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tv   Power Lunch  CNBC  July 14, 2009 12:00pm-2:00pm EDT

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that is it for "the call. "thanks for watching, i'm melissa francis. >> and i'm trish regan. >> and i'm larry kudlow. see tonight on "the kudlow report." drill, drill, drill. "power lunch" is up next. >> the governor reports a 1% drop in business inventories for may. that's the ninth consecutive monthly decline. companies have been tripping g inventories because of the economic downturn. businesses slightly less optimistic last month, according to a monthly survey from the national federation of independent businesses. but the group points out many indicators in the survey are positive.
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the pressure re will receive $201 million in t.a.r.p. related payouts after gmac returns dividends on its stocks. that's cnbc.com news now. i'm courtney reagan. %% hello, everybody. welcome to "power lunch," i'm sue herrera, pour partner paul griffith off this week. sizeable rally, or at least what a lot of people would like to see turn into a sizeable rally. energy shares leading the advance. good news on the retail front also brightened the mood, and is chevron, the big winner in the dow. >> i'm michelle cabrusso-cabr a cabrusso-cabrera, he is the fixed manager of the year, and he hasn't lost money since it started 25 years ago. he's going to tell us how you can cash in by betting on bonds. >> and i'm brian shackman, president obama making a good push toward alternative energy, and china wants a big part of the action. the question is, will protectionism push the u.s.
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aside and make china the power player for renewable energy? we have a first on cnbc interview with the chair woman of jpmorgan china equities and here is what else is on the power lunch menu. >> goldman sachs just finishing up its second quarter conference call, the company's cfo saying after big capital raises by banks last quarter, a lot more companies need to fix their balance sheets, and we could see a lot of equity issuance through the rest of the year. >> i'm scott cohn in butner, north carolina. bernie madoff was accompanied to pensions, penthouses and villas. now he is making his home here, a tiny cell that may be his home for the rest of his life. i'm jim goldman in cnbc's silicon valley bureau. better than 85% of intel's s business comes from overseas customers. shares are up almost 40% since march with some analysts believing this stock still has time to run. it will prove that point or send investors running.
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a preview coming up. let's get to the markets.s. stocks staging the come back. energy shares gaining on the back of oil. bob pisani kicks it off at the new york stock exchange. bob, we've moved into positive territory. >> yes, 60 points in the dow from trough to peak right now, michelle. thanks very much. and is the important thing here, we're in the middle of earning season. generally companies today are beating the numbers, but look under the hood, and you will still see some weakness there. johnson & johnson is a good expect here. bolt line is they beat on the top line, but sales were down almost 7% in the united states. that's a little bit of weakness. they did reaffirm their full year numbers, though. csx, the big railroad company, good news here. they too beat their numbers. they've become cost-cutting giants. but look below the numbers, look underneath the hood a little bit and you'll see rail car volumes down 21%. the ceo just came out and said that today in the third quarter they would be down in the double digit area. so some improvement, but still a tough situation. finally, a little bit of sunshine for the energy companies. remember, they had sold off aggressively in the last three
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weeks, as oil started moving down. as oil has stabilized in the last several days, we're seeing some nice move up. and today, there's your leader, the energy stocks. trad tradertalk.cnbc.com. >> talking about the shadow hanging over techs. a lot of companies are continuing to defer purchase weres, and as a result, they m have to lower their prices in order to retain, not gain market share. it's off nearly 7% today on its analyst day. meantime, novellis, boosting numbers for the third quarter and said its bookings are higher. casting sunshine on chips, including intel. and jim will have more on that, but it certainly bodes well for potential for buying from the chip equipment makers. and the other stock to tell you about today to the up side, a japanese pharmaceutical maker also showing good results on a
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hot flash treatment. let's go to our own hot flash, rebecca jarvis over at the nymex. >> thanks so much, bertha. oil back above 60 bucks a barrel, traders using it today as an opportunity to cover some of their shorts.. morgan stanley says use the pullback that we have seen over these last couple weeks as a buying opportunity. their thesis is that in the near term, we're going to see 55 bucks a barrel.. but over the longer term, by 2010 and 2011, we're going to see 85, $95 a barrel oil, and it's a fundamental case. they say they foresee supply issues in the future, and that is what they foresee as driving up prices. back to you guys in the studio. >> thank you very much, rebecca. now, of course, as we have been telling you, goldman sachs absolutely using the sports metaphor, knocking it out of f park with their earnings trading revenues doubled. earnings surging 33%, and they're putting 6 plus billion aside for compensation. mary thompson at earnings central, listening in on goldman's conference call.. what's the latest?
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>> well, brian, the conference call just wrapping up, and goldman's second quarter profits were helped as banks needed to raise capital.l. and the company's cfo, david venear saying this company could continue, because a lot of banks along with other companies around the world need to if i can their balance sheets so if the market stays receptive, could be a lot of equity issuance throughout the rest of the year. he also said if it the market stays stable there could be a big pick up in m&a activity, something that's been lacking recently. but given that coes are still skittish, he said before all of the deal dialogue that goldman has been seeing translates into action. as far as acquisitions of its own go, he's interested in buying an asset manager, but hasn't found one at the right price. talk about a noted weak spot, saying the banks, $6.4 billion in loans on commercial real estate were marked in the low 50s in the second quarter.
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also, speaking about added liquidity that the banks build in for regulatory and risk control reasons, he said it is a drag on returns now, but given the uncontinued environment, having the added liquidity far outweighs the drag on returns. lastly mentioning, he said the company right now is talking with the government about buying back its warrants, didn't given a time frame or update. of course on the warrants associated with the t.a.r.p. money that goldman received from the government. sue? >> mary, stay with us. because we're going to talk more about this and bring in our david faber, and also greg farrell, wall street correspondent at the "financial times." david, i'll start with you. one of the questions being bandied about is whether the guys at goldman are just that much better than everybody on the street to come in with a profit like this, or are they basically taking advantage of the government's safety net that in some ways they still have, and trying to redefine the role of the bank and how it makes money. >> yeah, that's always a larger question. listen, goldman did distinguish
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itself during the beginning of the credit crisis and throughout the crisis, the financial crisis by buying better openly, i think, sue, at understanding its risk and therefore positioning the firm appropriately. while on september 18th, goldman was on the brink, just like every other financial firm in this country, nonetheless, they ultimately did not get sucked into the subprime, the mortgage area in a way that resulted in significant losses for that firm. here we are now in this period where there are simile not as many firms taking risks. there aren't as many firms, of course. lehman is out of the market, bear stearns is gone. merrill lynch may not be what it was, as it's now owned by bank of america. and so david veneer on the press call earlier today admitted less capital available in the market and therefore when we go in, we're going to be to benefit in a larger way from taking risk.. and i think it is fair to say that goldman did a good job, pretty much in terms of understanding. >> but greg, can they do that
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over and over again? when you look at all of their upside year over year, it came from that their internal hedge fund and private he could fund. you've got to depend they can get it right every quarter, right? and can anybody get it right over and over again?? >> well, they've gotten it right in the marketplace that exists now, which is a trading landscape. and they have been very strong. and every time you try to predict or say can they keep doing this or can they keep doing this going forward, all they need to do is, you know, make it happen right now. and that's what they're doing. they're reacting to the world as it is. the marketplace as it is, and they're filling the hole. >> dave, don't they think it takes a lot of risk -- paul volcker has written an educated to recall saying, we know they're too big to fail. they are essentially if ever in trouble again, going to be bailed out by the taxpayer. so every time they trade internally like this, they're putting all of us at risk. aren't they going to face some kind of trouble? >> not excessive risk. >> how do we know that? >> we do know their leverage ratio, which, again, the reason
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they were on the brink like everybody else back on september 18th, i bring up that date because that was the armageddon day last year, was because of their leverage ratio, but right now taking their assets to 4%. they are -- several equities gone up so their leverage ratio is about 14 times on an asset base than nine months ago. i don't know, michelle, whether they're taking excessive risks. they would, of course, argue absolutely not. they point to value at risk which is one of many measurements and we can talk about how accurate it is, having gone up very slightly, they say, up quarter to quarter. you know, time will ultimately tell, but goldman does distinguish itself as a result of seemingly putting people in the position of saying no who have just as much power as those who want to say yes. >> hey, greg, has the populous rage played itself out on the bonus?s? is that story gone now? >> i don't think so.o. in fact, if you look at the amount of money they set aside for compensation, they're on
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track if they repeat in the second half, their performance of first half to pay every employee about $770,000. that's well above the record-setting levels they hit in 2007. so i think -- i don't think the populist rage is going to go away. >> how do they handle that? >> and by the way, they do have fewer employees than they had, right mary, a year ago. 29,400 employees versus 35,000. >> it's down about 4%. they said that -- >> 16% year over year. >> politically, how do they navigate that? because you know that's going to be a hot button on capitol hill. >> they addressed that in an earlier call when he was asked about it and he said what you have to remember is if we don't perform well in the second half, the compensation is going to be affected for the same way, as well. so when you look at that $6.6 billion figure, you know it jumps out at you, but you have to take into account, it's the full year. that being said, compensation he believes would be misguided. however he says there is nothing we can do about it. >> i tell you what, those warrants just got a lot more
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expensive this morning. the government is going to be asking for a lot more money than before. >> it's going to be a lot of stocks, not going to be the cash awards. >> and they have to accrue, doesn't mean they're going to pay it out. you want to make that argument across wall street, right? 49% of revenue goes to compensation. is that approach appropriate is a larger question, not just for goldman. >> thanks, david, thank you greg. appreciate it, and mary, of course. >> coming up next, the earnings parade, the jobless plate rising for months to come. so what is the key driver for your money?? we have a trading task force, right after the break. >> plus, he is morning fixed income manager of the year and the bond fund he manages hasn't lost money in 25 years. moments from now, the secrets to his success. and on the power grid, the president pushing hard on climate change. the deficit is at a trillion bucks. is it time to put the bills on the back burner. >> and the "fast money" halftime report about a half hour away. earnings and earnings and a little bit more earnings on the plate.
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for us, we'll be back in two minutes. tention
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inflation in jobs still lingering out there. so can those strong earnings power the market higher, or are we still slaves to washington task force? all right. joining us now, craig columbus, chief market strategist at advanced equities asset management, and john braider, senior vice president at mf global. you guys are the task force, not those guys in washington. craig, i'll start with you. you've been looking for pockets of strength in the earnings. so far, from what you've seen, are you satisfied? do you think overall the season is going to be good, and is it enough to power the dow? >> i think we can go higher. i don't think we can rip higher. look, we had three weeks of bad economic data. people put on precautionary shorts, and then they go and cover on the news event like this morning.g. i think what's going to drag us this quarter is consumer discretionary is not going to be the same as it was in the first quarter, because of the level of deflation. 70% discountsing is the new 50% discounting. but i still think we'll get a
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positive q3 gdp print. >> how does the bond market feel after taking a break from last week's just amazing amount of issuance. >> well, i think specifically with regards to treasury, it's been a little rotational trade, really trade has been a little choppy. treasuries are softer. i hesitate to say the bond market has been spooked by some of the higher ppi prints. i think it's just more of a case of perhaps the market being a little bit long, specifically noncommercial positioning on the front end of the curve. so you have seen a little bit of a backtrack here. but i think your other guest is certainly more right and more correct in his views in the fact that there seems to be little pricing power, both by retailers and by consumers, and the job market will most likely remain a challenge in the coming months. so treasuries continue to be a defensive trend. we will react of off the equity marks and that will be the trade. >> craig, i look at johnson & johnson, domestic sales down 6.7% when they reported earnings. this is supposed to be the
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bullet-proof area of the market. when you see weakness like that and consumingers in the united states, where do you end up putting your money? >> let's not forget, the past economic good has to stop at a place called less bad first. so i think it's -- there is still the green chute still in place. i think things like technology, which give you ability to have a draw down inventory the fastest, there is some m&a premium and productivity enhancing and i still think the energy story, a significant amount of supply destruction going on there. >> gentlemen, thank you very much. appreciate it. talk to you again very soon. coming up next, he runs billions of dollars, and he's morning star's fixed income fund manager of the year. the secret to this bond maven's success for 25 years straight. >> wow. plus we have a "power lunch" exclusive, picked from star mine on which companies might surprise you both on the up side and the down side. of course, as the flood of second quarter results comes out. "power lunch" will be right back. welcome to the now network. currently, thousands of people
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ahead of an analyst meeting, the cfo of dell saying the margins under pressure. off 83 cents, a decline of 6%. $12.18 a share for that
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technology company.. brian. >> thank you, michelle. if you want to know which companies will beat or miss estimates this quarter, one guy to follow us is from star mine that polls analysts for surprises both to the up side and to the down side. projected 19% gain to the up side including calling for a narrow 10-cent loss. another positive call is on radiosha radioshack, which will post results on july 20th. star mine sees a 5% gain to the upside at cents a share versus a mean of 28. here's how the two stocks are trading at this hour. mixed picture. ea to the down side, radioshack to the up side by 24 cents. on the down side, dr horton with a 25% loss. they can't catch a break. goldman sachs cites continued weakness in the housing market. another down side surprise, royal caribbean projecting a 13% loss on july 20th. that's an 11% drop from the consensus. of let's take a look at how
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those two are faring, as well. both to the up side today, as part of the market turn around. dr horton on up more than 2%. sue, back to you. >> thank you very much, brian. morning star has ranked our next guest the fixed income manager of the year. tom at abury runs the $3.2 billion new income fund for first pacific advisors and that fund has not recorded a single loss in the past 24 years. it has booked a nearly 60% return over nearly the same time period. tom joins us from new york this afternoon. tom, good to see you. >> thank you for having me. >> pleasure to have you here. one of the things you're worried about is not only the near-term outlook, but a few years further out, because of the issue of debt, and you obviously are investing accordingly, but tell us why you're worried about the debt that's out there. >> the debt that worries us a couple years out becomes one of the volume of treasury debt that we're seeing being issued here over this year and next year. as a means of trying to
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stimulate economic activity, and what's that going to be over the long term implication. our view is we have a new brother, the federal government, a new leveraging entity, the federal government and we're not going to get growth out of it and find ourselves at higher debt levels in a couple years, which is going to start to, in our view, lead to inflation problems or higher interest rate problems. you're just not going to get a return for the borrowed money that we're taking on. that's the thing that's concerning us. >> i see that you've got nearly 52% of your holdings all in mortgages, though, right? ginny mae is another mortgage-backed security? >> yes, ginnie mae, fannie mae, and mortgages underwritten prior to 2003. so good quality mortgages.. >> yes, where people filled out the paperwork, put money down on a home, their fixed rate, all of the things that you want to see in a borrowing and sort of lending relationship. so -- and they're also, you know, from 2003, many of them
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were 15-year mortgages at that point, so they only have nine years left. >> what would make you change your strategy? what would you need to see? you know, we've had the economic stimulus plan out there, there is talk there might be have to be a second stimulus plan. one, do you think that would make a big difference? is it necessary? >> to the stimulus plan, it's been underwe canning so far, and in its impact, and we think for probably the second will not have much of an impact, either. it will underwe can expectations. the things that will change us will really be more to if the realization that the economy is not going to recovery to a discernible did he agree in the second half of this year in 2010, we'll set up an opportunity into the credit space, whether it's high yelled or high grade credit, that that will sell and give us opportunity to work. we feel you have to continue to be very short in the duration, because as we look out a couple years, our expectation there is for higher interest rate. >> how high?
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what are you thinking? give us the metric, the 10-year going -- or the 30-year? >> let's look at the 10-year and think of it in a fundamental basis and say, okay, what if i just had inflation at 2.5% for the cpi? is the going rate and people felt that. if i look at history, somewhere between 2.5 and 3% is a real return on a 10-year treasury. so that would mean the 10-year treasury should be somewhere around 5, 5.5%.. instead of the 33 something it is today. >> from a government standpoint, just quickly, isn't it good that we're financing all this debt at such cheap rates then? >> it would be great if you were financing all this at cheap rates and doing it all with 30-year. but you're doing it with 2s and treasury bills and 3s, things you're going to have to roll over. >> yeah. tom, thank you very much. great to have you here. i know we don't get you on often enough. please come back and spend some time with us. >> appreciate you having us on. thank you very much. >> okay. president obama, of course, making a big speech on the economy in just a short while. meanwhile, the deficit is a
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trillion dollars, and he is basically pushing hard to spend trillions more on health care and climate change. should he put that aside and focus just on the economy? sparks are going to fly in michelle's power grid debate coming up. >> and also coming up in a few minutes, "fast money" halftime report. >> that was perfect, brian. very good job. all right. coming up, straight ahead, the markets may be hugging the flat line, but there is a big place in the options pits on the direction of the markets.. we'll tell you what that is, and in which direction. also, it is time to take our position on intel, which is due out after the close. that and much more on the halftime report. but first, more "power lunch" right after this. come on in. you're invited to the chevy open house.
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investment banking helping to offset the charge pay. of course, the government bailout money. johnson & johnson higher now, it's falling 5%, hurt by a stronger dollar. patent expirations on schizophrenia and epilepsy drugs in terms of sales. j & j still managing to top forecasts. apple on the move, as well. the company saying customers have downloaded over a billion and a half iphone apps in just a year, that part of the business growing at an incredible pace with more than 65,000 apps and more than 100,000 developers in the iphone developer pam. >> budget deficit breaking through $1,000, so with the deficit soaring, look at all these zeros, 12 zeros. the deficit is soaring, should the president focus on fixing the economy and forget about health care and climate reform? let's fire up the power grid. hi, guys.
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you each get 20 seconds. greg, let me start with you. you get 20 seconds. should the president demand health care and cap and trade reform in the wake of this big deficit projection? >> absolutely. you know, to add up a couple more trillion dollars so what we're doing right now. a trillion is even hard to understand, but it's enough money to buy everyone in great britain braces, and france. >> and they need them. >> exactly. and that's a lot of money. so you have the problem of the value of the dollar, inflation, interest rates, all of that in the future.. and the only way to really rebuild this economy is cut taxes and get the economy going again. ann 20 seconds to say why you should stick with health care and cap and trade. >> absolutely now is a wrong time to be pulling out the green eye shades, an economy is still in crisis and a unemployment rate, the worst it's been since ronald reagan was president. got to stabilize health care costs if we want the economy to be competitive. this is investment not spending. we're going to see a return on taxpayer dollars, i guarantee it. >> wow, absolutely wrong.
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you're not going to stabilize health care costs. they're going to keep going up when you do this, or rash on care. you have got to get money in the private sector. we're taking more dollars out to spend in the government sector. we tried that under fdr and it didn't work. even his own treasury secretary said it didn't work and they doubled unemployment. >> ann, the top rates for the top earners in this country, when you add the 5% increase that's going to happen in 2011 and then this 3% surcharge, now the democrats are talking about, we could have tax rates of 50% here in the united states.. that would turn us essentially into europe.. is that what we should be doing to pay for health care costs? >> we've got a long way to go before even approaching france. let's look at it this way -- >> we're already up there with belgium, denmark -- >> oh, no. >> yes, we are. >> for every $1 that went to the middle class in had tax cuts under president bush, $111 million went to the top two
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millionaires in this country. don't tell me there isn't something messed up about the tax code. the middle class is going to benefit from health care reform. >> wait. i've got to jump in and disagree with this whole thing about how the tax cut gave people money. i'm sorry, ann, but a tax cut let's you keep the money you actually made. and after the bush tax cuts the rich are paying a higher percentage of all of the taxes of americans, so that doesn't make any sense and we're talking about now the surcharge tax on small businesses. out of the house, 60% of those people in that income bracket are small business owners. 50% of that income comes from small businesses. that's the generator of our economy. >> let's turn the tables back around here and talk about who create the these big deficits in the first place. certainly it wasn't president obama. it was president bush, probably the spendiest president we have had since lbj. >> ann, we've had this discussion over and over again.. i agree with you. with president bush, who needs democrats. but say this, you want to add even more? you want to do the same thing. you want to add more spending to all this? >> there is a lot that hasn't been put on the table yet.
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we don't know exactly what's going to be paid for. >> oh, come on! >> ann, spending is up -- 20% from last year. right now. we're talking about 85% increase from 2001. now, i will give you, bush was a spender. but this is even worse! >> well, let me ask you this. would you decide not to buy a house, just because you have to take out a mortgage. would you decide to forego college because you have to take out student loans? these are investments we're making in the long-term future of our economy. >> i disagree with you that they're investments. i think they're actually going to cost us even more, because when the government grows, we end up paying more and more, and eventually you've got to pay the piper. it's not an investment. >> ann, you get the last ten seconds. gdp, debt over share gdp is much lower than it was under president reagan and president bush. we've got a to go before we have oblems created by our
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predecesso predecessors. >> we're on our way. >> way to go. have you ever heard of butner, north carolina? >> a long way from park avenue, folks. >> and it's where bernie madoff is going to spend the rest of his life. scott cohn takes us inside his new home. and is bing taking alternative energy a lot more seriously than we are, and will that green push send shock waves to our shores. the chairman for china equities for jpmorgan joins us first here on cnbc. at 155 miles per hour, andy roddick has the fastest serve
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bernie madoff arriving at his new digs a short while ago, where he is beginning his life sentence. cnbc's senior correspondent scott cohn is hot on his heels. he is in butner, north carolina. over to you, scott. >> reporter: butner, north carolina where you saw bernie madoff arrive a short time ago. he is used to villas, mansions, and chauffeur-driven limousines. but today it was a long ride on a bus from atlanta, where he was there on an intermediate stop from his jail cell in new york where he had been since march to here in the medium security
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federal correctional facility in butner, north carolina. it's part of a sprawling complex that madoff will be serving the beginning of his sentence in. just after 11:00 this morning, he arrived, got off the bus, with about half a dozen other inmates. and he was taken off the bus, patted down, and preparing now to begin his life behind bars. the life sentence. the particular facility that he is in is relatively small. it is about 725 inmates. and so that may give some control. but it is a medium security facility, not a low security facility.. and this is bernie madoff's new home for a typical cell in a federal medium security fast i will. it is not looks luxurious digs, bunk bed, toilet, small window. and this will be where he will stay. bernie madoff who spent so much time in villas and penthouses and mansions around the world. there had been some thinking he
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was going to come here mainly for a medical evaluation, and perhaps move on. this came from a prison consultant that we had spoken with yesterday. but it does appear now that this will be where his sentence will at least begin. of course, inmates transfer from time to time. but this is where he will be. his attorney, ira lee sorkin would not comment to cnbc, except to point out that the butner facility has both medium and low security facets here which suggest that bernie madoff could graduate to a lower facility over time, but for now, it's relatively hard time. guys? >> you know, scott, is there anything that we can read into the fact that the request was put in for him to go to otisville, which was in the new york area, new york state area, and instead he got sent to the north carolina area? is there anything that we can deduce from that, or not? >> reporter: the only thing we can deduce from that, sue, and we have seen this in the past with white collar case social security that a judge can make a recommendation, but the bureau of prisons has the final say.
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and they use a whole range of calculations and decisions in terms of where they will put an inmate. madoff's attorneys have requested that fast i will in upstate new york, primarily so that ruth madoff, who is in new york, his wife, could more easily visit him. it's 70 miles away from new york. this is going to be tougher. it's a two-hour flight and then another half an hour drive from the raleileigraleigh-durham air. and because he is in medium security, the visiting hours will be limthed.d. >> scott, quickly, we have talked about his safety and security. there is no way to know, but what's your sense. is there more a concern about him harming himself or other inmates possibly hurting him? >> well, it's both. it's something that they'll have to look at, brian, as they get him situated here, and presumably, they've done some of that. but they'll want to do, if they haven't already, a psychological evaluation to see if he's suffering from any sort of depression as he faces this sentence. and then also they'll certainly look to see that the inmates around him -- that's always a
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concern in a medium security prison. >> scott, thank you so much. appreciate it. the question we love to ask. almost impossible to answer. should congress hike taxes to pay for health care reform? >> i can answer it. >> we know what that answer will be. >> you saw the power grid. we had the pun ditties and michelle, and now time to go to the politicians, two members of the powerful tax writing ways and means committee who don't quite see to eye on this one. shocker. join us at the top of the hour. stocks searching for direction, despite goldman's blowout number. what's the next big market move for intel and ge? the "fast money" halftime report only two minutes away.
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welcome to the "fast money" halftime report. getting to the heart of the action as it is happening. goldman and j & j earnings not enough to keep the party going today, as traders look ahead to intel tonight. and this week for confirmation about the rally has been for real. we've got you set up in under 15 minutes time. time now for the word on the street. our "fast money" crew for today, joe terranova a, the liquidator is in the house. dennis gartman and patty edwards and j.j. kingaham of sink or swim. it was expected goldman would knock the cover off the ball. it happened.. what does this mean for the rest of the banks, given that its expertise is prop trading and that's where it came from this quarter. can we draw any conclusions about the banks or not?
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>> the banks, the consumer banks, you can draw no conclusion. goldman sachs only lost $700 million. what does it mean? it means the world's biggest hedge fund, they are back. they're taking risk. i think that is phenomenal. if you look at their value at risk, it was at the highest levels it's been at, above this time last year. goldman sachs is back, the world's biggest hedge fund is here, they're in the markets. and in terms of the markets themselves, they're functioning properly. that's a good thing. >> dennis gartman is the pressure on somebody like a jpmorgan or morgan stanley to see what their value at risk has been and what their success has been on their prop trading desk? >> i think joe gave you a very good lead-in. yes, with goldman raising their var, everybody else has to ramp up. is anybody going to take it to the same level goldman has? no, it's not the same kind of enterprise. goldman really is just one big hedge fund. the others are hedge funds wrapped around banks.. >> patty, you're shaking your head yes. so does that mean if you were an investor in the banks today, and the banks, aside from goldman, are down marginally on a percent
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basis, would you lock in some profits here, seeing that goldman here has brought the bar even higher? >> goldman is the standard. and i don't think you can judge anyone else by them, so, yeah, actually, i would be taking profits off the bank at this points in time. goldman is who goldman is, but i don't think you can put that on to anybody else. >> all right. let's lay out this argument. it doesn't mean anything for the rest of the banks, the financials, the biggest part of the market so j.j., you're seeing big bets in the options markets. that is actually bullish, even though our experts here on the desk on the halftime report are saying, you know, financials may not rise on the back of goldman. >> yeah, melissa, we're seeing in the xlf, we see some right out of the money call buyers, and i think the reason is, everyone is correct. goldman is in a league of their own. but i think this has given a lot of hope to the financials where there maybe weren't such great expectations that perhaps we can beat these expectations and send the market a bit higher. >> okay. so what exactly is the bet out there in the options pits?
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200,000 spy calls? >> yes, 200,000 spy calls, the august 100 calls, and it equates to the s&p 500 going to 1,000. while that might be a little bit of a bigger bet than we want to see, and again we're also seeing the financials, we're seeing some bets in there, that they're going to go higher. overall, people have taken a lot of hope from these goldman sachs earnings, they believe that as joe mentioned earlier, the markets functioning as it should and if the market functions as it should, these companies could make some money. >> at the same time, let's be clear, because we're seeing all of those calls out there, the volume of the calls is higher, but we don't know necessarily, can you give us any color as to whether people are buying or selling those calls? because obviously very different stance if you're buying versus selling. >> absolutely. the particular interest -- the particular trades i'm mentioning, we are definitely seeing buyers as we check back, everyone saying yes, they are buyers. you bring up a great point, though. just because you see somebody who is buying the call doesn't necessarily mean they're necessarily bullish. they could be selling stock on
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the other side. and these cases, with the prices of the calls, et cetera, what we're seeing is people who are making bullish bets, melissa.. >> okay. bullish bets.. let's move on to the next story, phrma and j & j, posting a smaller than expected loss, but like goldman, the post earnings move has been muted, j & j trading up only slightly today. and part of this is because we saw that huge market run i didn't do. so all of this is baked in. >> >> a couple different things. first, it's different than goldman and most of the earnings this season will be different than goldman. goldman, you're not going to see that much. you're going to see the bottom line. how is it we're managing the bottom line? j & j here, they are dealing with -- and i think properly, they have diversified. they are seeing that the revenues in generic drugs are being taken away and it's all l about neutrojena and listerine. so be careful with the phrma names. again, this comes down to how it is, what they do with their drug pipeline going forward. this is why in may they went out and got cougar biotech.h.
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>> right, and don't forget, when we look at the retail sales numbers this morning, look at the retail sales numbers, one of the areas that did best was the health and beauty services. when you start thinking about jnj, that leads into looking at somebody like colgate and avon. you want to think where the consumer is spending their money. >> good breath is not such a bad thing. >> even in a recession. >> with the big tech earnings, they give you a few hours to place your bet. here to help us is pete of option monster.com. grit to see you. >> grit to see you, melissa. >> we have good guidance and a lot of people are expecting a lot out of intel. >> novellus were expecting the
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margins to expand and that will be encouraging. when you look at intel there catalysts to look forward to you are probably not going to see a blowout number and they have beat four out of five quarters and expectations that is that they will beat again and you will get nice drivers and clearly the growth will be there. that's the cheaper end and if we do see that cycle start to come in because of the os 7 launch, upgrade cycles could get a big, big push for intel and they are looking forward to it. not just a net book explosion, but the move to the pc cycle consumers and as that happens, that should be great for intel. >> absolutely and on the desk, dell was saying customers are deforring purchases. isolated though. is this an opportunity for people out there to get into dell or is this a dell-specific
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problem they are facing? >> dell has more exposure to the consumer end of things and that's probably the problem right now. they snead growth, but if you are looking at the chip sector, this is the weather with intel, but we have a lot more numbers coming out in april. you showed the stabilization and called that bottom and talked about the chips are better than expected. you have to expect we will continue to see positive commentary. >> see tonight on the desk. we want to bring your attention as to what happened in the market. oil rolling over and we see oil to the downside. >> people have to understand there two different trades and the oil futures are lower. then the hedge funds communities will try to get it through energy equity names. >> because of those looming changes. >> if you look at the oil service text, the halliburton is up 1-2% and they are lower.
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you can't look at oil futures. they don't look like they want to go higher or have participation they need. >> after a $15 break, a little bounce is all we needed.d. that's all we got. >> we are tight on time as we always are. jj, what do you do for intel? >> i would be a buyer going into the close. >> young brands reporting. what do do you? >> they have great exposure overseas and you go ahead and buy. the growth is there long-term. >> now we talk about jnj. a few buy pharma. >> if you look at abbott labs, they have diversification in china and you want to see the numbers before you go in and buy. >> as we told you, rolling over right now and dennis, how do you play this?
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you go into the equities? >> i'm short exxon and chevron and the chart told me to stay short. the actions in the futures said i'm doing the right thing. >> very to take a quick break and the tickets to the gun show. smith and wesson over this past year. coming up next, retailers on the back to school season. the national retail federation has the winners and the losers. we will be back in a minute. >> goldman posting record profits and can rivals match wall street's rainmaker. the ultimate buys and sells. nfl games on your i phone. apple's next groundbreaking trade. our home run derby pick that can turn your portfolio from popper to prince. on america's post market show tonight. you have questions. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world?
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let's go around the horn. do you buy or sell going to 4:00 p.m. eastern time. >> i like the structured market. i'm a buyer. >> it depends on the oil stocks. i'msoming oil and buying food. >> i'm with dennis. i'm buying food. i don't want to be the princess of darkness, but the market has downside. >> i will call you the queen of darkness. >> i'm a buyer of both intel and the overall market. it's expiration week and we have bullish activity. >> we have a little bit of time. we have the "power lunch" trade to go. >> real quick, let's talk about it. turn around tuesday. that's what today is in natural gas. they got heavy with it selling it off today and they are moving higher.. here's the trade heading in and you want to be long. play those energy names for recovery. >> that are does it for us at the halftime report.
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the fast money all-star traders on intel and young brands. the bank earnings on city and bank of america. first on "power lunch," the smart way to play china minutes from now. the chair woman of jpmorgan china equities. >> coming up on "power lunch," capitol hill buzz over health care reform. should the rich be taxed to pay for a big chunk of the overhaul. also back to school shopping season. a passing grade or a fail. we will talk about that. could we see a sequel to the dot-com bubble. can't afford to miss that. >> house democratic leaders will hold a news conference to talk about health care reform legislation. bernard madoff arrived in a prison in north carolina to begin serving his 150 year sentence for fraud.
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investors are waiting for earnings from intel after "the closing bell". that's cnbc news now. first in business worldwide. i'm courtney reagan. hi, everybody. we are watching the dow jones where chevron is trying to keep wall street in the green and having a tough go of it. disney and cisco among the biggest gainers. >> i'm michelle caruso cabrera and exxon is developing a plan to develop biofuels from algae. this is a big waste of money. they should be drilling for oil and gas. i will go one on one with the greeny to tell me why i am wrong. >> a well-deserved week off from know analyst on what to expect
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from intel. fear that is a new internet bubble could be interviewing. >> going by today's power player and ron ensana.. a contributor here at cnbc and the street.com market movers. how are you? >> if exxon goes to my kid's bathtubs, they can spend wisely. plenty of algae to go around. >> if you buy the rumor and if you look at financials, they have an extraordinary day. a little profit taking and they are holding in reasonably well. they started to lead the turn around about a week ago when they started to go down and we noticed at the time, that was a good sign for the market overall. >> what are about earnings quickly? are you optimistic?
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i think that's important. some areas are going to be weak. regardless. airlines are being discussed for full disclosure and over a billion dollars in losses for the airlines. having said that, the pace of deterioration is slowing and the economy is starting to look firmer. >> let's talk about that and the markets and oil is is down below 60 right now. stocks leading the way ironically in the trading session. at the nymex at the nyse. >> a typical day for earnings and a mixed bag and some bright spots and a lot of uncertainty. retail sales up 0 preponderance 3%. it's up several months in a row. here's the problem. back to school is starting to
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look very, very lean. the bull argument is simple. sales have been tough because sales compared to last year were difficult because of the rebate checks that went out. inventories are low and they are cost-cutting champions and rocky environment. another group is the railroads: the big giant they beat the estimates and much was due to cost cutting. rail volumes down 21%. they said today they thought there would be improvement and pricing power this year. tradertalk.cnbc.com. oil is well below $60. >> couldn't hold on to this morning's value. what we saw was a short covering rally that fundamentally is still a bearish sense about not only the supply picture which continues to grow, but also the demand picture which many traders say they don't see getting better, not only here in the united states, but also in
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the broader markets. we will get a better look at this picture with the api numbers that come out after the bell. on top of that the department of energy figures will be important, but overall traders say as they look at the macropicture, it appears to be bearish on the fundamentals. >> back over to you. >> nancy pelosi unveiling the reform bill in about an hour. she is expected to talk about it there after and expected to include a surcharge on the wealth to pay for tax pair. health care. that was freudian. is a tax hike the right move in a recession. joining us live, two members of the ways and means committee and ranking member of michigan. good to see you. representative, let me start with you and will this bill contain a surcharge on the wealthy? how much is it going to be and
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do you support that? >> every american who has private health insurance is currently today paying about $1200 in a tax because of the fact that other people in the system do not have health insurance. people are paying a big tax now. to do health reform, we have half savings and half on the tax side and the focus is on individuals, couples earning over $350,000. it will be a small increase. >> what are size? >> it will depend on how large the savings is in the long-term. there will be triggered based on how much the savings is down the road. >> is that the right way to go? it seems taxation is to key to pay for a lot of these programs on the docket.. is this the way to do health care? >> this will be a massive tax increase, half of which will be paid by small business. two out of three could take
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higher tacks under this and we are in a recession and neither 10%. my state of michigan has 14% unemployment. what we don't need to do is add to the cost of health care. we have a plan to do that. there ways to do that. this is jammed through and people won't understand what's in the bill. the tax increases and frankly you will have two out of three americans lose private experience under their bill and the employer mandate will put five million people out of work. >> give details of the alternative proposal and president obama also came out clearly and said if you like it, you can keep t. >> two out of three will lose health insurance out of their plan. >> how? we need specifics. >> malpractice reform. you never hear them talk about getting the duplication medicine. we think there should be something there.. let's give small businesses and individuals the same regulatory
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and tax incentives to provide health insurance and fraud and abuse with medicare. we need to get at that. >> once the bush tax cuts expire, some of the wealthiest americans will pay 50% to the government and will be up there with belgium and denmark. they are up to the levels of taxation. this does not take effect until 2011 and number three, the independent office around here has reached a very different conclusion with respect to private insurers who offer employers and employees health insurance. you will not see people lose insurance according to the majority of people who keep insurance to the private system. the president was very clear. you like your current insurance and you get to keep it.
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you don't have any and you don't like what you got, you will have a choice through an exchange of private plans and a public option. choice and competition will increase. >> 787 billion in stimulus rolling out and they hit when it neutralizes on the docket right now. again at a period where we are unsure of how strong the economy will be two years from now. >> those people who make investment decisions don't say gee, tacks are going up at 2011. they will start making decisions now for 2011. the long-term unfunded
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liabilities being created by the way this bill will be written is massive and we are seeing medicare in terms of long-term in terms of liability. >> in a graphic, we noticed that president obama signed into law further coverage for children. president clinton passed the s-chip that covers children many, many years ago. if you were to insure kids and college students, you would get rid of 2/3 of the uninsured without doing anything more. >> you will still leave tens of millions of americans uninsured. they show up in the emergency room and we end up paying g through higher premiums. this will reduce the cost of health care for people out there paying through premiums. 98% of small businesses are not going to feel anything with respect to the surcharge and 99% of american citizens are not going to feel anything with the surcharge. these are high and did very well
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under the tax cuts. >> it's difficult to hit the numbers and assume they are true and we can't go into the details, but congressman, quickly tell us how nervous you are about draws the line in the sand about august and 2011 with the taxes kicking in after the election. if it doesn't happen this summer, that's pretty nervous. >> we have a choice to make and we will be debating this bill. do you like the status quo with escalating premiums and costs going through the roof with families and medicare. we'll bankruptcy the government if we continue this or take a change in course. change is always difficult, but the american people said in the last election we don't like the status quo and we want a new direction. that's what we will be debating. >> if we could, those who say the president focused on fixing the economy first and put aside energy reform, health care reform and a number of other
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issues on the docket. do you think what's what the administration should do is focus on the economy exclusively? >> absolutely. the concern is with the tax increases and what this will do to the jobs and the families and the energy taxes. every family will pay higher rates. everything you buy uses energy and food and clothing and small businesses. we need to do something as unemployment rates continue to go up and the stimulus was ineffective and didn't work. we need to go back to basics and get the economy moving. >> just a quick question before we go. not so quick, but i will try. after the baby boomers die off, health care and social security will bankruptcy the country forever. after that there is a baby bust where we will not have the same entitlement liabilities that we have right now. can't we focus on this being a generational rather than a
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permanent problem for the united states? >> i don't think we can afford to take that risk. you will have an unfunded liability and a debt problem. if we don't address this issue, then we are going to hurt the fundamentals. the president is right. what we do in health care relates to the strength of the economy going forward. we are going in the area of bankruptcy fe we don't ring out the costs in the system.m. on energy policy it's a national security issue. we are exporting hundreds of billions a year over seas that we should be investing here at home. >> thank you, gentlemen. we understand it was a busy day in congress and thank you for taking the time. appreciate it. >> the bulls were running pushing the markets higher with the shanghai market over 2%. is beijing the place to make money right now. the winner of china equities after a quick brake and exxon is making a bet on algae.
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is it a smart move by the oil giant or a big waste of shareholder money? >> look at shares of the railroad. pretty good numbers and everybody is up and looking at 6%. come on in. you're invited to the chevy open house. where getting a new vehicle is easy. because the price on the tag is the price you pay on remaining '08 and '09 models.
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>> shares of intel up about a percent. the question is, should you buy, sell, or hold the chip makers.
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we have a top sector analyst in a few minutes. >> should you buy, sell, or hold china. china is growing and is the push to grow businesses on the mainland going to lead to a major trade battle with the united states. joining us for a first on cnbc interview is chairman of china equities at jpmorgan. a pleasure to have you here. let's start with the growth we see in china. a lot of people are skeptical of the numbers we have coming out. here on the ground, they are frequently. you do see a resurgence and an increase in confidence and consumer spending. are you confident that the recovery is being led by china? >> absolutely. china is now the third largest economy in the world. it used to be the second largest surpassing japan by the end of this year. we are seeing strong growth from investments to private consumption. a lot of the retailers are
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reporting 30% growth this year and of course car sales have rebounded some 48% in the month of june. things are humming in china. >> sorry that because they are also taking the effort to increase the social safety net? it's a confidence issue, is it not? >> absolutely. the social welfare issue will take a long time, but in the near term, the government put in place a lot of things to boost confidence. we have the programs that are well under way and in addition, the government had to change a lot of policies to boost private consumption. a program under way called old for new. people can trade in old home appliances for new ones at a steep discount. >> does that mean you encourage somebody to invest in equities. we have seen the marks on a major run. is all this good news priced in?
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>> the stock mark is the single best performing market in the world so far this year, up some 85%. >> that makes me nervous. >> the valueations are high, butt the hong kong market represents value. the market stays on and the mainland market takes on and hong kong represents better value. >> you made a point in the note yesterday that not only is the market down 85%, and the so-called vigilantes which we are familiar with here in the states are driving rates up here in china because they are concerned that the stimulus is far too strong and it's dominating the economy and creating an asset bubble. do you worry about that? >> it had a rebound, absoluteliment property prices are up at record levels. the stock market prices are up strong leechlt
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we also see that the government is trying to contain speculation in the property market and in the stock market. in the meantime, lending growth has been 30% so far this year. the first half of the year, we had bank lending equivalent to the gdp. remarkable. >> good to see you again. what about american companies that are doing a lot of business. there is a story in the times about the solar sector and foreign companies are getting shutout of contact and so on. how opportunistic can they be if they want to invest in american companies? >> lots of american companies have done great things in china and been successful from car companies to consumer products. >> do they worry about the protectionism in the market
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place?e? >> the government tends to be protectionist.t. in a are you newable energy area, they represent opportunities and the next year or two will be the third largest market for wind power after the u.s. and germany and solar power as well is spending fast and trying to replace the dominating on coal. >> how seriously do you take china'ss repeated calls or at least the inference that they would like to replace the dollar as a reserve currency.. what are they getting at? is that a serious threat on their part or serious intent on their part or is there something else behind that? >> it's largely -- china holds 1.3 trillion in income securities. it is difficult for china to be here from treasures any time soon. >> thank you very much. pleasure to see you. >> you need more when i was on
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the show. generations away from having the economy. >> it's interesting that a lot of people feel there is a lot of job owning going on. i don't know whether you agree. >> if you look at the history of the euro from 1957 to 2000 with the treaty of rome. still at risk. a one-world curny as i wrote a couple of weeks ago. they are trying to get the universal language going. how do you harmonize policy in. >> it's tech huge in asia and we are dealing with tech a lot in the states. intel reporting after the bell and investors are watching closely.y. intel is called the bottom of the pc market. what's the one nugget you need to know? >> speaking of technology, facebook valued in the billions. will either facebook or twitter post a profit?
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"the insider"s are over that story a couple minutes from now. back in a moment with the dow. we are down eight points.
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>> welcome back to "power lunch." here's the nasdaq and the flat sessions and the drag being dell on its analyst day saying the pc market may be stabilizing, but we are having to cut prices in
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order to retain market share and that is dragging on its margins. meantime dell saying they are thinking of acquiring small commuting companies and an interesting area because microsoft said they are moving in and google has been in there as well. the other story, take two interactive and take a look at them. the gamers are dragging with take two and saying it is delaying the launch of the next game and chip equipment companies are trading to the upside with novellus having a bullish outlook. sending it back to brian. >> i'll take it. thank you. we appreciate it. talking about the chip equipment makers and the biggest one with incell set to report earnings and shares are slightly higher. this one bureau chief jim goldman ahead of the numbers. jim?
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>> you wonder what the trend is shaying up in tech whether intel's time is finally at hand. a good time indeed. shares are flat as you said and headed into the second quarter earnings report after the bell. that follows a better than 30% rise since the march lows. still they are well off the nearly $25 a share leading analysts to believe shares have more to grow than to lose. assuming they can reiterate that a bottom has come and gone. it's adam microprocessor powering the lion share of the net books. a pc upgrade cycle and microsoft in the windows 7 release that could accelerate amd and even dell. 7.3 billion in revenue and the numbers are coming right after the close and we will have complete coverage. >> stay with us. bring in doug friedman with the semiconductor analyst with the
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power player. ron ensana. thanks for coming on. i want to start with you. jim just mentioned about how analysts think there is room to grow and i want to know if you agree.e. also in light of what was said about dell and ow sensitive the market place was, it seemed like the market is jittery on what we may hear. >> it's great being here first of all. if we electric at intel and look forward, recognize dell came out and said enterprise market was weak for them. what we are seeing out of intel and they expect better than the street numbers is being driven by consumer demand. that's one of the earlier commentators was talking about china and the sflengt china. we are seeing resilience. >> sorry that enough to offset what people are talking about in the united states where they are saying back to school will look horrendous? >> what we are calling for is interesting.
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>> that sort of gets in the way of the back to school season and people will hold off and wait for win seven before performing new pcs. retailers alike sort of restrain the bills and they don't want to put too much product in knowing the major shift is coming. >> what are do you want to hear? >> if i had a wish list, i want to hear that margins are starting to improve and they are managing through this time and we are looking forward to an enterprise up tick next year. probably likely to see q4 maybe a little bit better than seasonal off of what might be less than seasonal.. again we are keeping that good news going forward. >> one question. with computing on the horizon, that may be a long-term for enterprise. the position for mobile commuting which may underline the results, are they in a
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position where people graduate and the pc is less important? >> i think i have a unique take on what's happening in the cloud computing space and what happens as we go more mobile. what ends up happening is an increase to support that mobility. that server uptick is important for intel. if we can get more servers into the market place to support the mobility, it does offer better mix of productions for intel on the margins and the servers are a higher margin. if we move into the mobile space, they see intel doing things differently. they troy to get commuting back in and announced a deal with nokia. that to us is on another horizon. >> jim, any thoughts on what he just said? >> i think intel will fire on all cylinders and deal with nokia. that's good down the road and servers are important, but that
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microprocessor continues to drive the low end and net books is the big trend in commuting and intel's position real well. >> thank you all. >> it's interesting. intel doesn't have competitors. they have other people in their space. how much can you read into it? >> i live four minutes away. >> that's handy. the pulse of the market on the other side of the break and the dow jones higher by a little more than a point. in a couple of minutes, we get the pulse of the back to school sales.s. it's make or break for a lot of retailers. should you get out the plastic or are you going to stay home and wait for the late sales. results of a brand-new survey. a look at the stocks on the move and they are on the upside across the board. oof!
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dell's cfo expects the pc maker's profit margins to come under pressure in the current quarter. microsoft ceo said google's operating system is interesting.
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mutual fund industry consultant strategic insight said $136 billion went into stock and bond funs, the biggest since 2007. the dow jones average is having a hard time hanging on to gains. let's go back down to the floor of the new york stock exchange and talk about that. yes, we have good numbers, steve. a number of dow components are doing well. >> we are arranged now. the bottom end is 875. the top end is 911 or so in the s&p. >> aren't you at least thrilled that goldman did not miss here? we are selling on the news, but things looked a lot worse. >> it was all about goldman and jobs. we have goldman out of the way and we knew with goldman being leaked about a tremendous
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quarter, we knew what they were going to have and that's when you see the market following through.h. we will be positive for the week. >> what's next on the radar? >> it's all about jobs. we have cpi in industrial production. i'm focused on jobs and housing starts. i think goldman set the stage so aggressively to the upside, that nothing can really bang us. it's a day to day trader's market. 880, 911 and if it pops through either way, look at the upside and the downside. >> thank you very much. appreciate it. >> speaking of goldman sack, goldman beat expectations and an under statement. they kicked it out of the park and they did it as a special bank with access to the discount window. on air editor charlie gasparino asked the question with risks that they ton take, should they be a commercial bank. >> they didn't beat expectations and see what was leaked as
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expectations. i have a proposal. i want to make the capital a bank. i want a coast er with steve. i have him on the brain today. i want steve cohen's name engraved on my toaster and a bank card because when it comes down to it, there is not that much difference between them. goldman sacks and i don't know why i'm the only one outraged by it. goldman sacks envy or something. that is a big hedge fund and they take risk and if you look at the reports, their risk is up and it's up for the shows that they take 8 risk. they will leverage 15-1. about half of what they were doing during the crazy years. fairly significant and i would say this.
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it was probably higher in the second quarter than the first quarter. i would say here's what the government should do. if goldman sacks can makeover three trillion dollars trading as a commercial bank, it should no longer be a commercial bank and they should stop today and start being a whaufr want to be. >> all the year over year increases. we talked about this with david and some brought this up and said okay, we know at the end of the day, goldman sacks is too big to fail and the taxpayer will always be on the hook? >> why are they too big to fail now? >> your point is if all taxpayer money is a risk, why are they allowed to run into the hedge fund. >> they had their chance and we
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bailed them out. i don't care what they say, they were toast in september. done. there was a run on them and they were the next one taken out. they had plenty of time. by the way, here's an interesting factoid if you think goldman is too smrt to implode. they bought $13 billion worth of cdos in 2004, 2005 that were basically insured by aig. they sold them this garbage and they bought stuff that is not good. they can't be all that smart. i will wrap you like this. they shouldn't be protected. >> you are right, charlie. see you later. thank you. a new study out shows the great recession is having an impact on back to school spending. cutting back on nearly 8% across the board. ellen davis joins us with details on that.
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as i understand from the relief, the rules have officially changed. what are consumers doing differently. four out of five say back to school spending will be impacted by the economy. a lot of shopping for sales and doing comparative shopping with newspapers and advertisements. a lot say we will have to make do with last year's womans or put off the cool weather purchases until september or october. >> a lot of people expected back to school to be impacked, but give us tangible statistics which we are looking at about how dramatically things have changed. >> this year we define k-12 and the average family plans to spend 8% less. we are back in the 500s compared to last year. back to college, spending is up a little bit last year.
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if you look at the total numbers, we are really seeing people impact and they will deal with back to school differently because there so many. >> are we going to see the caribou back off? it depends on the retailers.s. they see a lot of traffic during back to school and will still be the most popular destination. we will see home furnishings and home decor suffer a bit with college students living at home. they don't need bedsheets and silverware, but retailers where a lot of people are hadding to find promotions and discounts, they might. it's a mixed bag. >> appreciate it. >> a valuation and talk about the kids back to school and the 15-year-olds and the habits of children. facebook doesn't make a dime.
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slobbering over twitter, they don't make a dime either. is there another internet bubble about to burst? we will talk about it. >> the gold market is up about 50 and the s&p is making a gain, but not so the dow. down two points on the session. back in a session. introducing the all new chevy equinox. with an epa estimated 32 miles per gallon. and up to 600 miles between fill ups.
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it's the most fuel efficient crossover on the highway. better than honda cr-v, toyota rav4 and even the ford escape hybrid. the all new chevy equinox.
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get ready. apple shares are down a fraction at 142.24. up more than 65% this year. seeing more than 1.5 billion downloads. what is apple doing right when you compare web success to
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facebook and twitter and a handful of internet properties that are unable to monitize businesses. back on "power lunch". hello! >> since you are in the folds, what do you think? >> i get to start. wow. i'm sure julia has done a report, but right now we are in the cycle where it's just hit to barb social networking. where is the business model. back in the bubble, we believed it and we got burned. we are missing the point. when you put 200 million people in the same tent, you can do something. an ad popped up and said they like older men. that is an older guy who is divorced and that has great value. >> creepy! >> we talked about a 15-year-old and habits and the more the
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younger generation sees, the less interested they are. he talked about the population numbers and can they monitize it? >> we have to keep in mind they have about $500 million in revenue and the growth rate is 70%. this is worth something. i think if facebook can figure out how to target ads to people like dennis maybe with an ad not for that type of dating service or not a dating service at all, then my might be able to have people want to join. there is a lot of data there. >> you have the valuations and all that stuff can be true, but are they paying too much? >> the thing we are missing is apple silence actual products. facebook and my space, the best you are going to be able to do is get cheap ads sold. there is a business there.
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most major media properties will be happy to get the remedies and they're not profitable. getting a lot of money from the google ad that will aspire. this has not been solved. they haven't solved the problem. >> john. the magazine is up for sale. does cnbc sell anything? you can sell advertising to it. a half billion dollars at facebook is years old? >> we are talking about different celebrities and adding on business week and it's a cost war and valued by advertisers than on facebook. that equation has not changed. i'm waiting for google to do something through you tube.
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>> will you monitize to make more? >> 15 million users. >> i told mark that he should have told for a billion dollars, facebook that is worth from 8, 10, $12 billion. >> where is somebody going to get that money to pay for facebook today? >> business week is up for sale. don't worry. >> we are talking about two different things. if you are a fan of facebook, the bottom line is they haven't figured out how to monitize it. >> we have to have you back. >> speaking of the hope, you have been pounding the table for a couple of weeks saying the recession is over. >> i said this recession is down. bank of america. the headlines and the recession is over.
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my advice comes through. their wealthiest clients are paying a lot and the global recession is over and getting ready moving out of cash into energy and other places. >> it doesn't make you nervous? >> it's my story and i'm sticking to it. we have been out on a for support.t. tonight at 8:00, thanks a lot for the plug, guys. >> you're welcome. pumping hundreds of mill yens into a project to produce fuel from algae. exxon is a company and they should stay an oil company. they will try to convince me i'm dead wrong. >> let's look at how they have done. up 41 cents and that's about 2/3 of a percent. thth stock is down nearly 18% here to date. we are back in a minute.
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i have been fired up about this story since my eyes opened this morning. making an investment in technology to turn algae into liquid gold, supposedly into energy. the deal highlighted is a joint venture between a biotech company and the largest publicly traded oil company in the world. this is a total waste of shareholder money. here to convince me i'm wrong is the director of renewable energy policies. with a last name like that, what else are you going to do for a living? tell me why you think this is a good idea before i launch into why it's horrendous. >> whether or not this particular vin vestment is good, i think big energy companies like exxon are going to invest in innoefing as and alternatives is critical for their business
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model and the planet. it's time for companies big, small, american, around the world to realize the global warm suggest a serious environmental issue and the governments are starting to really change their policies and make this part of the market. for their shareholder's sake, they need to find alternatives. >> there in lies the problem. energy companies. it's a mistake we all make. exxon is not an energy company. they are an oil company. they drill and look for oil. hold on. as you call them an energy company, there was a point in time when harpooning whale fist that's what you did was an energy company. you wouldn't want them to get oil. it's a complete different set of skills.
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all of that is similar. that's why for them to get involve makes sense. unlike any biofuels that make alcohol incompatible, algae can make a hydro carbon fuel that looks like jet fuel and diesel and gasoline. they are making an investment in the biofuel that is most compatible with the refining capacity and distribution. >> you know where the innovation comes from are the small companies with the different still set. this is a distraction that could go to the bottom line and be well spent somewhere else. you know it's politics, nathaniel. >> they are trying to green wash the image and we all have to hold the pieces of fire. they won't change for being the most polluting company to being a green energy company. >> the most polluting company in the world?d? how about the company that helps us achieve so many things in this country and all over the world and helps us to drive and
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power. >> these are not incompatible things. the product they produce, we burn it and we have to cook in the planet. they are trying to get ahead of that curve. this is a good exchange here. >> green washing. that's a new word. i'm impressed. >> i thought he had you on the hydro carbon biofuels. i thought he had you. >> going to take a quick break and talk about the marks of course and the president set to give a big speech in just over an hour from now. back in 20 minutes and nancy pelosi will be holding a news conference. all of that straight ahead. closeout is here;
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