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tv   Squawk on the Street  CNBC  August 14, 2012 9:00am-12:00pm EDT

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>> okay. >> we added to our holding of kna navigator on friday. >> thank you. make sure you join us tomorrow. "squawk on the street" begins right now. little bruno mars from the "twilight" saga as actor robert pattinson gets ready to ring the opening bell in about half an hour's time. notice the ropes around our set to protect us from the screaming masses, guys? it's going to be very exciting. welcome to "squawk on the street." i'm carl quintanilla along with melissa lee, jim cramer, david faber. retail sales, the largest jump since february in about five months. with that a little nice pop on the futures there. as for europe, some pretty decent gdp in your opinions out -- numbers out of france, out of germany. >> our road map this morning starts with the power of home
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depot raising its forecast and posting positive numbers on everything from comps to average tickets. should your portfolio be wearing orange today? >> a slew of others. michael kors with a blowout quarter. where is the american consumer's head right now? >> groupon getting crushed. down about 20% after the core daily deals business is slowing dramatically. we'll start with earnings from dow component home depot. t home depot raising full year earning's guidance to 2.95. three cents above consensus estimates. previously they were at 2.90. people talking about consumers maybe not buying expensive stuff like cabinets. average transaction going up. >> this company has been on fire since blake took over. i got to tell you, one of the
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reasons why you don't hear about this great turnaround, this is one of least promotional people i've ever met. he just doesn't tell you how good he is. he relies on his staff in the conference calls. he's a remarkable man. tickets going up. regions getting better. home depot remains to me one of the most undervalued company in the dow. magnificent job. >> why do you think it's one of the more undervalued companies at this point? >> if we get a turn in housing, he's doing this without a definitive turn in housing. he's doing this with housing inventories coming down, right? but new housing not going up that much. what kind of numbers will he put on when housing comes back? i mean, this place is in shape. it's going to be remarkable when things get better. >> yeah. >> revenue up 1.7. we're not talking torrid top line growth. >> not yet. when that revenue comes back he is going to be so ready. i think there's a big share take from lowe's. i've got to tell you, when you
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go to the stores these days, there's a feeling of the way it used to be when bernie marcus ran it. feels great. >> global comps up 2.1. u.s. up 2.6. that is good number. >> yes, it is. >> a lot of discussion today about they tend to be focused in areas where housing has done okay. relative to the national average. >> i mean, housing has come back in areas they were decimated in. they never did that badly even during the downturn. this is a company that loves to return cash. it's a company that is so shareholder friendly, but it's associate friendly. it's just a marvel. the only company that can touch it is costco. which i know you know. i feel like the same level of bargains as home depot, same level of service. >> they are selling primarily to the professionals. which gets at this housing rebound trade. the foreclosure rehabilitation trade, that is still on and still very strong. some might say we are in the early innings of that
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transformation of the housing market when you're taking a foreclosed home. a lot of them have been sitting on the market for a very long time. you're pumping what could be up to $7,000 into each new home in order to fix it up. where are they buying that stuff from? according to home depot's numbers, in part from the likes of a home depot. the concern here on the street this morning, jim, is that they are in fact taking share from lowe's. what does this mean for lowe's? >> i'm concerned about lowe's. they have a turn going on. looks like that turn may have stalled. i know the company is very proud. i'd love to hear from what they have to say. you are so right about -- about this home depot being levered to the increase in price of homes. because you don't want to throw good money after bad if your house is declining in value. that's how people view home depot. but if your house is improving, you will go to home depot. it's a remarkable comeback from a great company. i cannot believe where it is. remember, they have good yield. the company has generated a lot
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of cash. >> stock buyback which is very strong. they've already bought back $2.63 billion worth of stock. they plan on buying another $1.4 billion in the remainder of the year. >> kind of ties in, too, with the overall retail sales we got today where every category was up and things like furniture were up. right, jim? which, i mean, the debate this morning will be is the page curan turns on the overall weak consumption, limited gdp growth story in this country? >> a lot of people are concerned the rth, retail holder, etf was way ahead of itself. how could it be? it turned out to be an accurate forecaster of these numbers. macy's having a terrific number. costco was great. walmart has been amazing. target has been amazing. these are numbers that we didn't expect to be happening given the lack of employment growth. it is kind of amazing. it's a big paradox between the labor department numbers and what's going on in the stores. >> all right. let's get to more on the retail earnings. we have a lot of them this
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morning. tjx posted second quarter earnings above street forecast. big winner, michael kors up sharply. numbers were blowout. 34 cents a share, handily beating the street. kors raising its full-year outlook forecasting a 30% same-store sales jump for the current quarter. same-store sales numbers, jim, were things that retailers dream about. in the first quart eer same-sto sales up 30% overall. europe, 24%. north america, 38.4%. >> a lot of the areas others have sited as weakness. footwear. accessories. very strong. kors, the legacy stores have been great. they just now are establishing their business in china. a lot of people, a lot of hedge funds were short kors betting that coach was a precursor. now we look at coach and wonder if coach was an outlieier. >> the short interest in kors
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about 5.5 million in july. now 3.5 million. >> this company came out fires on all sidcylinders right from ipo with a strong performance there. following it up with a number of quarters now, at least two -- >> it's not an inexpensive place. you go to kors, you're going to spend -- even an outlet you're going to spend money. kors is distinguishing itself as vf corp. has done as pvh and some degree ralph lauren as being companies that make far more money than we ever thought. >> we talked about the power of brands yesterday. >> yes. >> but a lot of discussion this morning about kors, they figured out how to sell through retail through their own stores. also the wholesale model. store in store model. as i said on twitter this morning, brands are the new kings of retail distribution,
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right? >> a reference to pop cultural icon. >> thank you. >> i do see -- i'm trying so hard. pay phone is big for you. "call me maybe." >> all a struggle. >> it is. but i do think that jc penney was talking about how the brands were going to get the brands. you know, the brands aren't stupid. manny cherico at pvf and eric weissman at vf, that's northface, pvh being hilfiger, these companies are making fortunes. cotton is down big. that turns out to be a bull market. >> what does that say about saks which says the economy is still tough and they're still giving monthly sales. >> i never want to see the people going away from same-store sales. he mentions that as others are doing, they're going away. well, gap, macy's. i don't know how prevalent it is, the idea of going away from
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sea same-store sales. i still see a number of companies that issue them. >> walmart doesn't. once walmart stopped. >> dave. >> they stopped a while ago, actually, before we started to see the extraordinarily strong performance in the stock market. >> i always thought it was the age of aquarius until another era was introduced. the age of walmart. >> when we first did the age of walmart it was the beginning of the decline for the company. and then, of course, "the new york times" story was the bottom. >> it's important. next time you see a story about a 5-year-old possible prescribeprescribe -- bribery in a country. >> dick sporting goods is going to license the field in stream brand for broader category -- more categories of products. >> hunting. >> which has been seen as a positive. >> the stock not doing that well. i have been favori ining cabelaf late. hunting and fishing. i know, dave, we haven't been
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hunting together. >> just had this idea -- >> the idea of you and david on a platform looking for deer is just frightening. >> or ducks. you know. >> in my old farm it was, indeed, a free fires up. >> i prefer to hunt my deer with bow and arrow. >> is that what you're using? cross bow? >> hunger games. >> yes. >> i am trying to -- yeah. trying to eliminate the deer. they're a problem. >> is david more pito or gail. >> i think he's more like president coy. >> you've got to read those books to know what we're talking about. >> yes, you do. >> estee lauder. >> iff had a good number the other day. we should have put two and two together. estee lauder not that communicative with wall street. this was a fine number. what was coach really doing? >> they missed the boat.
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their legacy collection came too late. they were missing the fashion trends. they lost a lot of customers. they also pulled back on promotes as we said in the outlet store. they missed a lot of customers. they brought them back. they started coming back. they're sort of off step when it came to the last quarter. kors ate their lunch. >> right. fossil came back. they had a better quarter. i refuse to opine on teen retail president are y . >> you're more of a hollister guy. >> whatever has the paul ryan abs of steel is where i want to go. >> was it "men's journal"? "men's health"? >> he's ripped. he tried to get me in that regimen. >> he does p90x. >> works out in the house gym, apparently. >> you guys read a lot of things that i just don't see. i have to admit. >> did you ever read helen
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gurley brown? did you ever read cosmo? >> no. i haven't read "men's health" or "health journal." >> helen gurley brown. >> what a life. >> 90 years old. >> 51 shades of something or other you keep telling me to get. >> all the women tell you about it, right, david? >> yes. all of my women friends in the office have told me it's not worth reading because the writing is so poor. >> i didn't know it was a literary master. >> apparently that doesn't matter since it is the best selling book. >> meantime, groupon tumbling in the premarket set to open at new all-time lows. daily deals website posting quarterly revenues below wall street forecasts racing concerns about the company's growth. both citi and benchmark downgrading groupon this morning. a number of firms cutting their price targets on the stock. my favorite metric, sequential quarterly revenue growth the past few quarters, 72, 97, 10,
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14, 14, 2. that's where the company has go gone. >> i will say i think in my judgment it is still too early to buy groupon. >> still? >> i've been saying that since we started the show. what was it? 12? >> it was. >> now it's starting to get to -- >> ipo at 20? >> down 70% since the ipo. >> it didn't have -- barely had a tick up. it did see above 20 as you see on the chart. it was not a great ipo. it's been downhill more or less ever since. >> it's now getting more involved with having inventory and selling goods. we know that amazon made its bread and butter by not having inventory. the conference call is very other worldly. kind of one of those things, you read it, wow, this company's doing great. they have what i call a total and complete lack of humility. this is the most -- the least humble conference call i've ever heard. if you listen to this thing, you think, holy cow. it should be a 70. >> to the point of carrying inventory now, the cost of revenues has risen to 24%.
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that's up from 14% a year ago. their costs are skyrocketing at this point. >> while growth is decelerating. >> exactly. >> in a significant way to carl's point. that's not a good recipe. that's not a recipe for success. even i know that. >> i remember web van. >> you like to bring up web van oftentimes when we discuss groupon or zynga. >> because it might as well have been yesterday. it's zyni zania. it's a keeper. zynga is not a keeper. >> wall street analysts still believe in these sort of models. citi, for instance, raised the stock in may. they're taking it back down to a neutral. didn't they ask the questions then? >> they thought it wasn't too early. they violated our wisdom. >> still, there are many people who still wonder whether the business model is a viable model. >> you called it a model. >> yeah. >> you're going there. you're calling it a model.
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>> as opposed to a business. >> a way of doing business. >> i'm a member of the elks, okay? similar model. not really thought of as a model. $2 beers. i'm just trying to relate it to other businesses that i've seen. i used to be on the summit police athletic league. >> you weren't trying to make money is your point. >> they are? >> that's my question. is this is a sustainable business model overall? >> this fellow, mason, he's very combative. >> yes. >> very combative. he'll be loud, cramer, what are those guys saying? didn't they read the transcript? i read the transcript. the operative word is inventory. what does mickey drex ler, another one of your -- your great documentaries, what does he say about inventory? >> try to keep as little of it as possible. >> exactly. >> groupon's going the other way. >> when it comes to retailers if you want to lump them in as a
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retailer, inventory matters and your inventory appropriately is one of the keys. >> citi's argument today is mobile may have some promise but it's going to take time. and management does not have what they call an execution track record. >> google, what, $6 billion, they bid? instead they bought fromers for 23. they also bid for yelp. google rebuffed many times. i think that when you look back at groupon, we will wonder whether there wasn't this moment before they stopped sending you to brazil all the time. i used to go to brazil and queens. >> you had to go to staten island. >> that was for nails. it's a limited number of nail salons. once you're going through and this combination, what is it, the wax candle and brazilian something, i don't know, they've
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sent me that repeatedly. i don't want to go to brazil until the rio olympics. i don't need a wax. >> you've got four years. >> carl's going to beat you there, there. . he gets number one choice. >> one of us a little more hairless than the other. >> you may go to rio. i can go to queens for, i don't know, a half price -- buy one brazilian wax, get one brazilian wax. >> i'll show you around the old neighborhood if you want. we can go to queens any time. >> really? zbr zbl sure. >> 25 cents off of pizza in astoria. >> between 12 and 12:30. >> can we go with you? can we go with you to see you get the brazilian? just to watch it happen? >> oh, please. that's a 40-year-old virgin thing. when we come back, we'll talk to leaders of businesses who use groupon to promote their product. see how they feel about the company struggles. a lot of them still say it is a good partnership to have. one more look at futures on this tuesday morning with the s&p's
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groupon may be losing its fwrip. the daily deal website reported revenue that missed estimates. shares of groupon have collapsed
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since they went public last november. down more than 70%. that brings us to this morning's squawk on the tweet. to get back on track, what does groupon need to offer that no one else can? tweet us. we'd love to hear your responses. we'll share them with you throughout the morning. what would it be? >> i do want to -- half off stock. they always send a little copy. very intriguing. edible arrangements. half off fruit bouquets. how do i get out to east elmhurst? can i pull that off between commercials. >> take the number seven. >> figure that out. we're going to take a break here. straight ahead, cramer gives you the stocks you need to watch before the market opens. his mad dash is coming up next. there's a bit of hollywood buzz here on the floor of the stock exchange this morn ing. robert pattinson of the popular "twilight" movies will ring the opening bell to kick off the launch of his brand-new movie
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"cosmopolis." see the crowds waiting for him. david and carl will be swooning shortly. >> he's so dreamy. >> more "squawk on the street" straight ahead. [ male announcer ] this is rudy.
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the average female population? >> yes. bigger than men. okay? this is the biggest that i've seen since i've been down here. >> we had teen vogue ringing the bell a couple of days ago. i thought that was a lot of women. there he is, actually. already up on the balcony. >> is he supposed to be a good looking fellow? >> one handsome man. >> a handsome fellow. >> promoting a film "k "cosmopolis." >> i met jeremy renner once. >> amazon, bernstein taking the price target to 2.83. >> amazon people forget is not just a retailer. it's a third-party provider. and i've been mentioning this one because it's the -- this is groupon. groupongoing toward inventory. one of the worst things in the world. you never know what the american people want. these guys sell other people's stuff. no inventory whatsoever. they make a fortune. that's why that big warehouse strategy. i like it. >> google, buying fromer's?
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>> this is the old model. i love it. they had wam pam to buy other dot coms. they're buying offline and turning it online and making it mobile. i'm continually amazed they've got the social going. they've got the mobile going. they've got the cloud going. this has been the best stock in the nasdaq during this period. it is a stealth rally. it's remark lk. i think it's going to highs. >> we'll talk about apple later. a direct shot across apple's bow and their partnership with yelp. >> yes. yelp. boy, yelp. they cut 500 million. yelp's actually bigger than what groupon was going to pay. google. forget groupon. groupon, it is very early in the groupon status. >> opening bell a few moments away. "twilight's" robert pattinson and director david kroegenburg will ring that bell when we come back. [ male announcer ] let's level the playing field.
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robert pattinson ringing the opening bell here at the nyse. funny enough, no kristen stewart. we know why. robert pattinson of "twilight" fame. also director david cronenberg promoting "cosmopolis." apparently, guys, pattinson plays a 28-year-old financial whiz kid and billionaire asset manager. hence the ties to stocks and markets. over at the nasdaq, by the way, first trust celebrating the listing of two new exchange traded funds. try to control yourself. >> he's not really my type. i hate to say while he's standing right there. but i have no shame. i'm sure i'm not his either. we're even. anyway, let's take a look at what is moving in today's
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session. obviously we're looking for some big moves in home depot. we are seeing them up by about 2.25 -- .75% at this time. impact on low's. lowe's is higher as well. >> when i see the revenues, not up huge. how many true values can you continue to take share from? i think that lowe's is -- is stalling in its turnaround. home depot is progressing. >> we've got the number transactions up. the average ticket was also up at home depot. you've got to wonder where that money is coming from. the logical answer would be a lowe's. >> there is a theory that says that foreclosures have actually slowed dramatically. home depot benefited in a strange way from foreclosures. then you rehab. then you resell. now they are very much levered into existing home sales more than new home sales. which are not doing quite as
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well as people hoped. there's an argument to be made when it comes to housing that it may not be quite as rosy as we think. >> this is a flexible company. at various times in the conference call they've commented that foreclosures have helped them. what they do, remember, they really thrive on velocity of sales. >> right. >> that was, by the way, bed, bath & beyond was a velocity sales play. they seemed to hit a wall. i like that one, too. >> you're going to most likely pay a visit to home depot if you're a new homeowner or existing home. >> that's why i go there all the time. >> a lot of discussion about the vix this week, jim. closed last night at 13.7. which is the average between 2006 -- or 2004 and 2006 when the s&p was up almost 30%. and is this a tell? or is this a mispricing of volatility? >> i never like to go deeper than the indicators. i think it's a tell. >> really? that's bullish. >> it's been very bullish.
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a couple technicians have called this one so right by watching this decline in the vix as being a precursor to a good market. look, there's an outfit maersk. m-a-e-r-s-k. i was talking about the freight last night. it's been bad. suez max has been bad. maersk put up unbelievable numbers. there's this rally going on in all the weird places. the vix is reflecting, i think, this kind of, hey, sentiment is getting better. it's not crazy anymore. >> just off of a five-year low on the vix. it's amazing. it's amazing how low it's gone. by the way, robert pattinson has left the podium? >> he did. >> the crowds here are thick because they're waiting for him to walk across the floor. >> they think he might do a little meet and greet. >> what are we going to ask him? >> you always know what to ask. come on. >> kors.
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>> jim, i feel as though we are being told something by this market. and its ability to climb higher despite mixed signals. plenty of decent ones. still plenty of things that would give people pause. yet we continue to grind higher. what does the market know that we haven't yet fully appreciated? >> i sit here because i'm not allowed to own stocks. here's what i know. i know looking at my self-employment plan. i'm looking at my 401(k). i.r.a. i know i'm making nothing. if i could just own dividend stocks, i would be doing so much better. and that's what the market wants. a return of capital through dividends. because then treasuries -- it's just -- i'm taking a beating. what do i do? you've got to do real estate. you're not allowed to own stocks. you can't own the dividend stocks i tell everybody else to do. that's where the action is, david. that's why procter & gamble didn't go down. >> you'll be opening a
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nationwide chain of inns. >> let's stop talking. there's important stuff going on on the floor. >> yes. >> robert pattinson has left the balcony, as melissa said, and is now on the floor of the new york stock exchange. i don't think -- >> it's a close tie. >> if anybody can get ahold of pattinson it will be bob pisani. >> you know that's true. >> would olympians, would they have that kind of pull? would gabby have this kind of pull. >> gabby douglas? >> oh, yeah. >> he's at an interesting moment, too. where he's been in the news. there's not been a lot of conversation or clarity on exactly what happened between him and her. >> although a lot of women are siding with him. based on the little information that we have. >> sure. i would, too. >> sympathetic. >> david is going to leave the -- >> this weekend i was telling all my friends at the beach, i
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am legacy. bask in my glory. these are people who are so large, right? >> true. i have a lot of deep thoughts about robert pattinson, oftentimes. really. he just brings -- i get great insight from thinking about him. >> do you and carly rae jepson have a thing going on? >> maybe we should have tutorials after the show. >> big moves. groupon is down 21.5%. michael kors is up 14%. huge move in shares of kors. >> somebody points out that the news out of kors, jim, shows that the problems out of coach were company specific. does that mean we can start discounting some of the disappoints that we've gotten in earnings season? >> i think so. i think that what we're going to do is we're going to start isolating chipotle. we're going to start rethinking about starbucks.
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we are going to say, you know what? if those companies don't rebound, then panera was right. we're going to start thinking kors, vf corp. and bph, even ralph lauren, are showing american ascendensy in retail. we're going to start questioning these guys. lou frankfort blew it. handbags are being mentioned positively. >> with increasing margins, by the way, for kors. where's coach now at today's session? down 1.8%. there was a fool's rally going on in the premarket. that tdissipate zbld will tiffay come back? that's an interesting one to measure. goldman upgraded tiffany saying the comparisons are about to get easy. >> by the way -- >> i'm interested in hearing -- >> i agree. that is, perhaps, another battleground stock for this question, is it about execution or about the overall path.
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>> the fourth time since '92 that all 13 components of the retail sales intdex were higher >> they were supposed to be so gloomy. everything is supposed to be shut down. remember the -- remember the howard schultz call the last two weeks of june. >> something happened. exactly. >> no. huh-uh. it turned out to be that was district nine. >> we should get to bob pisani. he's on the floor. >> maybe he's got pattinson. >> maybe he got some face time with mr. pasenson. >> facebook or face time? >> facebook down by about 2.5%, by the way. that road show that ebers puts on, not helping now. we do really need to get to bob, i'm told. let's do that sfwl b. >> bob? >> a little paparazzi flash. the five women from the olympic gymnastics team which i'm really
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excited about are ringing the closing bell. including gabby douglas. you should see the crowd for that. i'm sure it's going to be even bigger. retailers moved the market this morning. futures jumped several points when the retail sales numbers came out. better than expected. that's certainly a good sign. i thought the july numbers for some of the retailers -- rather earnings numbers for some of the retailers were very interesting. jim, you talk about michael kors. revenues up 71%? even i was astonished at these numbers. comp store sales up 37%, they're guiding the third quarter up 30%. here's something -- i don't know if you guys talked about. i specifically checked on how europe is doing for them. comp store sales in europe were up 24%. i mean, europe, guys. they're doing really well. i think they had about $100 million in sales in europe. that's tiny compared to their competitors. so they've got tremendous room to grow here. the company's fires on all cylinders. i think it points to the real power you've got to accessories that can be worn across all seasons. that's what's really hot right now. if you look at the competitors,
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coach looks like it's decelerating a bit. they had q3 2011 numbers up 9%. q3 2012 numbers up -- that's what the numbers are looking like now. deceleration in some of their competitors going on. tiffany, q-2 comp sale stores expected to be down 1.1%. high end is all right. it's still doing better. there's a very clear deceleration that's been going on. i still think, though, accessories are the hot area, remain the hot area in the retailers. elsewhere are you seeing what's going on in the corporate bond market? last night jpmorgan priced $2.5 billion of five-year debt, 2%. 2% coupon. that's, what, 130 basis points above comparable five-year treasuries? corporate america comes out with all sorts of new bonds here. jim, did you see ibm a couple weeks ago? they priced a ten-year at 1.8 %
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1.875%. ibm sells ten-year debt for. incredible numbers. you're going to see more from this corporate america. how can you not float money at these kinds of rates. >> untold secret of why earnings are so great. these companies are borrowing for nothing. real estate investment trust borrowing at 3% and change. these things were borrowing at 7%, 8% not that long ago. this is the stealth part of the stealth rally. cheap borrowings. >> you can add it to earnings by borrowing at these incredibly low interest rates and buying back stock. >> ben bernanke. >> which is amazing when you think about it. there are plenty of cfos who look at borrowing costs and do think about that. can i benefit from the reduction and the float. even though my interest costs, even though tax deductible, are so low. >> incredible. one of the reasons why you see these earnings. why we don't focus that much on revenues. great thoughts. the bond and the dollar. rick santelli, go ahead. >> good morning. thanks, jim. you know, i really enjoyed the
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conversation you were just having with bob regarding corporate securities because absolutely corporate balance sheets are definitely doing much better because interest rates, of course, are working in their favor. if we could create some jobs, get the customers along the same lines and knock the economy back -- retail sales was good today. ppi hot also. intraday of 10-year yields up five basis points. open the chart towards mid-may, you can see we haven't closed with a 1.70 handle since may 29th. that's the comp. last time we've been at these levels, may 29th. let's look at currencies. the dollar versus yen intraday, wow, dollar's having a great day. open the chart up here to date. just now turning. hasn't been doing very well. if you look at where the dollar's really been getting hurt a bit, look at the following currencies. this is the aussie dollar versus the dollar. the dollar hovering at the weakness levels against the
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aussie currency since march. dollar versus canada, dollar hovering at the lowest levels since around may. euro is what we most pay attention to. there's a lot of other currencies also associated with questionable commodity or in the japanese case, weak economies. so all these currencies have a lot of importance due to exports. now, let's go back to carl quintanilla. >> thanks so much. good stuff. latest moves in energy and medals as well. bertha coombs at the nymex. >> good morning, carl. we're seeing oil rise right along with the rest of the market. wti nymex group getting more of a boost this morning than the crude and brent crude. brent will be expires on thursday. we may see volatility through that contract. nonetheless, the move is in wti because we had better data here in the u.s. interestingly, though, when we talk about that retail sales data, watch gasoline. gasoline futures have run into some resistance in the summer. a lot of folks watch the technicals more because volumes
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are lower. while gasoline futures are at resistance, gasoline at the pump is now higher than it was last year at 3.70 a gallon on average. in 39 states, higher than it was last year. we are on track to see the national average for gasoline per gallon, a record this year according to tom closa at opus. techny cams recovering after holding support yesterday. take a look at the metals. divergent trading. gold dipping below 1600 an ounce after that data. gold, the feeling is that the good news economically is bad news making for less need for stimulus and any sort of inflationary pressure. you can see gold there today fighting to hold $1600. back over to you, melissa. >> thank you very much, bertha coombs. groupon by the way in today's session out of the gate hitting a fresh low after its ipo back in november. the stock hit 5.76. down by 22.75%. in today's squawk on the tweet
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we're asking you to get back on track, what does groupon need to offer no one else can? tweet us at cnbcsquawkst. first, take a look at this morning's early movers here on wall street. ♪
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take a look at the chart. remove the name of the stock from the top. what would you say about that decline. down 71%? >> back in 2001 looking at a company, we're looking at e something or other. etoys. >> something dot com. >> that's incredible. wow. >> disappointing quarter for groupon hitting a fresh low in today's session. tough, tough day for shareholders of groupon. >> etoys? really? >> look, i look at this thing and it just -- you know, those conference calls when the first
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dot coms came out of the chut were equally as optimistic. talking to you about the great growth initiatives and how it was going to work out. we look back and can't believe how much money was lost. i feel badly when people bought these things. >> squawk on the tweet today, rather kind of serious question. we're asking you to get back on track, what does groupon need to offer that no one else can? b writes, offer $1 for 80 cents. an offer to buy stock at 30% off yesterday's price. >> a few of those twit eeters mt have held the name at some point. >> each day you get the different bulletins. today was stomp. i always keep thinking, was this just something that caught our fancy momentarily?
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is that what happened? >> all right. markets right now up 28. we'll see what kind of reaction we get later on after a pretty good number out of retail sales. some of the winners like home depot and kors. a lot more squawk t"squawk on t street" still ahead. good-bye, ruby tuesday and hello, jim cramer. six stocks in 60 seconds is moments away. we'll be right back.
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♪ robert pattinson may have rung the opening bell. we have simon hobbs. >> thank you for that. we're going to talk about groupon and big falls today. going to talk to some of fwrupon's customers actually on the street. people offering kung fu lessons and cellulite treatments. see if now might be the time to buy. ben la bolt, obama's press secretary on the program as well. obviously, paul ryan, does his tour now as vice president elect. home depot, very strong
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performance. over the last 12 months up 79%. we're going to talk about whether it can keep on gaining. back to you guys. >> let's get to six in 60. six stocks in 60 seconds give or take a few. tech data. >> tech data reported not a great of a quarter. clsa trying to get ahead of the big seasonal turn. i like it. >> southwest air downgraded over at b of a. >> transports have to start confirming. bob pisani had something to say about that yesterday. this is not going in the right direction. >> crude talking here? >> yeah. >> tipco. cloud play. >> cloud plays have been very hot. golden called -- overvalued stocks. salesforce.com was soaring yesterday. >> ubs trims estimates on marvel. >> this is pc related. again, i'm trying to find pockets of tech you shouldn't participate in. this is not so good. >> getting some initiations of kayak. >> i'd just say be careful. google has decided they want to own travel. you don't go up against google. >> mark west energy. >> enough with the secondaries.
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they're burying us alive! there's too much supply. >> demand's going -- >> they've been bsh first trade's a bad one. this one, too. down already. >> for more on those stocks, sots.cnbc.com. coming up tonight we have? >> saks. i think that's really important. this is one where they've suspended the same-store sales as you mentioned. this guy takes old wells in the gulf and reinvigorates them. it's been a terrific business model. a lot of oil money. >> a couple minutes to talk about retail. one thing at saks, the quarter can be okay. comments can be okay. unless you blow it out you've got problem. others are. >> i'm starting to think too much new york. new york city is a function of all these articles we read about goldman and morgan and not new hires, businesses not doing that well. versus home depot. carl, on this conference call which i'm listening one ear
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while i'm doing the show, florida and california incredibly strong. housing they mention as a drag on the gdp. not this time. they say it's positive. jeremy seegle yesterday saying housing, 25% to 30% of the economy. this is again behind the stealth rally. h what david talked about, rates are so low it's below dividend rate. all things bernanke thought of. i know he's criticized all the time. i love the guy. >> do you think with retail today, and jobs, that qe-3 may be less of a factor? >> broke, don't fix. you can always hold it out there. but we've got a housing-related rally that if the transports confirm, people are going to say this market, i got to be in -- last night germany and france admittedly lower beat the numbers. >> we haven't talked a lot about europe. basically on vacation. >> things are a lilt better than expected. stock markets are up. we haven't heard from china yet which i think -- all i can tell you, carl, things are better. that's why the market did not go
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idly for five weeks. europe did not go idly for ten weeks. things are at the margin a little better. people want to obsess about what bernanke's going to do. he's done it. he's lowered rates to where you can go with 25% down in a job and get a loan to buy a house. boy, should you ever do it. get them while we're hot. >> see you tonight, jim. when we come back, the campaign trail with paul ryan. what he's telling voters after a relatively rough day in iowa. home depot, as jim said, beating the street with their quarterly earnings. how to play it after the break.
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he's my success story. [ laughs ] rick santelli here. we have june business inventories. i barely saw them as they scrolled by. we were expecting up .2. it was up .1. last month up .3. this is is an important number. we learned last week we had a big drop in the trade deficit. also second quarter number. this is june, second quarter number. we're most likely all things being equal going to see an upward revision when we see our next look at gdp which comes next week. actually, the last week of the month. so this is something to pay close attention to.
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retail sales looked strong this morning. that was a nice surprise. carl, back to you. >> all right. busy man today, rick santelli in chicago. thanks. retail earnings out this morning. one dow component standing out in particular. home depot beating the street. raising its full year profit forecast. is hd still best in breed? as vp candidate paul ryan steps out on to the campaign trail, we'll speak with the obama campaign press secretary, ben la bolt, for his official response to the romney/ryan ticket. on the back of groupon's big top buying myths, two small businesses who are sticking by their use of the coupon company. we'll find out why in a matter of minutes. first, a few days after being announced as the republican vice presidential candidate paul ryan hitting the campaign trail. our eamon javers is on the road with ryan. has the latest news from the ground. >> reporter: good morning, carl. we're in lakewood, colorado whereby where paul ryan will be speaking in about four hours.
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if you can look over here you can see these folks have lined up well in advance of paul ryan. you can tell he's drawing some attention out here. about 100 people in the crowd. then something new that we're seeing here on the campaign trail, at least today, at least here, we've got the brand-new romney/ryan logos. we haven't seen these out on the campaign trail. they're making their debut here. see the logos all printed up. they told us they trucked these signs in last night. but paul ryan is getting a little bit of a rude welcome to the campaign trail. we were traveling with the campaign in des moines, iowa, at the iowa state fair just yesterday where hecklers interrupted his remarks. and actually one of the hecklers tried to storm the stage. take a look at how paul ryan handled that moment in iowa yesterday. >> you must not be from iowa.
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>> so some tough stuff for paul ryan out on the campaign trail. you can tell. he handled it, though, about as well as you want a vice presidential candidate to handle it. do a little humor and shift and stay on target. paul ryan has stayed on target and on his talking points. we'll see what he does here in lakewood, colorado, later today. part of what's helping him out here is he's got a veteran campaign staff traveling on the campaign plane with him. we flew from des moines to colorado here yesterday. on the plane, a veteran foreign policy aid for the republicans. michael steele, speaker bane e boehner's press secretary traveling as a veteran press aid. a lot of veteran staffs on the ground here. the way this works, they take the staff, get them ready to go in advance. the staff is prebuilt. no matter who the nominee was going to be, whether it was paul ryan or somebody else, that staff was ready to roll on friday. they rommed in rolled into acti saturday. some real veterans here on the trail with paul ryan.
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he'll speak here in a couple of hours. back to you. >> you got to think, eamon, for someone who's only done a single congressional district for seven terms rallies like this are going to be a steep learning curve. eamon javers. retail clearly doing the business for a lot of people. certainly michael kors. tjx another of the companies reporting. etf, rth also at a record high. certainly 52-week high. courtney reagan is back at hq with all the details. >> good morning, simon. by and large retailer really performing better than expected. some of the conservative guidance does continue. look at michael kors posting another strong quarter. luxury goods maker beat the street by 14 cents on 34 cents per share. up 71% year other year. retailer opened 7 # n2 new stor. same-store sales grew 37%.
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guiding current quarter estimates above where the street is. strong quarter and bullish forecast sending shares up more than 15%. that's just the first 35 minutes of trade. last quarter kors noted it hadn't felt an impact from the european debt crisis. while many on the street found that hard to believe that trend appears to be continuing. retail comp store sales up 24% in europe. room to grow. kors raking in just more than $100 million of sales in the region. high end department store saks' earnings aren't quite as good as kors. they reported a smaller than expected loss of 5 cents per share. saks' earnings are impacted by charges relating to closing stores and opening a fulfillment center which is a little different than what we've seen in the past from the company. saks also noting new york city flagship store sales was positive but slightly below the average for the quarter. lower tourists and local spending in the financial capital of the world very closely watched by analysts when evaluating the high-end consumer and how that sentiment is. but beyond the high-end,
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strength also extending to off price retailer tjx for the quarter beating estimates by a penny. slightly upping full year earnings guidance. noting august is off to a strong start. ubs believes the retailer is being quite conservative with the guidance. we could see a stronger beat next time around. melissa? >> thank you very much. to dow component home depot. sales still missed estimates. retail analyst at janning capital markets has a neutral rating on home depot. good to speak with you. you seemed a little unimpressed by the quarter. why is that? >> not that i was unimpressed by the quarter. sales numbers were better. it's held up better. some of the costs. sg & a was down 3% in dollars. i don't think that's sustainable. they highlighted a couple things there that make that unsustainable. and this is a company operating as well as you could possibly
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want them to operate. i just think of ten times ebitda. it's gotten to be a pretty expensive stock. it just -- there's a lot of question marks about the back half. >> should we assume that what is good for home depot is bad for lowe's? or is there enough for everybody? >> probably home depot is doing better than lowe's. i don't know if there's enough for everybody. that was the history when things were stronger in the category. i think we'll find home depot is taking some shares from lowe's. particularly big ticket. >> you mentioned the back half of the year. that's about general consumer spending and concerns over where we're going with retail in general? >> yeah. absolutely. i mean, gdp. you know, it's hard to argue gdp is accelerating here. what they were saying on the call, and these guys have been pretty cautious people for a while, but as housing has become a bigger part of gdp here, it disproportionately should help them. there's a tougher spending environment it feels like heading into the back half. >> is that going to hit everybody across the board in terms of your coverage universe
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or is that specific to home depot in the home improvement space? >> it's not specific. it's across the board. we definitely have a cautious view as we go into back to school and actually into the holiday season. we just think it's going to be tougher out there. >> all right. let's bring in now peter keith of piper jaffray to join in the conversation. peter, david was saying he had some concerns about spending in the back half of the year. do you see those same concerns brewing? >> well, as it relates to home depot specifically, i don't. if we look at what they posted for the first half, which i think is important because you saw weather anomalies q-1 and q-2, their first half home comp was 3.8%. we're seeing better housing metrics. that comp could actually accelerate for home depot as the housing market becomes more and more of a tailwind. >> i want to ask you about the housing market. because the conference call management was very -- has been very bullish about the prospects for the housing market. what is the bigger driver? is it people, individuals buying
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homes and having to fix them up? is it this whole sort of foreclosure trade where there are big investment firms now investing in homes on scale and rehabbing the homes? >> i think what's interesting, when you hear from home depot management, they still don't feel like housing is a major tailwind to their business. they feel ultimately their business right now is tied to gdp. they're seeing some early signs that housing could be helping. i think the key driver to answer your question would just be existing homeowners remodeling their homes, putting money back in their homes where they've underinvested for the last several years. that could be a very powerful multiyear driver for home depot. >> is this a dynamic, david, where you want to own a little of lowe's a little of depot or do you really want to pick sides here? >> well, i mean, i think -- home depot is operating at the moment better than lowe's. one of the issues i have with lowe's, too, this deal -- this offer they made for this company in canada, rona, i think can cap their multiple as well. that's been a great capital allocation story. which i think has to be calmed
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into question in a little bit as they made that offer. i would probably stick with home depot. i'm neutral on both of them. i recently downgraded be ed bot them after big runs. i would probably stick with home depot if i was going to own either of them. i'd rather own the fundamentally stronger story at the moment. >> home depot up now 77% over the last 2 months. that's the context in which you're suggesting people should scale back potentially. >> that's right. i'm sorry. go ahead. >> it's had a nice move in the last 12 months. at this level, i would point out it's still trading at about 16.5 timesmy forward 12-month number. which i don't think is reasonable for a company taking share, best in breed retailer in an industry just beginning to see an emerging tailwind. i like the valuation. >> david, you have this shuddering when peter said that.
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peter makes a very cogent case. >> there's no square footage growth. he said 16.5, 17 times earning. we look more on an ebitda basis. at ten times ebitda it's at the high range of any range it's been at. it just to me strikes me as a pretty expensive one. you need some pretty healthy beat and raises there. if he's right about the housing market and there's an explosion here, i'll probably be too early in my downgrade. i think you need a lot to go right here for this thing to get more -- for this thing to continue higher is high opinion. >> last word to peter. >> we favor home depot over lowe's. this is a management team executing as well as anyone else in retail right now. if you consider housing has been a headwind on their business for several years, we're just beginning to see some stabilization and emerging positive trends. we think that can be a very favorable multiyear driver. on one of the few large cap names on this base to play in housing. >> always interesting when the
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two guests tisdisagree. market flash from brian at hq. >> thank you, simon. estee lauder the number one stock in the s&p 500 up about 7%. on one side they had a top and bottom line beat. on the other eps guidance was below consensus. what's really giving the pop to the upside. operating income. they lump europe, middle east and africa together. expectation was for $98 million. it was 147$147.5 million. back to you. when we come back, your official obama campaign response to the romney/ryan ticket. obama's press secretary, ben la bolt. stick around. we're back in two minutes. ♪
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♪ president obama in the middle of a three-day bus tour through iowa. in a speech yesterday the president referred to congressman paul ryan as the ideological leader of the house republican. he also stated that the romney/ryan vision is something he fundamentally tis agrees with. ben labolt is the national press secretary for the obama campaign. joins us from campaign head quart rs in chicago. ben, great to have you with us. good morning to you. >> thanks for having me, carl. good morning. >> interesting dynamic setting up here as the tickets now announced. is it fair to make ryan the face of the house gop opposition? because there's a bunch of other players in that space. >> well, governor romney has
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called him the intellectual leader of the tea party. he's put forward the budget plan that governor romney really has a carbon copy of that budget plan that would make devastating cuts to programs that would benefit the middle class and create the good paying, sustainable jobs of the future, things like education and research and development and infrastructure all to pay for $5 trillion tax cuts for the wealthiest. if you had any doubt about that being governor romney's top priority, look no further than this selection of his vice presidential candidate. this is confirmation fwovrn governor romney would rubber stamp the program of congressional republicans. >> dan balz in the "washington post" today says the campaign basically overnight has become a full throated campaign on the future of medicare. i wonder, as the obama campaign starts to roll out their advertising, specifically in florida, if you're going to make clear that there's a difference between a 60-year-old and how they're affected and a 45-year-old and how they're affected? >> well, this would have
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implications for benefits across the board. it would actually impact current seniors. because under the romney/ryan budget, the doughnut hole would go back into medicare. and seniors would pay $600 more a year on average out of pocket for their prescription drugs. the access to free preventative care that was in the affordable care act would go away under the romney/ryan budget. and for beneficiaries, future beneficiaries who are currently under the age of 55, it would cost them thousands of dollars more out of pocket each year. it turns medicare into a voucher program. it ends medicare as we know it. it has implications not only for current seniors, but for future beneficiaries. it's a radical restructuring of the program. >> is there not a danger, then, given that, that perhaps the obama campaign, which painted itself very much as the presidential campaign for change, seemed to be on the back foot in arguing for the status
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quo? i've seen in "usa today" it's going to be governor chris christie who launches the republican congressal in two weeks time with a 20-minute keynote address. isn't there a danger you seem to stand for the status quo when they're calling for sacrifice across america to deal with the longer term problems? >> i think it's the romney/ryan ticket that is advocating for warmed over policies that didn't work in the past. we passed those tax cuts for the wealthiest in 2001 and 2003. we were told like we're being told today they would unleash growth and job creation. and it didn't. it led to the slowest job growth we've seen since world war ii. the president is is fighting to restore economic security for the middle class which over the past couple decades has been threatened. he's fighting for investment in education, research and development to make sure america wins the race to the top. an investment in our future competitiveness. if you're looking to fight against the status quo, this is
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the ticket. the obama/biden ticket. >> ben, a lot of discussion today about ryan and his willingness to compromise. he's worked with ron wyden. he's worked with chris van holland on a variety of issues. does that to you seem to be the kind of man willing to come to the table and discuss ideas like an adult? >> let's take a look at the deficit reduction negotiations. the president has a $4 trillion deficit reduction lan on the table last year. congressman ryan said reducing the deficit was his top priority. according to "the new york times" yesterday he opposed negotiations over the deficit reduction plan because he thought passing something would help the president's re-election. >> do you -- >> he put politics before country on that matter. >> do you hold him personally responsible for the death of that grand bargain? >> ultimately the president made clear he was willing to buck democratic orthodoxy, sign into law tough spending cuts. he's already signed into law $2 trillion worth of deficit reduction in order to compromise
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to reduce the deficit. and to promote investments in the sorts of things that create the good paying, sustainable, middle-class jobs of the future. the republicans, including congressman ryan, walked away. >> you know, i've got a stock market over here who is going to worry to which degree we don't yet know. about the fiscal cliff as we get closer to the end of the year. do you think that ryan makes a compromise over the cliff less likely? >> well, governor romney is the one who's called for kicking the can down the road. when the president has called for action to address these mat rers. the president's also called for action to ensure that congress immediately passes a plan to ensure that taxes on the middle class don't go up by $2,000 on january 1st. and governor romney has called for congress to kick the can down the road until after the election so he can implement his own political agenda. both democrats and republicans
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agree that on this matter, that middle-class taxes shouldn't go up. we should pass the plan in which both sides agree immediately. >> finally, ben, does it feel to you like the campaign's going to end up debating more ryan than romney even though it's romney who's at the top of the ticket? >> no. ultimately i think this is the same choice that the president outlined in his economic framing speech in cleveland. it's a choice between building the economy from the middle class up by making investments in things like education and infrastrubture or what governor romney and congressman ryan want to do, build it from the top down with the same trickle down fairy dust that's never worked in the past. strip back oversight from leaders and assume the market will take care of the rest. we've tried that philosophy before. passed the tax cuts for the wealthiest. it didn't unleash the job growth and creation we were promised it would. >> trickle down fairy dust. we'll keep that in our pocket for later. good to talk to you.
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please come back. >> thanks for having me. >> you heard the obama administration's take on the romney/ryan budget. coming up, judd gregg will join us in a bit for his take. back in a couple minutes. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 trade at charles schwab for $8.95 a trade. tdd#: 1-800-345-2550 open an account and trade up to tdd#: 1-800-345-2550 6 months commission-free online equity trading tdd#: 1-800-345-2550 with a $50,000 deposit. tdd#: 1-800-345-2550 call 1-866-294-5373.
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♪ sfwlnchts one of the major events, of course, of the summer has been the drought of the midwest and rising corn and soybean prices. what does it mean for the rest of the world? let's trade the globe with david reidel. david, good morning. for emerging markets what does this mean? >> it is a huge deal for emerging markets. in this developing economies households tend to spend 55% to 60% of monthly income on food and fuels. food prices have a huge impact on the emerging market's consumer. particularly in china, a huge
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importer of soybean and second larger consumer of corn. and in other places like mexico. >> what does that mean for me as an investor? i'm also presumably bearing in mind in broad terms the price of oil has fallen dramatically and presumably that compensates slightly for the points that you're making? >> it certainly does help. but countries like china, as a massive importer of soybeans, 50% of their food imports are soybean. they import 80% of the soybeans they consume. in terms of headline inflation, in terms of the impact on the pocketbook of these consumers, these food prices have a significant impact on the ability of those consumers to spend on other things. on insurance policies and cellular hand sets and cars and all kinds of things because they're allocating more of their money towards buying their food. >> you seem to be calling here for an unwinding of that great middle class in emerging markets trade. surely it's not that serious, is it? >> it can be. if you get food and fuel prices
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rising in tandem, it can really derail this whole concept of an emerging market consumer. if you see those two things combined, you can have a huge impact on the emerging market consumer. >> bottom line it for me, david, if you would, just before we leave you. >> you want to invest in latin american producers, companies like agro. going to be a beneficiary of the higher prices. buy fertilizer companies. those farmers are going to be putting more fertilizer on their plants to raise yields. and you want to be very cautious in food products in the emerging markets because those producers are going to get squeezed by higher input costs. >> david, thank you for your time. you can catch more global trades every weeknight on "fast money." tuesdays, david, right here on "squawk on the street." >> you were talking about fertilizer. yesterday we were talking about activism. the two go together this morning. activism, of course, continues. this morning in the form of jon na partners. one of the largest activist focused hedge funds out there
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filing a 13-f in which it has less than a 5% but significant position on the $650 million worth of stock in fertilizer company agrium. for a cuple ouple of months the company has pushing for agrium to split itself up between the manufacturer fertilizer and the sale, retail distribution of that same product. this morning they come out and say we have no intention of splitting up this company. as you see, this is a stock right at its 52-week high. done quite well for all of its shareholders including johna partners. that because of corn pricing. you can also see it here what we're talking about in terms of the company saying we're one business. morgan stanley which it's brought in to advice it -- this may be one of the more interesting parts. morgan stanley advised cf years ago in trying to thwart agrium
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from buying pi ining it. at tend of the day, we don't think a proxy fight is likely. whether or not they determine to bring this from shareholders remains uncertain. the company itself has had a number of meetings with agrium management. tomorrow again trying to press the case what it believes is the retail business could garner a multiple of 10 or 11 times earnings. that it is not being managed effectively. it is being given excess inventory, too much cost at this point, and a number of other important things janna is saying in terms of making its case as to why there are no real inn synergies between the wholesale and retail operations. we'll keep an eye on this story. see whether or not janna decides down the road to take that to shareholders. again, when you've done quite as well as they have on this, we'll
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see. proxy fights are expensive. they take quite a bit of time. but they aren't something that you can't -- you have to go occasionally to actually make good on the threat if you are to have it yet again with a future investment. carl, over to you. >> some of these 13-fs it's like christmas in august in terms of stories. when we come back, groupon missing on the top line in the second quarter. shares hit another new all-time low today. could the online coupon company now be a good deal for investors at last? we'll talk about whether it's crazy cheap in a moment. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card
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♪ about an hour into trading. some of the stories we're squawking about. 7:33 on west coast. 10:33 on wall street. chevron rising to new 52-week highs. estee lauder the biggest gainer in the s&p. the vix, 4% up. one day after falling to some new five-year lows, it is now back above 14. >> watching shares of groupon this morning hit another new all-time low in today's session after missing on the top line yesterday after the bell. for more on the quarter, let's
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bring in herman lung. returning this morning to weigh in on the results. on the cnbc newsline, aaron kessler. senior analyst at raymond james. herman, is there home for groupon at this point or have they gone too far off the original business model, increasing the costs of revenue to the point where they can't return? >> i think there's clearly a lot of concern on groupon out there. gross profit, one of the biggest things that stood out to us was the gross profit decline down 1% sequentially. pretty big red flag in our book as well as even if you look at it on a 38 million active users that they have. gross billings -- gross profit per customer, active user, was actually down 22% year over year. a lot of the stats out there are not encouraging at this point. but, you know, there are some european macro headwinds the country is facing. >> oh, come on, herman. european macro headwinds? yes, that's a problem. take a look at these metrics.
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what is the path forward for groupon? should shareholders who've been holding this thing now down 70% over the past year or so, should they hold out for hope? >> should they hold out for hope? i think, you know, i think in the near term it's probably going to be a little bit more choppy than expected. on top of that european headwinds, i think, you know, their business model is changing. because what was new and interesting on the call last night to us was that they did admit that there are some -- the merchants on the european side are not getting the same terms as the u.s. merchants. in other words, u.s. merchants are making more money than european merchants are. they're thinking about changing that model. changing that model will probably have some impact on the company's cash flow and investment dollars going forward. that's one thing that somebody -- a lot of the investors are holding on to at this point. >> aaron, it's not just that. it's not just the potential mixed shift between u.s. and european.
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it's also the fact groupon is now holding inventory which is driving up their costs of revenues. that seems like a major strategy drift from when they went public. anybody buying groupon at the ipo was thinking they're getting a daily deals, social media sort of exposure. here fwrupon is saying they're going to carry inventory now. they're just like any other e-commerce player out there. perhaps starting at a disadvantage. >> yeah. we don't see a lot of risk in the inventory at this point. revenues are fairly small. $60 million for the direct business. maybe $30 million, $40 million of that was selling goods through the inventory. not a lot of risk there. the big concern for us if you strip out the core business. for a company that happened in hypergrowth mode this is a big concern to see a slowdown already. >> aaron, there is a good technology story, isn't there, though, still? as the ceo pointed out i believe on the conference call last night, as far as mobile is concerned.
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we talk a lot about the ability to monetize mobile. one-third of north american transactions are completed on mobile for groupon. and those customers spend 50% more than desktop users, we were told. indeed, they could export that with the first mover advance here, they say, around the world. does that give you any traction on the stock? >> yes. i think there is a positive and a hope for terms of the mobile transition as well as just them getting better on analytics and delivers the right deals with more personalization. there said, we still have some troubling metrics as herman alluded to as well. i think some of these mobile as well as other initiatives should be trooifing a little faster growth which we have not seen yet. we'll hold out hope we do see some better customer het ricmet the second half of the year. >> a lot of guys trying to point out the opportunity in mobile for them. over what time period? how much investment needed? how much pressure on margins in the meantime?
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is this a name you might eventually revisit in the first quarter of next year or is even that not enough time? >> the problem is, numbers keep going down. our estimates have gone down from 800 million down to closer to 500 million. you know, in ebitda for 2013. those numbers continue to keep going down. you know, the company continues to show marketing spend coming down. you know, this model just doesn't really make much sense to us right now. you know, it doesn't appear like one that is sustainable at this point. but we will be looking for more encouraging signs. because last quarter it was an encouraging step. now they're back in the penalty box. >> all right. herman, aaron, great to get your take on the groupon's quarter. we appreciate it. >> thanks. >> thank you. we got another market flash here. back over to headquarters. brian shactman. >> monster beverage got in a little trouble as well when it comes to slowing revenue growth for a high flier. down 22.5% in the last month. getting back today.
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up 5%. doubling down stock buyback from $250 million worth to $500 million. back to you. >> thanks, brian. when we come back, it's the drought that just won't end. up next, we're going to take you live to iowa inside dupont's pioneer seed lab. back in a couple minutes. [ male announcer ] when this hotel added aflac
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it is the drought that just will not quit. is there a solution to the crop yield in the form of genetically modified seeds? jane wells is live in iowa this morning at dupont's pioneer seed labs with the latest. >> reporter: carl, this is what a lot of farmers are seeing this year. this is what some of them are seeing. this is the first corn that has come from seed bred specifically to fight drought. it is new. what a year for its first real world test. it's called optimum aqua max by pioneer, owned by dupont. bred from only corn.
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they only made enough for 2% of all the acres planted in the u.s. this year. while seeds like this generally cost about twice as much as conventional seeds aqua max is promising a 7% better yield in drought. >> we find differences as far as when the male tassel drops pollen on to the female silks. that has to be a very closely timed process. aquamax hybrids tend to have good times as far as the pollen is going to fall when the silks are ready to receive that pollen. >> now, the global seed business has grown from $31 billion in 2005 to $46 billion in year, projected to top $58 billion by 2016 according to mind power solutions. competition is fierce. monsanto just won a billion dollar judgment against dupont over patent dispute in soybeans. dupont is appealing. when it comes to drought dupont has beaten monsanto to market.
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no seed is going to work if you don't get any water at all. but iowa native brent wilson from pioneer says this stuff is going to really be a huge deal. >> probably the fascinating thing for me is to see plants survive with very, very little water. when, you know, if we look at products we would have sold 20 years ago, they wouldn't have made it. so, to me, that's probably the really cool thing. to really see a crop survive through phenomenally horrible conditions. due to something like this. >> reporter: they take this stuff really personally. the bigger issue, of course, now, drought has even impacted seed production. on "power lunch" we'll talk about whether they're going to have enough seed to meet demand next year. back to you. >> i'm curious. when dupont takes a look at the potential consumer of genetically modified seed, buyers of the seed, is it in
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fact everybody who buys seed at this point or is the whole debate over genetically modified foods enough to limit the market they have perhaps more to the u.s. as opposed to europe? >> reporter: yeah. there's a whole -- it's more of a problem in europe. here's what they're saying is the difference here. for this pioneer seed, the drought tolerance in it comes strictly from native corn traits. the material being added to this corn is from corn. the stuff that monsanto is working on, drought guard, still in field tests, has material from outside corn going into it. it becomes a whole gray area about what is genetically engineered and what isn't. this corn could conceivably be sold in europe. the other maybe not so much. >> okay. good to know. jane wells, thank you very much. >> just to be clear the corn will have things in it that isn't actually corn? potentially? >> the way the seed is modified, yes. from monsanto. >> this is corn. >> not dupont's.
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>> thanks, jane. be sure to watch cnbc all day tomorrow. clearly this is a critical topic. all the networks of nbcuniversal will be joining together for an unprecedented look at the drought of 2012. a special half hour dedicated to that drought on this network. the impact clearly on agricultural companies. the nation's farms. and, indeed, you moving forward with food prices. that's at 1:30 this afternoon -- i beg your pardon. 1:30 tomorrow afternoon eastern on cnbc. coming up next woob, we're talking to two businesses sticking by their use of groupon to promote their products. how do they feel about the company's recent struggles. first, rick santelli, what are you working on for the next hour? >> we're going to talk a little bit about seasons. not so much the change of seasons, but the change of seasonality. we're also going to talk about another topic. currency. hey, i talk currency all the time. this is going to be more about political currency.
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last but not least, as we've seen corporate balance sheets improve, they are able to deal with low interest rates. that's a great thing for our economy. when the rest of the economy gets as good as corporate balance sheets. all at the top of the hour, of course. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.
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it's a rough rough morning groupon with earnings. some vendors inevidentbly continue to flock to groupon to do business. and we wanted to explore what's working for groupon at the moment. two vendors join us now. live from chicago, amy davis is with us. she is with amerlaser offering cellulite reductions, including butt lifts. and cindy english who joins us were dedojo offering self defense classes in new york. welcome to you both. cindy, you have continued to remain for some time i believe with groupon now. are you -- how many rounds have you done with them? >> this is our second round with groupon. >> how are you finding experience? why do you advertise, and what sort of deal do you get with them? >> well, it's a great way for us to introduce our school to people who might not necessarily know about karate or people who
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just might need an extra reminder that it's a great -- we're a great school, and that we provide excellent teaching in terms of karate. >> so for those who would say, well, you know, if you do a groupon flash deal, which is what we're talking about here, you might take money away from loyal customers. they will get a cheaper deal than they otherwise would. or maybe these people won't repeat, the people that take those groupon deals. do you find that? is that your experience? >> our experience is that we get to introduce all sorts of people, wide range of individuals who may not necessarily get an opportunity or know that we're around. and so it's just a great exposure for us. but it's -- it's a different business model for us. so i think most organizations, if they're part of -- if you're going to a restaurant and you're not necessarily going to go back, sure, it's not -- it might
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not be beneficial for them. but for us, karate is something that takes time to learn. and once you -- we're currently offering a 20 x 20 so $20 for 20 lessons. you get a short, quick taste of what it's like and then over time it takes many years to become a black belt. >> indeed. >> which she is, by the way. >> are you a black belt? >> yeah, i teach part time there. >> let me bring in amy who is joining us from chicago. you have used groupon i think -- this is your seventh time now? >> it is, yes. >> and how is it working for your business? because, you know everybody is really down on groupon here at the stock exchange today. >> it's a great way to bring in new clients from different areas. and to try our services. >> how do you measure success, amy? i'm curious. do you take a look at yield? how many customers actually come in versus how many people look at an ad like the one we're seeing on our screen right now? >> a combination. between the people coming in and, you know, they might come
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in for one service and is see something else they want to do so we retain them as clients. >> are you getting a sense you're robbing from future full-paying customers? >> no. >> no. >> are you, cindy? >> absolutely not. >> no. >> but it's interesting, with both of you, i think -- this is perhaps what we forget. there will always be new businesses that need to attract new customers and you're at the cutting edge of that. >> well, in addition to groupon, we also work with other types of groupon-like deals like living social or amazon local. >> how do they compare? >> well, i actually think that you can really specialize. with groupon, if they -- we don't have like a dedicated martial arts fielder. i think groupon really benefits from that. so they have a specific -- we're located in the rockefeller center area. and so if they have a dedicated
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martial arts vendor to help groupon rather than like a mid-manhattan representative -- >> so you don't want basically rivals to be on the same site. you don't want to be up against somebody else. it's not helpful. >> i think it's helpful to have a niche. and so when you are more selective about who you bring into -- who you feature, i think it helps groupon. i mean, it's easier to open a business. so with easy access, you're going to have all sorts of individuals. but if you have like a more specific niche, i think it can really help an organization. but i mean, every business is different. >> and -- amy, just finally to you, what about the -- there's a big discussion at the moment about staff that might be leaving
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leaving leaving groupan groupon, livin social might be attracting people away. >> people know groupon, and because of that, they've had good experience, so they will come back. >> good to see you both. good luck with both of your businesses. >> thank you. merriam-webster unveiling 100 new words and phrases added to its collegiate dictionary. some of them we use on-air on a daily bases. try systemic risk, under water as it relates to mortgages, toxic assets and cloud computing. others we utilize behind the scenes. apparently the f-bomb we use a lot. what is that? sexting, man cave, and bucket list. >> i can't believe systemic risk was not in the dictionary until -- until now. >> i totally agree. tweet time. and it's all about groupon today potentially losing its risk missing on the top line. slowing demand for deals. shares, of course, down 70% since the company went public in november. our question to you, to get back on track, what does groupon need to offer that no one else can?
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at cnbc squawk st. that's our twitter handle. get your responses later on.
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"squawk on the street" today, groupon reported revenue that did miss estimates as economic weakness in europe is slowing demand for online deals. shares of the site have collapsed since november, down more than 70%, below $6 today but brings us to the tweet question. to get back on track, what does groupon need to offer that no one else can? mike writes, $38 a share of facebook. ralph writes, a robert pattinson bobblehead. and brad writes, buy one presidential vote, get one free, although i think they already offer that in chicago. >> ooh. >> vote early, vote often. so want to tonight, i assume you're going to touch on groupon, but there's got to be more. >> a lot more. flooding across the tapes, we're going to decipher. the five places you're in the wrong etfs. we got the facts. and one of the top stock picking firms as named by barron's.
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edward jones is with us. speaking of etfs, should see the retail, 52-week high. see you later. if you're just joining us this morning, he's here's what you might have missed earlier today. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> we have really substantive guy who could be sitting in the light house. so i think policy design and substance moved back from the legislature to the executive, if romney and ryan win. >> both the european union and i dare say the ecb are ready to take action once certain conditions are taken. >> you don't want to throw good money after bad. if your house is declining in value. and that's how people view home dep depot. but if your house is improving, you will go to home depot.
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it's a remarkable comeback from a great company. i will say that i think in my judgment, it is still too early to buy. >> still. >> yeah. been saying that since the start of the show. >> yes. >> the opening bell. here at the nyse. >> it's a choice between building the economy for the middle class by making investments and things like education and infrastructure. or what governor romney and congressman ryan want to do, which is build it from the top down, with the same trickle-down fairy dust that's never worked in the past. >> this model just doesn't really make much sense to us right now. you know, it doesn't appear like one is sustainable at this point. but we will be looking for more encouraging signs. last quarter, it was an encouraging step and now they're back in the penalty box. >> good tuesday morning. live here at post nine at the new york stock exchange. the dow up some 27 points. pretty decent retail sales up
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today. s&p up 3, nasdaq up 8. retailers from every facet of the sector seeing solid gains today after positive numbers from michael kohrs and saks, fossil. southwest airlines, one of the worst performers on the s&p, trading in the red after bank of america downgraded the stock to underperform from neutral. want to get to the road map. groupon, as you probably know by now is getting crushed after its quarterly results show its daily deals business is slowing significantly. we're going to talk about the culture of the company, talk to two analysts who both made cuts on the stock today. plus, former new hampshire senator judd gregg gives us his take on the romney/ryan ticket, how he thinks things will play out in november. and signs of open on the high end. sax reporting a smaller than expected loss, getting a boost in the stock price. we'll see if this is the signal to bring some luxury back to your portfolio. a search for the next bubble in tech. could technology security be it? we're going to tell you if these stocks will keep your money
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safe, along with your laptop. all that and more in the next hour. tough day for groupon. shares falling to new lows this morning after the chicago-based daily deals company reported disappointing results after the bell. frank senate is a groupon watcher, the author of the june 2012 book, "groupon's biggest deal ever." also the president and editor in chief of "time-out chicago." good morning to you. >> thanks for having me, carl. >> what do you think they're saying in the halls of the company today? >> i think that they were dancing as fast as they could in the call yesterday, and they're a little shell shocked today. you look -- the big question about groupon was always, could they bring that marketing spin down and still have the hyper growth in revenues and the deal sales. and what happened was, they got the marketing spend down to 15% of revenue, down from 54% in q2 of 2011, but then the wheels kind of fell off and the sequential growth. just 2% sequential growth. so they were not able to kind of, you know, convince everyone that they can dial back that
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marketing spin and still get those revenues. your active customer base grew just 1 million sequentially, up from $37 million. so it's really just slowing down. and international, down 4%. and you know, the thing about groupan -- the other thing about the model, it's supposed to be really a good model in down times. andrew mason said on the call yesterday that they had too many high-priced deals in europe and they're trying to dial those back. but really, if groupon can't do well when people are looking for a bargain, that's possibly pretty big trouble. >> yeah. europe, you can almost give them a pass, because it's affecting a lot of companies with much bigger capital bases and management expertise than them. but when you start adding revenue to the mix, i don't know if people who bought at the ipo ever expected groupon to have a warehouse of goods. how is the groupon goods business changing the strategy. is that where they're headed? >> obviously, that's where the bright spot has been. they talked a little bit about that yesterday on the call. and -- but here's the thing. if you look at groupon goods,
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it's basically the world's largest as seen on tv store. even in the call, andrew mason talked about how there was this fancy yogurt maker that you could buy on groupon goods. and we've seen deals for a helium-filled shark that you could drive around the office. things like that. i don't know. to your point, i don't know that these investors thought this was where groupon was going to go. they clearly need to shore up the daily deals space, the g1 as they call it, even while they're going into these ancillary markets. overstock.com i think already had that business. >> sure, yeah. we've seen that story before. we just talked to a couple vendors who still use it. you might have met one of them in the studio there in chicago. they stand by it, say it's a good way to introduce a new audience to your product or your service, if you've never -- if they've never seen it before. are you getting any sense -- any rumblings that vendors are going to start to look at these metrics or the return on the investment and flee? >> here's the good news for groupon. i actually operate a business,
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time-out chicago, that uses groupon. i've had similar good experiences to the woman who was doing the laser hair removal. for us, we get as many renewals through subscriptions sold through groupon as we do through direct mail or any other channel. a lot of merchants are happy, continue to be happy. the good news also in the call was the take rate remains high. they said -- had not materially changed the last time they reported. that's a good sign. so they're able to get the money out of the deal. they got a lot of cash on hand. so the big question is, can they kind of hunker down and get their -- you know, g1 house in order while they create this dashboard for commerce. and so far, it looks like the merchants are sticking with them. all the merchants care about is is it getting people into the sampling, are they repeat business. can they grow their business based on this? and there's still good merchant satisfaction from what we've seen. >> frank, always good to talk to you. you know a lot about the company. appreciate your insight. >> thank you so much, carl. >> frank senate in chicago. want to move on to politics. mitt romney's vice presidential candidate, paul ryan, hard at work on the campaign trail. today he's in colorado holding
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fund raisers and talking to voters. eamon javers is in lakewood. good morning eamon. >> good morning, carl. from lakewood high school here in colorado, you know, paul ryan is not expected to speak here for another two hours or more. but some of these folks, we've got a couple hundred folks in line here. some of these folks will have been in line for about four hours before they get into the venue here. they've opened the doors here mi behind us and starting to bring people in. the ryan campaign clearly bringing excitement to colorado. we've also got over our heads here pro choice advocates flying a plane with a banner saying that paul ryan will cause women to lose their ability to choose. that's creating some excitement here on the ground, as well, as people look up and see that banner. but folks traveling on the campaign plane with us tell us that what we're going to expect to hear from paul ryan here in a couple hours is a talk on energy policy. he's going to tout the romney/ryan energy policy of all of the above. he's going to criticize the obama administration. and then we jump back on to that
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campaign plane, leave from denver, go to las vegas where the ryan campaign is going to have an event focusing on housing, and is going to say that because obama has introduced all of this muddled group of policies, it's created an endless series of bailouts for wall street banks. they're going to stick that tag on the obama campaign, as well. so some tough campaigning out here on the campaign trail in colorado and later las vegas today, carl. >> eamon, it's amazing that -- what, 72 hours since he was added to the ticket, people are already talking about the honeymoon being over, about the race to define him, about that appearance in iowa yesterday. i guess that's the speed at which politics moves now. >> you know, the new cycle is just a couple hours now. it's not even a couple days or -- what we're seeing here already is a headline in politico this morning where they've interviewed a bunch of republican establishment types in washington who are very critical of the paul ryan pick. they're very worried that it might cause the romney campaign to seed the entire election.
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no, ma'am must folks that politico is sourcing inside the republican party in washington. what the campaign out here has got to do, though, is shake that stuff off. they've made their pick. what they know is that in every presidential year, you get some carpeting from the establishment types in washington who have been out on the campaign trail in past years. but the campaign that's living in the present tense has got to say those are the old guys, we're the new guys, and got to ignore that stuff. but they're getting heat and they know it, carl. >> you were at the center of the storm, eamon. thanks so much for the coverage. we'll talk to you soon. eamon javers in lakewood. rick santelli with the tuesday edition of the santelli exchange. good morning, rick. >> morning, carl. and everything that eamon said, listeners, viewers, keep it in your brain for an extra minute. we're going to get to using some of that. listen, 'tis the seasonal. we've come to a point now where numbers are so important, there's so much at stake, trying to handicap. is the u.s. economy really grabbing or isn't it really grabbing? zero hedge, really one in the weeds today about seasonalities
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with today's retail sales number. and believe me, what they've done is really opened up many eyes that there's two sides to every coin. generically, it was a good number, up .8. generically, $401 billion turn into $404 billion on retail sales, up .8. if you look at the seasonalities, nonseasonally adjusted because they've gone back and proved there is a lot of seasonalities to july, it moved from $406 billion to $402 billion. i'm rounding off. that would be down .9. i urge everybody, look at it, not because i'm picking one side or the other, but because if you really want to know the answer, sometimes you just can't have somebody point it out to you. you need to do a little homework. now, let's talk about currency. not the kind i normally talk about. politico currency. remember what ajavers just said, i really like him. he basically said some conservatives don't like the pick. well, you know what? prior to very recently maybe the
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mid terms, there really was only one party. the last president had t.a.r.p. and lots of things off balance sheet. the new president continued the same. there wasn't really a republican party until the 2010 midterms. now, think about political currency. when the president was elected, the country was in crisis. and you can really tell a lot by what gets done during crisis. because political currency runs high. what did they do? big programs, i'm not questioning, but it was health care, carbon trading, czars, energy, stimulus, okay? what was it after midterms, jobs, jobs, jobs, deficit spending, entitlement reform. all i'm telling you, down here there is a phrase. whoever turns the market gets the trades. you know who turned the market? the people at the current washington republicans don't like. they turned the market. and the current administration says they've always been worried about jobs, jobs, jobs and deficits. but i urge people to go look at what the headlines were before the midterm elections. because that's what turned the market.
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and last but not least, there's a huge bright spot in this country that many other countries don't have. boy, these balance sheets have cleaned up big-time, and that is a great thing, because we're only a little out of phase in this economy, and an election could really get that fairy dust going, and corporate america, they're ready to do some hiring. just give me opportunity to do it! back to you. >> rick, before i let you go, i want to ask you, ryan is seen, as you know, as an icon for fiscal discipline. for less government. but he also voted for t.a.r.p., and he voted for the bailout, the auto bailout. so to you, is he a dream addition to the ticket? >> there's no virgins left in washington. you take what you can get. this guy turned the market. entitlements, fiscal reform. it's what this election is really all about. do you want a coach that says, don't worry, you don't have to run around the track, you don't have to do callisthenics, it will owl work out. or do you want that drill
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sergeant kind of coach that nobody likes? you know what, when you're done with him and time is past, you look back and say, wow, that guy brought out the best i could be! >> rick santelli in chicago. >> that answer your question? thanks, buddy. >> that answers the question. see you later. over to brian shactman at headquarte headquarters. >> i love when it's a yes or no question kind of thing and he gives you that. no virgins left in washington. memorable. social media not doing great today, across the board. i want to look at angie's list, the opposite situation of monster beverage which had a doubledown in its buyback. their lockup expiration ended today, 25 million more shares available to trade. four times volume. 10.77, carl, the all-time low. the stock down 17 1/3% on the day. back to you. thanks so much. when we come back, saks, is it a sign the cracks in the high end are finally healing?
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watching shares of saks trading higher after a second quarter loss. on the news line, fresh off the conference call, jennifer davis, an analyst. as a neutral rating on saks. good to talk to you this morning. thanks for coming to the phone. >> thanks for having me. >> i guess the general takeaway is not as bad as we thought it might be, right? >> exactly. the street was muddling a loss of 9 cents, they reported a loss of 5 cents and maintained back half guidance where most
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investors were expecting saks to lower some of the metrics in the back half. >> they warned that gross margins might be under pressure due to higher activity. they were down, but not as much as management guided. to what degree was that -- to what do we owe that? >> right. they -- they were able -- saks was able to sell more merchandise or more markdowns at the first markdown, not having to take a second or third markdown. so markdowns were not quite as steep as they anticipated they would be. >> we heard similar things out of home depot, in that average tickets were up. obviously, the broad macro data on retail today was good. is the consumer saying something here? >> well, i think the consumer is holding in there. i've been saying i would not bet against the american consumer. we are in a strong fashion cycle, so i think you're going to continue to see spending on apparel, and i think that as the weather turns cooler, that they'll increase again.
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>> of course, there were some concerning elements of the call, and the report. what do you make of the company when they say we're no longer giving -- no longer going to give you monthly sales? >> i wouldn't read too much into that. their comparisons get easier in the back half, so i don't think that there's any sign that sales are slowing down at all. they've been wanting to move away from monthly sales for a while. >> finally, you're on a neutral. you say near-term margins may be under pressure. we keep hearing this thesis that it's -- you know, the stores are not in control. it's the kohrs and practicedas and ralph laurens driving retail distribution. are you in line with that? >> i think that that's partially true. i think saks has a brand of its own, and people go to saks because it's saks, but also because of the brands it carries. >> all right. well, thank you very much, jennifer. appreciate that. interesting story taking shape today. jennifer davis at lazard
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capital. jim cramer going to talk to saks ceo tonight on "mad money." that's 6:00 and 11:00 p.m. eastern time. straight ahead, you've heard the white house's take on the romney/ryan ticket. when we come back, we'll see what a former chairman of the senate budget committee thinks of that. former new hampshire senator judd gregg, long-time friend of the network, joins us live in a few minutes. don't go away. you want to save money on car insurance? no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance.
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congressman paul ryan's budget plan on the campaign trail this week. judd gregg is a three-term senator from new hampshire, served as chairman of the senate budget committee and also a cnbc contributor. morning, senator. good to have you back. >> thank you, carl. pleasure to be back. >> i saw you on the guess list this morning and i was so glad we had you, because you can really speak to the debate happening right now. but first, what was your first reaction when you saw ryan's name on the ticket? >> i thought it was exciting. bold, really. you know, i, as you know, have -- because we talked about this a lot, feel the
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second-biggest threat to our nation after terrorists using a weapon of mass destruction is our fiscal policy and the path we're on. we're headed towards bankruptcy as a nation. paul ryan is one of the few people in washington who stood up to the issue. certainly, the president hasn't. and put out ideas, very original, creative ideas. ironically, some of them created by democrats that he took over and took credit for. but he's put them forward, and i think he's going to focus this debate on where i think it should be, which is on our future as a nation, and our fiscal policy as a government. >> so today people are trying to figure out, sure, he has big ideas. he argues forcefully for them. but as some have said, don't mix civility for bipartisanship. he is -- the white house and ken conrad on our air yesterday seemed to want to blame him for the collapse of simpson/bowles. you were on that commission. is he responsible? >> no, he's not, actually. simpson/bowles, he didn't vote for it, nor did any of the house members, except for john sprat.
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it was, however, a bipartisan package that came out. 11 people voted for it, including 3 of the most fiscally conservative senators, myself included and people like dick durbin and kent. the reason simpson/bowles didn't get any air under its wings was the president walked away from his own commission. we hoped to redo simpson/bowles and use it as a vehicle that the house and senate can use when they hit the fiscal cliff as an opportunity to try to correct that problem and to correct our long-term fiscal problem. but try to blame paul ryan or even -- any of the house members for his failure is just really inaccurate, in my opinion. the failure was the president didn't endorse it. >> i know you've seen some of the reporting, though -- correctly or not, put him at the middle of the collapse of some grand bargain. and you're telling me that you think he has it in him to work with the democrats and not simply demand more to the point
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where the whole thing goes away. >> absolutely. and i think he's made that clear in the discussions i've heard. he has been pretty forthright. he said if we get very significant restraint and entitlement spending that is not only scorable, but is enforceable, and that's critical. because in the out years, congress can reverse that and tends to when it comes to social spending then he would consider revenues as part of a revenue reform package, along the lines of reagan ross ton could you ski. and i think that's the framework for a grand bargain. you do much more on the spending side than the revenue side and you to the revenue side by putting in place dramatic tax reform package. and i think that's got a lot of legs, in my opinion. >> let's talk about the politics for a quick second. obviously, some have pointed out florida might be more of a challenge, depending on how the argument goes down there. do you think -- even if they can win the intellectual argument on fiscal discipline, medicare, entitlements, can they win the emotional and political
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argument, especially in a state like that? >> that's always been the issue, hasn't it? because people have always used social security, especially, but also medicare as a political club. even though anybody who is honest about those two programs know they're going bankrupt, and know they're not going to be available for our children and know they're not going to be affordable for the people who are on them very quickly here. and so having a really thoughtful debate on those two issues, i think the time has come. i think the american people have caught up with this problem. i believe the american people understand we can't spend more than we take in much longer and is still pass on to our kids a prosperous nation. and they're ready to hear some substantive and creative and bold ideas to try to address this issue. and nothing that paul ryan has suggested or republicans are suggesting is going to impact seniors who are presently receiving benefits. but we do have to change the program down the road and we have to do it in a way that isn't draconian, but is phased in so people aren't massively affected but are rather getting a program that's workable and
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can give them the type of services they need when they retire. and the ryan proposals -- remember, the ryan -- the key ryan proposal here is premium support. that was a democratic idea. he used it, and so it became a republican idea. but it was actually an idea that came out of a democratic think tank headed up by alice rivlin. >> yeah, who likes him very much. you've got to say that. senator, thanks for the guidance. hope to see a lot more of you soon. we will, i'm sure. senator judd gregg in manchester. a few minutes until the closing bell in europe. we'll get the action live in two-and-a-half minutes. don't go away. born with.ou're and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something.
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the european markets are closing now. >> yes, they are. simon is here to walk us through that. some of the gdp numbers, too. >> yes, it was interesting, the gdp numbers, a better showing from germany in the second quarter, still, of course, a contraction for the second quarter overall for the you're eurozone. we're not actually in recession in the eurozone yet. so green on the screen so far today. before we go further, it's probably just worth marking the fact that the commissioner that's at the heart of saving the eurozone project, was on "squawk box" on cnbc this morning and did say as far as he was concerned germany and the ecb are committed to shoring up the euro and the ecb has promised to buy spanish and
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italian debt if those two countries ask for help. interestingly, he wouldn't be drawn into a discussion about when that might happen. let's just listen to what he said for the record. >> it is clear that both the european union and i dare to say the ecb are ready to take action once certain conditions are made. >> and, of course, that is the question. will they ask for the help, can the spanish do that politically? just bear in mind, we have got green on the screen in europe today, this strong rally. in fact, the top 50 blue chips, the dow jones euro stocks, 50, from the june low up 50%. but we have managed to put on at 7.5% over the last month. we have not been able to get further gains in europe, arguably because of the long-term charts. wanted to show where we are on the five-year chart. you've got an important top coming through here from the
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highs you had in 2011, 2012 and a bigger one that comes across here, 40 points higher, which is arguably from the 2007 highs and the 2011 highs. that's arguably why we haven't been able to make greater gains, say, the technical traders there in europe. and also the earnings haven't been as good. there are more misses in europe, because of the forward-looking statements during earning season as you might have anticipated. let me mention one stock to you. united has got a lot of attention in the u.k. it could be -- and this is a water play. it could be that either the ontario pension scheme or kkr and various consortia depending on which newspaper you're reading could come through with a $9.5 billion bid so that's what people are talking about in london. and for the record, let me say to say -- did you see this, carl, the greeks raised $4 billion euro at a debt sale at an interest rate of 4.4%. >> this is 13 weeks, right?
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not a long-term bill. >> no. but they've raised $44 billion euros and you might say how on earth can the greeks do that? basically, the greek banks are being funded from the greek central banks, which is being funded from the ecb. and most of that money is going back into the ecb. so they're paying back the ecb on one window, essentially through another. and some salaries to keep everybody going until the imf makes up its mind. >> the shell game, but still the biggest offer in a couple years for that country. >> 4.4%. a lower rate than you might have to pay in spain or italy. that's true. >> because greece -- >> thanks, simon. let's get to rick santelli for his take on things european, as well. >> absolutely. mark rand from southwest securities. he's a friend of cnbc. i love to read most of his musings on what's going on in europe. he always seems to be closest to the bull's eye. welcome, mark! >> thank you, rick. good to see you.
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>> all right. you know what, i don't want to go into the weeds. i want to keep this really simple, mark. and you're the guy. >> okay. >> today i read that the greeks did a lot of t-bills, okay? lots of bills. more than anybody imagined. i hear about how the yield curve is so important in spain. but here's what i want to know, mark. who actually are buying these auctions? when i read whether it's greece or spain, are these just like normal, everyday global international investors? who is buying these auctions. >> it's a great question, rick. and the answer is the ecb. it's a circle that the ecb has created, where they fund, for instance, in the case of greece, the greek banks. then the greek banks turn around and buy the bills. then they pledge the bills back to the ecb to get cash. so in a sense, it's kind of ponzi scheme to be honest with you, that's put forward by the european central bank. >> you know, when it comes to politics in this country, i hate it.
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nobody talks about the only things that matter. and i think that this is the same dynamic in european debt. we use the barometer of debt levels as the end-all of whether things are going to work out or not. but when you're telling me is, is that it really is a rigged game. my next question then is, if we're gauging the outcome of europe to a manipulation of interest rates, the real question we should be asking is, what do internationals -- international investors want to be participants in the aukts auction to get a true read on whether these countries are doing better. how do we bring those investors in? >> rick, i can tell you, my commentary goes to about 5,000 financial institutions in 48 countries. and i can tell you that institution after institution, and i mean the real money guys -- i'm not talking about the hedge fund guys. of the real money guys are out of europe or getting out of europe or have cut back as much as they can, because we can all see the numbers.
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we can all -- it's just simple addition and the amount of debt that europe is building is going to at some point or another cause a moment like a lehman moment. when it comes and when it occurs and what sets it off, i don't know. but there's way too much debt, and not enough assets to guarantee them. >> real or memorex, and i think we're looking at a lot of things on tape that are memorex. mark grand, thank you. carl, back to you. >> thanks, rick santelli. we're watching a bunch of different things with the dow up 39. [ inaudible ] >> before you go on, i think we're having some audio issues with your mic. you want to go to break and we'll try this again? when we come back, we'll find the next tech battle ground. why security stocks might be a safe bet for your portfolio.
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and groupon taking a hit today. we'll talk to an analyst who downgraded the stock reasonable and cut his price target further today. ken cena joins us after the break. so, what's the problem? these are hot. we're shipping 'em everywhere. but we can't predict our shipping costs. dallas. detroit. different rates. well with us, it's the same flat rate. same flat rate. boston. boise? same flat rate. alabama. alaska? with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. dude's good. dude's real good. dudes. priority mail flat rate boxes. starting at just $5.15. only from the postal service.
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says is about to turn the debt crisis upside down. and a warning sign that a selloff is in the wings. now back to "squawk on the street." see you in 20 minutes. >> thanks, scott. back to bob pisani. >> these firms release how their trading was and percentage of the markets every month. and they got some good news. let's take a look. there's a way you can measure how firms are doing that do this kind of business. average daily dollar volume here. for july, it was down 17% year over year. this is for knight. that doesn't sound good, but everybody has had a horrible time, volumes terrible. month over month, only down 2%. most of the industry was down 10% in july. so i know this number isn't great, but believe it or not, they were gaining market share in july. they were doing a lot better than the rest of the market. then, of course, came the august 1st trading glitch, whatever you want to call it, and of course their market share dropped dramatically. look at this. even now they're coming back. remember, that trading glitch
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happened on august 1st, not in july. year-to-date, 12.5% of the s&p 500 in terms of the volume. they dropped down to 2 to 5%, the disaster that happened. now now look. in the last few days, august 9th and 10th, back to where they were, in other words, trading where the trading community is coming back tonight. this is a real testimony for the ability of this company to bounce back from potential disaster. and are they grateful for it? how grateful are they? they put a full-page ad in the "wall street journal." i understand it was in the financial times. there it is. basically thanking wall street, full-page in the "wall street journal." obviously good news. and knight knows it as well. and trading around $10, a very narrow trading range for a while now, just below $3. let me move on and talk about michael kohrs, a company firing on all cylinders and bucking the trend. these numbers are astonishing, had the earnings this morning. 71% gain in revenue?
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heavens. same-store sales up 37%. guidance for the current quarter, sales up 30%. you don't see these numbers, folks. these are not the cover off the ball numbers. and europe, i just want to note, 24% in europe. in europe. that's an amazing number. that's got people looking around, talking about what's going on. revenue numbers overall, again, that's the key point. let's take a look at the competitors, for example. coach's store sales have been decelerating recently. coach is a great company. take a look here at the numbers. bring that back. i just want to show that again. how its numbers have within been coming to the down side, to 2.5 in the last year, that's decelerating comp. store sales. the key metric you're watching. that's why when you get a day like today, kors knocks it out of the park. at the highest levels in several months. and coach is to the down side. that's the response because kors is taking market share away from coach. tiffany on the up side.
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nordstrom and saks doing well. a lot of people over at knight saying thank you very much to the wall street community. >> yeah, and that's built up over years. that's what that is. >> that is the goodwill of a lot of people, including tommy joyce who almost single handedly and a lot of other people involved in helping that country get over a very difficult period. but there is the reputation of a single man that i think mattered very much in a critical situation. >> incredible story. thanks, bob pisani. over to brian shactman at headquarte headquarters. >> great work with special olympics in connecticut, impressive. this is getting a lot of 13 fs, from julian robertson's tiger management, fascinating moves. i'll tick down just a few for you. raising stake in amazon by 90% to 346,000 shares. how about this one, taking a stake of almost 2 million shares in facebook. we don't know what price. but we know it's down 5%. getting toward $20 a share. also a couple things in social media, increasing their stake in
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linked in to 3.3 million shares from 300,000. and finally, dissolving the stake in yelp, taking some profits there. back to you, carl. >> brian, thank you very much. they're not household names, but tech security companies outperforming their social counterparts like facebook and groupon over the past month. so when it comes to tech, is security the new social, and should you get in on it? here at post nine, jason nolan in i.t. systems and net working senior analyst at r.w. baird. good morning to both of you. i asked on twitter whether or not evelyn the ultimate trade now is to short social and to go long security, because that is what's been working, right? >> that seems to be the sentiment for some of the traders out there. now, you said they're not household names in perva, palo alto networks, they don't occupy the sexiest corner of technology, but when you look at where the stocks are compared to facebook, zynga and others, they have done well in the wake of their ipos. >> jason, part of this is, look, we tend to trade what we're
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exposed to as consumers. and a lot of these things, unless you run an i.t. department, you're not going to be a customer of these companies. what are some of your favorites? >> we like palo alto networks a lot. that's a company that just went public. but really, the smaller, more innovative companies are doing quite well here. fortinet is another. privates would be fire eye or barracuda, but the bigger companies in the space are having a hard time keeping up with the pace of change. >> and of those you're referring to? >> well, cisco and junipers, specifically. and hp and dell play in this category, too, on the network security side of the equation. >> how do the smaller players -- how are they differentiated? is it the sectors they sell to? is it literally proprietary technology, the way we sort of slice and dies phrma and patents and things like that? >> that's fair. differs by vertical. but these are -- well-financed, sophisticated groups of people after all kinds of information.
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it could be profit-mindeded criminals, it could be social activists. it could be terrorists of some type. and the rapid amount of change in the industry is causing the smaller companies with new ideas and less bureaucracy to flourish. >> and evelyn, you wrote a piece in the times a few days ago, the lead was it's not a question of who has been hit lately, it's a question of who has not been hit. >> exactly. and you were talking about these smaller start-ups and what they're doing differently. it's about finding creative solutions to new threats. this is an industry that has to be so responsive to all of the different types of platforms changing. we have seen the shifts in mobile, the growing points of cloud computing. and so they have to be very responsive and flexible to all these new different threats and as well as all these hackers finding their own creative shrugses to get around, fire walls and traditional security software. >> jason, are the multi -- palo alto, is it a rich valuation at this point? >> it is. high-growth companies and a
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middle pell on next year's earnings doesn't tell you the full story. they're sticky businesses, quite resilient in different types of markets and long-term free cash flow and really discounted cash flow model is the way toel value these guys. >> before we go, i want to turn to social. because we're talking groupon today. i see tiger just took a big stake in facebook. but i mean, it's -- had to come down to the low 20s for that to happen. are you getting the sense that the people are beginning to talk about these names like they're cheap or not? >> for some, i think so. i think some people are looking at facebook and thinking, okay, do i wait another few dollars for it to go down before getting in? there is a question. we had an article in the "new york times," someone is quoted as saying when does this become stupid-cheap. trading at a high multiple, you have to feel confident in the prospect of these businesses. >> yeah, groupon down 20% after the slide its had says a lot. finally, jason, your favorite name of the names you covered?
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>> palo alto networks right now. and then i would say some of the storage names, too we like. emc and net app specifically. >> all right. i still remember palo alto going public, seems like the other day but already had quite a run. evelyn, good to see you. jason, thanks to you as well. up next, two analysts who made cuts on groupon today. any reason to hope for a comeback in this stock now at 5.68? back in a moment. gomery and abigail higgins had... ...a tree that bore the most rare and magical fruit. which provided for their every financial need.
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shares of groupon getting pummeled this morning after it failed to meet wall street's already lowered expectations. wall street revising its views on groupon today. ken sena is an analyst with evercore partners, cut his price target from 9 bucks to 6.50. and mark mahaney with citi downgraded to a $9 price target. good to talk with both of you. as tough as the story is, ken, you were leery going into the quarter, but 6.50? >> sure. i would say right now, we lowered it from $9 to $6.50. i think for us, a few of the concerns we had going into the quarter that billings were definitely getting weaker. the issue around goods in terms
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of the company taking first-party ownership in terms of the goods they were selling both happened on the quarter. and i think for us right now we are sort of stepping back and reassessing the stock. >> yeah, mark, you're in the same camp, although nine holds the promise for some growth. what are you seeing? >> the challenge is, you've got sharply decelerating growth in the two key metrics for this company. billings and active customers. so the core daily deals business is clearly slowing down dramatically faster than the company it fought in the market as well. and now the company is having to invest in new areas of growth so margins will come down with a decelerating growth story, with margins coming down, very hard to see fundamentals propelling the stock higher. you have support at the stock, you've got about over $1 billion in cash. but until you get some sort of stabilization in the core business, that stock won't go up. >> yeah. we joked around yesterday, because after watching jcpenney last week, another name with troubled fundamentals but a big
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short float that, you know, they would have bad news last night and yet the stock would rise. that has not happened, mark. is the first turn going to be europe, is it going to be mobile paying off, is it goods becoming the core of the company? what takes us to nine? >> it's very hard to know. the -- again, the core daily deals business is showing that it's really hit a wall. there are a couple options plays here. it's 30% of their transactions are via mobile devices, getting deeper into the goods business. the problem is, while there is competitive motes around the daily deal business, they're taking on competitors like an amazon and ebay, very different and much tougher competitive set. so they really need to first stabilize that daily deals business and show some growth and some of those option areas for the stock to work. if those things come together, the stock goes to nine. but if those things don't, the stocks flat down from here. >> i hate to ask a simplistic question, but is this about
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mason? if he left with a stock pop, would a change in management make much of a difference at this point? >> i don't think so. i think it's about consumers and i think consumers are getting a lot of daily deal e-mails now. and the argument can be made, enough is enough. and unless the company can show that users -- their user metrics are going to continue to grow, then marketing expenses go up and the other businesses they're looking to pursue, including goods, as we have argued, carry higher cost of revenues. so the operating leverage, much of the cash flow conversion cycle that investors have signed up for with this model, they are at risk. so i think for us, you know, i think if trends continue as they are -- as they have had with billings starting to slow, with the company accelerating into goods, you know, i think that there is the possibility that some of the cash on the balance sheet, you know, is in jeopardy. >> all right. and that's when we start talking about it's liquidity story. mark, this morning cramer -- we said what does this remind you of and he said it's reminiscent of 2001. he mentioned e toys in
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particular. i hate -- you never want to kick them when they're down, but are you seeing any shades of that at all? >> the one big differentiator is the cash positions these companies have versus that time period. and the profitability. in most cases, not all. but you've got four of these internet ipos over the last year-and-a-half that came public with i call them speculative business models that have already had to pivot, have already within a year of going public have had to materially change their business models and all four stocks have materially underperformed. two of the others that come to mind would be zynga and pandora. but that's the risk that came with each one of those names. speculative business models that have had to pivot within 12 months of ipos creates a disaster for those stock prices. >> yeah, and they're all trying to find a new floor on which to dance. it's amazing to watch. mark and kent, thank you guys. appreciate your insight as always. >> thank you. ken sena, mark ma heene. keep the tweets coming. groupon did report revenue that missed estimates. they say europe is still a problem. slowing demand for online deals. the shares getting hammered.
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so we're asking you to get back on track. what does groupon need to offer that no one else can? tweet us @cnbcsquawkst. we'll get your answers after this break. ♪
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let's get to squawk on the tweet. groupan missed estimates, europe is in trouble. shares of the site have collapsed since it went public last november. it brings us to the question on "squawk on the street," to get back on track what does groupon need to offer that no one else can? lori writes, a buy one, get one semester of college free. craig writes, discounted medicare and student loan gift cards. and igor, 25% off ipo. oh, never mind, they're there already. as anyone who has held their shares knows. a couple movers that might surprise you. google is currently above its january 2012 high of 668. if it ends the day above that level, is going to close at its highest level in four and a half years. that's going back to 2008. and then gap, the best stock -- one of the fourth biggest move on the s&p. gap, believe it or not, is up 111% ove

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