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tv   Squawk on the Street  CNBC  June 19, 2013 9:00am-12:01pm EDT

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we have gone from the city of 2.2 million people to 700,000 in the last 35, and detroit was one of the arsenals of democracy, and don't forget that. detroit. now, the al teternatives and lo at pittsburgh. i was in pittsburgh monday, and pittsburgh is booming. but anyway, let's take heed on what is going on in detroit. >> and nobody is going to roll in the money. >> right. >> and make sure you join us tomorrow. "squawk on the street" begins right now. >> thank you. for investors the wait is almost over and in hours from now, we are expecting to hear what fed chairman ben bernanke and the fellow policy makers have to say about the stimulus strategy and will wall street like the message? good morning and welcome the "squawk on the street." i'm jim faber with jim cramer, and carl quintanilla. as you can see, the futures are
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trading lower, and in europe, largely red on the board when you look at the various forces on the continent. our road map this morning? well, it starts where you would expect. the fed investors are jockeying for the position, and they are preparing to parse wording by the fed later this afternoon in the statement. we will help you the prepare, t too. >> and fed results are exceeding expectations, and see what that could mean for commerce and economy. and now a backing off of a bid for sprint by dish, and they will concentrate on clearwire. and also, a look at icahn stepping up dell bid. and now the fed is wrapping up the two-day policy meeting this afternoon. investors hoping that fed will provide clarity about how and when the fed will wind down the bond buying program. make sure to watch the
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statement, and ben bernanke's news conference which is i perhaps more important, and it starts at 2:00 p.m., and one way or another, it is going to be nice to get something out of the way, wouldn't it? >> yes, i used to regard these events as big bad events when i worked at the hedge fund, because there could be relief even if he says the wrong thing and i'd love for him to address the 10-year, because it signals that the e kconomy is better, b it is not just weak. but if you address the 10-year, i'm in control and the bond vigilantes are not. i believe when this is over, we will come back and discuss -- i'm not kidding -- stocks. >> although, is it possible that the language that he used that got some markets across the board concerned was designed perhaps to take a little bit of that out of risk assets which in some areas were getting overheated? we were starting to see the signs and not '06 or '07, but not good either.
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>> yes. i was listening to "squawk" this morning with mr. langone and andrew and going back and forth, was he artful and was bernanke intentionally saying things that were royali iroiling the market? this is a considerate man and he is tired of people saying i will do whatever i want and 100-year bond offering at 1%. that was wrong. he wanted to take some of the r irrational exuberance out of the bond market. >> and part of the issue, too, is that people say that bernanke has not been clear in what he is saying, right, in the most rekre recent appearance in capitol hill, and those who tweeted afterwards that he spoke out of both sides of his mouth? >> well, greenspan did it for ten years. >> well, in is within minutes of the statement. >> well, i think that the the market is not the market. okay. in other words, it is the real estate investment trusts, and
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the bond market equivalent so to the speak because they are not equivalent because you pick up 3% and lose 11%, and now the parlance which you have been saying all year is starting to happen. holy cow, how did i lose 10% on the bonds? i thought that you put the money in and get the 3% and the principle back, and these are the people he is waking up. >> well, he woke them up, and what they decided to do is to not only just pull the money from the bond funds, but they decided to go the equities and emerging markets. >> yes, remember those? holy cow. >> and we didn't say this, but coming back to the financials, jefferies which is a part of the lucadia reported down year over year and tough comparisons there, but that is a tell on what is going on in the bond markets with all of the money flowing out, and that did not include june. >> and we had agnc talking about the dividend, and a little cut
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there, and what has happened is the mortgage real estate investment trusts and the guys trading the curve turned out to be a little less ready. what happened here is that bernanke said to all of the guys, hey, look, i gave you a fire drill, and will you please position yourself, and get a little bit more used to the idea that this is not going to last forever. i think it is important that people recognize that it does not mat the ter wheth-- matter t is today, but when. that is what is important, when. >> and you feel, jim, the moment of truth for the rally, that when you look up, given the volati volatility that we have had of late, we are not that far away from the all-time high of the dow, so this is either make it or break it. and bernanke, what he says today is going to determine whether this thing continues to go or whether it backs off. >> well, i think that there again, i want the talk about the techs and the banks. they actually would like to see a sign that the bernanke thinks
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that the economy is getting better, because you buy the techs. that is what is going on all qua quarter, and old tech and the banks do better with inflection. so it is not like everything goes bad, but there is a considerable, i still think group of people hiding in the stocks thinking that, you know what, this is better than 10-year. >> if you were hiding in g.e. yesterday, you were happy, if you were hiding in that group. >> that is aerospace. >> i don't know what they said over in paris, but people liked it. >> there is a 40-year wait for planes. this is mcinerney is one of my heroes of boeing. this company by the way, they can't make these fast enough, and everybody in the food chain is being carried up, because the chinese wants the planes and the middle east, they want planes, and everybody wants planes, because by the way oil is so high that you can't use the old planes to make money. >> so many questions that mr. bernanke will field including his own job. >> right. >> we heard the other day from
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president obama, and talk about parsing a statement, and many have parsed that statement trying to figure out what he was say saying. larry meyer thinks he knows. take a listen. >> in is remarkable and i almost fell off of my chair when i heard the president's remarks last night. he essentially fired ben bernanke on the spot, and gave him a tepid testimonial afterwards, so it is time to really now focus on who is the next chairman and who that might be. >> we should go focusing on who the next chairman might be. >> that is harsh. i don't think that he was fired. >> always important to know the kcon text. >> he tried to back off of that as well in a follow-up question there. >> and he tweeted that he is gone. >> and he could have taken the question and said, done a great job, and next question. >> well, we are always uncomfortable when the president talks about the federal reserve. hey, the guy is doing a great job and sending him south of the border of south carolina, and
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sending him to have a couple of meals with alan krueger, and go tige tigers. >> well, we have to face the reality that sooner rather than later bernanke is not going to be in the job. jackson hole is not that far away and bernanke is not going that way, and janet yellen is going to give the keynote out ther there, and most are thinking that she is the most well positioned to take that gig next. you have the face the fact that bernanke is not going to be in the job forever, and what that ultimately means for the qe and the unwinding tofr ba ining of sheet and everything. >> soon. >> it will be here before you know it. >> time goes by, and the kids grow up, and how does it happen? it is incredible. >> i don't know. >> where does the time go? >> believe me, i don't know. >> that is what popovich is wondering about duncan, where did the time go? i do think that the game picking, and you started it this morning on "squawk" the game of who i it is going to be. too many parlor games, and can
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we play the gail of whether boeing is going to have better than expected earnings, and we are stock network, right? morning joe did more stocks. we are talking about the obesity stocks. >> move on to one of the barometers of the economy as a matter of fact, and that being fedex, the package delivery company reporting fiscal quarterly products with $2.13 and that is exceeding expectations. they are improving the margins, and ceo smith said that they have not exceeded the tepid growth, and international shipping services is the point of weakness as customers are selecting cheaper modes of international shipping. >> why not? there is really much less business going on there. one of the things that happened in this period is that we are seeing the chinese as a paper tiger. this is my new theory.
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>> really? new theory. >> my theory is that either the military is running that joint or that they are not building things fast enough to ship anything from there. >> and think are building trains and lines in cities that nobody lives in yet, but that is planning. you have to understand central planning. >> i have a plan for china, make it so you can see the feet. >> you have to understand the concept. >> it is called pollution. i lived in los angeles in 1978, and you could not -- and today, you cannot go outside. remember that? we had air quality day, and you cannot go outside today, and china, ever. >> so you are rebounding and calling over? >> well, i'm saying that china is a paper tiger, and we should stop worrying about the chinese and stop thinking that we are bozos here. >> why, 3.5 billion of them, and why worry about them? >> well, that is a great force, and by the way, isn't it great to watch the president in
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germany knowing that they think we are like the stau zi, and the lives of others, and every five germans -- >> yes, we have a different satellite on every single one of the people. you can tell putin. >> yes. >> what about putin not being in shape? >> well, it is levity about getting older and not doing the things that he used to do. >> who is the comedian in chief? and when you need -- well, maybe we need like a friars club guy in the cabinet. >> a little roast. >> yes. we bring a roaster in chief out there like the g-8. >> i would like to play a game of one one-on-one basketball. >> i understand that jack lew is funny. >> well, he is writing his name. and i think "down at the schoolyard" with carl icahn. i got sandwiched with icahn and
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icahn. >> all queens boys. icahn, and jack lew and me. >> it takes a ton of people to cover him. >> what is in the water in queens? nothing. nothing good at all. >> it stunts your growth, and that is all i can tell you. >> dish network is not going to submit a revised takeover for sprint which clears the way for japan's softbank to continue with the offer, and sprint's decision to cut the due diligence short, and they are competing to buy the rival company clearwire. they have a tender offer out there, and the minimal condition is 35% which may be tough to do, but as you know the special committee of clearwire says they favor the 340 of dish over sprint. there is going to be a 22%.
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we will hear from the son in a big way, and i have yet to meet him, and i can't wait to bring you the interview one day. i am pounding the fist, because it is getting closer. >> maybe closer to, because of maybe some clairity. >> and guys say, he is going to shake it up. >> and he is going to shake up verizon and at&t and you know the spencer davis group, and i am a man, i will tell you so -- that is a group that you would not have been born, but spencer davis group is "i'm a man, i'm a man." >> we will play nit it in the break. >> no, i think that always play tom club. >> and are you in the camp? >> no, the day they met with charlie and delivered the sprint bid i was in the camp that he
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was serious the finance it and the spectrum he held when combined with clearwire and sprint would provide a robust pl platform and the combination of services, satellite tv and fixed wireless he could provide to provide broadband and wireless service for the phone would be interesting. but he never followed it up. never really followed it up with the firm pfinancing where he pad for the financing. i don't think that his own bankers have figured out what the strategy is. they always had questions about the ability to continue to spend money on sprint's network as would be needed. and softbank is going to do that. >> where does he look now? clearwir clearwire? >> well, he says, if it does not work out, i will tell to at a&t >> and verizon buys vodafone, and there is a long running yarns in your area of expertise, and everybody is going the buy everybody. i am surprised that has not changed. >> not yet, no. >> i mean, it is still a
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deal-mdeal deal-happy group. >> he has a lot of spectrum, and he has to sell it. >> use it or lose it? >> yes. >> and fed chairman ben bernanke is not the only big name in the news. we will have the latest on billionaire carl icahn and his bid for dell. and should the s.e.c. be involved in trading? the markets are in a wait and see mode for 2:00 p.m. this afternoon when we are all over what the fed says and then what ben bernanke says afterwards. live from the nyse when we come back.
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you know the ads if you like the way you look, but apparently they did not like the way he looked before. >> zimmerman terminated. so we should speculate idly, no. >> taking the five suits for the price of one and getting out of here. >> that is another company a bank company. >> and down 7%. >> didn't they have any good promotions going on over there?
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>> terminated george zimmer. >> with extreme prejudice, but that is "apocalypse now." >> and now dell in the spotlight again, and the board's special committee says that it won't endorse the billionaire's latest proposal to call for dell to sell for $14/share, and they say that it will not adequately address the liquidity issues. i am not sure we have all of the time to talk about it here, but if you do the map, there was a liquidity gap in the previous proposal to provide a $12 dividend per share and then a stub equity, but now it is $15.6 billion and when you do the math on the actual funds available. for 1.1 billion shares he would have 76 billion shares remaining and a lot of them would be held by carl and southeastern, and that is 13%. >> southeastern sold half of the position to carl at $13.52.
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>> how did that happen? >> that is to me one of the more interesting things. >> half of it is positioned and $13.52 is just above market. and then they sell? >> with five minutes left in the game, they pass it off? >> it is like putting duncan on the bench last night. >> popovich. oh. >> and listen, you are talking about a master chess player, and you talk about ergen and carl that way, and he is farther down the vote, and he may think that he can make money on oil or casinos and things that were viewed as distressed and he has come in and controlled them and walked away through the tough times with enormous amounts of money. >> even airlines he made money. >> and it is going to be a july vote, and it is going to be close. ics is going to be a proposal, and if he does not get iss, dell will win it, and if he does, man
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it is tight and he will probably lo lose. >> michael dell is mum throughout this, and he has to stay that way? >> no, he can say whatever he wants. >> no, he can anything. >> he can absolutely start to articulate why shareholders would take his shares, but he has not done so. >> the statements and the one s that carl has read, and i want to read you something that he said yesterday and i want your reaction it to, because it plays to michael dell acting like this company is finished basically, and needs to take it private to fix it, and carl saying despite dell's own dire projections, their own company which they failed to report stated that in most conservative case dell would make operating income of $3.3 billion in calendar year 2014, and he is telling you that because he is saying that this company is not as bad as michael dell is wanting you the believe it is.
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>> not anymore for george zimmer. and we have a triple digit day ahead of us or do we? just moments ahead of the opening bell, and it is another big day for trading here on "squawk on the street." tioned
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you are watching cnbc "squawk on the street" live from the financial capital of the world where the opening bell is set to ring in one minute. in fact, one minute. mens warehouse and it is a funny sto story, but may not be. >> he owns stock. >> and george zimmer founded the company 40 years ago and we know the company because of the ads, you are going to like the way you are going to look, and he is so associated with it, and it is going to be down, but today is the share hoeholder meeting and was supposed to be and then they canned zimmer, the board, and they ais wesay we are go g ting reconstitute the board. >> and will they get rid of the guarantee, david? >> that is a problem. >> well, he founded the company
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but he owns 3.5% of it. >> and the fis of tace of the c guarantees something, and then he is fired. >> yes. >> and there is the bell, david! >> and reconstitute ing ting th. hold on. reconstituting and now more red. i could watch that all day. isn't that incredible, because it is mem merizing. >> it is like time square. and captain america was there to help with the launch. always nice to see him. over at the cog nizant as well. >> i love the concept, but it is bernanke day and not george zimmer day. don't lose sight of that.
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>> right. >> and absolutely, right. i don't know if i'm going to like the way he looks. >> no, the market is not going to like it, jim, but at sop point -- >> it is going be overwith. >> the fed has to set the path to ending qe at some point and the market is not going to like it. >> i keep saying that you can't look at it as a market, because the bond market equivalent are being smoke and the western digital is going up, and texas in instruments and somehow we relate the better economy with old tech. >> adobe. >> so certain parts will not like it. >> right, adobe will but kadoba being jack won't. and the stocks that the floor was brought out from under them including retail. retail is not faring well. housing, and we have a toll upgrade and will that withstand
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the fed? i don't know. >> i don't know. don't you just need to watch the 10-year and the dollar and that dictates everything? >> i think so. and the 10-year is not -- >> where is the 10-year. >> and bernanke say i'm in charge of the 10-year, and will he be announcing it? i'm in charge of the 10-year. >> i don't know what he will say, but hopefully he won't say something like subprime is contained. that didn't work out. >> holy cow! and remember when they all laughed when the fed minutes came out, and that cramer, and it says laughter. >> by the way, talk about the guys on the bubble. >> no kidding. >> when you have had dinner with the fed chairman and you sit next to him, he cannot talk to you at all, because anything that he says to you in the discourse of any kind might be interpreted. >> so mr. chairman, how did you like the steak?
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>> noncommittal. >> it is a little tough. kind of i'm not sure about the -- >> he is tightening, and the i went over the graduations and the commencement speech and i think that it was meant to inspire youth. what is that all about? it was supposed to be a tell, but it like addressed people graduating? what is the point? >> and at least when he is freed up, he can talk again, but the point is that you wonder how much these guys are in a bubble so much that the only people they are talking to are the economists at the fed and the mathematicians and the phds, but not talking to anybody in the real world. >> and the other guys give a speech saying that bernanke, there is a hard hawk view which is that bernanke never should have bought the bonds or the mortgage bonds and the guys all felt that the economy is stro stronger than anybody on this panel this it is. where is the strength of the economy? where is it? >> the fed has been above
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consensus of everybody in where the economy is. >> but where is the strength? i feel better against europe and china. >> and oil and gas. >> and the unemployment numbers from those districts are amazing. >> and the housing and the ripple effect that you have pointed out from housing many times. >> and nordstroms. >> and autos doing pretty well. >> restoration hardware. and housing, we could use 2 million homes. you are right. you are right. i'm saying that if you are the fed and say 6.5% unemployment, we are not there. >> we are not there yet. but we may be getting there. taking a look at the futures. >> well, quickly, the banks, jim, that you said are the most impornt sector to keep an eye on, and they are lower this morning by a half percent. >>le with, people are not buying my rap on that stuff. banks are too high, and this guy who is a pop-off jamie dimon
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said that the rates he will do $2 billion more with the higher rates, but who is he? who is jamie dimon to nknow abot his own bank? >> what do you mean, who is he? >> that is shakespeare. >> yes, the bard as you like to say. >> yes. as opposed to c.r. dickinson as the bard. i think that jamie dimon is right. >> and there was fixed income commodities down sharply. june has been bad on the fixed income side, and volatility might be good, but i wonder if there is a read through for morgan stanley or goldman sachs and the lehman brothers -- well, that is a joke. but my point is to the existing investment banks that we have. >> and we had the morgan stanley conversation that would have said that we are positioned poorly, and citi didn't say that and jpmorgan didn't say that, so i'm reluctant to damn all of them and i don't mean to use a
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curse word with the same curse of jefferies which is a good firm as we know. >> and yes, the shares of sprint, and i would have thought that a lot of it had been taken out, but apparently 3.5% has not been with some in there with the hope that dish would come back. you are going to look at a company that very soon under the shareholder meeting on the 25th i believe. >> it will trade at a vastly reduced price and not because something is wrong, but because of the arc. and some levels -- >> well, 22% of the shares remaining outstanding and you are getting cash. and all of the different number s in my head, i don't want to quote it from memory right now, but the point is that 78% of it is going to be owned by softbank, and they raised the bid if you recall a week or so ago to compete with the dish to close it out which they appear to have done and the question is can they close with clearwire and any chance they will come back there? i don't know that is the going to be the case, and instead,
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they are going the litigation route having filed a lawsuit earlier in the week. >> well, i will look to you, because a lot of people who watch "mad money" own sprint and say it is cut in half, but theru tepder. >> right. and softbank will continue with the buildout most important, but clearwire is a interesting situation and has been from the beginning given the spectrum that seems to be so important to the plans that both softbank has and dish had. and it does not promulgate incredibly well. it is the higher band, but good in urban areas the spectrum from clearwi clearwire. >> not to switch the topics too radically, but why is mens we s wearhouse? >> i have no idea with the loss
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of george zimmer. >> the stock should be down because he is the company. >> well, he is in ads. >> well, they have no official comment to cnbc on the day that he is fired on the same day they were supposed to hold the shareholder meeting, and we do have the commercial, i guarantee it. let's hear it. >> we have commercial? >> yes. >> you are going to like the way you look, i guarantee it. >> there it is. you won't hear it any longer except on youtube and the oldies. >> and dell is really huge, and sprint is huge and the fed is huge, but it is an oddity for me that we all know the ads and we have all been to mens warehouse, and the guy who we regard as n menswearhouse.
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>> and here is a great call waiting for mr. bernanke. the stock market goes down no m matter what he says, and i know it is cynical, but it is the stock market. up two days in a row, and the dow is two points away from a historic high. and two, a lot of people think that the market is weird so that anything he says can be spun negative ti. if he says to stay the course, keep buying the bonds, they don't want to hear that, because we are primed to move to tapering, and if he says tapering or the people interpret it that way, people on the sidelines will be worried about that. so people feel that we could drop 100 to 150 points after he talks no matter what happens. but the question is how we close, and that depends how the adults react to things here. and the truth is that the bonds have hit historic highs, and that is what is motivating at this point. you were talking about bonds and bond etf, and looking a at the vanguard etf, the biggest in the united states is down 2.5% in
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the last month and a half. that is what the yield is. already you have lost a full year and no wonder people are concerned with minor changes in the bond funds. the key message is that hopefully the adults will prevail and listen to mr. bernanke, the tapering is not bad as long as it comes to the economic outlook and it is transparent and hopefully the adults will prevail on that opinion. and fedex is up even though they gave a guidance that was dis disappointing. the midpoint of the guidance is $6.85, and the expectation was $7.35. and fedex will no longer give quarterly guidance and another company backing out of the guidance business and that is disappointing, but why is the stock up on the guidance? they have a successful cost reduction program and talked about it, talked about it in the conference call, and had some voluntary layoffs and 2,500 people in total. people reacted to the hope that
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the margins are going to be improving. the margins are measly, and off all margins down 3%, and used to be 10%, and there are hopes it will improve. they said international shipping the same as before, people are continuing the look for the lower cost ways of shipping overseas. this is part of everybody's effort to reduce costs, and it is understandable. finally a hot ipo pricing tonight, hopefully, bluebird, and this is in the whole gene therapy program. and remember the clouding was the magical phrase for last year and this years, but now we have a supreme court ruling that you cannot patent human genes so gene therapy tries to introduce dysfunctional copies of genes into somebody's cells and hot ipo and hot idea. we have seen one epizyme, jim, that stock now is $24, and also
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in a similar field of gene therapy as well. that is going to be pricing tonight. keep an eye on that. cramer, back to you. >> well, we had a subdued view, and now it is back. over to the bond pits, and rick santelli of the chicago cme. go ahead, rick. >> of course, we are waiting for the complete clarity by the fed chair and the conference of the probing questions of why the economy is looking so good to so many and yet ben bernanke is after fra id to take away some of the juice. we will know more in several hours, but the markets are not looking like they know much more. not a large amount of activity, but yesterday, we did have a rejection again in the low 220s, and that will prove to be significant especially should we on a closing basis get above it. even more, some time coming into the time zone, and we are are hovering over unchanged.
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if you look at the boon, a boon's high water mark is equivalent to the 223 and they have backed off 7 basis points, and similar pattern that all the world is watching. and all funds are fungible, and if we look at the foreign exchange, a two-day yen, a couple of bright spots. we are holding above the 94 which is significant and slightly though at 95. remember, a month ago, it was at 103. last chart, the most important chart to europe at least is the euro currency, and intradays don't do it here. and how is the euro adding up against the greenback going into the meeting? hovering at four-month highs. you won't talk about farming, but dell. back to you. >> you read my mind. back to talk about cable deutscheland which is an interesting battle in europe. back to dell, not down too much of course. carl icahn is still in there and
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i wanted to end the kconversatin because we were truncated a little bit, but it is interesting to see the battle of somebody who believes that a company should lever up because of the shareholders and down playing management, and how good things are, if you will, and icahn is saying that he is a force for good and shareholders are getting shorted. it will be of great importance here. >> what you have said in the past is maybe a detriment to the process. >> the overall process, and why in an index fund can't they do it for cost? why do they have to have people analyze these things, and put them on the payroll, but as close as the vote is going to be, they could be a crucial, crucial part of it, iss, and if he believes he can win, it is a
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still a no-man's-land, and don't for get that it is that you have been gone with the icahn plan, and then another vote which is a proxy to elect his members of the board to put in his management team which we don't know which will conceivably go ahead with the plan to pay $14/share to the 1.7 billion shares outstanding. >> you know is what interesting, david. as we talk about other people and icahn being there, and staying power, he has a lot more staying power than some people might at this point. but this thing is done. >> he has more staying power than the partner southeastern who said we are there until the end, and then sells the steak to him. it is because he is incredibly rich. >> and he could throw in another billion if he needs to. >> that is why he is going to keep pushing and pushing, and pushing until the very end. and he is going to hope he gets what he wants. >> is he really serious about
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making a lot of money here and the stub will trade at a significant price as a result of the 3.3 billion that bcg says that the company will have in operating income? it is not over yet. and if they go down, then the stock may go down, and michael dell might look for an opportunity to buy more. it is a fascinating battle between that man and mr. icahn. >> and meanwhile, herbalife, nothing happens. remember that? there was like a interview -- >> oh, yeah. >> that one on january 25th of last year. >> i saw that hackman had something out. >> and we will never forget. >> and hackman saying that the nielsen study was no good. icahn from netbooks alone could take a takeover bid for herbalife. netflix is up again. >> and let me come back to the big deal con e sieve bli taking place in europe. deutscheland, one of the largest cable providers in germany, and then you had liberty global on
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one side and vodafone on the ther, and we will see who wins, but regardless, liberty global may be a winner, because if vodafone steps up to play the multip multiple, you have to say that could apply to them. and if they sell a verizon wireless to use the proceeds to buy liberty global. in is chess pieces down the road. but we talked about ergen, icahn and malone. >> i am trapped in a time machine. this is important, david, you know who else agrees with me that germany has bottomed. would you bid on a cable company if it wasn't? >> well, debt is cheap. >> i think that we should replay the interview with him 40 times. >> it has not been 40 time, and
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it is jermaine. >> and i went down to the schoolyard with julio. >> oh, down by the schoolyard. that was classic. i loved malone, but i will do the icahn for you later. >> okay. >> oh, man, president obama delivering a speech at berlin's iconic brandenberg gate. one-third cutback in u.s. and russian arsenals and the remarks come 50 years after president kennedy's cold war speech at this gate announcing a divided city of berlin. >> blistering hot there, and the president had a good sweat. >> you been to berlin? >> no. >> i have. >> and east germany or east berlin, they are proare proleta and they don't smile, and berlin the most cosmopolitan city i have been in. >> and isn't it a sign that the electric car make ser about to lose the sizzle? that is coming up.
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the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives.
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tesla announcing a voluntary recall of model s vehicles manufactured between may 10th and june 8th. elan writing in a blog this morning that a mounting bracket from the seat latch could be weaker than intend ed. it shows that the stocks on tesla are higher. with that model s, you didn't have trouble with the bracket. that was a few weeks ago. >> it is in the back seat. when i drove the car, that thing is a dream car. what's the matter? you don't believe me? >> i do believe you. >> i put it in the charging system. >> and you have not bought one yet? >> i have no need. i can't get to philadelphia to see my dad and i would run out of gasoline like the alexander hamilton or whatever it is. >> and the gasoline -- >> power, and there is a rest stop named after some poet or something. >> vince lombardi? >> well, i believe that pride still matters with that guy.
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>> they need a charging station with all of the rest stations. we will have "6 in 60" with mr. cramer next. at farmers we make you smarter about insurance, because what you dont know can hurt you. what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers
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it is that time, "6 in 60" and start with factory outlet.
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>> steven panger does a great job. be careful. >> corning? >> well, the things are good and this stock is one that retail loves. i will believe it when i see it. >> you are not a believer? >> no. >> and blackberry? >> i had a good call on this and when they say sell, you should se sell. >> and soda stream? >> when i look at soda stream and you look at u any of the big department stores it is selling like mad, but enough is enough. >> i skipped visa. >> it is all right. morgan stanley and visa and mastercard are the two names that everybody loves, they are going higher. >> and cliff natural. >> this is a footwall stock as my father retail would say, and to hold to sell merrill lynch, i am not guaranteeing that one. >> well sh, i know what you can guarantee what is on "mad" tonight. >> well, we have restoration hardware, one of my favorites on tonight. they are miracle workers and the
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stuff is beautiful, and then iconics brands, and we have been trying to get these people on the show for literally a year. and i can't wait. >> that is going to be a great refleck thun sof where we are? >> yes, exactly right. this is what we will talk about. >> awesome. i look forward to watching it and hearing it. >> and the blackhawks and the bruins tonight, and we didn't mention that. >> "mad money" 6:00 and 11:00. simon hobbs, what is coming up in the next hour? >> well, a hard look at fedex, and apparently 20% upside on federal express and we will explain potentially why. and tesla, and the battery swap video coming out, and if that is not enough, we will talk about how saying sorry is the most expensive and hardest for ceos with harvey pitt. that is coming up in the second hour of "squawk on the street." ? [thinking] i'm still working. he's retired.
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what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ welcome to the second hour of "squawk on the street." our road map begins today with the federal reserve, and we are hours away from the decision and ben bernanke's news conference later today and find out what the market wants and needs to hear from the fed chair about
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tapering jobs and growth. >> plus it was called one of the best cars on the road, but now tesla is recalling some of the model s vehicles and what does it mean for the future of the company and how should you play the stock now? we are breaking it all down. and the s.e.c. is changing the way it fights. it wants to hear you say that you are wrong. s.e.c. chairman harvey pitt is with us to talk about how it will affect future cases. >> we start with fed reporter steven liesman in washington, d.c. looking for four key idea ths that he expects chairman bernanke to address today. rapid fire. how to not spook the markets on interest rates? >> well, that is true. and one of the pieces put out from morgan stanley who is a big guy at ta fed says that the fed can't do it, and the message that bernanke can'ts to send is that we can taper up and down, and no information on what is going to happen with the interest rates and rhinehart is going to call bernanke on it,
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and say that the market will take a cue from you on tapering, and no way to avoid it. >> growth of the economy strong or sequester effects still to come? >> that is a big question that the fed chairman has to address and i'm not sure how he will address it, but the expectation is that it could take off from 1.5 of gdp growth, and consumer spending has stayed more robust than people expected and we haven't not seen the layoffs that come with that, and the e question, the critical question about policy, is the fed chairman making in more impact from the sequester in which he has seen in which case he should stay in the accelerator of the economy and what some economists have by the way, scott, we have come through the worst of it and it is not as bad as we thought, and that is going to give him enough to ease up on the accelerat accelerator. >> and what about if payroll growth is strong? >> well, scott, the issue of the participation rate in the last report and may not say what is it going to happen in the last
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report, but participation rate went up, and you saw the unemployment rate go up with it, and more people back into the workforce and you could have an environment of strong payroll growth, but rising unemployment, and we dot no know, scott, how that is going to factor into the fed policy. >> and last but not least, steve, interesting interview with former fed governor larry meyer responding to the recent president obama comment that ben bernanke has been in the post longer than he wanted. >> this is remarkable and i almost fell off of my chair when i heard the president's remarks last night. he essentially fired ben bernanke on the spot, and gives a tepid testimonial afterwards so it is time to focus on who the next chairman might be. >> somewhat controversial comment obviously, steve, but what does bernanke say about his job or anything? >> well, i fell off of my chair when larry meyer said that, because he is not a guy who has
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given to hyperbole and he talks in a measured way having come from the greenspan committee, so that was an interesting comment that he made, but he is right in the sense that it really changes the dynamic of the questions that we can ask. it is sort of like, we know that you are leaving, and when are you leaving and what have you told the president before and it is like the reporters were dancing around the questions, but it is going to change the dynamic of the questions that we can ask. it is going to be more than i serve at the pleasure of the president. >> sure. thank you, steve liesman. >> and 2:00 today, the news conference is all about the language and how will ben bernanke's choice of words move the market? we will be joined by brian westbury who is with chief investment and also from overnight, as rhinehart put it, how can bernanke deliver a
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commentary that the central markets and the fed and the other banks can taper the support without inflicting a cataclysmic bloodbath on financial assets? >> well, simon, first of all, i think that the fed can taper without hurting the markets, because i don't think that qe is what has lifted the markets. >> how do they tell the market, because i am asking you, specifically, brian, about the language, and what do they say to the market? >> this is what i would say. i would say that the monetary base, because of the quantitative easing has been growing 25% to 30% a year for the last four years, but m-2, the money supply that milton freedman told us to watch has been growing six. so we believe that we can pull back quan titative easing withot hurting m-2 growth, and therefore without hurt iing the economy or the markets. >> joe, i'm not sure that is a catchy headline for tomorrow, and would it convince the markets? is that the language that we
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need? >> well, i think that there is going to be an initial knee-jerk reaction really whatever the fed says, but all said and done, if i were bernanke, i would stress that there is a difference of tapering quantitative easing and tightening the monetary policy, and there are several steps along the way, and the message there needs to be that it is all data-dependent and to the extent that the economy is continuing to heal, and to the extent that unemployment rate is actually slowly coming down and inflation is stesteady, it warrants the f to take a step back. >> and let me push it further, ben bernanke obviously with the academic background has delivered for many people, and the u.s. economy has outperformed and clearly and demonstrably other economies throughout the world through the crisis, and are we focusing now, brian, the language that it is time for him to leave in january and put somebody in there to arctic eticulate the exit stratd
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immediately tim geithner comes to the fore. >> if i were ben bern kishankeb would want to start tapering or i would be remembered as the guy who turned money and turned on the fire hose and that saul i did. if i want to be remembered at the i'm ben bernanke again, i fixed everything and temporarily turned on the gusher and then turned it off when the economy was on its feet. >> brian, that is not what i asked you, but in terms of the language in articulating the exit, do we need to change who is in charge? somebody who is more market-friend market-friendly be a better bet with an economist like janet yellen is what i am headed for? >> well, somebody like janet yellen would not turn off the spigots ark and this is why ben bernanke needs to set the stage, and it is not going to matter who is appointed after him if he starts the tapering, the new
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chairman is forced to follow that path. so that is why i believe he is going to start the tapering before he leaves, because he doesn't want to be remembered as somebody that just left the fire hose on and put it on ground and walked away. he wants to set the tone for the fed in the years ahead. >> joe to, t, to the point that fed chair needs to come out to set the tone to tapering, but no kidding. he can come out to talk until he is blue to tapering and tightening, and the markets will reed read it as tightening regardless. >> well, it is going to be a knee-jerk reaction either way. people are looking for clarity, but he is going to say the same thing. this is data dependent and the law laws of diminishing return have
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kicked in and to the exthaent the economy is improving, fwheed to pull back. and once you get past the knee-jerk reaction, the focus is back to the fundamentals and you have an economy that is boding well to the risk assets and to the extent that you have an 800-pound elephant get off of the long end of the curve, you will have higher interest rates down the road. >> would either of you like his job this afternoon? brian? would you like his job? >> i really, really like my job right now. i don't think that you want me that job, because i would stomp on the brake as fast and hard as i could. and to go back to what joe just said, i think that he is absolutely right. a knee jerk reaction, but from my point of view, it is a buying opportunity. >> okay. guy guys, we have to leave it there, and we are out of time, but thank you for joining us. brian and joesh, thank you. the fun kicks off at 2:00 p.m. >> and also squawk on the tweet with an event that is shaping up to be the summer event, and how
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would it be different if the fed decision would be different if it were in the hands of steven spielberg or cameron? later the s.e.c. has new rules that it wants you to say that you were wrong if you did wrong. we will talk to the former s.e.c. chairman harvey pitt and what it means for the future cases and for how corporations will behave and whether the bankers will ever be jailed. in the name of style and sophistication. but to us, less isn't more. more is more. abundant space, available leading-edge technology, impeccable design, and more than you've come to expect from a luxury vehicle. the lexus es350 and epa-estimated 40 mpg es hybrid.
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mens wear house ousting the chairman george zimmer, and courtney, coming on the day of the shareholders meeting makes it more interesting. >> yes, they were getting a couple of surprises this morning and the shareholder meet iing today has been postpone because the founder and executive george zimmer has been terminated. >> you are going to like the way you look, i guarantee it. >> je, he he is the guarantee guy and no reason for the termination yet, but we are looking. the company has no additional comments to cnbc at this point. because the likeness is so c connected to the company, the warehouse has to pay zimmer for the use. and according to the s.e.c. filings, the request is to pay zimmer or his estate $250,000
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per year for four years with a continued license. after that, it will have the option to continue the license and subsequent payments for its use. now in a press release menswearhouse intends to discuss his relationship, and that is harsh words for the founder of the company. he does have a 3.5% stake, and blackrock and vanguard have 4% more stakes than zimmer. management does not believe any of the matters will have a material adverse effect on the company's position, but we don't know if it has anything to do with what happened with zimmer, but we will going to keep looking. scott and courtney? >> it is david, but we should point out, he is not ceo or chairman. >> that is right. he is not. >> and you might not think it given the appearance in the ads, and while he is the spokesperson
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and the founder, he has not been running the company. >> right. and the current ceo does not have a comment for us either. >> but still to, postpone the meeting and that is the signal that many people are going with as much as the oustings. thank you, courtney. and in shares bellwether fedex is trading higher, and missed on the revenues as the company gave a down beat forecast for the year, but up 3% right now. chris weatherby, and brad kn nolinsk circumstances a tra-- n trader. and so whatis go ing on with the margins, because they were low and then high and what is going on with all of this? >> well, it was a difficult third quarter for them, and the
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expectations were fairly low, and they did a good job in the fourth quarter with the margin expansion and operating income growth which is the biggest segment and the one that people have concern about. the guidance gave cause for concern when they put it out this morning, but it is much lower than consensus numbers and probably i think that spooked people a little bit. when you start to go through the details particular i on the conference call, it was clear that it was fairly conservative and adjust iing a little bit of way they guide the street. so they have been aggressive with the forward outlook and now they are bringing it up to go forward from this point. >> and now spencer jacob makes the point in the column this morning, but it seems that the investors rather than punishing them for that, they still continue to increase the valuation on the shares? >> well, sure. but you have to recall that we have underperformed in the shares this year. to chris's point, we are coming off of a rough third quarter. more importantly, it is about
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the capital discipline of the company, and they are take steps in the right decision to cut some of the aircraft out of the challenging slow growth world environment, but that say, they are increasing the capital outlays for next year. the earn also be up a little bit and the outlook is conservative, but the cash flow generation is going to be light of where the investors were, so that is something to keep in mind. >> and chris, cash flow generation is light, and focus on the express segment, and the extent to which that has been a driver to earnings in the past, but maybe there is a trade down effect now, and people are moving towards the slower moving and slower margin businesses, and it seems puzzling. >> when you think about the valuation of the company, and particularly relative to some of of the come ppetitors like a u.p.s., they are trading at a fairly steep discount relative to the historical spread between the two of them, and so there is a healthy skeptmism that has been baked into the stock right now.
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and the call was focused around operating capacity they have in the market right now and controlling the things that they can control and that got them in trouble in the third quarter. they have made efforts there and cut out more xcapacity on the international lane to improve the mix on the aircraft they are operating. so ultimately, it is going to foster well for profit improvement going forward, and they have further levers to pull on the cost side. >> and you believe that the $200 million of savings to be made, but you are not seeing it yet, are you? >> no, you will see it build over the course of fiscal '14. >> ask you talk about it? >> yes, on the call today, they highlighted a number of the factors including the frequency cuts and lower pension expansion and some of the things around the head count that will lead to that. >> and brian, you think that there is 20 to 25% upside and one of the things that you believe is they will merge the
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ground and the air. but it is continuing to be shot down. >> you look at the u.p.s., and they are generating twice the returns if not more than what fedex is doing with the disaggregated ground and express in the u.s. there is a lot of long term potential here, and even if they don't make the step of ultimately merging the operations flshgs is a lot -- ts a lot of efficiencies to be shifting from air express air focus 15 years ago to ground and e-commerce focus where they are successful today. and to the point that management takes the capacity out, to chris's point, it is a cost takeout story, and we are seeing more steps from the management team that has investors excited today despite lower earnings expectations. >> and people are focusing on the fedex as a economic bell
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weather, a san diego is that justifiable? are they geared towards the global market, because when i look at china and other markets, it is not correlating as well? >> well, over time it is disconnected a little bit, but if you look at the world gdp relative to the trade, that relationship shaz been broken down to some extent and better in the past. i believe they are a good indicator of what is going on from the global economic perspective. if you look at some of the express volumes that are really high, the high premium stuff is coming in a little bit and showing the weakness that we are seeing in my opinion in global market. >> chris and brandon, thank you both for your time this morning. >> thank you. >> thank you. all right. consumer reports called pit best car they had ever seen, and right now tesla is recalling some of the model-s vehicles and what does it mean for the future of the company and the stock? find out next. [ male announcer ] the mercedes-benz
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welcome back the "squawk on the street," i'm josh lipton. have a look at blackberry in the red this morning. analysts at bernstein not fans. they downgraded blackberry to unts underperform and talked about the weak traction and said to disappoint investor expectations, and they take the stock down to $10. back to you. >> and thank you. meanwhile, tesla with a bump even though there is a recall due to a seat remount recall. we will bring in collin rush who covers tesla for the northland capital markets. glad to have you here. what does this recall mean if anything, and clearly the street or the investors don't believe it is much, because the stock is up. >> well, it is a proactive move
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by the company and not defect per se, but a result of a quality process by tesla. they have identified a potential problem if the part wears in a unusual wear, this could be a problem, so this is not a pr problem now, but it is a problem that could develop on, but it is in sharp contrast to jeep, as they fought the recall and then at the end bowed in. tes tesla knows they need strong trust with the customers and they want to demonstrate they are looking out for the customers. >> well, the unique thing about tesla is the distribution and the lack of dealership models, so if you want to get it fixed and the generally the relationship between you and the car owner and the service that you need to have when you buy a tesla. >> they are going out to the consumers? >> to the driveways? >> yes, to wherever these cars are, and make the change within
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a couple of hours and bring loaners to them with consumers to drive. >> how is that a sustainable model going forward if the company is going to sell millions of clars here? >> this is a few hundred cars and not a big problem. we are talking about a few hundred vehicles. >> not in this instance, but tesla will grow, and if it has thousands and thousands of cars that are recalled for a minor adjustment? >> well, it depends on the issue and may need to come back to the dealership, but the company just raised $1 million, and this relationship is critical in the long term success so they will continue to provide the exceptional service so far. >> colin, are you excited that tomorrow, elon is going to put a swap video online to show how
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easy it is. our producers on this show are apoplectic with enthusiasm. >> well, it is going the show that you can swap a battery more quickly than you can fuel a gasoline-powered car. >> how heavy are the batteries if you cart them around in the back of the car? >> extremely heavy. this is not two guys and wrench. this is a high-tech solution for tesla to do this in an e misht manner. it is a company with some of the best engineers in the world working at the company. elon has basically built a company where engineers can build one of the most incredible sportscar sportscars in the world and attracting talent and we believe they can put a high-tech solution on this to be efficient and exciting. >> and you are excited about it? >> yes. it is a ease of use thing and i
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don't know if it enables the company to grow. >> i'm excited that you are excited. >> glad to hear that. >> colin, good to talk to you. >> straight ahead, why ben bernanke has more in common with justin bieber than you think. yeah. we will be right back. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company."
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>> welcome back to "squawk on the street," i'm sharon epperson at the nymex with breaking news from the u.s. energy supply
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about oil supplies. in the last week crude oil supplies rose by 300,000 barrels, rose by 300,000 barrels and most of the analysts were expecting a decline in crude supplies of 1 million barrels and the american petroleum institute last night reported a decline of 4.2 million barrels and this is a big surprise to the marketplace to see a rise of 300,000 barrels for crude supplies in the last week. we are looking at the oil prices slightly lower at the moment, but basically flat on the session. we are also looking at the gasoline supplies in the last week rose by 200,000 barrels. up by 200,000, and the expectation was larger increase of 1.2 million barrels, so smaller than expected rise in gasoline supplies, and dislate fuel supplies down by half a million barrels. the analysts called for an
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increase of 300,000 barrels so traders are figuring out what the data is, and of course, the main is going to be watching at what ben bernanke has to say. but looking at the oil prices, after oil had hit the highest level of the year, scott, at $100 a barrel. >> thank you, sharon. meanwhile, president obama speaking in berlin, and address ing ben bernanke as well. we have scott joining us. >> well, the president had a double barreled mission today. first he appeared with german chancellor angela merkel. he defend ed the programs, and said they saved lives. >> as a consequence, we have saved lives. we know of at least 50 threats
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that have been averted because of this information, and not just in the united states, but in some cases threats right here in germany. so lives have been saved. and the enkroechment on privacy has been strict ly limited by a process to relate to these particular categories. >> so leaning on the technological means to battle terrorism, president obama also spoke at the brandenburg gate and said that a different threa additional cuts in nuclear weapons. >> our fates and fortunes are linked like never before. we may no longer live in fear of global annihilation, but so long as nuclear weapons exist, we are not truly safe. >> and of course, simon, none of
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that on either subject addressed the number one most pressing security issue facing the president which is what to do about syria, and the president and other parts of the world, including russian president putin, are sharply divided on that still. >> on a lighter note, john, he didn't announce that he was a hamburgler as the predecessors have done. >> yes, that is true. >> and so will the feds taper or not? cue the high pitch screens. the washington post neil irwin says that what the fed tapering debate has to say is just as obsessive with jus tin betin bi. well, the giddy attention reserved for teenaged girls talking about jus ttin bieber a
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that may be unfair to teenaged girls. o.m.g. really, neil? >> well, the taper that people are obsessed with and driven the huge swings in the markets and you remember the day that ben bern kay came out with 100 and 200-point swings based on the phrasing of the next meetings is not a healthy thing. here the thing to understand about the tapering. what is the ultimate size of the ba balance sheet and how do they expand qe3 and when do they tighten the short rate. when they begin to taper does not matter that much. >> neil, i totally disagree. the very fact that the markets are so focused on what the fed is doing tells us, it is because we are not strong enough or able to stand on our own, and we are not being driven by other fundamentals, and that it is a fed-driven markets that we have had for the last couple of years and to the point that you made about the key decisions coming up, of course, it is the attention and not because something has changed with regard to the way that reporting is happening, but it is still what is happening in the markets. >> now understand that is what
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is happening in the markets and the markets are what i am describing. the hypertension of does it begin in september or 2013 or 2014? that is the wrong way to interpret the information for the taper there. are technical reasons to begin the taper sooner as opposed the later and it doesn't have anything to do with the monetary accommodations over the next three years. >> yes, it does. you can't get past the fact that if the fed is talking more optimistically about what the fed is doing, of course, you will price that in throughout the curve and the next couple of years. >> there are two pieces in there, the forecast and the reaction function. what has happened is that the u.s. economy has done the same in the last few months as earlier in the years, and maybe little better or worse depending what to emphasize. the reaction function, i don't know that has changed. what we have heard from the different members and bernanke on the hill a few weeks ago
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sounds like laying out a reality function the same as in march. >> the issue and what kelly is driving at is that the huge weight of what is going to turn or when they eventually move. the fed for five years has deliberately created as you know, massive distortions, and massive imbalances and trillions of dollars will flow out at a time when they put the communication front and center and they become a proxy, neil, for europe going wrong and china slowing and the unrest around the world. and when we trade off on the taper talk, it is arguably to factor in all of the issues that we are immune to, because the fed has made itself front and center? >> well, part of this goes back to the debate of stock and flow view of qe and how it works and affects the markets and the economy. the view at the fed and my view is that what matters is the total size. whether it is 85 billion a month or 70 billion or 90 billion is
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less than 3 total or 4 trillion total and you can taper without changing the ultimate number which makes the focus on the time of the month suspect. >> and even if that were the case, it is still true that the ultimate size will be dictated by the market conditions, so it is an e open question as to what the ultimate size will be. it is still up in the air. >> it is, but the question is knowing whether the taper starts in september or november of 2013 gives you information on that number? >> yes, because it is reliant on the changing macro conditions are. >> i disagree with you both. it simply a signal. when does the cash start flowing in the other direction. it is a trading signal. it does not matter what the practical effect of qe was, because there may have never been a practical effect of the qe recently, but it is a risk on or risk off signal. and look at the emerging
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markets, and huge moves, neil. >> while i agree with you that we are in a bank-driven world, the qe and the other markets are driving the swings in ways that make you nervous. if you are mark carney starting the bank of england next week, you have to make you nervous of all of the global markets are driven by what you do and less by what are the fundamentals on the ground for the u.s. or the british economies. >> neil, quickly, what question are you going to ask bernanke later if he calls on you? >> i will be my colleague elon will be there and depends when she falls. nailing this down, and has the reaction function changed and what is taper going to mean if you do it, and he has an opportunity to resolve the question that we have been a arguing about for the five minutes and does the tapering matter in terms of the monetary stance. >> it is an interesting
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conversation and we will watch the news conference at 2:00 p.m. what would you ask him if you were in the audience? >> do you have any regrets? anything that you'd do differently if you could do it all over again, and anything that is going to play? >> once asked the chancellor of france if he had regrets and he said no. >> i asked greenspan the same thing if he had regrets a couple of years ago, and he said, no. show me the evidence of how i was wrong of conducts monetary policy through the period. true story. and the s.e.c. has rules that they want the wrongdoers to admit they were wrong. harvey pitt will join us to weigh in on what that could mean for future cases. "squawk on the street" returns. [ male announcer ] with free package pickup from the united states postal service a small design firm can ship like a big business. just go online to pay, print and have your packages picked up for free.
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welcome back. now the s.e.c. is changing the playbook and it wants to hear you say that you were wrong and that could result in more cases go going to trial. current s.e.c. chairman mary jo white spoke about this at a conference in washington yesterday. take a listen. >> it is to some degree case by case, but obviously with some gui guidance for the staff as to what kinds of cases, and among the, you know, the kinds of cases that you will look for are that you have to balance everything, strength of case, the harm done, how egregious the conduct was, and how important to get a quick resolution. >> harvey pitt is a former s.e.c. chairman and ceo of calimaran partners. good morning sglcht good morning. >> what is the reaction of the s.e.c. move here? long overdue or is it headed down the wrong path? >> well, no, it is bold.
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yet cautious and innovative approach to a very difficult problem. i think that the commission is right to try an experiment to see if it works. >> what do you mean by bold and cautious? >> well, it is bold in the sense that they run a significant risk that they will have to litigate significantly more cases than they are presently litigating, and yet, it is cautious, because they have reserved complete control. if they want to get a quick settlement, and if they have concerns about the strength of the case, they go back to the tried and true formula, and they get a quick set almost n. thats. so in that respect, it is an appropriate way to sort of dip their toe in the water. >> harvey, what i hear you saying is that in, i will echo some of the comments that jim cramer made this morning as we
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were having a conversation about this topic. legal fees going through the roof as more things will be litigated and no one is going to admit to anything, and no cases are going to be settled, but one giant legal fight after another that is going to be litigated beyond all beyond? >> i don't think that is likely to occur here. i mean, it is always possible, but i think that first of all the staff will do this on a restrictive basis to start with. they will see what kind of pushback they get, and i think that if they see too many cases stretching out in terms of the settlement or going to the litigation, they will pullback. >> mr. pitt, what is the point here apart from get and apology saying that you have done something wrong, and is it so that it opens up the businesses to then greater civil action, class action lawsuits? is that the point of it? >> well, the real point is that there's a seeming contradiction
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that the se.e.c. files a complaint or brings a proceeding. they accuse the defendants or respondents of extremely terrible behavior, and then the settlement says it is without admit org deny-- admitting or denying and people have questioned how credible it is for people to say they did not do it, but not deny it. so this way, they will have to admit certain culpability in certain cases, and that is a plus. >> this morning, ken langone was on "squawk box" and he said he anticipates not only to pay to make the problem go a wway with the reputation on the line could fight the s.e.c. more often and could result in less of the holding to accountability than more? >> well, that may well be a result in some cases. i think that by doing this on a restricted basis at the outset,
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the s.e.c. has given itself enough flexibility to pull back from the process if it finds it to be the result. >> harvey, if retribution is the aim, wouldn't it be more appropriate to go after individuals and get more of them in prison in their own pension report and penalized rather than an attempt to slug it out with the businesses. isn't it the individuals that most people in society would like to see paying the price? >> i think that there's a real point there, an d it is absolu e absolutely essential that the s.e.c. focus not just on institutions, but entities and the people at the entities. corporations do not act by themselves, because they are inanimate objects, and requires people, and the s.e.c. needs the go after more of them. >> all right. harvey pitt joining us with his thoughts on that decision. harvey, thanks. >> thank you. up next, fed day
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observations from the one and only rick santelli. and how should you play the stocks ahead of the big fed decision. find out when "squawk on the street" coming back. the most free research reports,
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welcome back. now lets get out to the cme group. rick santelli with the san til y -- santelli exchange. >> fed days, i can remember when i first started trading, in the late '70s and early '80s. not only were there not statements, there were no press conferences, no financial channel covering it because there were no financial channels. if you wanted to know what the fed did back then, you watched your quo tron. you had an inkling based on short rates, based on fed funds and some of the issues of the day, what was going on. now we need to be led. we need to be led. and not only that, we talk about transparency. you know what? forget politically correct. let's toss politically correct out the window and let's toss everything from this day backward out the window. so matter what you think of the programs, no matter what you think of the crisis, let's start
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right now. my question right now is, and i wish i was in that press conference, and jon hilsenrath will be on in 20 minutes and we'll ask him some of the questions the rorners should be asking ben. the one question i want to ask ben is, ben, what are you afraid of? i want to know what you're afraid of. cnbc, all the channels that cover business, we have person after person after person, buy side, sell side, upside, downside, how is the economy? economy is great. what about stocks? you got to buy them. what if they break? you have to buy the dips. what's wrong with the economy? i don't hear these people saying anything is wrong with the economy. so what's wrong, ben? why can't we get out of crisis management mode? there's always going to be something. let me think, ism is under 50, oh, my good god, we can't pull in qe. or unemployment. this unemployment really gets a spur under my saddle. i remember a point when i was talking about labor force participation rates before the election. when facts really matter and people vote for their leaders.
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no, the unemployment rate isn't really going down. what did i hear from the fed chairman? crickets. crickets! now that he 250is ties it to th unemployment rate, everybody wants to talk about ha factor because if the unemployment rate goes up, that may be a good thing, if it goes down, that may not be a good thing. why didn't we have all this information then? so why can't we take away the qe? i don't get it. what are we afraid of? do we have a fed that operates like a day trader where every little gyration in the market, every ten minutes is all that matters? if you pull it away and the stock market goes down, where does it say in the constitution that some form of the government has to guarantee stocks go up or guarantee that you have a house? they don't! where have we gone off the rails? enough is enough. two fed chairman, is that enough? it's enough. i would like gordon reporter to say, mr. chairman, what are you afraid of in the u.s. economy? because no matter how he squeezes that water balloon, no
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matter how much smoke comes from that curtain, in the end they're going to have to deal with the reality, and the longer you put it off, the thinking about a parent, the worse the consequences are. simon? >> breathe, breathe. >> it's probably best you're not in the news conference, all things considered, this afternoon, rick. >> you know who is it best for, simon? who is it best for really? why don't these people kick the tires? why don't they kick the tires? they take a press release from the federal reserve and they think it was written by god. >> i can't wait with you and jon hilsenrath later in the program. >> oh, boy, you want to watch this one! >> thank you very much. rick santelli fired up is an underestimate in chicago. today's federal reserve decision is shaping up to be a summer blockbuster event in more than ways than one. we're asking you, how would it be different if it were in the hands of steven spielberg or james cameron? i like the music. tweet us @squawkstreet.
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event. so we asked you how would the fed decision be different if it were in the hands of steven spielberg or james cameron? and that brings us to this more than -- morning's squawk on the tweet. maybe the good guys would win for once. matthew tweets, super fed, the movie. bernanke flies around the u.s. in a cape supporting failing business. is it a plane? no, it's super fed. >> okay. >> james tweets, spielberg's bernanke exits qe while chased by a huge boulder as cameron's bernanke pilots titanic away from qe and into an iceberg. rick tweets, the decision wouldn't be different but darth bernanke would find your lack of faith disturbing. >> okay. i want to know what role santelli might play in this fed blockbuster of a movie. we are about an hour away from "the halftime report." >> we have lee cooperman of omega adviser and jeff gundlach, the ceo of doubleline.
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two guy s we consider to be one the king of stocks and one the king of bonds. >> a little apple talk as well? >> maybe a little bit. >> we'll talk sprint for sure. a lot of other stocks as well. it's going to be good. >> a lot is happening. we will look forward to it. thank you, sir. here is what you might have missed this morning if you're just tuning in to "squawk on the street." >> welcome to "squawk on the street." here is what's happened so far. >> how can you hire somebody who has trouble counting, whose prehengs and comprehension and reading, lacking there. >> i think it's really clear that the fed is not going to be pulling back anytime soon. they want to sustain and sustainable recovery in the labor market. we may be getting there but we certainly don't have enough evidence of that. >> and if you adjust the ten-year you're saying i'm in
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control. the bond vigilantes aren't. but i believe when this is over we will come back and actually discuss, i'm not kidding, stocks. >> i believe he's going to start the tapering before he leaves because he doesn't want to be remembered as somebody that just left the fire hose on and put it on the ground and walked away. he wants to set the tone for the fed in the years ahead. >> does knowing whether they taper starting in september or december of 2014, does this actually give you useful information? i argue not. >> because it's all reliant on what the changing macroconditions are, so -- >> i disagree with you. it's simply a signal. when does the cash start flowing in the other direction? it's a trading signal. good morning. we're live here at post 9 at the new york stock exchange.
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let's get a chaek on markets as we wait on the fed decision later today. we've got the dow jones industrial average just slightly lower by about 20 points. similar losses for the s&p and for the nasdaq. the ten-year above that 2.1% level. adobe shares are rallying after earnings beat expectations in the latest quarter. they reported strong subscription growth. you can see shares there up better than 6%. s subscription revenues jumped 70%. the ceo of fed ex said improvements are still not enough to have fully offset economic growth. their shares up 3.1%. >> it's clearly a huge day for the markets. years in the making as we await the fed decision and news conference at 2:00 p.m. but could too much information from the fed be negative for investors? we'll take a closer look. speaking of the fed and information, we've got someone who really moves the markets when it comes to news on the fed.
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"the wall street journal's" jon hilsenrath will be here with rick santelli. and what the heck is going on at men's warehouse? the company terminating founder and face of the company george ziner. we're going to be digging deeper into the story and we guarantee you're going to like what you see. in an interview on monday president obama hinted that ben bernanke may be on the way out. the president said bernanke, quote, stayed a lot longer than he wanted or was supposed to. in an interview with cnbc yesterday, former fed governor larry meier said the president was basically giving bernanke is pink slip. take a listen. >> this is really remarkable. i almost fell off my chair when i heard the president's remarks last night. he essentially fired ben bernanke on the spot and gave him a fairly tepid testimonial afterwards. it's time to really now focus on who the next chairman might be. >> and focus indeed on this new era of transparency which was,
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of course, supposed to make things clearer, but instead we've seen a market that is reacting wildly to every little piece of news about the fed and its clear massive stimulus program. is all this transparency from the fed a good thing or bad thing. steve liesman is live at the federal reserve in washington. i remember you and i having this conversation, steve, as we went further into qe and the transparency grew. and as i recall at the time, you were a fan of transparency. >> absolutely, and i remain one, if only the fed had some we wouldn't have this problem we're having. let me give bernanke his due. walk you through what he's done and then sort of single out the place where it's not done and maybe you and i at the end of this will agree more than we realize. first they think we call is the list of ben there, done that. the things he's done. the press conferences, answering the questions from reporters, minutes coming out three weeks earlier so they're fresher, quarterly economic projections so we have an idea of what the
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longer term outlook is from the fed and the individual members. public outreach, trying to explain the fed to the public. finally, economic targets, began as calendar targets, went to economic targets for interest rates. now, let's take a look, what is different now? here are the basic quantitative easing programs that the fed has done. qe1, defined time period, defined amount. qe2, some of these were extended, but they told us they were going to to it. defined time period, defined amount. even twist, they extended it in june, told us about how much. there's the problem. the question mark after 9/12. qe3 says we're starting it now but we don't know how long we're doing it. we're doing it until we have substantial improvement in the labor market. simon, the fed has failed to explain that, and i think it's suffering a little bit from that. if you look at our cnbc fed survey which we brought you yesterday, you can see the percentage of our respondents who say the fed is unclear, has been on the rise, and so i think the fed chairman has some explaining to do. transparency i believe is a good thing. i think bernanke does it because
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he thinks it leads to better monetary policy. it's the lack of it in this case, in my opinion, that's brought us the volatility, simon. >> i disagree with you, steve. i think -- thank you for the analysis. >> darn. >> i disagree -- >> i was trying. >> what they did on the way in was they attempted to amplify everything that they were doing to make it louder and louder so people would realize they were there supporting and they were there easing. and the payback on that is that when you come to withdraw, you also amplify all those messages that interest rates may be going higher sooner or that they're going to taper back. it's not so much the tapering of qe that's the issue. it's the fact they're amplifying it, they have to say it, and everybody talks about it, and, therefore, you get a series of contractions all the time. the market is coming up more and more negative talk. >> i don't disagree, simon. i actually agree with you. i think in more clinical terms, what the fed was trying to do was to use forward guidance as
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policy to proteject forward tha the policy was not going to change until economic targets were hit. we didn't get through the policy through the most intelligent or academic way. he had to make a political compromise and that compromise was he could not put numbers around when the fed would change. he could only get away with substantial improvement, and, again, it's that lack of transparency that i believe leads to this volatility right now. >> okay. i hear you, steve. it's a busy day for you. thank you very much for the moment. steve liesman live from the federal reserve in washington. let's bring in jeff, chief market strategist with lpl financial. jim is also with us, chief investment officer at pnc wealth management. gentlemen, welcome to the program. >> thank you. >> good morning, simon. >> jim, do you think it is fair to say that as we now look to withdraw from monetary easing, we have payback, payback,
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negative payback due to the increased transparency? >> i'm not sure that's fair, simon. i would suggest that as with withdraw the economic conditions are going to be improving. i think in the discussion i think the chairman needs to be very clear about the data that they're looking at and why they believe at the fed that the economy is improving and it's now time to let the economy and the markets stand on their own two feet. so i don't see a negative in that. i actually see a positive. >> i would disagree with you, jim, and i would say look what we saw when he was on capitol hill may the 22nd where he indicated that tapering could come even though the data didn't necessarily suggest that. >> but, simon -- >> i think he probably was intentioned. recognize that jaw boning is one of the most important tools the fed has. actually talking the markets one direction or the other may be more important than actually what they do historically. that's been one of the most
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powerful tools the fed has. it means they need to do less actually priming of the pump and less when they pull things back out by being able to talk the market around a little bit. i think bernanke did want to reset expectations about when the tapering may occur and how abruptly it may occur and he set that tone for the markets. that made less of a volatility break in the market down the road if expectations had gotten misaligned. >> jim, i'm just curious, and this goes back almost to kind of defend what rick was just saying, pick up on a point stan drukenmiller has made. there's a sense people can't value assets because the fed has to disturbed the pricing of financial assets relative to the fundamentals. you're sa chia chief investment offic officer. how do you value assets and do you think we've gone so far in allowing the fed to have this much influence over financial markets. >> it's a difficult environment. we've said in the past this is an artificial environment. i think all the market participants, including myself, would like to get back to a
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normal environment where we don't have an economy that's supported by massive monetary accommodations. so, yes, it has influenced behaviors, decision making. that's why risk assets are trying to push investors around the globe into risk assets to get the economy back on its feet. you know, they have pledged that they will continue to have 0% interest rates until employment is at 6.5%. i think the challenge for the fed is they're still the only player on the field, and we still have yet to see really fiscal policy come in to help stabilize the economy so that they can remove themselves from the market. but it does make decision making that much more difficult in that consequence, but i think you will see investors as the economy is improving pivot to more growth. >> how have you allocated your own portfolio? are you playing the game? is it stocks? is it bonds? what are you guys doing with your capital?
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>> we have been fully invested in this environment, and for us in that balanced account that would be a full allocation of stocks of 65% and 35% in fixed income. we have had 0% in cash. in that fixed income portfolios we have taken measures to reduce risk. >> we're out of time but it seems -- >> and we're still there. >> just to ask you quickly, jeff, where you are in your strategy. what you're telling people. >> this is the most important thing, simon, look differently at fixed income. it's pretty much you're not fixing your income jean anymore. that's the portion of the portfolio you have to think differently about. >> so reduce maturity? is that sufficient or more than that? >> more than that, simon. you have to think outside the box. you have to think of different types of securities. some stocks are yielding more than bonds. you have to look at mlps, a lot of different solutions to find that income going forward without the interest rate sensitivity. >> good to talk to you guys.
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thank you. jeff and jim. the fund starts at 2:00. make sure you tune in cnbc's special coverage of the fed decision coming to you live at 2:00 p.m. eastern with the news conference at 2:30. we want to know what you would ask fed chairman ben bernanke. you can go to cnbc.com to post your questions. today's decision shaping up to be a summer blockbuster event, so we're asking how the fed decision might be different if it were in the hands of a spielberg or a cameron, james that is. tweet us and we'll air that. >> as opposed to david. >> being in london i'm thinking to myself is -- >> did you meet the prime minister of the united kingdom when you were there? >> no, i had to rely on the airwaves for that one. maybe you will see him next week when you travel back. today's fed decision will likely have a huge impact on financials. we've been keeping an eye on them. we'll tell you what names you should be paying most attention to when we come back.
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but first, rick santelli, sir. >> thanks, kelly. you know, we have the man, jon hilsenrath, writes a good story, and many of the stories that have moved the markets lately aren't about many of the fundamentals of the economy. they're about some of the activities of the fed. we're going to talk about that dynamic. we're going to talk about how it's a bit convoluted, and maybe we'll see what jon wants to ask the fed chairman when he has the press conference and that's all coming up in about ten minutes.
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as we head in the fed decision day, take a look at the telecom sector today. josh lipton has more back at hq. >> simon, telecom, it is your worst performing sector right now and within that sector we are watching sprint. japan's softbank getting support from a critical shareholder to buy sprint. dish network saying it won't make a new offer. analysts weighed in. they downgrade sprint to neutral recommending investors take profit as they say attention shifts from m&a to fundamental. they lower the price target to 765. sprint down 3% right now. kelly, over to you. >> keep an eye on it there. we're watching the banks today ahead of the fed's decision. the fixed income desks in particular have been hit hard since the fed began its bond buying program. we should really say the fixed income desks have been hit recently since there was more talk from bernanke about
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potentially pulling in the horns. >> good morning. >> jason, first to you, and it's just picking up on an article in "the times" today. fixed income currencies and commodities which are such a stalwart for some of these banks have appeared to suffer. trading volumes, trading revenues are down. how wire e worried are you abou reverberations about that across the sector? >> not really that worried. if you listen to recent commentary, they point to higher trading revenues versus where we were in the second quarter of last year. so while revenues made the climb, we're looking for double digit year on year growth in trading with equal gains in vic and equities. >> this is just an issue of jeffries. >> it did look like there were lags. the month count is different so they don't get june. they pick up march in their
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figure so that could also have something to do with it. but, you know, our general sense is for the big bulge bracket, global investment banks are doing well in here. >> the reason i ask is because it all kind of plays into what the earnings growth will be for these financials as we especially start to talk about a transition to higher rates. because, look, we know that the banks with more of a securities portfolio will be sensitive to that move. we've talked about this before. how are the banks trading today, jason, and what do you expect? how sensitive are they going to be here to what we hear out of the fed? >> the -- what we've seen of late is a back up in the long end of the curve. historically sometimes the short end has followed that long end higher. the long is being somewhat influenced about the expectations around the fed's tapering. to the extent the long end goes up and the economy continues to expand, we think the u.s. banks are well positioned for that. >> david, can i ask you about a point that was made about
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goldman sachs jefovernight in a note. some of the rate sensitive banks may have rerated too rapidly. on the basis that interest rates will rise maybe in 2015 and what goldman's is saying, actually, rates are probably only going to raise in 2016. and, therefore, maybe those have moved too rapidly, those two banks in particular, and they will be sells at this stage. would you agree with that? >> yeah, you know, as jason pointed out, there's a lot of factors that go into the interest rate management of the regional banks as you were alluding to, and, you know, how they hedge and the duration of each side of the equation is really important. i think it's tough to generalize about regionals. you know, i think on the capital market side it's a little tougher because, you know, my concern is you might have a buyer's strike in the bond market. we're at a perverse level of
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interest rates we've never seen historically. so the old rules don't really apply this time around, and i'm concerned that, you know, not only fixed income trading activity but also some of the inventories are going to be tough to manage. >> but david, david -- >> if everyone exits if there's a big buyers strike. >> my sources at jpmorgan tell me they've already restructured right the way through in anticipation that there could be an aggressive sell off in some of those instruments. this is no surprise to any of those big guys surely. >> yeah. they've said that before over the last 20 years and been -- and not been right. sometimes some things are just tough to prepare for. it would be massively expensive to, you know, to hedge your bets on a big run for the exit. so even if they do that successfully, it's going to cost you and cut into your revenue. so we're actually fairly concerned about that portion of the earnings mick and that's a big one.
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that's the big swing factor. there's not a whole lot happening on the tra kitional banking side. >> that's going to be the one to watch for the rest of the year. david, jason, thank you both. facebook is preparing a big announcement for toment. we'll tell you what you should be expecting next. and today's fed decision is shaping up to be a summer blockbuster event. we're asking you how would the fed decision be different if it were in the hands of steven spielberg or james cameron? tweet us @squawkstreet. we'll get to some of your answers later in the show. ♪
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when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. facebook is hyping up its big announcement tomorrow afternoon. some potential details are already leaking. julia boorstin joins us. >> facebook is being characteristically mysterious about its announcement coming
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tomorrow at 1:00 p.m. eastern. facebook sent out a physical information, that's right, snail mail, saying a small team has been working on a big idea with a coffee cup stain ring in the corner. one thing is for sure. whatever facebook unveils, it's sure to have something to do with mobile. where facebook has been focusing to keep its shifting user base engaged and to figure out how to generate more revenue. after some speculation that the announcement would be about a news reader, the big bet now is that it will be a short form mobile video sharing service. an extension perhaps of photo sharing service instagram. this comes as twitter's vine which allows users to share six seconds of video has exploded in popularity since launching in january. earlier this month sharing of vine videos surpassed the number of instagram photos shared on twitter. twitter announcing in four months vine has drawn 13 million y users. the company has said it will announce more features to make
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it easier to have public conversation about, say, current events like the conversations on twitter. facebook doesn't announce a video sharing rival to vine tomorrow, we do expect one eventually. not only is it key facebook compete with twitter but also there's that fact that video ads are increasingly valuable. kelly? >> julia, we're wondering what to make of that coffee stain as well. any hunches? >> well, they say they will be serving coffee at the event. there's also a thought that maybe it's sort of a retro thing the way instagram puts all those pretty filters on things. that's sort of the idea where the news reader thing orange nated, that people drink coffee with their news. i'm betting it's something video related. >> maybe the filter can be a coffee julia, last. rick an telly is fired up about today's fed decision. >> where does it say in the constitution that some form of the government has to guarantee stocks go up or guarantee you have a house?
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they don't! where have we gone off the rails? enough is enough! >> fed watcher jon hilsenrath gets a chance to respond. we'll jump into the ring with rick. we guarantee it's not to be missed. plus the bell is about sound across europe. stick around. (announcer) at scottrade, our clients trade and invest
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i'm very athletic and i swim in the cold water in the ocean. shingles forced me out of the water. the pain level was so high, it was like fire. and i was thinking like, i wish i had that cold water i could go in it. the doctor asked me "did you have chickenpox when you were a child?" i'm very healthy and i do all the best things to keep it that way. all of a sudden i got shingles. it was so hard to accept that pain, it became unbearable. europe is about to close. they will, of course, be reacting first thing tomorrow morning to what is said from the
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fed. there's absolutely no doubt there is one central bank that moves world markets. there's one guy at the helm of that who will face a lot of questions this afternoon starting at 2:00 eastern. ben bernanke and everyone will swing on that. >> the european markets are closing now. >> we were kind of flattish earlier on. some slightly higher, some slightly lower. you will see particularly in spain we have come down about 1%. what's interesting as everybody focuses on the fed is the degree to which you're also trading when you go negatively on some of those other factors like the eurozone, like the ec b, like china. look at what europe has done on down moves since may the 22nd. you can see that massive underperformance. each time you go down there or you move downwards with wall street, the downward move is so much greater. do you see the point i'm making? at the corporate level there was a lot of excitement when we thought nokia might have a bid
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from the chinese, but then they said that wasn't going to happen. so that initial pop that we had last night on the adrs of 13%, 13% has been erased. we're still up for the session but not as high as we were. banks are absolutely key now. take a look at some of the nordic banks. not just banks being key, but european governments selling stakes in banks are key. the swedish government just reduced its stake from 13.4% to 7% to raise $3 billion. and we've moved on to the uk banks. they now take prominent place. tonight the finance minister in the united kingdom, george osborne, will detail when they are going to be privatized. 81% of rbs is owned by the uk government. 39% of lloyds bank is owned by the uk government as a result of the $20 billion they pumped into the system to save it in 2008 and a lot of people want to know when they will come to market, kelly. >> just a brief mention as well, we get the pmi data tomorrow.
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>> yes. something that the producer is even more anxious that i tell you about. dolce & gabbana have been sentenced in milan. they have been sentenced both of the two designers this their absence to one year and eight months in prison for hiding, it is alleged, hundreds of phillies of euros from the tax authorities. neither of them were present at the court. this obviously isn't pictures of the court. they don't dress like that in court. and the likelihood is if -- as you know this, kelly, if past performance is anything to go by, they probably won't serve any time. it's a very complicated process, the italian legal system, but it is going to make a lot of headlines tomorrow. >> the appeals process likely to be drawn out. it came as a bit of a surprise. people watching the case. an interesting one to keep an eye on. they might have dressed that way for court. >> i'm sorry, i interrupted your conversation on the pmis. pmis tomorrow. >> i was going to say the impact
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of the serious flooding we have seen across germany and eastern europe could mean we get a negative headline there. but one off -- >> i guarantee the fed will wipe out pmi concerns. we'll see. >> that trumpsp mi in our game of rock, paper sisors. >> part of the problem with today is that it's a lot easier to predict what mr. bernanke will say than what the markets will do in reaction to it. you and i could probably write what mr. bernanke is going to say. what we can't write is what the markets are going to do about it. one of the reasons we watch what the fed is doing so much is there's been a pretty good relationship between the size of the fed's balance sheet and how the stock market reacts. that's why everybody is all concerned about this. put this up. i just want to show it to you. the size of the fed's balance sheet is a little bigger than $3 trillion. somewhere around there. and the important thing is we have seen the stock market move up in the last several years as the federal reserve's balance sheet has increased. we don't have that chart for you
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but trust me there's a fairly good relationship for that. that's why we've seen the markets hold up and that's why it's been a little flakey recently. in the last couple days the stock market has gone up. there's a very good dovish case you can make for mr. bernanke on why the marks have been holding up very well here. very gradual tapering we have been seeing. no rate hike in a while. and a lot of people have noted some of the bubbles we have seen out there, particularly in japanese stocks, have been deflated now that the fed has made some comments. mr. bernanke has to be fairly pleased but it could get away from him very, very easily. meantime, if you look at the overall markets, sectors, s&p 500 sectors, energy rges materials, consumer staples, discretionary, modest gains. the problem i think a lot of you have is there aren't a lot of signs of global growth that's going to help move the fed and
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get da tat here that's going to support very strong growth at least in a global level. here is the number one piece of evidence the cynics point out and that's copper. if the global economy is really getting better and 50% of profits on the s&p 500 depend on the global economy, why is copper again down today? why do we keep drifting lower every day in i can put up any of the charts, aluminum, any of the base metals have all been moving to the downside. one of the beneficiaries of improving economies should be the e emergencying markets. we have seen what a mess they are. we've seen what's going on with brazilian stocks. many of the big names like petrobras all to the downside. we've seen the brazilian markets weak ever since the federal reserve started talking about it, put up the brazilian stock market. we're down almost 20% here since end of may. that was may 22nd when mr. bernanke was speaking. this is the ewz.
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that's the etf for the main brazilian stock market. you can see the flutters that have been going on here. no signs of very much growth in the emerging market economies. finally, we've noted how many countries where there's protests going on today. some of these markets are starting to bounce back a little. turkey has bouncing back. indonesia where there's been protests recently, flat today. a little turmoil still out there. again, we know what mr. bernanke is going to say likely. we just don't know how the market will interpret it. >> we need to focus on what's happening across emerging markets. all right politically we've seen this play out in the middle east and the question now is what happens as it spreads to other areas. >> here is what i call the twitterization of the planet where i think the growth of social media really has made a difference in places like brazil and turkey and indonesia where people can organize very, very quickly now. i'm not sure that story is well enough known, how social media is changing global political movements. >> it's a great point. >> thank you very much, bob. it's a big day here on cnbc with the fed news conference this
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afternoon. rick santelli is in chicago with a highly appropriate guest. rick, over to you. >> thanks, simon. and i would like to welcome jon hilsenrath. welcome, jon. >> hey, rick. good to see you. >> good to see you. listen, jon, and i mean no disrespect in any way -- >> that's always a loaded introduction to a comment. >> no, no, but it really isn't loaded and you will see why. i have great respect for anybody who is working, taking care of their family, and you fit that to a "t." but there are players and there are tailors, okay? when i talk to players, okay, when i talk to the people around me or i talk to my sources or i talk to the hedgies or i talk to the bond fund people, they think it's crazy what's going on with the fed, especially this many years after a crisis, especially considering the economy has some wind, maybe it's not running a sprint, but it's definitely certainly not in recession. and then there are the tailors. the fed chairman i think is the emper emperor. we can argue about what state of clothing he has, but the tailors
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are the surveys, some of the articles of the press. that seems to be getting all the traction and focusing on the taper and the programs. the players are fed up. you're one of the tailors. you write stories that move markets. my first question to you is, why is it that there's so many softball questions at these press conferences? why do you think we need qe after all this time given how many stories have been written in your publication every day about how solid the stock market is? >> you're jumping to a whole bunch of conclusions there. i don't know where to start but let's start with your question about why do i think we need qe. i don't think -- you know, i don't argue in any of my story that is we either do or don't. you know, i'll explain what i do. i'm a reporter. i do several things. i'm trying to inform the public about what the fed is up to. if people don't like hearing what the fed is up to, then, you know, that's part of the process of me informing them. and i do think i try to hold
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them accountable. you know, we ask tough questions at the press conference and elsewhere. last time i asked bernanke -- >> what was the question you asked last time? >> how long are you going to stick around? i think a lot of people wanted to know that. >> i don't know. i don't think that's a tough question, jon. >> i could tell you i think they weren't very happy about it, but, you know, if you want to talk about the stories that i have written that have held the fed accountable -- >> i'll tell what you, that's why i have -- no, that's why i have great respect for you. i understand that you need to in some way be an intermediary between what the fed -- >> no, no, no -- >> -- thinks reality is -- go on. >> an intermediary. i'm a reporter. i'm going to write stories -- >> listen, let's drop the pretense. the reason your stories move the markets is the same reason greg's stories have moved the markets in the past and that is that the world at large does believe that you're sourced. and that's a reality. you can protest all you want. >> of course i'm sourced.
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every good reporter should be. yeah. >> so then what's the issue? >> i don't know. i don't know. >> what i'm saying is they have a message. your source. it's not like you're saying, listen, here is the reason i think something is going to happen, but i think it's crazy considering how the gdp is positive for so many quarters. see, what i would think is that i understand what you're doing and i have no problem with it, but it would be nice if there were stories after that where it was maybe more of an opinion piece or kicking the tires. i'll ask you the question i would ask -- >> let me stop you right there. i would -- >> what mr. chairman, what are you afraid of? why do you think the fed chairman refuses to stop the programs? why is he holding on to the purchases? >> i would suggest you read a story that i wrote on monday which showed that the fed's growth forecast for the economy have been wrong every year in this recovery. >> that's not a story. that's a fact. they're wrong on all their forecasts and half my friends are wrong on theirs as well.
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>> so -- >> let's stop. why do you think ben bernanke feels the need to continue ongoing really crisis programs with regard to the training wheels of the economy? i'm asking you, why do you think that is? >> well, i mean, i think we have a horrible recovery, and as the central bank, they're asking what else can they do to get the economy going again, and this is what they have come up with. they've come up with a bond buying program and very low interest rates, and, you know, so i think you have to ask your question, well, so what's the downside? what's the risk? what damage could they be doing? a lot of people, including yourself, have said they could cause a lot of inflation. well, show me it. show me the inflation. >> you can't show the inflation because the $3.4 trillion on the balance sheet, that's future inflation. but it's in a jurassic park-like electric fence. but it's not going to sit there
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forever. or on the balance sheets of banks. it's quarantined but it's not going to be quarantined forever. >> part of me holding people accountable is holding people like you accountable. people have been saying inflation, inflation, inflation. show me, show me. >> no, no. you know what -- no, no, no, no, no. that's not the issue. the issue is you're not going to have a lot of inflation showing up when you have no velocity. i have talked about commodity, price, volatility in the past. go back to the tapes. whether it's with steve liesman or all the others in the past. i said it was about gyrations based on these programs in the foreign exchange markets that show up in volatile. the average guy doesn't care about a definition. he cares about volatility. when he goes to the grocery store, to the gas station, he cares about volatility p.m. and just because an index like cpi is at all-time highs and the next month it comes down a bit, to me that doesn't mean inflation is down 0.2.
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it means it's still sw at the highs. >> how about the dollar? how about the dollar? >> the dollar is like trying to measure somebody who can't answer a question against somebody else who not only can't answer the question, doesn't speak the same language. >> okay. all right. >> the problem is that the eurocurrency and the british pound and the dollar all developed countries have an issue. in about ten years let's talk about some of the upper comers, whether it's mexico or korea because they're the ones, the emerging markets are having huge issue was the liquidity flooding around because central bankers have too much hubris. i want to ask you another question. >> okay. >> if you ask a tough question to the fed, i mean a tough question, this is a tough one for you to answer, do you think that your access to ability to ask a question in the next press conference would be impaired? it's not funny. i think this is important. >> so let me point out a story that i did with one of your colleagues a few years ago, kate kelly, okay? this is a story about the chairman of the new york fed and
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the trading he was doing in golden sax stocgoldman sachs ste freedman. steve sfredman stepped down from the new york fed chairmanship within days of that story. that did not make them comfortable. i'm continuing to report. you know -- >> good for you. >> that's the world we live in. >> it just seems to me that the reporters -- let me ask you another question. when fed chairmans or some of the committee, when they give press releases as to whether it's their growth forecast, what they believe on the inflation front, or what they believe their impact is based on these programs to employment or unemployment, why is that most reporters, and let's put you aside a minute, why is it that these press releases aren't gone after the way a reporter over the last several years would go after a tea party conservative? why don't they have the same kind of intensity when they go after some of these issues where
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we're sold that these programs are helping unemployment or low interest rates are the most important part of the mortgage arena when i could show you in the '70s, '80s, and '90s rates multiples where they are today where we had solid housing markets. >> so, you know, i will give you this, these press conferences are very polite. you could argue they're too polite and i'm also frustrated by one aspect of them which is that it's difficult to ask the follow-up question because you get the microphone in your hand, you ask a question, and then the microphone gets passed to the next guy. it would be nice if we had the opportunity to ask follow-up questions when we don't feel like we're getting the answers that we want on our questions. so i'll agree with you on that. but the other point that i would make about the press conferences is that we're trying to do different things at these press conferences. the fed is a very obscure institution. on the one hand we're trying to understand where is the chairman at? what is he trying to accomplish?
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what is he going to do next? there's a lot of just figuring out what happens next. you know, i would say there's different kinds of questions. there's accountability questions, and then there's just understanding questions. what are you thinking and what's the process? we probably get a lot more of the questions about what are you going to do next than the hard accountability questions. >> no, i understand that. i have one bit of advice because we're running out of time. you know, if they take away the mike for your second question, just think about what i did 20 minutes ago. you don't need a mike. use the vocal cords and the second issue is -- >> rick, i have done that. >> -- we are debating $54 billion in tax issues ad infinitum to the point i wanted to pull out my eyelashes. here we have a federal reserve pumping $85 billion a month, $3.4 trillion balance sheet. boy, that sounds like a darn good question to ask. why does he believe he has the right to do that to the monies and why does he believe that it's making a difference when
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you started out this interview five years after a crisis saying the economy is not good. >> okay. all right. but at the same time i think people need to ask you where are all the bad things that you've been saying are going to happen and they haven't happened. >> listen, that's why i say enough is enough. the bad things have diminished to a great extent. let's move on. jon, you're a great sport. thanks area your time today. >> thanks a lot. >> rick santelli and jon hilsenrath having a conversation we can guarantee is playing out across much of the country. no guarantees here. men's warehouse terminating its founder and face of the company, george zimmer. and today's fed decision shaping up to be a summer blockbuster. also the subject of our squawk on the tweet question. how might the decision be different if it were in the hands of steven spielberg or james cameron? tweet us @squawkstreet. some of those responses will air in just a few minutes. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution,
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all right. coming up next on "the half" live from the new york stock exchange today. how will today's fed meeting impact stocks, bonds, and everything in between in two kings of the market are here to guide you through it, jeffrey gundlach and lee cooperman. what is next for sprint now that dish has bowed out of the
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bidding war. plus two traders battle it out over the metal's next move. >> thanks very much, scott wapner coming up in about ten minutes. we're just a couple hours away as well from the fed decision. ubs director of floor operations artcashen joins us at post 9. we just had an extended debate talking about whether the fed is being prudent. what's your view? >> well, i agree, as i usually agree with many things rick said, but the key thing is the press conference can be very important. this would be a great time to elicit some really interesting information from the chairman. a couple things going on. when the president was interviewed earlier in the week and indicated that bernanke had not asked for nor was it likely that he would get an extension, that made this a little bit about legacy. so he's going to talk to us, and i think he's going to wind up putting a little bit of legacy
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spin on it. how bad things were, the improvements that have come along, and where we want to go, and i thought that that also gave him some latitude to talk about tapering. i want some of it on my watch so that it's not with the next person. my friend barry habib put out an interesting letter where he said everybody assumes it's going to be janet yellin as the successor. two of them are in the same meeting. one is going out to make a statement. i wonder if bernanke might try to preclear some of that statement with her. now, it's months away, but this is a very, very eventful press conference meeting. >> how do you think the market will react? there's this big -- a stupid question, we simply don't know this huge disconnect between what he wants to say, what he actually says, and how the market interprets it. >> i think it's going to be very difficult for him to -- he's going to have to be one of the
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what lan das in a gale walking that tightrope and making sure he doesn't go too far off. there's such fascinating questions. they not only are doing $85 million. some of that is mortgages, some of it is treasuries. if you're going to taper back, are you tapering back equally on both sides? are you coming out of treasuries? if so, why? second airily, the same treasuries and the same mortgages you own, they pay you interest, so that's income to you and you get money back in maturi maturity. there's probably another $30 billion a month being put in by that. so going to be very tough for them to do. >> and it may explain why we don't necessarily get a knee-jerk reaction that takes markets a little bit to digest it. art, thank you so much. trading in a really narrow range, simon, ahead of that event. >> we'll take a closer look at the markets next. tdd# 1-800-345-2550 [ trader ] when i'm trading, i'm so into it,
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where does it say in the constitution that some form of the government has to guarantee stocks go up? or guarantee that you have a house? they don't. where have we gone off the rails? enough is enough! >> today's fed decision already eliciting some passion from rick santelli. needless to say, this afternoon's announcement shaping up to be a summer blockbuster. we've been asking you how would the fed decision be different if it were in the hands of a spielberg or a james cameron? and that brings us to the squawk on the tweet question and responses today. christopher says it could be the sequel to the original qet"
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except this one doesn't have a happy ending, extra taper pentagon. james says they would do tie-ins with the upcoming bernanke biopics. thank you for your responses. >> hey, a great couple of hours of television. up now, "the halftime report." all right, guys. thank you very much. four hours to go until the close. let's show you where we currently stand on wall street on what is a very big day down on the street, and right now we're in the red. we know what we're all waiting for this afternoon. here is what we're following on "the half." sprinting ahead. what happens to shares now with dish bowing out of the bidding? golden eye, the pressure metal is in the spotlight as taper talk looms. first, our top story

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