adam: welcome back to market now. this hour, the fifth biggest bull on wall street. tom leaf, his ear and target on the s&p is the highest on wall street. the undivided guest keeping the party going. apple shares top $500. whether or not the meddling is good for the tech giant. plus, the very latest on the ups plane crash. egypt's vice president resigns as violent turns deadly.

security forces move into forcefully break up things. time for stocks now, as we do every 15 minutes. laurence simon that he there. >> the next catalyst will, about 15 minutes from now. stocks in the red across the board. eight points away from session lows. macy's is the number three loser on the s&p 500. they cut their outlook for the year. the air are also saying that the consumer is pulling back on discretionary items.

adam: the "new york times" is under cyber attack. the website went down earlier today. it is still not in service. elizabeth macdonald is following the story. cheryl: good to be with you. the corporate and media site has been down for more than an hour. the next message you see here. it has resulted in the e-mail and website being down. we are hearing from sources that

this could easily be a bot not attack. it was thought to be related to the military in china. at that time, they are was now where that was installed. we will be tracking the story throughout the day. he recently raised his year and s&p 500 price target from 1715 to 1775. it is the highest on the street. it is a pleasure to have you on fox business market now.

you have lunch with some 80 different wealth advisors and hedge fund managers. you have heard how most investors are spectators. the big money is out of this market. why are you saying no? >> you do not want to be the last one in. what it tells you is stock market talks never occur when you have talks about valuations. again, we do believe we are in a multiyear bull market. one that will not end until at least 2017 or later. adam: your own institution put out a note earlier this week.

hedge funds and big money, the selling of stock was unprecedented. it would seem to me, as a retail investor that the big guys are getting out. i realize you believe we will have this really good run-up. i get scared when they've money is not doing what retail investors are doing. >> that is a good point. from what we can gather, large accounts are doing some repositioning because it is august. we have vacations. nobody wants to have a lot of exposure when they are taking holiday. whenever large institutions make big moves, it is usually at the wrong time.

meaning, because we have not had a lot of retail investors, in other words, if they are doing a lot of selling today, that would mean the markets are getting ready to make the next move higher. adam: explained to me. i have been watching disney since earnings reports last week. >> i do not really comment on specific stocks. one of the things that has been supportive of the markets, it has really been stock buybacks. it is overt 2 trillion just

since we do like the idea that companies are making gobs and gobs of cash right now. unfortunately, they are a little cautious. adam: aren't they buying back their stock? >> i think there is a little risk at looking at the aggregate data. oil prices are down. pacifico revenues are accelerating.

revenue growth is about keeping up with gdp right now. corporate cash continues to rise as well. to put the number in perspective, that is equal to $270 per s&p share. there is a lot of cash in the number. the idea that we are stuck in a slow growth environment is not because nobody has any money, it is because we don't have the spirits yet. adam: no one will cheer louder when you are correct. thank you very much, sir.

>> thank you for having me. adam: we will turn to egypt. >> one of the reasons egyptian government has closed their markets is because there is such chaos. the market may reopen on sunday. that probably depends a lot on what happens on the street in egypt. we just got some video from a very reliable source. it directly refutes the claim by the muslim motherhood. the muslim brotherhood has been camping out there for weeks now.

it is time to leave. the bid move is what we saw just a couple hours ago. the vice president they are resigning. there were many more peaceful ways to and this than the violence that happened. you could see a cracking. that is when you see the financial sector are there in egypt really get a good shake. back to you. adam: thank you. oil is on track to snap a three session streak. phil flynn is on the trading floor of this cme.

>> i think it is about inventory. the spread has been accelerating and expanding. here in the u.s., it is all about inventory. the crude oil inventory was initially taken as a bullish number. it is actually in line with expectations. gasoline demand is improving and production is falling. it seems like the refiners think fall is coming. they are starting to come back. the drawdown in gasoline supplies. the bears influence on the market back to you.

adam: we might need that heating oil. you heard about that crash juts outside of birmingham alabama. a pilot and copilot aboard that airbus 300 died. we are now going live to fox news correspondent jonathan cary. >> ntsb investigators are on scene trying to figure out what brought down the fly. there was rain and low cloud throughout the morning. the ntsb said a full go team was looking into the crash. there are no homes in the immediate area where the plane went down.

no one on the ground was injured because of this sparsely populated area. ups confirms the aircraft was in a cargo jet. it was flying to birmingham from louisville, kentucky. "we placed the utmost value on the safety of our employees, our customers and the public. we will immediately engage with the investigation. we will work exhaustively on response efforts." that response from ups as the ntsb investigation just now gets underway.

adam: it is no easy task. thank you very much. we want to update you on the story regarding a "new york times" website. it now appears to be back up and running. sources tell fox business that the website was indeed hacked. we will continue to update this story as we learn more. not so sweet coca-cola on the offense. beating back aspartame. the new ad campaign is just ahead. all you need is a luxury handbag. the chinese economy that has the rest of the world up in arms. whether or not carl icons meddling is good for the long-term. we will be right back.

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>> >> i am: , adam. the ceo don mattrick is making a lot of changes. more senior executives leaving the company, coo, chief technology officer, the chief people officer. that is what i want to be if i was an executive at a company, adam. all the moves come ahead of a meeting with employees. zynga shares are up 2%. adam. adam: thank you very much. lauren simonetti. we'll see you in 15 minutes. we want to make money with charles payne. this hour he is looking at technology stock chi pms o, did i say that correctly. >> yes. adam: you recommended this back in march? >> yes. i was going to tease you, a big story out after successful big-time money manager took a big stake in a tech company. it wouldn't be carl icahn and apple. this guy has an amazing track record. he is a value investor. would suggest a long-term play. back in march it was 11 bucks. went all the way to 20.

this news is moving the stock and i'll tell you why. people try to pick who will be the winner in all the technology wars but sort of axe and shovel mentality. who makes the chip for touch-screens? touch-screens are big and they will get much better. talking about 20% annualized growth rate. lcds, they will get better. the first quarter of this company ramped up. first two quarters. cash flow is really strong. i'm betting on technology in general, the grand scope of it. individual winners and losers, the fact we'll keep buying this stuff. adam: as you said there will be growth in devices that use the touch-screen glass. >> absolutely. adam: you brought up carl icahn. he is short term in this. what do you think? >> carl reminds me of character in "wall street," the guy who was the corporate raider -- adam: gordon gekko? >> the good guy. adam: english guy. >> say i can buy and sell you.

no, he was australian, right? i can't do either accent. i was trying to make an excuse for my poor imitation. i think he might be in the for the long run. one thing i tell you, all names we throw around, big-time guys, he is the guy i follow the most. he is the guy makes money for people. he is pragmatic and reminds me after regular new yorker. adam: you vote for a lot of people holding apple since april, made them a lot of money pretty quick. >> 17 billion-dollar market cap after the announcement yesterday and a lot more today. adam: good to be the king. that wasn't in that movie. catch you a little later, buddy. great at hedging money. now bill ackman is hedging on publicity he got for hiring and firing of former jcpenney chief ron johnson. meantime, carl icahn, you know who he is, he is racking up 54,000 twitter followers and growing fast after tweeting about quote, his large stake in apple. the fallout as apple's stock, we're over $500 a share.

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adam: no surprise, shares of apple are trading near seven-month highs. right now, near $500 a share. let's be act, $500.79 last bid. after billionaire investor carl icahn tweeted he has a large stake in the company. minutes fol tweets our next guest personally made, two, $22,000 as the stock shot up almost 5%. paul meeks is the sextent portfolio fund manager at turner capital. he joins us on the telephone. i should point out to everybody i've been invested in apple in the 1990s. you purchased stock originally for investors at $8 a share. congratulations you have been in the long term, so why sometimes being long term can pay off. what do you think about carl icahn? >> first my predecessor nike kaiser bought the stock then. i taken over the fund recently. he is the genius. i'm hired hand. adam: you were smart enough to take the job.

>> sure. carl icahn, this is interesting. yeah i agree with him that the stock is clearly undervalued. my price target is in the 600 plus range and one of the things however i think's a little bit unusual is at least via the tweet, he claims that the company hasn't been aggressive enough in the stock buyback and this is a firm that just last quarter spent $16 billion on a stock buyback after the previous six months spending less than two. so i would at least beg to differ with the guy even though he is obviously a genius and a billionaire and successful investor, that i actually think apple is being quite aggressive since they announced their capital allocation strategy a few quarters ago. adam: let's talk about the capital allocation because they got pushed by david einhorn to up the buyback amount. of course there was an increase in the dividend. i think the whole plan is 100 billion over next four to five years and they borrowed at incredibly low interest rates to

do that what mr. icahn now wants them to do is increase the amount of the buyback with another borrowing because they have a 150 billion in cash. why jeopardize that when the government is giving money away like it is candy. doesn't that pose threat to long-term investor and carl wants to make money quickly and he is out, he doesn't have a stake in innovation and product improvement at apple or does? >> that's an excellent question. i think he is concerned about the capital allocation strategy. i think you hit the nail on the head. i don't think he is particularly unempressed with tim cook as ceo or the innovation that will be announced in the next quarter or two but, yeah, i agree, he has had the reputation coming in and out. i don't think this is a situation like he has with dell where he is actually trying to fix a broken company. i don't, most people would think that appeal needs -- apple needs to be fixed too dramatically. that is always a risk. but he said he invested a

billions billion 1/2. because this is the largest market cap company in the world a billion, billion 1/2 dollars even though that it a lot of dough that is not a whole lot of influence at the end of the day. adam: i think i misread something leading into the discussion with you that your fund made in the thousands, i would imagine it was in the millions of dollars just by the tweets mr. icahn put out there. >> oh, sure. adam: does this have the ability to sustain itself going over the next several months? or do you think this might be a quick jump up and then we come back below $500 a share? >> good question again. i'm a little bit worried about the stock moving so far so fast. this is a stock that, early june was trading below 400. actually, troughed at about 385. adam: i think it was april 29th around. >> so you have a situation where, yes, we do expect first, second week of sent to have a new iphone announcement. there will be some other innovations ex-iphone coming.

maybe that sustains on a more fundamental basis beside what carl icahn is doing which isn't really a fundamental shift in the company but i'm hoping that one leads to the other. so and when icahn steps off the curb, if he does, then you have a situation where there is some better fundamental news, which frankly we haven't had in about a year. adam: that's a good point. paul meeks, we'll follow your tweets on apple. there are people that believe mr. icahn is in it for the short term and you're clearly in it for a much larger picture and broader picture. thank you for joining us on "markets now." >> thank you, sir. adam: turning to activity making headlines, bill ackman. he sat down with charlie rose for his first interview in months and involvement with jcpenney and trying to turn that company around. this is a quote. we got too much credit for ron johnson's hiring and when the business failed, i probably got too much of the blame. as for johnson, ackman believes he had good fundamental ideas

but his biggest mistake short term was eliminating coupons. ackman stepped down from jcpenney's board of directors yesterday. he said it was time and that he achieved all he could and wants to restore peace in the boardroom. as of now he is still jcpenney's largest shareholder, something like 17.7% but the next real test for jcpenney could come next week when the retailer reports earnings. that will take place tuesday and we'll have them for you. criminal charges against two former jpmorgan traders over those $6 billion in london whale losses. wee have the latest on that coming up. if you're worried about artificial sweeteners in your diet drink, diet coke, coke says you shouldn't be. its new ad campaign to help you convince you why. ♪

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adam: what happened to the dow? we're picking up momentum in the wrong direction for lot of people. we want to go to the floor of the new york stock exchange. lauren simonetti, the dow is down big numbers in the last few minutes. >> we took another huge leg lower. off 125 for the blue-chips. down three of the last four sessions for the dow jones. we're looking at cisco. this stock is down .7% that ahead of earnings that report after the bell today. we'll cover the earnings for you. the expectation is 51 cents for earnings per share and revenue of $12.41 billion. pay attention to cisco's business in europe. we found out the eurozone out of

recession. 24% of cisco's business is there. back to you, adam. adam: headlines back in the news, two former traders at jpmorgan face criminal charges in the "london whale" case. prosecutors say they tried to hide hundreds of millions of dollars on those risky trades but "london whale" himself, bruno iksil, he escaped charges. he entered a non-prosecution cooperation agreement with the feds. tune in at 2:00 p.m. here on fox business for full coverage of the u.s. attorney's news conference on the charges against the two other jpmorgan traders. coca-cola is launching a new ad campaign defending its artificially sweden drinks. boost to sagging diet soda sales. diane has more on what you can expect. >> adam, coca-cola is out with a new print ad defending sweeteners in its diet drinks. it features headline, quality products you can always feel good about. alongside a photo of a woman and a teenager sharing a laugh over

diet coke. it emphasizes that coca-cola has been trusted brand for more than 12years but it knows to change with the times by doing things like offering more low-calorie on shuns the ad goes on to say, artificial sweetener, are safe, quote high quality alternatives to sugar and the aspartame is safe by 200 studies over last 40 years. a growing trend avoiding sugar and leading to a growing trend of avoiding artificial sweeteners. "beverage digest" says sales of diet soft drinks are falling faster than regular soft drink sales here in the u.s. coke is hoping to reverse the trend. the company said in a statement, quote, we felt it was important for to us answer the questions and reinforce that these are ingredients people can feel good about. adam, back to you. adam: diane macedo thank you very much. we have more on coke's new ad campaign. our next guest says this is artificial defense. we want to bring in dr. poet

poet dr. poet poet. i downloaded recent report online about aspartame. they say, this is what the american cancer society is saying. both fda and european equivalent called these results into question, that found aspartame possibly dangerous, lacking important data in other studies and other concerns. they go on to say the largest study of the issue looked at rates of cancer in 500,000 older adults so they didn't find risk in aspartame some what's the problem? >> so, adam, the data is still fairly suspect there is no direct correlation in terms of aspartame in the incidents of cancer. this goes back quite some time. when you talk about the word, is it safe? there's enougher of implications for that. coca-cola is here as a part of

coca-cola is in a campaign of fighting childhood obesity worn erred into the that people get fat because of drinking a lot of soft drinks. this is part of a broader campaign, that not our soft drinks causing the problem whether regular soda or diet soda. people need to exercise. that is why people are obese. that is why you see the big push in addition to doing sales. adam: let me talk to you about the ad, a tag line, a product that people feel good about. doesn't say it is good for you. don't most people know whether it is sugar colas or diet colas, every day in large amounts? this is kind of thing you should have occasionally in moderation, right? >> we, i think the reality is, most people did know that, perhaps the defense of childhood obesity wouldn't be as high as

it is today. clearly there is a lack or gap of knowledge in terms of what our diet should be and what's accessible to kids or young adults. adam: last question, any problems with this campaign launched by coca-cola? >> the direct verbiage of the campaign is notify us -- false. the broader question at hand is how comfortable the market is in promoting soft drinks. i think that everything needs to be in moderation. look at what the state of new york did in terms of their counter against this. we'll see a continue battle between legislators and beverage manufacturers in terms to limit consumption. adam: we appreciate you joining us here on markets now. >> thanks for having me on.

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adam: bringing you up-to-date with this fox business brief. u.s. households are holding less debt according to the new york federal reserve. household debt including mortgages, credit cards and auto loans fell by $78 billion in the second quarter, that is the lowest level since 2006. steinway musical instruments has agreed to be taken private by investment firm paulson and company for about $503 million. the deal works out to $40 a share. the national highway traffic safety administration announced a new mandate requiring automakers let car owners do a website search to do active recalls by simply entering a vin number. the agency says more than 70% of recalled vehicles get fixed. the other 30% the owners don't know about the recall. don't bother to have it fixed or the vehicle has been junked. that's latest from the fox business network, giving you the power to prosper.

adam: there's a new way to obtain a loan. hong kong's wealthy fashionistas are pawning, that's right, they're pawning purses for quick cash. joining us with the story is our own jo ling kent. jo, i've got a 10-dollar wallet i got on the street. would i do well in hong kong with this thing? >> maybe not well but 80% is what you would get with a luxury brand. this is one-of-a-kind phenomenon for right now. hong kong, yes, lady's finance company accepts luxury handbags on the spot and procure loans of 80% of bag's value within half an hour. 10 of thousands of dollars in es exchange for a bag. they will exchange the bag or has to be gucci, chanel, or stoop sometimes down to the level of prada. the four-year-old company returns the bag once the owner

repays the same loan with 4% monthly interest within four months. the exploring, exploding luxury consumption in hong kong and main lane china create ad twist on a pawn shop, originally popularized by poorest dents of hong kong who sell watches and jewelry and electronics to their pawn brokers. for a purse loan, for many a purse loan is so much less risky than advanced credit which requires repayment and can affect your credit rating. frankly if you own one of these handbags, you might not notice it missing if you don't get it back. interesting nugget, adam, one in five of the purposes loans, male handbags. talking about man purses. adam: i joke about my sixth avenue throw away, people on corner you get these for nothing. is this indicative more of a perhaps a bubble economy of china real trouble? >> it definitely does if you're loaning handbag to get cash you purchased of a chanel

$5,000 handbag and $4,000 you need somehow. that is questionable. i looked up yes, sir lady finance, if you have a fake, they don't say a word. hand it right back to you. adam: i like to know how they know but we don't have time. jo, good to see you. thank you very much. speaking of bubbles, people say the fed created one. st. louis fed president bullard dragging markets lower. peter barnes is here to talk about the markets going down based on what bullard is saying. peter? i think we might have connection problem with peter? are you there? >> i have got some headlines for you from on the fed and this debate on whether or not to start to taper the fed's quantitative easing bond purchases, the $85 billion a month. there has been this, debate inside the fed, on when to start doing that. and we have some headlines now from james bullard, who is the president of the st. louis federal reserve bank. he is speaking in paducah,

kentucky. he says that actual accident. dp growth has not been great the last three quarters. if the fed set as 2% inflation target it must hit it or lose credibility. he said this a couple of months ago in a statement at one of the fed meetings when he voted against a policy at that point and he said up nation is running on the low side. he is very concerned about, deflation or, disinnation, low prices here. sounds like he would like to keep quantitative easing continuing for, at least the foreseeable future. adam, back to you. adam: peter, thank you. we'll get more reaction on the trading floor of the new york stock exchange about all of this. keith bliss of can tone and company joins us. we keep hearing about taper, taper but stocks already priced this in. actually this stuff from bullard would indicate we should be going in the other direction. why is the dow going down do you think? >> excellent question. this is where you really have to

be good at reading the tea leaves and i'm not sure any of us down here are so good. the market has become so distorted over past two years. best i can tell what the market is reading to st. louis fed president bullard's comments, basically the economy is not really strong the you could think given at this point all policy tools they have thrown at economy, including kitchen sink, quantity quantity is basically pietri dish experiment we should run at 3 1/2, 4% nominal gdp, inflation should be ticking up to 3, 3 1/2% that is not just there. that is what the market is reading in a low volume day. economy is not as strong as everybody thought it was. we'll look at economic data this week and next week to really gauge that. that is what people are reading into bullard's comments this afternoon. adam: keith bliss, appreciate you joining us on markets now. you do know what you're doing down there. thanks for joining us. >> my pleasure. adam: you have friends, lots of

them. people like your stuff but are you really a facebook vip? the new lengths the social network will go to keep up with the in crowd. that's next. ♪ right now, years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internethe room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together.

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adam: facebook is developing some new features but is there such a thing as too much in social media? what do you think? tech know buffalo joins us now with his take on the new features are they good for facebook or sending them the way of myspace and yahoo! and blackberry. have they jumped shark? talking about voice protocols,

open table and instead of having to go outside of it what are they up to? >> i think what they're trying to do is the google approach. throw as many ideas out there and see what sticks. the way they're doing that or reason is to boost mobile revenues. we saw that increase 51% year-over-year in the last earnings report and i think that's going to continue and what they're trying to do with open table, keep you inside facebook and inside the app. they don't want you going to yelp. they have 800 active users and yelp has 84 million. adam: television, content is king. social media and internet is about simplicity and user experience but do people want the kind of experience you get as the eagle said in hotel california you can check in anytime you light but you can never leave? that is what facebook -- >> nobody really wants that. i go to facebook to see my families and what they are up to. i don't want to go in there to

make a restaurant reservation. that is the last thing i think when i'm hungry. jump on facebook. adam: they have been successful monetizing mobile. their stock trading lower today is much my higher than it was a year ago. kind of like people are running around with their hair on fire and they don't take the bucket to put it out. >> i think they're making their platform as future rich as possible. boosting anything they can in the mobile app they will attract additional mobile users and that's the goal. as people use smartphones and tablets more. they're not necessarily going to facebook.com, they load up the app on the smartphone. adam: 40% of this country logs into facebook on a pc and just under that logs in on mobile device. how much is that some one like me? i check in on three times a day. i'm counted three times. is that accurate figure. >> that is accurate figure. when you have 800 million a month active users. that is more than twice the population of the u.s. there is

a lot of people using service. adam: that facebook jumps shark? >> i think it's a danger. you can't start throwing some things in front of users. i open the news feed and third or fifth post is advertisement or game i don't want to play that my friend is posting about. it reminds me of myspace. obliterated with animated gifts. adam: forget about myspace. that is sore subject. last question for you though, facebook has to do something you don't want to become a blackberry or a yahoo! or a myspace. >> right, exactly. i think they can do it by adding more features to their platform. it becomes, you know, more valuable and i want to use it more but i don't think open table is the right way. that is a learning lesson what could come down the road, whatever it might be instagram. adam: she sold millions of dollars worth of shares. buying a new house you think? >> yeah. i don't know. i don't think facebook jumped shark. i would still watch it as more features are added. maybe she did want to buy a house or a boat. adam: a big boat.

todd, thank you very much. all the best to you. >> thank you. adam: criminal charges against two jpmorgan traders in the "london whale" case. u.s. attorney preet bharara expected to speak to reporters in a few moments. we'll bring you that discussion live. tracy byrnes and ashley webster take us through the next hour on fox business on "markets now." you have to see it to believe it. mantra? trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications.

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tracy: welcome back, i'm tracy byrnes. ashley: and i'm ashley webster. breaking news in the jpmorgan "london whale" case. federal prosecutors are about to lay out criminal charges against two former traders that could be going to prison for 25 years each. we'll bring you the news conference live in just moments. >> finance expert josh rosner is here to break down the case. plus why he said the tide is totally turning against the banks. the latest on the deadly crash of a ups airbus jet in

alabama. investigators are racing to find out what brought it down. ashley: first stocks hitting session lows in the last half hour. time for stocks. let's go straight to lauren simonetti on floor of the nyse as we do every 15 minutes. we're off 110 points on the dow. >> certainly it is lower. the markets took another leg down. the low of the session is 15, 315 on federal reserve governor, bullard saying fed has to hit the 2% inflation target it set and with those comments the markets took another leg down. we have two stocks today, one a winner and one a loser. jc pane any, put out -- macy's is down, one of the biggest losers on the s&p. a big winner is apple shares, up three days in a row, finally piercing that key 500-dollar level for the first time since

january 23rd. apple a winner once again today. back to you. ashley: lauren, thank you very much. taking a bit of a bullard bounce i guess you could say on some comments from the fed president. tracy: we're awaiting news conference right now. two former jpmorgan employees facing criminal fraud and conspiracy charges for their role in the london trading whale blowup. it cost the bank over $6 billion. the second the conference starts we'll bring you to that. until then, josh rosner is here to talk to us about this. who is really to blame here? at the end of the day isn't it jamie dimon? >> from my perspective this is operational risk failure. this is a failure of oversight. that is first and foremost should be the way it should be looked ait is not so much a trag problem but a risk management problem. ultimately the buck should stop with jamie dimon. that said it does look like within the cio's office, you know, they got iksil to turn. he is obviously turning on one

of his bosses, his direct report. and so the question is, are we going to see them in fact roll over an turn on perhaps, ina and what dud she know? what did she inform the front office of the company on. tracy: bruno iksil was the one who got the name, the "london whale." he turns information. we're looking at two others, you're saying they can turn to get us right to the top? >> that seems the way the prosecutions usually work. there is in fact obviously at love questions about and a lot of feelings about iksil having turned and, you know what you go back and read the testimony put before the senate permanent subcommittee on investigations in march he really was internally giving warnings saying he wasn't comfortable with the projections over the losses and in fact, when he said, you know, i think losses are higher, he got a response from his boss, makris, saying why did you do that? why did you put those numbers out? it will make our conversation

tomorrow, seems, inthat drew, more difficult? >> you think this was the start after total attack, dare i say on the banking system? we'll see more cases like there, aren't we? >> i don't think it is the start of. it has been going on for several years. i think it was punctuation point, exclamation point. even jpmorgan which escaped largely unscathed from the financial crisis has problems. and, yeah, i do think that it is really embowlenned people in washington both on the regulatory side and on the legislative side to say hold on, maybe we should be rethinking the power and the scope of these businesses. tracy: do you think that, i mean, maybe just because of the my experience with washington and unfortunately we often think they don't know a whole heck of a lot, do you think they don't truly understand how complicated for banking system is and it is simpler for them break it up? >> i don't think the banking

system understands how complicated banking system is. part of the problem -- ashley: i have to interrupt you. let's go straight to the u.s. attorney for the southern district of new york, preet bharara, talking about the criminal charges in the "london whale" case. let's listen in. >> the largest financial holding company in the united states and the parent of the nation's largest bank. we have filed conspiracy, wire fraud, and related charges against these two traders, for their alleged participation in a scheme to hide the true extent of massive losses in a synthetic credit portfolio maintained by the chief investment office of jpmorgan. all told, as the world now knows, those losses ultimately reached over $6 billion. the named defendants are javier martin-artajo. who served as managing director and head of equity trading in the that office, and julien grout, who was a vice president and derivatives trader in that office. as the complaints describe, at the heart of this case are

alleged lies and misrepresentations about the fair value of synthetic credit derivative products and in particular, credit default swaps on jpm's books. while the transactions and financial products involved may be complex the criminal conduct alleged is simple and straightforward. the defendants deliberately and repeatedly lied about the fair value of billions of dollars in assets on jpmorgan's books in order to cover up massive losses that mounted month and month at the beginning of 2012. those lies, misled investors, regulators, and the public and they constituted federal crimes. as has already been conceded, this was not a tempest in a teapot but rather a perfect storm of individual misconduct, and inadequate internal

controls. we also today, announced, a cooperation and non-prosecution agreement with another former trader at jpmorgan, bruno iksil. before i get to the charges in some detail today let me introduce our partners in this prosecution and investigation which began well before the senate issued its very thorough report this past march. these are by the way as you may appreciate difficult cases to investigate and to piece together and the only reason we're here is because of the fine men and women who are career prosecutors and investigators and enforcement lawyers who literally poured over thousands of pages of documents and interviewed dozens of witnesses and built this case through sheer hard work. and i'm joined today by our partner, the fb-i, in this case, so many cases led by george venzuelos and represented by april brooks, special agent in n charge of criminal division of new york field office and her excellent team at fbi.

doug left, mario, dave schawb, matthew taylor and saa tory chinella. i would like to thank them for their assistance. and we're joined bit coen forcement director at sec. thank him and his team for getting to this point as well. andrew call mari director of the u.s. office and assistant director of the new york office and they're always a great coliberate tore on these kinds of business cases as well. last but certainly not least i want to thank the career prosecutors in my own-offs who are standing here. eugene and matthew schwartz. assistant attorneys handling prosecution and their chiefs mark berger. take a couple minutes to talk about the particulars of today's charges. first as i mentioned, the two defendants were traders at jpm's chief investment office or as it is known, the cio what was the

purpose of the cio? well functioning banks have excess deposits, meaning the difference between the amount of money put in by customers and the amount of money lent out to other customers. in jpm's case that differential in 2012 was a whopping $350 billion. which is by the way more than the gdp i think of many countries. in jpm's case the responsibility for wisely managing that $350 billion resided with the cio. now within the cio there were various portfolios. one of them was called the scp, or synthetic credit portfolio. this is at least 2007 jpmorgan's cio invested a part of its money in risky complex credit derivative products that synthetic credit portfolio grew dramatically in size over time and was extremely profitable, generating a approximately $2 billion in gross revenue. it was profitable that is until

2012 when things began to go south in a pretty big way. and that's where the trouble began, culminating in today's charges. as alleged, the defendants violated in essence, their obligation to honestly value the bank's assets. banks that trade in these sorts of risky products are required to record their daily assets and liabilities in an honest way by marking the position as their fair market value, known in many circles as mark-to-market accounting. according to both u.s. generally accepted accounting principles and also jpmorgan's accounting policy the fair market value for the derivatives traded in the cio was price at which traders would actually sell their positions which makes sense. but these products awe may know don't trade on an exchange. so traders are required to make determinations of the fair market value by looking to a number about objective data points. prudent and accepted practice is to value derivatives between the

bid and offer prices generally available in the market. typically close to the midpoint. jpmorgan's own accounting policy provided that the quote, starting point for the valuation of derivatives portfolio is mid-market. and that's exactly in fact what executives at the cio did. they were at or near the mid-points, sometimes referred to as the crude mid, until 2012. and that is when things took a turn for the criminal. you see in 2012 the scp, that portfolio i mentioned, began to lose money at a rapid and alarming pace. approximately $130 million in january, and another $88 million in february. why? because traders made big bets in those derivatives but the market ended upturning violently against them. and so as alleged, a cover-up, mounting losses and under pressure from above, beginning in at least march 2012, the defendants began to creatively

cook the books. they summarily abandoned the valuation methodology dictated by common sense, by prior practice and sound accounting practices. methodology used by jpm's own investment bank. moreover as alleged, the defendants knew they were cooking the books with respect to valuations because they separately, separate and apart from what conduct i'm describing, they separately kept meticulous track what the valuations would have been had they not lied about them the hope was that the bets would turn around. but they didn't. and as the bets continued to sour, rather than scale back and come clean, the defendants allegedly doubled down, not only on their bets but also on their fraudulent evaluations and on their cover-up. if you take a look to the chart on my right, for a moment, you will see reflected here a lot of what is in the detailed complaints that were unsealedded today. as i mentioned, beginning in january of 2012 the cio had to

report a 130 million-dollars loss. over time, based on pressure from martin -- martin-artajo according to the complaint and instructions from martin-artajo according to the complaint people were instructed not to show losses and change the valuation methodology. as of march 15 as alleged in the complaint, the mismarks or changed valuation was so large according to their own separately-kept spreadsheet that said what the valuation should have been had they been doing it way they always had been the gap in march was already $292 million. by march 30th, according to a later analysis that the bank asked its own investment bank to do using a reasonable methodology in their view to figure out what the gap was between the way the ppople in cio were valuing the assets and what an appropriate methodology would have been, they came up with a value after the fact

after $676 million. as everyone knows the bank had to significantly understated its first-quarter losses within that derivatives portfolio and had to ultimately restate its first quarter net revenue to the tune of $660 million and throughout asset forth in the complaint and won't repeat this here, conversations and chats between and among the people who were identified in the complaint about whether or not this was a wise thing to do. at one point the cw, mr. iksil says, i don't want where he wants, i don't know where he wants to stop but it is getting idiotic. those are the words of mr. iksil so, how did this happen which is a reasonable question? where were the internal controls? to be sure the cio had a valuation control group whose job it was to serve as an independent and rigorous check on the traders asset valuations but as alleged in the complaints, that group was

neither independent nor rigorous. in fact there wasn't even really a group as it was staffed in london with essentially a single employee and as alleged the value control group regularly tolerated wide discrepancies between traders marks and the control groups own independent valuations. let me end by saying a couple of things. the difficulty inherent in precisely valuing certain kinds of financial positions does not give people a license to lie or mislead or to cover up losses. it does not confer a license to create false books and records or to make false public filings. and that goes double for handsomely paid executives at a public company whose actions can roil markets and upend the economy. of capitalism work best when its captains do not lie and cheat. capitalism work best when its biggest beneficiaries play by the same rules as everyone else.

we happen to live in a time where, not just one bank, but one trader within one bank can do catastrophic economic harm. in practically the blink of an eye, and recent history bears that out. and that is why prosecutors need to be even more aggressive, regulators need to be even more vigilant and as i have been saying for some years now, companies themselves need to pay closer attention to the cultures that they create. and now it is my honor to call to the podium april brooks from the fbi. ashley: just heard u.s. attorney preet bharara laying out the charges against javier martin-artajo, former trading supervisor at jpmorgan and julien grout, another former trader. he called the instruments that they were dealing with, complex but he said the crime itself, the fraud was pretty simple. they misled the public, they misled investors and misled

regulators. the question as we were watching this, josh, how far up did this really go once they realized how much money they were losing? >> that is really the question. they talked about the fact that internal valuation group was not a group. it was one person. they talked about the fact that there really was no internal control. ultimately was that with the blessing, with knowledge of higher-ups? and did they, either willfully turn a blind eye or knowingly choose to ignore the issues there? ashley: right. >> we don't know the answer to that usually i would think you will go after someone like martin-artajo in hopes of seeing if he is going to spill -- ashley: further up the chain. >> and people further up. tracy: the problem with mark-to-market, and there are issues time and time again wit, it is a little vague this notion what exactly is fair value. we obviously know the cost on books, the notion of fair value especially during some hairy times it is hard to come by.

does this therefore, does it fall down on the gaap rules? >> i mean, look, remind me of, when fannie and freddie, when fannie mae was in trouble for mismarking. tracy: yes. >> and they had their discussion with the sec and the sec chief accountant came in with a piece of paper and he said look, here is a piece of paper which represents the rules. and where you should mark. the middle being the clearest mark. you're not even on the page. so that really is seem that they have any case. at the end of the day, these are illiquid instruments. they don't strayed on exchanges. trade by appointment. tracy: right. ashley: it was totally cooking the books. tracy: but i've seen, i was former accountant i've seen this mark-to-market stuff get so fuzzy and you would think by now -- ashley: absolutely a gray area. >> there is a lot of gray areas. this sort past reason regulatory community as part of dodd-frank said we need to move more

towards standardization. ashley: is this "london whale," bruno iksil, yes, he said at one point this is idiotic. >> he said more than that though. he essentially prepared a document showing the potential losses and martin-artajo said, why did you do that? right? and so he said, well because i'm not really comfortable, he functionally said i'm not really comfortable. martin-artajo said that will make our meeting tomorrow with higher ups -- ashley: more uncomfort aable. >> you have to assume ina drew and did she know or anyone higher than her know when this transpired? tracy: can you play this out before we let you go? >> i don't know how to play this out. at the end of the day the issue is the issue. this is internal control issue. the cases are the cases. i'm not a lawyer or play one on tv but to my mind this is only going to fuel those in washington who say look, we've got institutions that are clearly too complex to manage. tracy: right.

>> we need to simplify businesses. bring them back toward narrow banking. if they want to do things outside of -- ashley: traditional banking. >> traditional banking it has to have no call on federal reserve or no call on the taxpayer. >> as you and i were saying earlier you would think they want to get the fed the heck out of there. >> you would think. tracy: josh, thank you. ashley: well it is a little after quarter past. of course we've been talking about this issue. time to check the markets though. also on their way down. the dow is down 111 points. we've stopped the bleeding a little bit i guess, lauren. >> we have stopped the bleeding a little bit and to give you a little good news, yes the dow is down 111 points, responding to what james bullrd said moments ago on breadth market. when i look at advance-decline line we don't have that many chairs trading down compared to those trading up. august.e of those kind of days. stocks, s&p, dow are down so far

this month but it is not too terrible. airlines are down once again today. we have to bring this up because they got hammered yesterday as the doj tried to scuttle the merger between us airways and american. i want to point out, jetblue up 1.57% and up for the second day. yesterday all airlines except jetblue were down. reason some are down, delta, us air and american were cut from overweight on jpmorgan. back to ou. ashley: we're indeed in the summer doldrums because trading volumes are low. we'll be back to you at the bottom of the hour. tracy: bullish on europe? what? alex says the old continent is posed to outperform. you will get strategy next. it is alex young. i sort of changes his nationality i think. ashley: we'll look how the u.s. dollar is moving in this market. bit of a mixed bag. generally lower against foreign currencies. euro moving lower, there you go,

fat on the day and of course on the news that the eurozone south of recession or at least moving in the right direction, let's put it that way. we'll be right back. friday night, buddy.

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>> 24 minutes past the hour. i'm jamie colby.

this is your fox news minute. egypt's vice president mohammed elbaradei to protest deadly police assaults against two sit-in camps supporters of ousted president morsi. he said he is not prepared to be held responsible for a single drop of blood. he warns violence will breed more violence. egypt's official news agency says 149 people have been killed in clashes across the country between morsi supporters and security forces the police raids set off a running street battle in cairo and other egyptian cities. a white house spokesperson says the world is watching what is happening in cairo and urged restraint. egypt's interim president declared a month-long state of emergency. that is one of your headlines this hour. the fox business network and an important one at that. ashley and tracy, back to you. ashley: jamie colby. thank you very much. we appreciate that. major averages are in the red as investors wait more from fed president james bullard but

eurozone is climbing out of recession posting better than expected gdp growth, certainly in france and germany at least. my next guest says even though the recovery is slow those european equity markets weill outperform. joining me, alec young, s&p cap al iq global equity strategist. alec, thanks for joining us. are we seeing money coming out of the u.s. equities and going over to the pond in europe? >> absolutely. it has been a quiet outperformance. we look at august, doing very well in july. profit in u.s., japan, so far in august. in europe we continue to make new highs. for the last few weeks, europe has been quietly outperforming. a few things are driving the story. one as you mentioned they're coming out of recession at long last. so that is good news. we also don't have any fears about tapering of monetary policy in europe. obviously they're coming out of recession but it is still a very weak recovery.

so no one is worried about the end of stimulus yet the way they are in the u.s. that is another thing that is helping in europe. we have very low valuations and high dividend yields. when you add it all up, definitely think as investors look at the globe, europe is looking most appealing right now. ashley: is it all a bit edgy when you have country the like greece, italy for that matter still has trouble getting its economy to grow? it wouldn't take much for those economies to teeter back into the headlines that affect our market. are you worried about that? >> not really. the good news the bar is set pretty low for the european recovery. street is looking for 1% growth, largely led by germany, france and northern countries that tend to be stronger. if you wait for really much better news flow out of southern countries before you get invested i think you will miss the move. don't forget equities are leading indicator. you have to be willing to buy when there is still uncertainty out there. comparatively to the u.s., for example, while we still like

that story, investors are clearly tired of bidding up u.s. stocks. that market is definitely due for a breath. so if you're looking into rotating into something that's still working, we think europe fits the bill right now. ashley: well, we do bring you back to the u.s., alec. what do you i like? you mentioned the market is tired. i heard that from a lost analysts. we need a bit of a breather and perhaps a bit of a correction before we make the next leg upwards so with that in mind where do you put your money? >> we've been focusing on health care, consumer discretionary and financials for most of the year. those are the three best performing sectors in the u.s. market. unfortunately when you get poser of a pull back and profit-taking leaders can be laggards at least in the short-term. those areas are not proving to be impervious to the profit-taking we're seeing right now but they have certainly been the leaders as 2013 has progressed and we like them through year-end. we do think the u.s. market will be slightly higher by the end of the year than it is right now.

ashley: you mentioned europeans not having to worry about tape everying anytime soon but of course it is a big issue in this market, what do you see that the fed is doing and we know that we've been told the market already knows it is going to happen. anytime the word taper comes up there is reaction in the market so can the fed do this smoothly? >> i think they probably can but there is growing feeling of inevitability about the tapering, whether december or sent, people know it is coming and they know it is coming fairly quickly. the markets have gone a long way to discount it. how well the markets handle it will come down to what numbers look like when it starts. we'll see what the august payroll report looks like. if people feel the economy is strong enough to handle it i think we'll be fine. we have to continue to watch numbers as they come in. ashley: great stuff, alec young, s&p capital iq. thank you very much. >> thank you. tracy: so the white house is not happy with some democrats, speaking about, speaking out about who the next fed chair

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>> 90 minutes until the close. lauren simonetti is at the floor of the new york stock exchange. >> session lows just a couple minutes ago. the stocks are underwater.

they missed their numbers. they cut their outlook for the year. since that april ipo, they have been citing bad weather as a factor. attendance has been down. tracy: orlando also has disney. >> an easy excuse. ashley: the airbus crashed on its approach to a birmingham, alabama airport.

>> it is a daunting task. we enjoy it. we operate out of 700 airports. we fly over 1800 flights a day. we are very active. there is always something to do. ashley: we will work responsibly on exhaust efforts. tracy: working overtime to squash senate democrats. the president wants to mmke the decision without pressure from his own party.

good luck with that. >> it is normally subject to that kind of lobbying you get in other cases. this is a little bit unusual. they send a letter to the white house. it did not speak out against larry summers, but did speak for janet yellen. he is not taking a lot of counsel from the outside. i think he is trying to head off a problem in advance. tracy: doesn't matter, really, at the end of the day? the markets should be happy

either way. >> i think the markets may be slightly happier with larry summers. probably a little lighter on the regulatory levers than janet yellen. there may be some marginal difference there. i do not think either of these are likely to turn it off on qe3. i think larry summers has been a little more skeptical. i think the long-term is more important to president obama. who is the best person to be there if we lapse back into an economical phone. hh does not want a big international crisis. we want the city growth at home. that is what he is worried about

here. tracy: who is that person then? is a decision he will have to make. maybe he thinks that larry summers is the guy. we will have to wait and see, obviously. he is making sure that the larry tracy: i bet you cannot believe how much time we are putting into the discussion of the next fed chair. >> it is always a big decision. i remember when president reagan picked alan greenspan for this job. there was always a lot of attention around it. it is a big choice.

what is unusual is you have a lot of people from the air outside. tracy: thank you, sir. ashley: do you think your e-mail is private? if you use google's gmail service, you should not think that. gerri willis joins us with details like the company is making that disclaimer now. gerri: anything in your e-mail is subject to scrutiny. i think this is really interesting. they say just as a center of a letter to a business colleague

cannot be surprised if there e-mail is processed by the recipient e-mail provider. i do have expectations of privacy. tracy: i do have a gmail account. very frightening. if i send an e-mail to my fox business account, i get it, it is fair game. this is my personal account. ashley: a machine looking for keywords to target advertising to your specific interests. gerri: i do not want any of those services. i just want my e-mail. they have it in the tiny type, the disclaimer put in.

i know a lot of americans saying, holy cow, i had no idea. tracy: i was really dumbfounded. i guess i did not read the fine print. it is not blatant in bold letters. gerri: we have pam bondi, the attorney general from florida. she is joining with the department of justice in an antitrust lawsuit in this merger of the largest airlines. we will be talking about that tonight. how bad is it for consumers? what will be the impact? it will be a great interview. ashley: thank you, gerri. do not miss "the willis report" tonight right here on fox business.

tracy: some lawmakers say yes. elizabeth macdonald is all over the next story. treasury yield down a little bit after spiking yesterday. on the 30 year, unchanged. we will be right back. ♪ with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everi'm with scottrade. me. (announcer) scottrade. awarded five-stars from smartmoney magazine. help the gulf when we made recover and learn the gulf, bp from what happened so we could bear energy company. i can tell you - safety is at the heart of everything we do.

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>> i am ashley webster with your fox business brief. mortgage applications dropping. this according to the mortgage banking association. 53% of the activity was for recent applications. the interest rate falling to 4.56%. coco cola rolling out new ad today defending its use of artificial sweeteners. the ad comes as coca-cola faces growing challenges. many of the drinks are made with aspartame and they say they are safe. that is the latest from the fox business network. giving you the power to prosper. ♪

tracy: a quarter till. time for stocks now, as we do every 15 minutes. we are down about 113 points. there is some jitter out there. >> there is. it is interesting what a difference a week makes. the market feels heavy right here. it feels like it wants to go down. we have been bumping up against a pretty serious resistance level today. i think we will probably flatten around their right ñ-letter close. the market feels a little heavy. all we need is one match to light that views. tracy: i like that word, heavy. thank you very much.

>> my pleasure. ashley: as if the irs was not in enough trouble already. what is this all about? is it harassment? elizabeth macdonald is here now with her bottom line. >> possible underreporting of income to 20,000 companies. we have a letter from the chair. let's take a look at what he said to the irs. he is saying, wait a second. here is the deal. the notice from the irs, there may be possible underreporting of income. they do not tell the small business owner, hey, here is the

amount that you underreported by. at the same time, it you have to report back to this in 30 days to fix their tax return. this is like saying i am overweight for my height, but not telling me what the average wait is. he is really upset. he feels that penalties and fines may be assessed. ashley: what kind of information are they using? >> the irs does its own metadata collection. they could get access to a debit card and credit card transactions. there is a tax gap out there. they are under pressure to bring that money in the door. all sorts of information on the internet, on the web, to get at the underreporting.

tracy: it needs the money goes under the table? >> essentially. it is that cash transactions they are trying to get at. you are not told in the letter what the dollar amount you are off by is. this s scary stuff coming out of the irs. the rates are slowly keeping up. ashley: very disturbing. thank you very much. tracy: the post office trying anything to stop red. ashley: we will be right back. ♪

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ashley: patrick donahue is hoping alcohol delivery will be the answer to the postal service deep in the red numbers. >> we have a lot of ponds around this one today. deep in the red. red wine. well not go there. this issue has been bottled up on capitol hill.

it is on his legislative wish list. postal service says the change could raise as much as $50 million a year. >> find people running local wineries, people running small businesses that have micro breweries going. >> ups and fedex have a lock on this business. the postal service has been banned from delivering alcoholic beverages since 1909. earlier this month, the senate government affairs company introduce legislation to change the law.

they just need to make sure that kids do not get booze by mail. customers would have to go to the local post office to pick it up. we presume they would get carded ashley: is this really going to put a serious dent in the amount of money that they are losing? peter: if they were to bring in all that revenue, not a lot, but can't let you know, i guess to the postal service, every little bit helps. ashley: thank you very much. tracy: they could put coolers on the truck then. you would not want skunk beer showing up. launching a compact crossover

suv. the smallest one for the u.s. it will be powered by a 2-liter for it -- 2-liter four-cylindere mercedes? now you have these little volkswagen type cars. ashley: this probably does not really go with the image. we will see. speaking of luxury cars, coming up on countdown to the closing bell, a new study has something to say about the driver of one particular brand. that and the rest of the days

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