities are some of the biggest borrowers, very

sensitive to interest rates. so, when you see geopolitical conflicts that are affecting the market in this way, keeping ten-year treasuries below 2.6, that's going to be a good play for sectors like utility. >> i wonder, do we talk about the extent to which higher oil and gas prices are already a factor for the u.s. economy or do we have to have them spike more? >> i don't think we're there yet. if there's one lesson from earlier in the year when the tensions between russia and ukraine took off, is we have to be careful not to overdramatize the extent to which even massive geopolitical stories are going to become big economy stories. i don't think we're there yet. i think we have to be patient. >> interesting point, and it comes again, today, even while the world's attention to some extent is focused on what's happening in iraq. gazprom has stopped supplies of natural gas to ukraine. wisely, perhaps from their point of view, has kept them flowing to europe, so you're not seeing the immediate economic or market backlash that that could force

their hand. let me turn it around. if these stories aren't really moving markets here, what -- how do we come to some sort of resolution? >> well, i would like to point out that in terms of the cutting off of energy to ukraine, this has happened twice before and ukraine weathered it. it happened before in the dead of winter, when the country was less prepared for it. some sense is this move is one that the country was able to prepare. they knew it was coming and they say they can last through december before they have to reach some sort of agreement with russia over energy prices. but obviously, i think that one of the things people are waiting for to happen this week is what's going to happen with the fed. >> absolutely. >> you know, there's been a lot of speculation about what they're going to say over the economic outlook, what they're going to say about the first rate hike, future path of interest rates, but the truth of the matter is, the fed just doesn't know. they're throwing spaghetti against the wall moment right now, where they're trying to -- so many fed officials are saying many different things about what the pace for purchases should be, what the first rate hike should be, what to do with

reinvestments. and right now you're going to see them throwing different ideas out there and then trying to come to some sort of compromise. it's going to take them at least another six months before they can sort of see the segments coalesce into what the different angles will be able to come together and agree on. >> i just wonder if they try anything on wednesday with regard to "waking up the markets," because again, to quote goldman on this, but i think it's been 40 sessions in which the s&p has failed to post a 1% move in either direction. that's the longest stretch of calm, they're saying, since 1995. do you think against that backdrop, their view that the fed would do something here so we don't have kind of the late '90s moment all over again? >> probably not on wednesday. i think on wednesday, the most you can expect from a policy standpoint is a change in the outlook and a change in the forecast, but there are an interesting set of countervaling forces ex-erring themselves in the fed right now. we have had four pretty good employment reports. inflation has gone back and

janet yellen believes there is more flack than being reflected and she inserted the language earlier in the year about rates staying low for a long time, even if we get back to consistent levels for inflation and unemployment. and the theories that were once con eject yours are becoming formalized by the academics, taken more seriously. that's the kind of thing that would justify such a move. i think if you're going to watch for one thing, watch in the presser whether or not she fully, she more fully explains why she did that. >> would you agree that, in other words, their concern would be more that they do something to cut off the recovery at this point as opposed to something that, you know, sends markets, financial assets another 10%, 15% higher? >> yes, absolutely. i believe that the market column story relating to the fed has been a bit overblown. the fed has spent many months trying to make the markets calm after the temper tantrum of last year. so, this is to some extent a success of that, being able to pull out and phase out the bond buying program without disrupting the markets. but the second point is that the fed is actually trying to push on both sides of the train.

they're trying to sort of prep the markets and say, hey, the first rate hike is coming, in fact, it may come sooner than we thought if the unemployment rate drops faster than the fed expects. but at the same time, saying, but don't worry, you know, interest rates will not go as high, and they'll stay relatively low for a longer period of time. so, they're in sort of a tricky balancing act here by trying to push on both sides. >> guy, what do you think about that message come wednesday? >> but isn't that interesting that we're even speaking about -- and i know we've been doing this for a couple years, it's nothing new, but we speak about the fed and their concern about the markets to me. >> markets, yep, yep. >> that's got to trouble people. i'm not saying it's bullish, bearish, whatever, but that should not be their concern. the markets should do what they're going to do. to have a conversation, it's crazy. >> let me put it this way, isn't it completely legitimate, in fact, necessary for them after the last couple of cycles to at least talk about markets from the point of view of are things becoming disconnected, has the move been too far, too fast? >> interesting. >> you know, is the absence of

more volatility a sign that there is complacency out there? i mean, that certainly is -- >> there's clearly complacency, but none of this should be, in my opinion, should be their concern. the fact that it has become a concern should be disconcerning to people because maybe they're taking their eye off the ball where it should be. the markets -- i'm in my rick santelli moment -- the markets should do what the markets should do, regardless of fed activity. they should do whatever they think is right and let the chips fall where they may. >> here's the question i have. i mean, and guy brings up a great point here. but for the past five years, it really has been about everybody saying don't fight the fed. you've got to always be careful what's going to happen. so, my question then becomes for the overall markets, when do you feel comfortable enough to say fundamentals matter more than anything else and i would much rather trade on those particular aspects than, say, what's going to happen on the central bank side of things. and maybe, guy, that's the question for you. how would you play this if you know that the fed is such a central part of the picture? >> i think that's a good point.

if you've been trying to trade on fundamentals the last couple years, you've been getting steam-rolled, because effectively, you've been trying to play it from the short side. so, i think when fundamentals do matter again, which they will, i don't think the fundamentals, and this is just me speaking, are nearly as strong as the broader market would suggest. and the fact that interest rates, not only in the u.s., but globally, are at levels that they are speaks to deflate -- a global deflationary story, which to me, again, is going to become a story. i don't know when it's going to become one, but when it will, it's not going to be a pleasant ending. >> guy, we'll leave it there for now. good to see you this afternoon, though. >> right on kell. >> thanks to everybody. stick around and catch guy coming up with the rest of the "fast money" crew here at 5:00 p.m. they'll talk with jetblue ceo dave barger about their new premium service called mint. don't miss that. domino's pizza today launching a new app that enables user to order a pizza through voice recognition. you can kind of think of it as a competitor to siri, but the app

is named dom, so we've put our own dom here up to the challenge. dom versus dom. we want you to give this a shot and test it and see how well the voice recognition technology works. >> what we have is the dominos app on your iphone and there's a beta button with a microphone at the bottom, that's the dom app. we decided to see if this app really does work well. it's driven by nuance communications, the same people that did siri, other voice recognition, but we're going to try to order a pizza. >> right now? >> right now, and see if it does actually get to us before our hour is done. >> they have to get the order right. >> so, they have to get the order right. here's the question. before i place the order, anybody have any special requests?usage. >> and pepperoni. >> plain cheese. >> pineapple. that seems like a tricky one. >> how about everything? >> how about a combo pizza? you're going to see on our screen right over here, we're going to hit the beta button that says "voice recognition." it's telling me, what can i get you? so, i'm going to tap in here and

say, okay, large combination pizza. >> is there an option to get this thing delivered by drone, by the way? >> i know, right? >> oh, there are the choices. >> there we go. >> i'm not sure we should have said chicken bacon ranch sandwich -- >> 2 liter of coke. >> should we say it? large cheese pizza. large cheese pizza. just a moment. >> yeah, i think we're going to have to finish this one up during the break. >> we're working on it. >> tell us what you ordered, we'll track it throughout the hour. and you can catch an exclusive interview with dominos ceo patrick doyle on "squawk alley" tomorrow morning at 11:00. >> still working on it. >> still working. still working. also still working, the stock market, remains near record highs, even as main street is slowly recovering from the great recession. coming up next, we'll look at why the boom on wall street could, perhaps, force fed chair janet yellen to raise interest

rates sooner than anybody is expecting. also, how is increasing regulation impacting the bottom line of financial industry? we will hear exclusively from travelers ceo jay fishman later on "the closing bell." keep it right here, you're watching cnbc, first in business worldwide. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪

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welcome back. as we continue on the path of what some call an uneven recovery, one investment strategist is now saying the federal reserve may be forced to tighten rates, not because of main street getting stronger, necessarily, but because of wall street getting too strong. our own jeff cox is tracking the story for us over at cnbc.com and has more. jeff? >> yes, kelly, thank you. michael hartnaet put out a note last week that caught my eye. it was a little bit of a stark reminder of just the situation we're in with this two-speed recovery. his position is basically, look, wall street has done so well during this recovery, and main street still meandering, still a lot of things out there, the housing recovery and we look at the jobs numbers and see all the long-term unemployment. when the fed starts to put all that together, as we go through the year, maybe into the fall, they're going to have to start tightening maybe sooner than they want to because they want

to rein in some of this speculative excess. >> and is the sense from michael hartnet that this would be a mistake or that this is the right thing to do, jeff? >> i think his sense is it would be the right thing to do. i don't think it's something anybody on wall street really wants to see. it's important to note also that his advice for investors is not to really worry about this until the fall. he thinks the summer's going to be very good as far as the market goes, and in the fall, he thinks we'll start to see that correction. now, i think it's important to make a couple of points here. we know that central bank policy is most effective, for good or for bad, when they do things unexpectedly. i was drawn to something else that i read today in "barron's." abby joseph cohen, senior strategist at goldman sachs, says she thinks the fed may actually increase rates before the end of qe, which i thought that is a really out-of-consensus call, but if that happens, it will really shake up the market. >> but what's interesting, kayla, about this is exactly your point earlier, which is, if people were anticipating this, wouldn't bond yields be moving

much higher as opposed to had i so this steady, in fact, decline we've seen so far this year? >> yeah, and i think that at some point the expectation, but the fed has to balance that consumer demand for loans hasn't been as blockbuster as the market may have expected that to be. and so, do you start to raise rates earlier than expected when a lot of these consumers are starting to have dry powder again? they're starting to have, you know, a desire to invest in their business or to take out a loan to do something else or to buy a car, to buy a house. so, how do you balance what's going on with the consumer, if in fact, there is a disparity with some of the speculation that jeff is mentioning on the buy side of the market, where sophisticated wall street investors are concerned? >> cardiff, what say you? >> i think this is a very problematic argument, okay? we have to distinguish first between the fed's regulatory responsibilities and its monetary policy mandate, which doesn't say anything about financial stability. that has to be a secondary subordinate variable. to say that the fed should raise rates before it otherwise would is to say that it should

deliberately miss on a couple targets it's already been missing for years in order to avoid missing them by more in the future. that's a very tough case to make and it risks setting the expectation that there will be times in the future when the fed won't go out in hitting mandated targets. i think it's a tough case to make. >> which target do you think it's missed on? >> inflation and employment, on both, since the end of the recession. it hasn't -- >> consensus expectation is that they're actually going to ratchet down projections for unemployment. in fact, in other words, the rate's going to be lower than they think it's going to be -- >> but it's not at its long-term estimate for full employment yet. >> jeff, i think actually that that employment picture is what is going to end up forcing the fed to move, not the concern about financial stability. you know, unemployment could fall below 6% this year, and that would be very hard for the fed to dismiss as saying, you know, obviously, there are broader measures of slack in the labor market, but once you start getting a 5.9, 5.8, 5.7, you're

close to full employment and that might be the first thing to trigger the fed to move, not the worry over financial stability. >> so, the fed provides easy money, allows company to buy $1 trillion worth of stock, pump up the markets and then walk away from the mess it created? >> good monetary policy doesn't necessarily have to be costless, all right? i don't like instability any more than anybody else, but the fed has to calibrate its policy so it's best suited to pursue its targets, all right? that's what it has to do. it can use other tools to combat instability. there may be instability as a result of monetary policy. we just have to live with it. >> one thing i wondered before you go, if you fast forwarded a couple years and say the stock market goes up another 25%, unemployment is down towards the goals, inflation is in line, even, it's at 2%. in retrospect, should they have tightened to prevent some kind of market melt-up like some people are discussing? that's what i wonder -- >> not necessarily. i think you still have to make

the case that the fed in the future still won't have the ability to fight even future bursted bubbles. i think that's tough to make, too. >> the problem of using monetary policy to pop bubbles is it's very difficult to pop the bubble while you're in it -- [ everyone talking at once ] >> cleaning up afterwards hasn't been done so easy, either. >> how do they get a free pass after they create the bubble and then just walk away and say, okay, you figure it out? i don't understand that. >> who says they got a free pass? >> i mean, you guys -- >> what are you talking about? >> didn't you just say that the fed is not responsible for financial stability? >> no, i said it was a secondary subordinate variable. it's an input, like anything else, but it's not its primary target. if you want to elevate it to the rank of primary target, that requires a new act, a new mandate. >> and the now sworn-in vice chair of the fed said in his congressional testimony that he felt financial stability should be on par, even if it's not a legislative maneuver, but should be on par in the fed's considerations with inflation

and -- >> we've got to leave it there, jeff, but -- >> i hope somebody's thinking about this. i really do. >> no, they are. they are. wednesday's the day, and we're going to send it over to mary thompson here for a quick "market flash." >> hey, kelly. check out jen teva health, spiking in the after hours. kindra health is announcing tomorrow it will begin a cash offer to acquire gentiva for $14.50 a share. gentiva trading higher in after hours, up over 4%. look at shares of kindred to see how it's responding to the news of its offer. slightly lower, down just about 2%. also, we want to check out shares of gm on that recall? guess not. all right, kelly, back to you. >> mary, thank you. we would like to check in with gm and tesla, another big mover today, later in the hour. meantime, we're awaiting a big interview. coming up, we have some pizza that's finally going to be delivered, as dominic chu has managed to talk to the other dom. yeah, oh, there it goes.

>> it says it's baking in the oven. >> yeah. that only took, well, about ten minutes. >> ten minutes. >> there is a gratuitous order of parmesan bread bites. for the ride home? >> no, that's because kay lo only wanted cheese pizza and i felt bad there are other toppings on there, so i'm getting kayla something she can eat. >> such a sweetheart. travelers are at all-time highs. up next, travelers ceo jay fishman tells us exclusively how his company has been able to double the returns of the rest of the financial sector this year. and a new report finds half of all asset managers will be gone by the year 2030. find out what will spark that shake-up and if our "closing bell" panel is buying it. we'll be right back. [ female announcer ] there's a gap out there.

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we constantly evolve to meet your needs every day of the week. welcome back, and take a look at insurance giant travelers. the shares trading near an all-time high. in reality, the company's pretty much about on a tear since 2005. so, let's dig into the numbers exclusively now with the man leading the charge, travelers' ceo jay fishman. jay, it is great to have you here. welcome. >> nice to be here with you, kelly. and don't wish a curse on anything, but at an all-time high. >> so, this raises the question. given the out-performance that you've registered not only during your tenure relative to others in the sector and in the financial sector, but also during the financial crisis, where travelers avoided the subprime, some of the other issues that have felled rivals. make the case for owning your

shares, though, from here. >> well, so, first let me back up a little bit, because i think it's helpful. back in '04, we made the decision to move away from risk-based assets, and it wasn't because we were all that pressed in about the real estate environment, but risk spreads, spreads you were getting for risky assets relative to risk-free, were simply at all-time lows, so we made a moveaway and managed to avoid all of it. fundamental in that decision was a premise that we are an insurance company first and an asset manager second. now, not everyone does that, and i give lots of credit all the time to berkshire hathaway. warren does it a different way, and he is remarkably successful, but we are an insurance company first. and our premise for producing value is that superior returns over time will -- returns on capital will ultimately convert to returns on the stock, and it's been successful. so, we've generated substantial earnings. we have been buying back our shares since the middle of '06

as a strategy, not as a tactic, and we continue on that same path. so, if you believe in the value of returns and the value of capital committed to thoughtful businesses, to good returning businesses, i think we're as good today as we were then. >> well, and you guys say your objective is midteens operating return on equity. again, that's something a lot of the banks are struggling right now to achieve. but at the same time, about half of that return on equity lately has been investment returns. i mean, you are in that sense a little bit riskier and more of an investment company, perhaps, than people might realize. >> yeah, although the nature of our assets are interesting. we've got a $72 billion investment portfolio. $68 billion of it is bonds. $4 billion or so are in alternative asset classes. the bonds that we buy are all very high-quality bonds. our duration right now sits at just below 4. we're an average aa-1, aa-flat kind of holding, and we look for

municipal securities, tax-freeze, a smattering of taxables. again, it's to match our insurance policies. we price them to yields available today. when i'm asked where do you go to reach for yield, the answer is nowhere. we take the yield we can get in an appropriate, risk-adjusted way and sell insurance policies around it. >> interestingly, there are a lot of people today looking at pension funds, but also insurance companies and saying, why isn't anybody buying the stock market? and why aren't you? i mean, $68 billion of your $72 billion is in bonds, and it sounds like you've been positioning for a raise in interest rates as opposed to the environment we're in today. why not just invest in the plain, vanilla s&p 500? >> yeah, and again, certainly, people do. for us, very comfortable selling an insurance policy priced at today's yields and not worrying about the mismatch going forward. all of the things that we worry about. we worry about a hurricane, an earthquake, the things that require us to pay potentially billions in claims starting the

very next day. so, we stay focused on liquidity and we stay focused on matching our assets and liabilities. if one wants to carry an investment portfolio, you could certainly do that, but it's just not how we've concluded that we want to create value. >> a couple major changes in the industry you noted back in 2010. one of them, in fact, was just historically low rates. the other was increased volatility of weather patterns. and in response to both, you've had to make some changes, and they include raising premiums on the homeowners side, also on the auto side. it sounds like, though, with regard to the auto piece right now, it's bottom almost a common tiesed business, thanks to the likes of players like geico. how do you fight back, or do you fight back? >> it's certainly a challenging business line in auto. and of course, our philosophy of raising prices was not unique to personal insurance. we're two-thirds business insurance and been raising prices there as well. but auto insurance continues to change. we focused on two things. we knew we had to lower our

costs and we'd been through a significant restructuring of our auto insurance business to do that. taken about $140 million of costs out of that business, and we've established a new product that also pays a lower commission, because ultimately, agents that we sell our product through, independent insurance agents, they understand that 12% of something is a lot better than 14% of nothing. and so, it's been a success. so far, we're out in 28 states or so now, and the product is working for us. but you're right, it's certainly a more commoditized product. i don't know i would call it truly a commodity, because there is a value component that's different than just price, but price sure matters a lot. >> what happens to that business going forward? i mean, does this trend inexorably continue? because there are people that know as you've seen firsthand, this is driving down costs and reaching competitors throughout the industry. there are plenty of people that say to me, i still don't understand why auto insurance is so expensive. >> and we're on the cusp, i suspect, of some real changes in

auto insurance generally driven by cars and technology. so, you've read a lot about driverless cars. i worry less about that certainly than the notion that technology will eventually make driving safer. now, what's happening right now is the technology is doing its job, but the distraction factor is trumping it. so, you've got, whether it's your gps system or your radio, it isn't just texting while driving, it's all of the systems of your car that attract your attention, other than the road are trumping the basic systems that are embedded in there. i suspect once the automobile manufacturers get that technology better embedded in automobiles, less active, more passive, that, in fact, automobile losses could go down, could go down a lot, and that will change the automobile insurance business, i suspect dramatically. i don't know whether it's 10 years or 20 years, but i could see the day where premiums are much smaller because losses are much smaller, and we drive our premiums off the loss base. so, it's going to be a fascinating business to watch over the next 10, 20 years, i think.

>> meantime, just a question, how's the housing market? >> most recently more sluggish. same things you're reading. in the longer term, it has been better. the economy generally -- so, you have people here who are economists we speak to all the time. we insure a million businesses a year and we get a lot of data from them of what they're expecting economically. we price our policies off data, whether it's employees payroll, workers compensation sales for general liability, and we take all that data and we tumble it. and the best you could say at the moment is that the outlook is, the outlook of businesspeople at that level, small, middle market business is cautious, very cautious. if you had to put a number on it, and it's a tough thing to do, but you'd say business owners are contemplating perhaps 2%, 2.5% growth. now, that's an outlook, and it will be different. the actual number will be different. but our customers are at least telling us that they remain very cautious about their outlook for the economy.

>> i imagine that makes them very cost-sensitive as well. and they have other factors to work through, including the affordable care act, obamacare. and you guys see yourselves as actually playing a role to some extent in bringing health care costs down, is that right? even through the property and casualty side? >> yeah, i'm not sure bringing them down, but we are the largest workers' compensation insurer in the united states and we handle billions of losses in workers' comp, so we have a great, big business in helping our customers manage their medical costs associated with workers' comp claims. we engaged hart analytics to do a survey for us. they went out to 1,100 businesses. it was interesting, at least to me. the single biggest worry that businesspeople responded to was the uncertainty and unpredict t unpredictability of health care costs. that's obviously a benefit and the human resource people go work on that. we get very focused on helping our customers get their employees back on the job and back to work, so we are deeply engaged in medical networks and in helping our customers manage those costs. it's going to be a challenge.

the demographics in the u.s. are clearly working towards higher medical history. we are getting older and visit the doc more frequently. increased demand, supply not keeping up with it, and in that will come, we suspect, some increase in costs that will go along with it. >> speaking of big changes, one that you've been a proponent of in the past is drawing attention to the nation's long-term debt and deficit situation and you've had the documentary you helped produce a couple years ago. but it's a different picture today. i mean, would you acknowledge that, certainly, at least for now, there's been a vast improvement? and is our attention, do you think, misplaced on trying to do more to address those fiscal concerns right now? >> yeah, so, short-term, sure, we were running deficits of $1.1 trillion and now we're down in the $700 billion, $800 billion. it's moved a little bit. some of the sequester helped, some of the economic recovery brought in more revenues. longer term, i think the picture remains the same and it's

concerning. social security, medicaid and medicare, just cbo data, they're going to go up by $100 billion every year for at least the next ten, at least. that's $1 trillion more in spending than we have today. so, that $1 trillion over the next ten years, add it to today's expenditure of $1.6 trillion, trillion is what we brought in last year of total revenues. i think at the moment, it's a little bit better. i think the fundamental demographic challenges remain, and it's a real concern. >> and are you, just a couple quick questions about business as well before we go. one is, you've done an acquisition in canada recently -- >> yes. >> are you looking to make more acquisitions abroad? >> we would like to in markets that allow more robust returns. and there are markets, continental europe is overinsured, way too much capacity there, so we're really not interested there. we would love to find a way into india to do it in a thoughtful kind of way.

so, where there are markets where the game isn't already over, we'd love to find our way there. >> and with target in the news again with regards to security at its stores, is cyber security going to be, do you think, a required part of insurance for most businesses going forward? >> i actually think in the insurance arena, which can be boring as can be, but that's actually i think the most interesting topic of all, because insurance companies have not yet wrestled with the notion of reputational damage and the knock-on effects of reputational damage. we don't cover that. we cover loss to physical property, we indemnify against lawsuits. but the question is, when something like this happens and there really is no loss except a reputational impact and then the resulting impact on the business is customers make other choices, that's going to be a really hard one. and i think, by the way, that's both a challenge as well as an opportunity, but we're at the earliest days of figuring out how to help customers manage that risk. >> and even with your shares at all-time highs, you're still buying them back. you've bought back 58% of the float since starting the buyback program in 2006.

>> yeah, yeah. we're trading now with something like 1.25 of book, the bre break-even between the book value delusion and the increasing earnings per share and time you earn that back is still an easy call for us, so yes, still in the buyback mode. >> well, congratulations on the success you've had relative to your peers in this marketplace for now, certainly since 2005, and i think more people are looking at returns on equity, not seeing them in the traditional financial space, and seeing them at your company. jay, thank you so much for being here. >> pleasure. thank you for the invitation. >> appreciate your time. the company voted with its feet. medical device-maker medtronic becoming the youngest to escape corporate taxes with its purchase of ireland's covidien for $43 billion. are the flood gates about to open for tax inversions because lawmakers are behind the curve on this issue? we're back in a moment. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase. like 50,000 bonus points when i spent $5,000

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that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. a major deal in the medical device industry which may have as much to do with taxes as it does with medical devices. meg terrell has the details for us now. meg? >> hey, kelly. that's right, medtronic buying covidien today, reincorporating in ireland to take advantage of that 12.5% tax rate, continuing

on a lot of these inversion deals in health care lately. earlier this year, pfizer attempted to buy astrazeneca for almost $120 billion to reincorporate in the uk. of course, that didn't go through. we may see that come back at the end of the year. a couple other deals in the last couple years on that. but this is also continuing a trend of consolidation among medical device companies. we saw zimmer and biomet get together earlier this year. j&j a couple years ago. and analysts are saying this is a result of pricing pressure in the industry. now hospitals trying to spend less money under the affordable care act and just overall pricing pressures throughout the industry. so, we may see more consolidation. now, interestingly, medtronic's stock, after being up today, ended up closing down about 1.1%. analyst josh jennings telling me some people were concerned maybe the deal wouldn't go through before congress aims to curb these tax aversion capabilities of companies. he thinks that concern is overblown, but there are some proposals being batted around in the white house and congress to

curb this activity. we're hearing a lot of lawmakers may be trying to get this done before that happens. kelly? >> meg, such a controversial topic for now. earlier this month on "kiloing bell," we spoke with the ceo with regard to mergers and acquisitions and here's what he told us. >> i don't want to comment on any speculation, but what i will say is our general strategy towards m&a is first around strategy, business strategy itself. so, we look at what the strategic elements are, and then we optimize the structure after we've settled on whether those strategic elements are attractive or not for us to pursue anything in that space. >> are we in an acquire-or-die kind of environment? and is this motivated by cost pressures across the industry? does it have to do with obamacare or some of the broader transformations happening in hospitals today? >> i don't think we're all in an acquire or die mode. we have a strong business, a strong operating business. we know how to grow the business

organically. we've got heavy investment in r&d, for which we're getting returns. we've got plenty of opportunity, organic opportunity in emerging markets. i think health care is an industry and an opportunity that's an undeniably big, both from a business perspective as well as a societal need. >> all right, so, here's the question, dom. now that this is happening, does this just create every company needing to jump in and do the same thing? >> it does for the time being, but you get a sense that this is perhaps a salvo being fired across congress from the business side of things as well. if there is this kind of a rush to get deals done strictly because of the tax benefits of incorporating outside the u.s., does that in essence amount to a ceo letter, if you will, to congress saying, if you guys keep on this path, we are going to look for business opportunities elsewhere? it's not that we don't want to be in the u.s. maybe -- i tend to view this as more of a signal that ceos are saying, hey, congress, we'd like a more friendly environment for

business in america. if not, these are the things we have to do to get business done, especially if our international competitors are doing the same kind of thing. >> kayla? >> a lot of these companies have also -- they feel like they've been promised a lot by washington, and washington hasn't delivered. remember, when taxes started rising after the 2012 fiscal cliff standoff, there was something of a promise from washington that the entire tax code would be reformed at some point. didn't happen in 2013, won't happen this year. now people are saying it won't happen until 2017, after we're out of the current election cycle, and i don't blame some of these companies for saying, look, we can't wait any longer and we have our strategy in place and we need to execute on it. >> and just as a note here, medtronic's covidien buy is subject to no change in u.s. tax law, so it's not a minor issue. the crisis in iraq weighing on the stock market, and that's been heating up cnbc.com today. "the hot list" is next. according to the firm kpmg, there's a 50% chance your asset manager could be out of business by 2030, but our panel isn't so

sure of that. details are straight ahead. and dom chu anxiously awaiting this pizza delivery, well, from your alter ego. is it arriving? will it get here on time? we'll find out when we come right back. seeing the world in reverse, and i loved every minute of it. but then you grow up and there's no going back. but it's okay, it's just a new kind of adventure. and really, who wants to look backwards when you can look forward?

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different. for the rundown of "the hot list," managing editor allen wasser. good to see you. a rock dominating "the hot list," i understand. >> a rock. ever since the story started boiling over last week, it's been a dominant subject on the website. right now we're leading with a piece from "the fiscal times," where they laid out what the consequences for america would be with a collapse in iraq, laying out military consequences, economic effects, the energy game. fascinating story. over 30,000 people have read that one. my number two right now is why millennial women do not save. this is a story about kelly holland. she digs deep into a number of reasons. the most concerning fact i got out of this one was, 18%, only 18% of millennial women are actually financially literate compared to 28%. >> what does financially literate mean? >> this is done by finra, the financial regulatory authority, and they have their, you know, average investor quiz. >> okay. >> and this is sort of how people perform on that one. number three is a fun one from

robert frank, a slide show he put together on how to get rich men to go shopping for mansions. apparently, they don't like to do that kind of shopping too much. so, he's laid out some little tricks that they do. >> like, so, like any other kind of shopping, i guess. >> basically. >> i still can't stop thinking about these millennial females who aren't saving. thank you. >> take care. what do apple and walmart have in common? they could have the future of finance. why retail and tech and consumer industries may rise in the management business. and tomorrow, outspoken fed critic jim grant, a day before the fed's latest meeting. he'll have plenty to say about janet yellen and co. tune in.

. two reps blockbuster video could by a set managers according to a few study from kpmg. 50% of global asset manager firms will be gone by when the itself 30 as new technology and social habits change the industry, dom, this a big wake-up call for the business or something they shouldn't lose sleep over? >> it could be. i'm a little skeptical, having

come from won point in my life from an independent adviser poll, i worked for a smaller moouch mutual manager. i worked at hen see funds. they're not the bank guards, the t. rose, they have a role in this financial mark because they provide prukts and services that everybody wants to use in their own way, shape or form, so to me to say there will be a handful of asset managers left 20, 30 years from now doesn't get to the point because of technology, because of changing needs, there will be so many other people that can fill some of those other niches. i tend to think there will be more asset managers, maybe not the biggest ones out there. >> there might be more, they won't be the traditional ones, i'm thinking of learn vest, you pay a flat fee annually, you basically, have access to a low cost financial adviser, people don't need the newer touch anymore. i think another thing is hurting the traditional asset manage:in

industry, that's the do not call list the ftc put out years ago, so now you can't cold call, you are pounding the pavement, getting new clients that, is not the the way to connect with them. >> all the young financial advisers on wall street know what we were talking about. i was happy to make those cold calls or semi luke warm calls. and it was a numbers game. you dialed 100, hopefully you got one or two people to talk to you. >> that's the point. you talk about the demographic shift that might be driving this trend, people don't want to be cold call anymore, that's not how you will get your business the kpmg report they mentioned the increasing role of women, marketing of women as head of households and managing family finances, i think that will be an important sectr to manage in the future. >> i think consolidation in the industry is different from saying growth in assets under management will slow, since we said this has the potential for stockmarket disruptions later. it's not because of leverage

problems, it's because of short-term typical behavior, it will be more money chasing the same stuff. it will be flowing in and out. >> that will be a potential problem. >> we are seeing that now. earlier, domino's advocates called dom, by the way, the 'izzo did finally get here. the question is whether the other dom understand u understood this dom's order. we'll find out. >> we finally got it. >> it smells good. >> it does spell good. smell good. kid: do you pay him? dad: of course. smell good. smell good. smell good.smell good. smel. . . . . . . . . dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab.

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welcome back, final thoughts now, dom buy, sell or hold? >> i will say it's a buy. i will say this. >> i expected -- >> i have inspected it. i will say on the actual iphone app, it does say for the voice ve rex recognition it's a bet that test. i will say after our ordering snafu it took them about 30 minutes to get the pizza in the door. >> flo word on how successful it is when are you not broadcasting the coverage on television, of course. >> or ordering it at 2:00 in the morning. by the way, we took the consumer reports approach, we didn't tell

domino's we were doing this. we will see whether tomorrow morning patrick doyle has a problem. >> we want to foe if they need a recognition app if the regular app is working just fine. >> google three times on the show it's been domino's, diversify a bit. >> pizza hut, the rest, they have to get into the game. think the big four only have 40% of the market share, though, as compared with other serious other -- >> are you going on jeopardy? >> i would much rather talk to a reel real person, i'd rather call dom. >> if we live in the tri-state area, we have a ton of tweets, we should be ordering from mom and pop shops, of course, that itself small business side. >> that's true. we can do that like grub hub kind of thing. guys, thank you. "fast money" coming up if a few

minutes. melissa lee, do you guys got pizza? >> no, send some our way, kelly. >> we sal. what's on tap? >> we will trade tesla, up 9% on top of a huge move, tesla is up a 22%, so our traders are weighing in, giving you the trade right now. >> all right, looking forward it to. over to you guys. >> fast money starts right now. live from the fax markets, new york city's time's square, i'm melissa lee, tonight's top story, the escalating crisis in iraq. turmoil in the middle east is keeping wall street on high alert. we have dennis gartman. plus a first on first cnbc interview about jet blue and how it could impact his business. the question right now is how high the government will allow oil es