tv Squawk on the Street CNBC July 19, 2013 9:00am-12:00pm EDT
economy does fot do bnot do bet is not going to happen, and the fed will have zero rates, and the fiscal tightening will be gone, and the housing boom is not going the last forever, but it is going to be gone. this is it. better see it now and better stocks bs stocks, but the bonds are going to be clobbered more. >> thank you, larry. time to leave, i mean, time to leave the show, and make sure you join us monday. "squawk on the street" is next. ♪ work hard play hard ♪ we work hard play hard ♪ keep partying again like it is your job ♪ good friday morning. i'm carl quintanilla with jim cramer as david faber is off today. the tech earnings are disappointing and this time google and microsoft and watching the bankruptcy filing in detroit, but the industrials are holding in. g.e., and honeywell and whirlpool among the bright spots and crude oil is in the spotlight near 109 after hitting
a 16-month high, and gas prices up 11 days in a row. the road map begins with two days that are part of the old guard and the new leaders today, g.e. and honeywell trading higher after earnings beat expectations. on the opposite end, google and microsoft both missed slipping ahead of the open. and chipotle is spicing it up higher after beating the consensus, and detroit has become the biggest u.s. city to file for bankruptcy. we will get a live report from the ground in the motor city. good morning, and good morning for the old industrials and g.e. is rising in the market, and rising in the qe earnings 36 cents per share, and that cites big ticket industrial equipment and services orders. and honey well, helped by higher margins, jim, and to some degree, the margins are the story of the morning. >> you nailed it. one of the reasons i like general electric because in every business the margins are improving and the water inf
infrastructure had been the big, really big disappointment, and the margins were up there, too. and honeywell, the margins up across the board and great quarter for dave kote, and meanwhile, the ceo of g.e. is being much more positive and it is as if these companies are doing everything right, and tech seems to be doing everything wrong and the different analysis though as we drill down. >> we will get to tech. but immelt had been under fire for some of the margin targets that he wanted to hit this year, but it appears they are on target. >> yes. >> he talks about europe stabilizing which is a change in tone? >> yes sh, i think that definit and by the way the united states is very, very strong. industrial sales are really good. now, look, people say, wait a second, jim, how about home business? oh, please, not important enough. this company is going to be returning more capital increasingly, and aerospace in an incredible bull market, and honeywell is in there and g.e.
and obviously boeing in the sweet spot here, and this is a good quarter g.e. after multiple quarters where there was always some nitpicking, and i'm having a hard time nitpicking today. >> interesting. record backlog is $223 billion and if you were looking at appliances, you got some g.e. and whirlpool. >> i like that. >> and electrolux saying nice things about housing at least in this country. >> yes, in the whirlpool's outlook was positive and whirlpool was good in latin america, and in brazil they never divested that business. lieic what i heard from whil pool and you lump in honeywell and you have a picture of the industrial world where the revenues are okay. not great. but they are making more and more money. now, there are going to be people, carl, who say, i don't care the revenues are not up. those people are so wrong, it is frightening and what matters is that g.e. has not done that good, because the margins are not that good but if you get the margins up, g.e. will join the crowd of companies going higher here. >> and earlier in the week, u.p.s. blaming the weakness on
the industrial economy and your point is wait for g.e. and see what they say on friday, and who do we believe? >> well, i like u.p.s. by the way frup 85 to 88. i will go with the industrial companies. i know that there's weakness over, and last night i spoke with sap to bill mcdermott who is the co-ceo and terrific and talking about asia being weak, and maybe that is what united parcels is reflecting, and we will obviously get the call next week and we need more granularity of what u.p.s. said, because i don't like the total slacking of industrials given what you will see. look, you don't mail a boeing plane through u.p.s. maybe it is as simple as that. >> well, that is a good point. >> and in terms of the international, we talked about g.e.'s tone on europe, and vf corp, and great quarter, but europe is the spoiler at and other wise nice party. >> well, they have two europes, and you are speaking to eric wiseman. >> yes, we are. >> two europes, and you go to
the equivalent of madison avenue in berlin, and you have to wait in line to get into the north face store. so tale of two europes and i don't want to bet against the vf corp, and when they report not last quarter, but a big drop off and nen the vf corp and the margins are strong again and it is a growth company, and throw it away at your own peril. i don't know if you can get it to five, but maybe that will happen. >> and google if you missed it last night did miss on the top and the bottom line for the second quarter, and ad prices weakening and lozs for motorola, and weakening ad price and losses in mobile unit. and then microsoft, misses on the top and the bottom line and a write down on the inventory of the surface tablet which they have not sold. what do you want to talk about? >> i don't think that google is that bad. >> you don't? >> no, they are changing the pricing for some of the
advertising to monetize, and we had ben schacter on earlier and he was very right to monetize mobil over time, and they are taking a longer term view which is frustrating to a lot of people, and the $1,000 price targets, and you know, they are foolish right now. >> two of them went away today. deutsche and raja took them away. >> well, they won't tell you with the mobile app, but the last couples drilled down that the analysts are unhappy with motoro motorola, but a write-off is a write-off is a write-off. my inclination is that it is not that bad. they did some cleaning up of the parental cleaning up of some of the things that own google and that did hurt themselves. i do believe that people don't click as much on mobile, but mobile is ultimately very good for google. i'm not throwing google a wway. >> interesting. there has been a lot of the analysis of the stock and obviously the big rise and people saying that it is based on all of the pie in the sky projects, but you to run your
day to day business, and some of the businesses are tough. >> what i wish would happen, carl, is that today is the day when you get a $1,000 target. like with apple, the prices go up with the stock, and that is why they are valueless. and rick sher lynn who had not liked microsoft spoke positively about them today. he does not like it in the high 20s, but this is his chance to speak positively about it. it was not, and microsoft was disappointing, and i won't -- >> well, talk about a microsoft 66 cents and looking for more. and they call it the sloppiest quarter in memory. >> yes, and some of the language in the conference call and you go over the thing, and one of the things that they start "working to transition the business into the modern era of computing." >> this is what intel said earlier. >> this is the palaeozoic era again. we know when the dinosaurs ruled
the world it was frightening time if you were a smaller animal, but last i looked the dinosaurs not doing as well. >> so, a, has the runup in microsoft been deserved? when are you interested? >> well, not much below here, you get interested, because there is a family of devices and services and switching to the cloud. one of the continual themes is people switching to the cloud and not making as much money with the cloud. in the end, geez, windows is horrible. i mean, the pc, and michael dell and carl icahn go read the microsoft call, and just drop your bids. dell falls to 7 on this quarter without a bid. 7. >> we should point out by the way, that is a monumental move in a company that size. that is more than $20 billion in market cap gone. >> whoa. >> that is the size of somebody pointed out this morning the whole foods just gone away. >> well, they just -- there was, we have to, and we know we have to do better was the theme of
the call. when the stock was from 27 to 36, and we should have done better. and i think that they are answering the call of what the stock did by saying, hey, listen, we are just -- we blew it. we blew it on the tablet. when you take that size and not a $1 million writedown on the product that just came out, that is zune-like. >> and they were rolling it out the other day, and we know the marketing muscle. last point some have said that when ballmer made the restructuring they bombed. >> it looks like it is the right thing, because the company structure is wrong, and right now this cloud move and the subscription model is fooling people. remember, there is a different accounting to amortize over 12 months, and it did look worse. i didn't mind the entertainment division, because they told you a pause as the new console comes out, but when a new company, and the s&p and when a company says we are disappointed in
ourselves, i will never say why are you disappointed in yourselves, but a these are honest companies and microsoft has every right to be disappointed. >> did it make you wonder when you preannounced to make the management switches? >> it is not wrong the do and they should have said, listen, as the stock ran up, i like to think that you should throw some cold water, and since the reg, it is harder to do, but it is good to say that we are doing the restructuring and be aware that the pcs are falling faster than we thought, and be aware that the windows is not working, and be aware by the way when we cut the price, it is because 900 million writedown and i don't want a surprise like that. >> and the last story is a good one, the chipotle mexican grill, and the restaurant chain posting above expectations revenues a tpd same-store sales up 5.5 for the quarter and the cfo will be kr cramer's guest on "mad money" 6:00 and 11:00 eastern. and we have been around the block with them, and looked like
we would push the comps down, but now looking like up. >> and same store sales 5.5, and you can adjust for the additi additional day, and they are making more transactions per day translating to nice money, and so-called leverage to the labor costs. they went down and making more money, and two things that people are looking for. they were looking for perhaps a price increase. they won't get that. okay. that is really important. and they were hoping i think that a lot of the people were hoping for something that says, you know what, we are okay on all of this food with integrity and don't worry about the steak, because we can manage the prices and don't worry about the ingredients and the avocados and they are struggling with making better food, meaning getting the right price for it. if i were them, i would say, we have to raise the price of steak. if you want to take out the genetically modified ingredients, we will have to raise the price of it, and i did see they added more stores and i
liked chop house even though they made a point saying this is not meaningful here they are opening up four more chop houses, and another line which is this noodles and company doing well would make me excited about 2015 for chipotle. >> and what about the big players famously short this name, an convinced that taco bell was eating chipotle's lunch? >> well, taco bell and i happen to like david novak and at yum and his food does not have integrity, but it is true, but there are degrees of integrity, and i think that yum is good, and that is a chinese play. look, i'm pleasantly surprised that chipotle is able to do as much with cheaper labor, and do as much with food that costs more. when you are trying to change the food change by having organic cows, this whole country is based on the opposite and genetically modified food and based on the cows force fed and the cows i have owned -- >> you don't force feed them?
>> feed them corn. >> and the test for mcdonalds in the coming days and a heavy bear case on mcdonald's who has said, we could use a little inflation in food right now. >> true. and by the way, the currency, and throughout the quarter and not chipotle, because it is domestic, and chipotle has played havoc and if you look at the currency, and the numbers are better and by the way google is like that, and i know quickly, because i know that we have to go to break, but schlumberger was the best of the industrials, because they are saying that finally you are paying more at the pump, and they are getting bigger orders internationally, because they are recognizing that the price of food is going higher. >> and we will compare it later on with baker. >> yes, not good. >> and it was once the mighty symbol of america's industrial strength and now detroit is the biggest city to file for bankruptcy, and we will go to the motor city shortly. and we will talk to the head
of vf corporation eric wiseman and try to get out of this friday with the minimal pain, and at the meantime, it looks like a 40-point down on the open. we will be back in a moment. clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning
>> detroit has become the biggest u.s. city to file for bankruptcy and the filing puts the city on an uncertain course which could mean laying off municipal employees and selling off assets an raising fees and our reporter is there this morning. hello, brian. >> good morning, carl. the numbers tell the story of what is going on and how dire the situation is. the city has been living on b borrowed time and money for a long time and it looks like both of those have run out. first here is detroit by the numbers. look at the figures. 18 to $20 billion in obligations listed in the filings. deficit of at least $327 million for the fiscal year, and that is with millions in borrowing over the last couple of years. part of the problem is $131 million in uncollected taxes. in the 3,000-page filing more than 100,000 creditors and people owed money by the city of detroit listed and part of the problem of uncollected taxes is that detroit has more than
76,000 abandoned structures, and even structures that have people in them, and few of them are paying taxes. the city in a last-minute ditch literally five minutes before the window closed filed for bankruptcy protection last night surprising a lot of the the unions. the biggest union and one of the biggest creditors as far as the pensions go is the union that represents the state and the city and the municipal employees, and here is a statement from the president of the union. governor snyder's plan to suspend democracy to drive one of america's largest cities into bankruptcy and deprive the worker workers of their hard earned security move dangerously closer to reality today without a single negotiation with unions, workers or retiree, and one of the hallmarks of chapter 9 which is what detroit filed is that the city has unlimited power to do what it wants in a plan. if the plan is approved by a bankruptcy judge, they can doefr they want, but no judges can compel detroit to do anything
like sell art. detroit has billions in art, and they cannot be forced to sell it. they can sell it if they want it to, but they can't be forced. and carl, the numbers are one thing, right. numbers, and we like the numbers for cnbc, but the story of the humanity of detroit is the reason that i wanted to come here. okay. think about this. the average response time in america when you call 911 and ask for the police is 11 minutes. detroit, the average is 58 minutes. 30% of the ambulances run regularly, because the others are broken down, and the average age of a fire station here is 80 years old, and even if they had the money, carl, to buy new fire trucks, they can't, because the fire stations are often too old and small to accommodate the new trucks. so houses and 11 to 12,000 a year burn to the ground in the city of detroit. this is going to be a long hot s summer, and a tough state and a tough situation for detroit. >> it raises a lot of questions,
brian. you mentioned the art, and here with jim, 2.5 billion would not get you a tenth of the way to get the obligations taken care of. >> and brian is reporting and i have been watching him all morning and it is phenomenal to put it in context, and i hope that everyone realizes that while there are cities in california that are somewhat like detroit, please, but what brian is telling you is that this is unlike any other city. this is a 60-year downturn and you cannot extrapolate. brian, do you think that is a fair analysis? >> yeah, i think it is, jim. in fact, i had a guy out here named kelvin, and this is the city government here and he came out to say hello the jim cramer and thank you and that is a true story, and about 15 minutes ago and kelvin, if you are watching. and you went to law school, jim. this is what they call a precedented center and this is going to the 6th circuit in cincinnati most likely and probably at least part of goit to the supreme court, and the reason is that detroit is
important is not just detroit, but this case will set the tone for what happens if and when and more likely when and not if more major cities have to file, but the key question is who is on the hook for the pensions, and the pg and c and federal government do not cover municipal and state, and who will cover it or will the pensioners get whack and get 20 cents on the dollar? >> bingo, who is going to lose. in gm, the creditors lost. if this is a traditional situation with the munis, the pensioners would take the haircut and creditors preserved. >> okay. thank you, brian sullivan. we will stay with that all day long and talk to the governor rick snyder and steve rattner who served as the bailout chief for chrysler and gm coming up at 11:00 eastern time. and how do you reach the
summit? go with cramer and his "mad dash." today, several companies are going public today and the next is the site groupon. more "squawk on the street" is back in a moment. my mantra? trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all
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about five minutes before the bell and let's get cramer's "mad dash" before we leave for the weekend. talk oil services and schlumberger and baker. >> well, certainly, you may say that microsoft set the tone, but maybe schlumberger, and the ceo's first interview in -- well. this company is saying, you know what, that oil price and brent is causing people to drill more. and remember, that is what you are talking about 10% of the s&p is going to do well with the oil service, and schlumberger, and we have been waiting for them to get bull ish and i like them. they are saying good things. so by the way, g.e., because substantial oil service business, too, over time. >> yes, yes. >> and watch the sector, because it is going to be good. put it together, and the health care sector, unitedhealth, and the drugs are good, and capital bank reported a very, very good number, and the industrials are looking good, but if you are involved in software that is being obliterated by the cloud in terms of the margins and
hardware by the form or factor of pc going to mobile, that is weak. it is not the whole market, but 17% of the market for us, and maybe 15%. >> we will talk more about bp and what dudley told you last night, and what baker said about north america. when we come back, will it be another record-setting day for stocks? the opening bell is moments away. hey linda!
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♪ all on thinkorswim from td ameritrade. ♪ all right. you are watching cnbc's "squawk on the street" on a friday morning live from the financial capital of the world. the opening bell in a minute here as we come off of a day of record highs for the stocks. jim, interestingly, the low from november to yesterday almost exactly 3,000 points on the dow. you had larry fink on the air and a man who once said he would have put all of the money in stocks if the accountants would have let him and he said he would not be surprised to see 5% come off. >> i know, i heard that. and larry is terrific and runs a lot of money, and there are parts of the market that are weak, but let's remember, carl, we have had a lot of good industrial earnings that people didn't think that we'd have, and
we had a lot of good bank earnings that we didn't think that we would have and a lot of the so-so tech earnings and we thought good ones so i'm not sure about the 5% decline, but i like what i see. >> with that, let's get this last opening bell of the week, and a look at the s&p at the top of the the screen. the big board. diamond resorts international celebrating an ipo today and four ipos on the street. >> yesterday, that was a big one with money to be made in that market. >> at the nasdaq, retail me not celebrating its ipo and we will talk to the company's ceo in a few minutes. >> they are doing quite well retail me not, and that is another one to keep an eye on, and they are doing good things for ipos for you and remember that morgan stanley reported terrific ipo business, and they make money on wall street and you at home do make money. >> the two performing components g.e. and honey well are the best, and the worst are mic
microsoft and hp. >> and boeing has been the biggest contributor to the dow this year in terms of the points, and 3m has been one of the biggest contributors, too, and it will be, and j&j, and interesting to see that g.e. has not held the weight in the dow. this could be a day for g.e. and one of the reasons why it is so hard to get negative on g.e. and the economy when you have g.e. saying the right things, and whirlpool saying the right things and honeywell saying the right things because it is a broad plan p panopoly of areas. >> and jim, this the largest equity funds here and today, there is a report titled "usa, usa!" because of the money coming back to stock, and i don't know if it is a material trend or not. >> when you look at the railroads, tremendous commerce pushing it burk just as important to not overlook the transports all-tile high, and
they signaled that the united states is stronger than the i believe the rest of the world. if you put money in europe, and it is bottoming, maybe it is, and i believe it is. asia pacific is declining and latin america is difficult, and our country is doing better than expected but it is a pock on the other houses than we are doing so great. >> and the 16-month high on the crude, and whether or not the dow theorists could be happy here. >> they should be. by the way, it is the airlines at the top of the heap there, and delta and united and continental and amazing to see them doing well. carl, one of the great things about this bull market is that a lot of the patterns that you thought were true aren't. oil going to $108 and $109 and i should sell the transports because not holding up. read union pacific's conference call, because they are a big winner. that was a beautiful conference call yesterday. >> and one thing that is increasingly clear is that microsoft is going to have a bad day and down almost 9%.
>> yes, microsoft, and rick sherlen talking about the activists involved, but mostly it was a terrible call. it took your breath away, because what they said ways cli -- said basically, we had a gigantic product and nobody likes it. that is supposed to be the big news there, and one of the major take aways is that, carl, david is not here today, but we would be talking about how michael dell and icahn should walk away. they should walk away. >> because the industry is so toxic. >> the industry is horrendous. horrendous. and another company microsoft did not see mobile coming. it was a horrible quarter. >> yeah. somebody points out that cash and microsoft are now higher than it was in '03 when they announced the special dividend, and maybe a return to the shareholders story. >> get the offshore capital and they could do a gigantic buyback and down here, do i want to flee it? there are a lot of other
businesses working well in microsoft, but the conference call is one of the great inflicted wounds, because the nu numbers and appear that the estimates were way off. the tablet had been their big bank, and their surface tablet and now we know that apple, and nobody likes apple anymore, but apple has a stronger tablet offering, and remember them? samsung, and it looks like there is no room for microsoft right now, and i think that microsome r soft has to talk up the xbox in another quarter and entertainment division, and the switch to the open system has played havoc with their margins, too. there was a lot not the like, but, hey sh, the stock had run m 27 to 36 ahead of the quarter. >> yeah. and you mentioned apple a couple of stories. hey, we never talked yesterday because of bernanke and everything else, the way in which verizon telegraphed decent sales of phones, but on the other hand best buy today reports thatreport s that they are cutting the
prices of the notebook going back to school. >> and apple is not as bad as wintel system. and yesterday, people did not talk about the fact that nokia reported a bad number, and not as bad as we thought, and samsung a num bber not so good, but the come e tigs in every area of tech is hurting everybody. so much good tech for less price. price wars everywhere in tech. no price war at schlumberger or g.e. or honeywell or boeing. and this is an issue where the competition is so ferocious in tech, that nobody can make a profit. >> and 71% beat iing on the earnings, andp 3 beating on the sales and revenue. >> not bad. >> that is fine. i would have expected a lower ratio on the sales. the earnings mixed, and remember, we have a lot of companies like the unitedhealth
and i come back to that, carl, because it is one of the bull market stocks that is like, well, a dow stock and what is that up there? shwell, the drug companies are very, very big companies and i want people to focus not just on what is going on with microsoft and intel, because if this were 1977, i would be very afraid, but this is 2013, and we are seeing some great earnings from industrial industrials. >> and no question. we mentioned whirlpool and honeywell and g.e., and we haven't, and we are getting news here on john paulson who was at delivering alpha earlier and it appears he will be called as a witness in the trial of fabrice to tour tourre, and there were former paulson employees paul greenie was on and described how to
describe an ico, and he said he couldn't, and anything about this trial is interesting. >> well, go back to what paulson told you about the great interview, and going back to the sek or the for a sector that has lost the luster, housing, and that sector is holding up and interest rates seem to be going back to 2.4 or 2.3, what you might think that paulson is saying, hey, i didn't say it was a straight line, but housing remains a more of a -- i'm going to say tailwind than headwind. >> yes, and whirlpool says that some of it is the restructuring that is able to handle some higher material costs because of the restructuring, but they are taking aubt the growth and the pricier products in the united states and the kinds of things they have been hoping for, for a while. >> people got short whirlpool when sherwin williams reported a lower number. home depot with such a run, and i wish it were 75 or 76, but i would be pounding the table at 75 or 76. >> a lot going on when the dow
is down 37. bob pisani is right by post 6. bob? >> take a look. we opened at diamond rer we opened at diamond resorts international, drii which is an international company opening at 14.56 and very well known time share company competing against a number of big time share businesses out there. marriott has a big business and sheraton, and even walt disney has a big business, but $14 is the price, and the talk was $16 to $18 so little below, but a nice open here at $14.56. we have a number of other ipos today, and a couple of reits as well priced today and we will tell you more about that, and perhaps more interest over at the nasdaq where we are waiting for the retail me not to open. that one priced 1.9 million shares at $21 in the middle of the range of 20 to 22. they say they are a coupon
marketplace, and we will get you that when it comes out. in the earnings season i was not in a good mood because of fwoog l and microsoft at 5:00. google missed by more than 10%, and not a surprise for microsoft, because they are tied to businesses like intel, but with the results, i feel the same way, jim, g.e. beat, and the immelt's comments with the merging markets getting better and we expect the margin expansion to continue, and this is jeff talking, and profit margins to increase, and rand ingersoll is up, and they narrowed the guidance and good news for them and these are three of the biggest industrial companies in the world, and they across many platforms in many parts of the world. honeywell beat and raised the low end of the 2013 guidance and they expect modestly improveded or organic growth, and continued margin expansion in second half of the year, and then when you get to whirlpool, while it looked like they were a little disappointed because they were like raising the 2013 guidance and this is all about volumes
improving in north america. from my math, it looks like the volumes are expected to be up 6% to 8% for the year, and that is previously around 2% to 3%, and so they are doing better in north america, and you are right, jim, the whole point about selling more in the home improvement market is a story still intact, and sherwin williams is looking like the outlier. this is why i care about microsoft and google. they are both big weightings in the s&p 500, and because of the market cap waiting, it is earnings weighted by the size as well. so their misses, microsoft and google's misses are going to weigh on the earnings momentum in the s&p 500, and so right now we are looking at the earnings growth in 3.3 or 3.4%, and yesterday before then, it was closer to 3.9% for the whole s&p 500, and that is the impact they are having on the s&p 500 earnings picture. guys, back to you. >> great rundown, bob. i should have mentioned before we switched to sharon epperson that a lot of the companies that
everyone wants to know that bernanke did not do anything right, and that is the rawrath that i hear, but the sbig intbi international companies took advantage of the bond market, and it has helped them, g.e. and rand ingersoll. >> please, we are on television here. >> bernanke has done a terrific job and he does not get the respect he deserves. there, i said it. sharon epperson over at the nymex. >> jim, you are watching the oil prices moving to $110 a barrel and a lot of the drivers are paying attention to it as well. we are looking at the wti crude oil prices in parity almost in line with the brent group price, and in fact for the first time in three years we saw the price of wti oil exceed that of brent earlier in the session rising above $109 a barrel. now, a lot of this has to do
with the decline in inventories, and we have seen week after week in the past three weeks, 27 million barrels of crude oil is the declining number that we have seen here in the u.s., and that is a big reason why we are seeing the rebound this big gains in the wti oil contract. what does this mean for drivers? well, look at what has happened to gasoline so far this month up about 16%, and just in the past week, prices of the pump up 12 cents, and the national average at $3.67 a gallon and now four states where the statewide average is above $4 a gallon and you know it is a laugh to hawaii and california, but add to that connecticut. carl, back to you. >> thank you, sharon epperson. >> we have been talking about the detroit bankruptcy all morning and kelly is here to talk about the munis at large. >> yes, people forget that it is a $4 trillion market and a place where we knew that the tax rates would go up this fiscal year and a lot of the investors got interested in the space, because the tax advantages can give you a significant yield advantage, so the retail money is in this space. in is what is important to keep
in mind, a lot of the retail money had been coming out of the space well before what happened with detroit last night and chicago earlier in the week which is just as important for the market in some ways. so we will show you if we can put up the chart first a sense of what is happen iing here, an let's start with this, america's greece moment. i mentioned this chicago and detroit earlier this week, and the outflows issue. so if you looked last week we saw 2 billion coming out of the market. not a huge amount itself, but it is on par with other hated markets like tips, and emerging market debt and you might say, munis? rates are supposed to be going higher because of the macro economic improvement, and shouldn't the story if anything be better, and tax recements and better advantage, and this is what we are seeing with the outflows and tied with the corporate debt in general and munis with the blue line here, and taxable funds are the greenline. they are basically going to follow what is happening in the space, and one of the guys that we spoke this month said stop
get sog caugting so caught up ii levels and this is about inv investors selling what they can sell to put the money into cash or equities ultimately. so going back to whether this is america's quote, unquote greece moment, a precedent in the case of the detroit is going to be so important, because what happens with the treatment of voter approved general obligation bonds that are supposed to go specifically towards some of these areas that then, in other words, the zen senie seniority bond markets is going to be important of the way that people treat municipal debt across the country. probably more knee-jerk selling and space, and here is what jim vogel said, look, if this means more differentiation across the muni space, and places to pick up a 5% or 7% or 9% yield in
some places, what a perfect place for bank loans, and who knows more or should know more about a local market and local conditions and local fundamentals than the bank at least if this were the case 50 or 75 years ago and maybe an opportunity for them to actually improve their own earnings power by coming into this space. >> yes. >> you have done your homework. >> nicely done. >> and somebody has the do the homework and a lot of the guys can't at home, because you have seen the way that the documents and the offerings look, and forget about it. >> and we will talk about it with rattner and governor snyder, too. thank you, kell. >> and a lot of excitement about coupon retail me not opening today, and we will talk with the ceo in a moment. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage,
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entering the market under the tick er rmnt. cotter cunningham is the ceo, and he joins us now. congratulations, cotter. >> thank you. >> and we were looking at the metrics on the business and gross margins of 94%, and higher than any other company in the s&p anyway and we know that the issues that the market has had with the online couponing and the low barriers to entry and a bunch of bear arguments, and so what is your case? >> well, you know, we really believe that we ultimately offer value to consumer. the consumers will do a lot the save money, and they love to save money, and we help them. the average consumer who comes to retail me not saves $20 per purchase and that is exciting. it is great for consumers and retailers and obviously great for retail me not as well. >> well, cotter, jim cramer
here. i want people to understand that -- >> hello, jim. >> if you could explain your balance sheet and income versus groupon, and you would help people think, oh, man, another elf that has never made a dime and all hype, and you are not. >> no. as you can see from the s-1 we are quite profitable, and made money from day one. i think that we ultimately offer a very different business model than groupon. groupon is a great business, but we, they help small companies give big discounts sporadically. we help big businesses give small discounts everyday. so our customers are big retailers and we work with 90 of the internet retail 100, and 80% of the ir 500 are customers of ours and it is really the biggest retailers in america, and we work with them everyday. >> cotter, i am also told that you have incredibly popular apps on the iphone and the android
and that drives business. >> great point, jim. we have an app that is geofencing the 500 largest malls of the u.s. and when you get to the app, they say, hey, in austin, you are at barton creek and do you want to see what is on sale at the mall to day and the consumer can scan around and make a sale. it is fun and the consumerers really enjoy that interactivity. >> and as we wait, and waiting for the stock to open, and see where it goes. >> sure. >> are there long-term contracts with the retailers and how much do you have to win the hearts of the retailers and the consumers? >> well, you know, we have been doing it for four years and i have been in the business for four years and we have not lost one significant customer in those four years, and we are proud of the record, and the contracts are short-term, but we bring significant value. it is ultimately not the contract, but the value that you bring to retailer. >> and always the requisite mobile question, and to what degree is mobile a part of the montization story and how much
runway ahead of you? >> yeah. you know mobile is interesting, because for us it is a different model. if you think about it, the coupons are our version of advertising. so when you come to our mobile site, we don't have to worry about it is a small screen and where do i put all of the banners and the badges on the home page, and instead, all we have to do is to make the coupons visible and available to the consumer. it is a different form factor, but a similar experience to the website. and mobile is a big chunk of the traffic and probably 22% of the current traffic in qe1 was for mobile and excluding the app. if you include the app 40% of the traffic on mobile and crazy. >> interesting. >> somebody is making money on the mobile. >> cotter, we will keep an eye on you today. >> thank you so much. we appreciate it. >> cotter cunningham with retail me not. >> maybe he should have listened, because cotter is right, people love the coupons, carl. >> it is not that far from us.
>> and how many did my late mom, and i mean, we would go to the supermarket, and geez, don't get behind my mom. >> and "six in 60" with cramer is next. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. my uncle wanted to say thanks for idea hub. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a $150 amazon.com gift card.
time for "six in 60" with jim on a friday. >> well, i'm using this as an example of raw stores and they like chico and lulu and just the growth is winning for urban outfitters. >> and sky works? >> it shows you that if you are levered to mobile, it is working. and sell on sprint? >> yes, the this is the most controversial story out there, and don't sell sprint. >> and there is a great resurgence here. >> channeled to one of our own herb greenberg, and he said that the company had problems. >> yes, and good props for herb. and now this one? >> well, they said that this is a terrible stock the own, and he was long some against it, but it is citigroup says to sell it and missed the move. >> and wholesale to panera. >> you know i have jack
hartongue hartung on tonight. and i wish they were weren't so nervous about panera, because i believe the comps are accelerating, and tonight, we will talk about how chipotle there is a love for a product where if they wanted to raise the price, they could, and everybody is saying, raise the price, and i like a company that doesn't need to until they have to. >> and jim, finally the worst day for microsoft since '09 and best for g.e. since 2011. >> i know. i will tell you that i have a soft spot for jim immelt who is our old boss, and i wanted him to win. his tone on the call was terrific. the microsoft, the cfo talked and said, gee, why don't you sell our stock for now, but we will get it together, and we will get out of the dinosaur land, and i felt like i was in some sort of bizarre steven
spielberg movie with them. >> and over to simon. >> good morning, carl. in a few moments time, a news conference will start with the mayor of detroit and we will take that live. we will talk about who took gm and krchrysler through bankrupt and talk about why google is no microsoft this morning and how most banks are most vulnerable to losing you as a consumer, because they are nickel and diming you. that is in the second hour of "squawk on the street" this friday morning. but from an early age, children internalize behaviors that affect financial decision making later in life. pwc is helping spread that message. i'm bob moritz, u.s. chairman of pwc. pwc's earn your future is a 5-year, $160 million commitment to help students learn the financial skills they need as they grow. pwc's earn your future: empowering students and future leaders through financial responsibility. and experience the connectivity of the available lexus enform,
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welcome back. we will be beginning with breaking news. the detroit emergency manager and the governor of michigan giving a press conference right now after the city declared bankruptcy yesterday. when that happens we will bring it to you live. in the meantime, the dow is off 37 points. i want to bring in the cnbc contributor steve rattner and former adviser in the obama administration and talk about detro detroit. good to have you back. >> thank you. >> and some see it as a surprise and some see it as a surprise that it took so long? where are you? >> in the latter camp. ba based on my experience in the auto companies and having learned a fair amount about bankrupt bankruptcy and when i looked at detroit's numbers and
the amassing liabilities and the credit and the numerous stakeholders and the kinds of stakeholders and the ideas that it will be resol nevada a negotiated way seem remote to me. >> 100,000 creditors, steven, tossed around a lot today. who is going to take the bite? who is going to take the lion's share of the bite? >> not only 100,000 credderer tos, but many of them are retirees depending upon the pensions and the health care, and current city workers may have to take a haircut as well as part of this. this is levels of i will call it austerity and cuts and levels of cut s th cuts that were not necessary in the ford and chrysler bankruptcies, because frankly as bad shape of car makers, not as bad as city of detroit, because they have declining revenues and declining population, and deficits as far back as the eye can see.
the cuts will have to come and be shared pain. ken orr has been candid in many weeks to say it. it is no possible that one group of stakeholders can absorb all of the pain needed for detroit to get back to where it can function in a solvent way. >> steven, as specific as this is to detroit's struggles, there are people out there saying that michigan's response not being more proactive is setting a worrisome precedent for other cities across michigan who could face higher borrowing costs as a resu result. >> well, a couple of points. first, fairly technical questions around the priority of some of detroit's debt holders, and as we see how they are going to be treated in the course of this bankruptcy, and it will go on for more than a year, we will see that the municipal market will learn a lot about how the municipal bonds really rank which could affect the value of the bonds. the lack of productivity i would put in a slightly different bucket. i don't see a way quite frankly for detroit the restricture that will make it solvent, that will make it functioning again.
i don't think that the level of haircuts that realistically can be imposed on the workers and the former workers who make up more than roughly half of the city's obligations you cannot impose a level of haircuts on them realistically that is going to get detroit back to the manageable debt level. this is a classic case where the government has to help. >> that is a very interesting comment, because a lot of the people were questioning how powerful the labor unions would be here in pushing back, and, because it is a closed system pushing a back effectively against those muni-bondholders steven is what you are saying. specifically, you raise the issue of the in inference to what you are saying in obligation bonds backed by revenue of the municipality which are usually considered to be senior debt and therefore more immune from the haircut. do you believe they are in play now? is that the nub of the question as those labor unions prepare to push back against?
who knows a quite liberal judge. >> well, i don't know the answer to that question. we are in unchartered waters in terms of how it plays out, but as a political and i don't mean democrat or republican or whatever, but as a social question, i believe that the idea that you are going to ask the workers to take massive cuts in the retirement, health care, and potentially in the pensions and leave a group of bondholders completely unscathed may happen, but it is hard for me to imagine it happening. >> and having pulled both gm and chrysler through the bankruptcy process, steven, how much of a soul do you have to leave in the entity? for example, there is $2.5 billion of art sitting in the detroit institute of art, and if your view, should that be sold or do you are to leave those type types of things in the entity to give it soul in the future? is. >> let me cast the question in a business context. we can talk about soul, but we are on a business show, so let's talk about business.
for detroit to function as a city going forward, i think that it has to have all of the necessary ingredients of a city. that means a functioning police force and functioning am babula and functioning street lights and all subpar, and public parks and talks of selling off the beautiful special parkk and yes, i believe it needs an art museum, so i don't believe that the solution to detroit's problems is to sell off whatever attractive assets it has, and expect to function. it is as if we said to gm, you have to sell off chevrolet as part of the restructuring and that not a realistic way to approach the restructuring. >> well, you can imagine the audience shaking their head at that, and keep the art and ask the government the help. >> well, yeah, but the art, and it is not that the art is not necessarily benefiting rich people b a people, but all of the residents of detroit, because it brings tourists to detroit and business to detroit and so forth. and we will see how it unfolds
and i'm not making a specific comment on art, but i'm saying that you can't throw all of the good furniture into bond fire and expect to have a functioning city when it is over. >> all right. steven, we will be talking about this for a while, so we appreciate your early guidance on this, and we will come back to you many times, i'm sure. >> look forward to it. >> steve rattner at 30 rock. >> and back to corporate news this friday morning. google trading down 3% after the estimates came in below what many hoped. and the losses increasing at the motorola handset business and joining us is evan wilson and specific crest securities and also joined by the global head of media internet research at canter fitzgerald. >> you, sir, let me kick off with you, that how concerned are you that the price of advertisers are paying google now av ri time a user clicks on the ad s as are 6% below what t were this time last year?
>> i'm not offly concerned for a couple of reasons. one, management has made some changes to the platform by introducing something called enhanced campaigns. and this is by the way the largest change they have made to the platform since ever. so, and this is a change that is in effect is dramatically increasing the relevancy in making the process of buying apps for the advertiser a lot easier. so as a result, we are still in the transition phase. we got some increase in mobile usage which in our mind has dramatically increased the mix of mobile to nonmobile. mobile usually carries lower cpc and that is what drove it, the decline, but we are not overly concerned. >> let me elaborate. the advertisers have a single dashboard and they are trying to
push them to buy combined campaigns and those that would rather be on pcs and they say, look, why don't you take a mobile app as well, a nd as the purchase both, and 6 million advertisers are doing that so that the volume of those ads has gone up, and it is 23%, yousef. >> correct. we went from 22% to 23% which is significant acceleration, and over the next couple of quarters we will see the pc price decline per click and ameliorate and hopefully go positive. >> evan, the revenue up for the third quarter and the profitability up 16% for the second quarter in a row, and does the stock keep gaining from here? >> i think it does. i think that if you look at the reason why the profitability at google has not grown as fast is purely because of motorola, and that is a business they are in the process of turning around. we haven't seen the new products from and if we look at the
second half of 2013, google has easy comparisons to integrating the motorola business last year, and in this second half in the 2013, we have new products coming. so it is a scenario where i think that you will see a sharp revision upward in terms of the profitability for motorola in the second half of the year, and things will look better in terms of the profitability growth. >> evan, how important is that second half motorola story to google right here? do most of the investors expect they will see it pay off or does it remain one of the options, if you will, if this goes well, that will be an additional and cherry on top. >> well, there is an interesting kind of perceptional shift happening at google where there is lots of talk about things like toolbars an enhanced campaigns and things like that over the last year, and really the most important thing to google's bottom line is the transition to becoming a hardware company and motorola is the biggest part of it and the swing factors for the model is nexus and motorola for the next half of the year, and the
products with the profitability of that part of the business is going to be better. >> really? because the tech world at the moment seems littered with people who have wanted to produce hardware. and look at steve ballmer with the great hardware on the surface, and this is not an easy thing to do. the ad spend on the new handset is half a billion alone, evan. they could lose an awful lot of money here. >> sure. well, let's take that half a million dollars for what it is, and that is kind of a more market rumor than anything else. the biggest issue with motorola is at the time they acquired the business they were selling 8 million devices and released no innovative product since then, and they have still the quarterly run rate of expense they need to amortize more revenue over the top of it, and when they get some revenue from new product, profit will improve. >> guys, we can talk forever, but we are out of time. thank you very much, and have a great weekend, evan and yousef. markets have traded down,
but they have broken records all week. what is ahead next week? the one and only art cashin will join us at post 9 to figure it out. later, we will have a live interview with governor rick snyder as michigan has declared bankruptcy. "squawk on the street" is back in two. we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
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>> stocks are drifting lower from the record highs set this week. microsoft in particular weighing in on the dow, and joining us is art cashin director of floor operations with ubs, and art, good morning. a couple of days and so much to talk about. and we have digested bernanke, and record highs for the indexes, but then the earnings were like a slap in the face last night. >> well, they clearly were. the disappointing thing is that on the face of it, total earnings looked great, but if you take out the financials, earnings are only so-so. and one of the concerns that we have had down here is that through the creativity of management, you had profit margins at an all-time record high, and it is tough to sustain, and you can't keep cutting people, and cutting costs to gain. so we are going to see how the rest of the earning season plays out, but for now, all we have gotten today is a pause that refreshes, and no real change. >> are you seeing the broader impact from some of the
headlines out of microsoft and google other than just those companies, and in other words, a focus on the weak earnings that the market in general has a harder time moving through the rest of the season? >> well, i think that there is some general concern about the techs. you did all right with ibm, but if you dug down deeply, they were kind of strange numbers, too. the secret down here is that the floor has assumed and it has never happened that when google got moving would challenge microsoft by offering free operating systems to everyone. and it never happened. i guess they came up with a different plan, and so we have always looked kind of with a jaundiced eye at that combinati combination. >> art, if you strip out the financials, we are half and half on the revenue misses and half of the companies are missing on the top line.
does a point come at which this ability of the market to disconnect from what the world economy doing becomes an issue, and can the market continue to rise if the revenue is under pressure for the big multinationals or indeed those operating at home? >> well, what you are seeing here, and we don't have absolute proof of this, and this is just traders assuming, and if you have looked at the performance of the hedge fund industry over the last year and a half, and absolutely dreadful, and the fear there is that people are going to say, listen, if you don't do something with my money, please, give it back. so there is a maybe a kind of rush to get back in among the hedge jis which may give you a solid bid even with the mediocre earn inings. >> and the in-flows, art, biggest weekly inflows into stock funds since 2008, a san diego that the beg-- is that th of something new or not? is. >> well, i know we have been waiting for the call, but the square caller has not put it together. we will give it a couple of weeks. people want to know how the earnings come in, and
geopolitically, the market is tiptoeing past it. you are getting a feeling that america is stronger than everywhere else and where i want to hide my money and put it and what i said to simon about the hedge fund, it is giving us a bid here. >> any concern that detroit files for bankruptcy and other cities might look to it as an example or mean that more people get out of the muni market and stocks? >> well, lit make people very discrete and concerned about where they put it. i mean, a lesson learned from the panic of 2008 was don't be sure your money is safe anywhere and now we are learning that lesson again in the municipal bonds, and we have had meredith whitney overstate the case, but people will go back to revisit it. we will take a look at the credit ratings all over again. >> and credit ratings in particular, art, because some parts of the market can't function without that stamp despite all that we have said about the ratings losing some of their viability over the last couple of years. >> that is why it is interesting
to watch several of these suits beginning to move forward in the courts, because it will make the man who owns the stamp much more careful about how he uses it. >> good point. art cashin joining us here on the floor on this friday. art, thank you very much. if you are shopping for a new home, there may be a new way to get a bigger mortgage, and we will tell you about that. and while you are shopping for a home, you probably need a jet. there is an app for that and that g-6 is waiting. we will talk about that in a mome moment. [ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ] surprise -- your car needs a new transmission. [ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science. it's just common sense. from td ameritrade.
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we continue to watch this press conference with detroit emergency manager kevin orr and governor rick snyder and the governor saying that he is not sure if some of detroit's creditors will ever be paid. and detroit is the biggest u.s. city ever to file for bankruptcy, and if we get anymore headlines we are bring them to you. in the meantime, a way to get a bigger mortgage if you are buying a energy efficient home. diana olick is live in washington with detail s s on t this friday. diana. >> that is right, simon. the idea is simple, let the energy savings from your home
from green technology like the solar panels on this home add to the value on your home in the appraisal and more importantly in the mortgage calculation. by doing that, you allow the borrower to get a bigger loan. >> it is about energy efficiency, and savings and increasing the borrowing power of the borrower, and a win-win for the industry. >> it is a bipartisan bill in the senate called the save act. what it does is two things. it requires the lenders whose loans are backed by the federal government which is now about 90% of the market to account for expected energy cost savings and those savings are then factored in to how much a borrower can afford for the monthly mortgage payment, and it is essentially subtracting the savings from the energy bill to your monthly expen expenses, and says to add the value to the home in the appraisal, and since the homes are based on the value of the percentage in the home, this would allow the borrowers to get that bigger mortgage and that is where homeowners like tamera
lions would be able to make more money when they sell. the value of green will show up in the appraisal. >> a lot of my neighbors feel that it is too much of a initial investment, and they don't want to put that money down, but if they see that it is going to add to the value of the home for resale purposes, it would make the idea more sexy and more appealing. >> now, this legislation would of course also benefit companies focusing on the green technology like dow, home depot, whirlpool and of course the insulation manufactu manufacturers. so it could be a win-win and it has a lot of support in congress right now. back to you guys. >> incredible, diana olick. thank you very much. now, over to josh for a market flash. >> yes, thank you, kelly. check out a highlight by our own
kayla tausche checking out assured guaranty shares. names like mbia and ambac is a buying opportunity, and the expose surer of the bond insurers like mbia says it is manageable, but they are down about 0.9 right now. carl, back to you. >> thank you. microsoft taking a dive today and in fact, the worst day since 2009 and that disappointing fourth quarter. people are asking if it is time for steve ballmer to go. we will talk about that after the break. to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection.
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coming up to one hour into the trading. here are the stories squawking about. 10:28 on wall street. whirlpool is one of the biggest gainers on the s&p 500 this morning and up 6% as the appliance maker raising the full guidance. it is a good day for the food stocks as well. general mills, and kellogg's and smucker hitting all time highs and dow component 3m is also rising to a all time high as of course we bounce below the record levels achieved last night on the major indices. >> at 3:00 a.m. that record
high, and that goes back to 1945 that data. there is a look at the governor of michigan speaking at the presser. we said before the break that some of the headlines said that he didn't think that any of the, some of the creditors would be repaid, and he clarified it to say that the creditors themselves are not sure if they will be paid, because they have referred to the chapter 9 filing as a tool in the tool box, and guys have talked about the amount of infrastructure repairs they need to make basically 60 years of decay that has gone, been lost. >> 6. 0 -- 60 years of deferred maintenance they need to make up in 18 months? >> yes, and technical problems in the press conference to get the lines ready, and they said that it served as a metaphor of the city of detroit, itself, as to which detroit is perceived as one-off, and we will have the comments of how they are are going to do deal with the cities across the state and not just
this specific case. >> yes, the point earlier, kelly, do other stories who would not have made this move see it as a viable path to fixing the balance sheets, and say, let's give it a shot, and see if the courts shine some light on us, too. >> and to what extent the stigma once associated with the city filing for bankruptcy as now with the case of detroit, all of the cities across california and of course, what was happening in alabama as well has changed. >> and that might be affected by the split of what the labor unions got and the bondholders. if it is perceived that you can push the losses to the bond hoehold ers then you have to find out that more states would go for for it. >> and not only that, but simon, how much have you talked about it this across europe, and you can push the bondholders to greece, but when they are going on strike and drive up the borrowing costs of everyone else, that is the or wo ri of the municipalities now, because if detroit decides to take a super hard-line with bondholders in the case, who is going to show up if they are to be
protected by the general obligation bonds to set the revenue stream aside to service the debtsb and we did not cover what we expected and not going to show up for the next time around and that is one of the questions to grapple with. we will continue to follow it and bring you the headlines out of it. meanwhile, shares of microsoft are short, and what could be another headwind, video sales tumbling 17% in june. julia boorstin joining us live with more on this this one. tough day, julia. >> well, the video games are waiting for the new xbox console and sony's new playstation to lawn inch the fall. so in the meantime, the whole video game industry is suffer i ing. in june, the total video sales declined 15% dragged down by a 30% drop in hardware sales as the consumers await the next console cycle. and meanwhile, the software sales, games, fell 10% in the sales, and accessories declined
9%. one bright spot is the nintendo 3d handheld which enables game play without the glasses. they is a they the sales rose 42% from june a year ago. after so many months of declines the company analyst says that while ea and take ii posted declines, they were not as bad as he expected and the software sales are not that important, and even right now including the analysts are waiting for a new rack of consoles and games in the fall. the real trend to watch is the rise of digital games. digital purchases added up to nearly $550 million in june, and that is nearly half of all of the video game industry spending. potentially disruptive force is a kick starter-funded game console running on android and costing $99 and a fraction of the cost of the other consoles. it launched in late june, and
while they say that the sales are light, and ouya does not track the sales. so we will have to see the if the consumers tracked the alternative as sony and microsoft plan to launch the pricey next generation consoles in the fall. >> julia, thank you so much for that. out in los angeles. microsoft missing the earnings because of the lagging sales of the surface, but the stock having the worst day as we said earlier since 2009. you have to go back a ways. walter pritchard is an analyst with citi, and he joins on the newsline. first time we have had you na while, walter. good to have you back. >> thank you. >> is it true that you called it the sloppiest quarter in history? >> yes, i did. i believe that we foresaw some down in the guidance but it was sloppy. >> why is this a surprise to you and why didn't they preannounce this with the restructuring and is this no longer the balance sheet hope story that we have
been led to believe as the stock climbed into the 30s? >> well, so a few questions there, and the preannouncements that the company has not done it on the upside or the downside and i think that relative to the numbers going forward, we had it down at 277 for the support team, and we were low expecting some of the things that they set for fiscal '14. other surprises there on the quarter, i would say that it was a comedy of errors. we have had inventory writedown and costs and everything that could have gone wrong went wrong. really the market is reacting to the 4.25 now. >> and walter, it is fascinating, because just a couple of days ago, we were talking about the runup in the stock so far this year. everything they had done right, and does it seem as though the entire investment case has been turned on the head as a result of the earnings report?
>> well, i think that it depends what the investment goal was. some people had developed an investment piece that windows did not matter, and they had four operating businesses, but we warned that it was maybe a false piece. that changed the decision to be more difficult as windows had a number of goals for the franchise going forward, but the stock obviously, our goal is around with stabilization, and the cap as people believe in that, and nothing that changed our view there. there are others hoping that there is bigger capital return or maybe they have a ton of expenses, and that is going to remain to be seen. i'm not sure that the quarterly did much for the that review. >> we will bring in brent sill who is an analyst covering microsoft for ubs and welcome the program. when we had the reorganization announced by ballmer, it was
aimed at sharpening the focus on the tablets and the smartphones, but now we learn that we have a $900 million charge because of the surface launch. what is it with microsoft and ballmer that they can't get the consu consumer electronics to fly in the same way as other companies in your view? >> yeah, microsoft is a great company stumbling on the consumer side. the whole reorg is around getting them aligned to where the market is going which is clearly away from the p.c. and toward mobility and the cloud. so when you get to september analyst day, they will give you more financial guidance and more catalyst for the stock, and fast money left this morning obviously, because of the qe4 disap poi disappointment, but we believe that they are aligning the company, but it is going to take time. they can't flip the switch and be where they want to be. we have always said that the biggest issue is mobility, and
they have completely missed the boat. >> brent, now the amount of cash they have approaches the levels in 2003 where there was a special dividend announced. can that theme carry the company through to the stage where they do solve some of the consumer mobile issues? >> yes, you have over 70-plus billion in cash, and we think that the dividend is higher in september. we think that the company is capable of buying a lot more stock back. in addition, we think that they should be using it to fuel more investments in mobile. that is clearly a lot of the activists have been all over ballmer, because of their lack of focus on in actual proof that they can succeed in the mobility. so we think that they are coming from the position to improve this. again, double-digit enterprise growth in this business. so that's the core of this business. and we think that they are
capable, but it is just that they have little signs yet on the consumer side that they are improving. >> yeah. and finally, walter, brent mentions the heat on ballmer for not quarters now, but years. does any of this quarters' results give the activists more firepower to demand the ouster? >> well, i think that they probably make a run at it. i think that our argument for this is that i'm not sure that this is somebody else to bring them in, because it is a unique company and they have grown up organically together, and it is a difficult discipline to make change changes to split the company apart or bring somebody else in. so it sets the table in terms of whether it is the mobility that we talk about that has to let the market play out a little bit, and that is what is going to happen. -- >> okay.
brent, walter, thank you. the stock at $32.18 the low of the day and as we know a day that you have to go back a long time to find a day as bad as this one. guys? >> find out which bank is in danger of losing hundreds of billions of customer deposits, and we will have details on that. also a live interview with michigan governor rick snyder, and plenty of questions to ask him coming up after the break. eu start breaking down. i love my car. i want to take care of it. i have a bad wheel - i must say. my car is running quite well. keep your car healthy with the works. $29.95 or less after $10 mail-in rebate at your participating ford dealer. so you gotta take care of yourself? yes you do. you gotta take care of your baby? oh yeah! it's been that way since the day you met.
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and we had the ceo on earlier, and that is up. >> i can't believe that ticker was not already taken. >> simon, we have a new survey out, and on which main street banks were most vulnerable to losing the large number of customers an large number of deposits. it is conducted by steve beck with cg 42 joining us on the floor. you are basically a consultant to the banks, and you tell the banks what is going on in the marketplace. >> yes, at cg42 the specialty is helping the companies grow and align the operations, finance, marketing activities behind building customer loyalty and growth. >> what did you look at in the survey and what did you find? >> we pioneered the approach three year ago and it is designed to help us to understand the key frustrations that customers experience when they are dealing with the primary bank and by understanding the frustrations,
we can create greater levels of loyalty by fixing them, and design around problems. >> and three frustrations in the main. one being nickled and dimed, and two, not offering competitive rates or pricing, and three, being hit with of draft chargs.s >> right. some of the key foundational operational foundationings of the banks are causing the key frustrations with the customers. at the end of the day from 2011 to 2013, we have seen a lot of progress. a lot of improvement among the top ten banks here in the states. >> well, let's talk about the top ten, and who is most vuler inable? >> citibank, and the signature frustrations are elements of service, elements of online and their ability to work with their customers on technical basis and mobile or online, et cetera. and certainly unfortunately making promises they don't keep.
in other words, marketing and the communications does not actually set up an experience that the customer is experiencing, and therefore they get pretty upset. >> in what way? >> well, if you promise relationships and promise service, and then you don't end up bringing that to the bear, to the fore, customers will be upset. >> the banks are desperately trying to cut the costs and head count, and tell me, what are the figures attached to this, and how much money is potentially at stake? >> well, based on our estimates in the, you know, looking at the frustrations and the number of customers at risk, basically, at the category level we see roughly around, you know, 15% of cu customers actively looking at alternatives right now. now, obviously, not all of them will leave in the survey we also found that over half of them believe it is too much of a hassle to switch banks. >> or where to go? where do you go? >> much of the risk, and most of the frustration, many go to other banks within the top ten.
some do go to regionals or the smaller community banks, but also, mostly what we are seeing is that folks go from one bad relationship unfortunately to another similar relationship and frustration continues. >> good to see you, steve. thank you for the information. steve beck joining us from cg2.2 kelly, back to you. >> all right. simon, thank you for that. are you in the market for a private jet? don't worry, you can book your flight from the stafety of your smart pho smartphone if that is the case. we will show you an app that lets you do it. "squawk on the street" back in a moment. who can help keep your investments on course, whatever lies ahead? that someone is a morgan stanley financial advisor. and we're ready to work for you.
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taking one more look at retail me not, and the stocks are up 26% or so, and the $26.55 and priced at $21 and one of four ipos on the street today. let's send it over to josh lipton for the market flash. >> hey, carl. we are watching general electric in the green and the earn ining are best of the street's estimates and it is jeff immelt calling it a solid quarter and on track for the year and talking about market expansion in 20. 13 and looking to slink g.e. capital and that stock is up 5% right now and back to the
highest level since october of 2008. kelly, back to you. >> all right, josh. thank you very much for that. and speaking of jet engines or something, are you in need of a private jet? who isn't these days. well, don't worry, because there is an app for that as there is an app for everything. we are joined on reporter rocke fra -- robert fronk joins us on set. >> do you have a private jet? >> not yet, but i have a phone. imagine picking up your phone, clicking a few buttons, and your private jet is waiting. it's becoming a reality. jet companies are launching apps that allow you to book a jet anytime, anywhere. many jet companies do still insist it will always be a person-to-person business but wealth savvy tech folks are proving them wrong. last month a rich middle east family booked a $500,000 charteder flight to europe through private fly. they booked it with an app.
it's believed to be the largest transaction ever for a jet with an app. members to book individual seats on jets, they say nearly half their bookings now are through its app. a seat on a private jet to florida, for instance, is less than $3,000. not just anyone can book a private jet with an app. you have to be a member of some of the companies or you have to make payment by phone after you book, but with prices coming down for jet rides, new apps may be making private jetting for the masses. or at least the mass millionaires. should we book one? >> can you do it right now? >> we can now. >> whose account is this linked to? >> it's mine for now. let's see what the cost is. this is black jet, and maybe you can see it there. so basically we're going to start in new york. we can go to l.a. let's go to l.a. l.a. is a good one because that's a frequent destination. just brings you there. going to go to l.a. now that's our destination. so click that. and it should take us -- let's
go l.a. should we go tomorrow? let's click tomorrow. we'll go 7:00 to 10:00 a.m., morning. >> kind of early. >> there will be four of us. we'll click four. next. >> let's bring our stage manager brad. >> 15 -- less than $4,000 each for a private jet. >> i like the way you make it sound like that's nothing. >> if you're flying for business and it's a group of you and you would have paid first class and you have to go to multiple cities, this is an interesting thing. plus, it's less expensive than people -- most people -- how much a private jet to l.a.? most people would think it's more than $4,000. >> do you share it with people? >> you have to share it with me and kelly. >> what's curious though is the fact that you can actually have one at the ready so quickly. this is just for tomorrow morning. i thought there were more logistics involved. >> that's what's interesting. there are 10,000 private jets in the air. a lot of them are sitting empty.
that brings that whole database of inventory to all of us to see maybe there's a private jet at teterboro if i wanted to go to florida that isn't that much money. >> could i board the flight and get to the other side and then have to pay? >> no, you have to pay once you get to this point. then you have to pay. usually it's been phone or you have to be a member. so not just anyone can do this. >> so you book it by the app but then you have to call up on the phone to -- >> some of them. actually you don't because you're already a member and they have your account. >> sounds like the skies will be a lot more cluttered with private jets. >> not a bad problem. again, given the b that costs are coming down, there's a lot of planes. somebody is going to make a lot of money. >> i'm hearing from some friends who were investors in black jet. they must know a lot of people for whom this would be a key service. >> especially younger tech entrepreneurs and younger tech executives. they love this. >> early to bed. :00 a.m. flight tomorrow, robert. >> thanks, robert. >> thank you, guys. >> still ahead, we're live with
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hitting new highs is the fact that crude oil continues to hit new highs as well. we have been talking a little bit about the difference between wti and brent, but, frankly, the story is starting to become just the levels of wti oil prices. we're almost at $110 a barrel. >> that's one thing that's puzzled me. i have seen so many people and so many outlets reporting the price of wti is higher because of the middle east or these intangsibles. i thought the price was rising because finally we were getting the oil out of the middle of the country through the pipelines, through the railroads, or at least there was an expectation we could. why is everybody reporting it's on middle east tensions and nonsense like that? >> i don't know what kind of programs you're watching but here on cnbc -- >> until we see violence at the suez, that's a hard argument to make. gas prices, aaa up 11 days in a row. $3.67 the average. a four-month high. the old saying, every penny is a
billion dollars in annualized consumer spending. >> it's going to be a huge hit. there is an impact from the middle east. the extent to which it's making wti more of the global benchmark because people are looking at brent and saying it's a regional specific story. when the prices are so close it almost doesn't matter. >> google, cramer said it was not as bad as they got slapped with in terms of their reputation last night. now down less than 2%. >> they continue to hover at money as barry diller once put it. that's the nature of it. this move to force people, advertisers, to spend more money on mobile apps that are cheaper. it will bring down the average cost of your click. the volume of the clicks is up 23%. >> although they did lose two of the four digit price targets on the street. raymond james and deutsche. >> probably a healthy sign. still might get there. we'll see. >> in the meantime, dow is down some 29 points. if you're just joining us this morning, here is what you missed
earlier on. >> welcome to "squawk on the street." here is what's happened so far. >> this is a chance for the city to kind of find its purpose, find how it's going to make itself viable, how it's going to make itself attractive. it isn't as simple as bringing back one industry. >> the markets are focused on when is the first real tapering going to take place and i think the consensus is still september. >> i think that in the end, geez, windows is horrible. michael dell and carl icahn, read the microsoft call and drop your bids. >> last opening bell of the week. >> i know you're not allowed to say anything good about bernanke. >> please, we're on television here. that's terrible. >> i think bernanke has done a great job and he doesn't get the respect he deserves. there i said it, okay? >> consumers will do a lot to
save money. we help them do that. the average consumers saves $20 per purchase. it's exciting. i think it's great for consumers, great for retailers. it's obviously great for retailmenot as well. >> it's going to have to be shared pain. i think kevin orr has been candid over many weeks in saying that. there's no possibility that one group of stakeholders can absorb all the pain needed for detroit to get back to where it can function in a solvent way. >> good friday morning. welcome to "squawk on the street." we're live at post 9 on the new york stock exchange with a check on the markets. coming off record highs yesterday, the dow giving back some 22 points. s&p is giving back about 1.25. burrito is a good business. shares of chipotle surging. chipotle boosting its full year same-store growth outlook.
there's amd selling off. posting a loss in the second quarter. lower demand for pcs. in addition amd was citing the weakp pc sector. it's down 71 cents. >> it's the biggest municipal bankruptcy in u.s. history. the city of detroit going broke. rick snyder will be here to tell us what could happen next. it's a blowout quarter for bla blackstone. tony james will join us to explain where the firm is investing next. plus, a cowl forall for a 1 correction. google shares lower citing weakening ad prices. can the motox help turn the company around? dennis, good morning to you.
>> good morning, carl. >> you're wearing a tie. gutsy. >> that's what we do here at the exchange. you should try it sometime. >> i know. >> did they get smacked around too much last night? >> well, i mean, the proof is in the pudding right now. the stock is down 2%. i think that's a pretty good result. remember, of course, that this stock, carl, was at $600 at the beginning of the year. it's had a great run. perhaps good that the price targets have come off. i think google is much better situated than many other companies when you think about platform, when you think about devices, android, chrome. they're kind of at those junction points where you need to be. microsoft, the stock is down almost 10% today, clearly is not. it got beat around a little bit, but long term you have to give them the benefit of the doubt and i think they're in a pretty decent spot, carl. >> interesting. scott, your thoughts? we mentioned google glass. that's a ways off. they have to deal with price per click in the meantime. >> yeah. i think they have got cloud
locked up. you look at business applications, sure. they have a lot of research projects that's very exciting, but you have no idea which ones will pan out with driverless cars and you're dealing with google fiber, and google glass, who knows how that will go. google's history su don't really know which of these little mini think tank projects will succeed or fail. google glass is intriguing, who knows what it will be in the future. there's a lot of growth left for chrome and even an dried as well. >> speaking of android, dennis, they clearly are telegraphing they are willing to spend a lot of money to market the motox although we know what marketing dollars have gotten microsoft. is that going to work? >> microsoft and nokia and blackberry. let's keep all those in mind. you know, whether the motox does well or not, i think android is such an important function here for the company, the long term risk, and this is why they're putting so much money behind the moto x is where a fundamental shift might come in 2014.
the important battle of 2014 is not so much apple versus google. it's google versus samsung. how do their fortunes diverge particularly as samsung starts to create its own environment from a software perspective. it's all about getting that mobile environment and capturing that mobile click. i do think when you own that environment, you have the ability to make it more profitable for yourself. again, microsoft is, you know, not even the conversation so i'm not even going to mention them anymore this afternoon. >> we keep getting microsoft drift in this conversation. scott, we got some pictures of eric schmidt when he was in sun valley talking on what appeared to be a moto x. what kind of legs will it have? >> it's hard to tell. there are so many great phones. this has been a long-awaited phone but google hation had a hard time trying to wrangle what's going to happen with motorola. so i think it's got a lot to live up to. it's really the most well-developed area for google is phones. frankly, i'd love to see them take that type of effort, apply
it more towards tablets, towards chrome books and really coming up with the pure best iconic products going forward. but it's intriguing. i think it's going to have a hard time competing with samsung. >> but is it worth doing that at a time when a lot of the devices seem to be getting commodityized. why go through the headache of trying to win in this space when we've seen in some extent fatigue among consumers? >> i think there is fatigue. i think it's useful in developing platforms. who knows if they will make a watch. when you deal with stuff like google glass, new directions. and i think chrome books, too. where there isn't an understanding of what the product is, it really helps to create a well-polished product to draw people to, but you're right. when they think so get more commodityized like phones it becomes less of an important thing to do. >> kelly, how can you not be investing in phones right now? we see basically the decrepit
fortunes certainly of nokia and blackberry and more so microsoft. okay, i said it. but you have to be in front of the consumer because that's where the consumer is. you see where pc shipments are going, windows shipments are going. maybe you're losing money on it, but this is where the eyeballs are. this is where the human activity is. so my mind they probably won't necessarily make back all their marketing spend but they're getting into the game. >> they have that option with glass which seems to be the next generation. thank you both. have a great weekend. >> thank you. let's send it over to josh lipton. >> watching charter communications here. john malone backed charter communications. now reportedly working with goldman sachs to prepare a bid for time warner cable. this is from a report from bloomberg citing people with knowledge of the matter. time warner cable rejected, of course, an informal approach at the end of the may. chtr up more than 2% right now. kelly, back to you. >> all right, thank you, sir. coming up next, we're talking to
[growl] we'd always have to go everywhere with it. get in the front. we drive. it was so embarrasing that we just wanted to say, well, go away. shoo bear. but we can't really tell bears what to do. moooooommmmmm!!! then one day, it was just gone. mom! [announcer] you are how you sleep. tempur-pedic. well, if you're worried about the industrial economy, you got two big names backing you up at least in terms of positive news. ge beats by a penny. revenues were a little below because of the shrinkage of ge
capital, but margins apparently looking better. infrastructure orders up 4% year on year. do you know how hard it is to move a stock like ge 5%? >> especially they always beat by a penny. it's not as if they come out and do something extremely unusual. so i wonder if this tells us just about expectation going into the quarter. >> some have tried to say it's the summer trading, things move a little bigger but that's a huge market cap. that's an amazing move. the best day for the stock since 2011, i believe. talking about europe stabilizing as well. some change in tone quarter on quarter. and then whirlpool, if you're into housing, they're looking at better appliance growth. raising their full-year forecast and on margins up 110 basis points. whirlpool is the number one s&p gainer today up 7.5%. >> echo bob pisani earlier, it makes sherwin-williams
disappoint more of an outlier. the biggest u.s. city filing for bankruptcy. a tweet from bill gross warning that more competition -- global competition and overspending could threaten more u.s. cities and corporate business models. we've been watching the mub this morning which is one of the biggest etfs for munis. it's down by half of 1%. so it's been falling a little bit throughout the morning. >> when we come back, black snst stone president tony james will be here. plus even if you don't know the company, you know the brands. northface, wrangler, vance and a lot more. the ceo of vf corp is here to tell us which brands are making most money. the city of detroit has filed chapter 9. michigan governor rick snyder will tell us what's next for the motor city. maybe he'll respond to what bill gross just said. mo town could be yo town in gross' words. we're back in a moment.
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blackstone with a whopping $230 billion assets under management seeing its shares continue to rise after reporting yesterday its second quarter profit tripled. joining us now is president and coo of blackstone tony james. he's in montana with some news this morning. tony, we'll get to that in a minute. girs, welcome to the show. thank you for joining us. >> thank you very much, kelly. >> and congratulations on the quarter. look, it was a strong period for you guys. you sold $1.6 billion worth of investments. you raised another $2 billion. you have seaworld, for example, one of the ipos doing quite
well. everyone wants to know when are you taking hilton public? >> well, we don't have any specific plans on that. the company is doing fantastically. i think we told people yesterday that the earnings before interest and taxes and depreciation was up 17% last quarter at hilton and we're accruing equity value very, very rapidly. no rush from our standpoint. it's a great company with great management and it will be a hot ipo some day. >> speaking of ipos, i understand last night you filed for bricksmore which you can think of a strip mall asset, and conditions there you guys bought it for, what, $9 billion a couple years ago. do you think you're going to get all of that back on this investment? >> well, we think of bricksmore as grocery anchored shopping centers, not strip malls, but i hear you. it will be a very successful investment for us. we obviously can't comment too much about the company because it's in registration, but it's done extremely well since we bought it.
>> okay. and what about the broader environment here, tony. we've seen such record low interest rates. it's a good environment for private equity generally, and again market conditions with rising equities have also helped when it comes to exiting, but do you expect tougher times in the second half of the year? do you worry about the recent backup we have seen in rates? >> you know, honestly, we actually think the economy will continue to get better slowly but gradually and that's kind of ideal conditions. in general, low rates are not good for private equity because it makes purchase prices high. it does help exits, but it make it is a tough environment to invest money in. so for us a little backup in rates is a good thing. >> okay. and so you're there in montana, i understand, with some news for us this morning. >> yes. well, the blackstone charitable foundation is going to announce this morning that a commitment of $2 million to something called launchpad here in
montana, which -- where we work with the university systems to set up offices and counseling for students to start businesses and the idea is we want students to view new businesses, entrepreneurial careers as a career path, and i think it will be great for the state because we hope it will keep people here and create jobs. we've worked with the white house. we've committed to do six of these around the country. this is our fifth. our last one will be in california, and we're very excited about it. we're getting a great reception here in helen a. >> we're talking about a fair number of kids, 30,000 in montana alone will have access. and you don't necessarily need to be a business major, right? >> no, you sure don't. you just have to have an idea and need advice. collectively across the six schools, we touch 230,000 kids every year on an ongoing basis. so it could be a massive program, and we could create a
whole generation of blackstone entrepreneurs. that's what we hope. we like to dream big at blackstone, as you know. jo tony, shares of dell are trading just over $13. you guys had submitted a proposal for this company at $14.25 and that was just back in march. how did you get this one wrong? >> well, as you know, we submitted preliminary proposal before we were able to get in the company and do any work, and dell is a complicated company. it's got some great upsides but some significant challenges, and i'm not sure who is right on this one. >> tony, we're going to have to leave it there. thank you so much for joining us this morning and that's tony james, president of blackrock joining us from helena, montana, on this friday. dark days for detroit as the city is declaring bankruptcy yesterday in the biggest municipal bankruptcy in u.s. history. the question is where does it go from here. michigan rick snyder and detroit emergency manager kevin orr
joining now. gentlemen, good morning. >> good morning. >> good morning. >> governor, first to you, look, there's questions here about the extent to which michigan could have done more to help the city of detroit. what's your response to that? >> well, it's not about bailing out the city of detroit. they have $18 billion in liabilities. this is really about how to get better services to the citizens of detroit. i deeply respect them, i work for them. they deserve a better answer, and part of this is to say let's address better services and let's address the debt question in a structured fashion. there was no other viable option so let's use bankruptcy effectively to stabilize the city government of detroit and let's grow detroit and i believe we have that opportunity here. >> governor, are you comfortable then with other cities that might look at their pension obligations, for example, as being unmanageable and saying, you know what? we're just going to have to file for bankruptcy. >> well, again, this was through an extensive process. this wasn't just deciding to do something offhand.
there was an extensive process that goes back a couple years and i want to compliment kevin. he's done outstanding work since he became emergency manager to do this in a thoughtful, deliberate faths, trying to avoid bankruptcy but recognizing there was no other viable option in terms of creditors coming to the table to work through this. let's get it done and let's grow. >> kevin, we have been talking about this all morning, of course, as the whole country has. how receptive would you as emergency manager be to federal aid? is that something you will actively solicit? >> well, you know, my role as emergency manager under the statute that i operate in chapter nine is to deal with the realities on the ground i have today. certainly we have to fix our own problems here in detroit. they are a long time in coming. we put forlt a proposal on june 14th to address that. we're continuing to negotiate with some creditors to address that rubric and have had some success with it. we look forward to continuing to do that. >> governor, you said this morning, and i hope -- your words might have gotten twisted
by some news organizations. it sounded like you said creditors are not sure if they'll be paid at all. is that a fair characterization of what you said today? >> no. what this process does is really create an environment where the city will present a plan approved by a judge that says currently in the situation without bankruptcy, they're unsure how they're going to get paid because you have $18 billion in liabilities. what the bankruptcy process will do will give them certainty to say there will be a revised number but they should have confidence they will get paid something. >> kevin, what is the plan at the moment for the treatment of general obligation bonds for the city of detroit? >> well, kelly, as you know, we have about $12 billion in unsecured claims, liabilities. general obligation bonds and the other unsecured class of creditors constitute $2.5 billion of that $12 billion. the majority is related to both health care obligations and pension obligations. as we said time and again in the bankruptcy context, there are only two types of creditors,
secured and unsecured creditor and people within each of those classes have to be treated equally. that's why in the proposal we've treated them all in the same fashion as unsecured creditors. >> would it be, kevin, a situation then -- let me ask you this actually first. so if you have $12 billion in unsecured debt, what about the secured portion of that? explain that a little bit to people. >> sure. well, in the secured portion a majority of which is made up of debt related to the water department, we are going to pay that according to terms. we might try to negotiate some ajustments but we have to pay that. that class of creditors are unimpaired. in the unsecured class of creditors, there's no way to reasonably pay all that debt, kelly. even if we took $200 million of the billion we have every year in the general fund and paid that, that's over 50 years of payments. we can't do it in any reasonable time so we said we'll give you a note of some fashion as best we can to try to address that debt
and that's why we've divided the two. >> governor, we continue to read people weigh in on this story obviously. bill gross, the noted bond fund manager, writes this on twitter today. mo town could be yo town. government mismanagement, overspending, and global competition threaten u.s. cities and corporate business models. we're talking not just about the news today but the long term trend and where this will lead. what do you think detroit will look like in 10 years, in 20 years? >> going through this process, detroit is going to be a stronger, better city because if you look at detroit has been on a downward path for 60 years. if you step back and look at it. in terms of most violent city. in 24 of the last 27 years, the detroit has been listed in the top 10. that's unacceptable. we need a better resolution. this is the format to do that because the question now is let's solve the city's debt problems. let's put in a plan for improvement. get better services and detroit
has a brobright future. there are young people flocking to detroit. the format is there, the philosophy is there, let's solve the city prom and move forward and grow. >> there are great museums and a lot of people talking about the art you have that you could sell, although apparently will not be forced to sell. kevin, is that an option you're seriously considering? >> you know, right now we're looking at the reality of negotiating with our creditors and getting to a point where we can reach a consensual resolution with all parties that want to. we're not addressing those issues because we think we can get some settlements in over the transom even now. >> we'll leave it there. we want to join you again. thank you for joining us on this morning. a difficult morning for detroit as you mentioned. one perhaps though that we will look back upon as a turning point for the city's future. the market now about to embark on a great crusade or so says
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the clothingmaker vf corp trading lower. the company profits showed a slowdown from a year ago. however, it did raise its full-year forecast, issued a dividend. we're keeping a close eye on this one. joining us on the newsline, the chairman and ceo of vf corp eric wiseman. good to talk to you. good morning. >> thanks, and thanks for having
vf back on the show. >> interesting quarter. margins, man, i think i saw 240 basis points to the upside. good inventory control. what's troubling the stock today? >> i don't know what's troubling the stock today. we're thrilled with where we are. we're right on track with how we planned this year. our second quarter came in with 4% revenue growth which is what we expected. what was a little different is we earned more money in the second quarter than we thought. our earnings were up 14% driven by the gross margin expansion you mentioned. in fact, it was our highest gross margin rate for any quarter in our history and we're not a young company. we've been around since 1899. >> there's a few yaurs of results in there. some are pointing to wholesale business at timberland and northface, maybe cautious retail orders, at least in the united states. is that something to watch? >> we think we have our year dialed in at this point. we called for the year to have 6% growth this year organically
and that's the way we see it. we confirmed that guidance today. obviously our business is a mix of wholesale and direct to consumer business. but globally we're expecting 6% growth and that's what we said back in february and we now have the orders to support that. so if anything today we confirmed our annual revenue guidance and improved our profit outlook for the year. >> international up 6%, asia, latin america up 10%. to what degree is europe the spoiler at this international party so to speak? >> well, the european business is obviously tough and you're right, our international business is up six in the quarter. and we have a really broad global platform. that's one of the strengths of our corporation is we are well-developed in the united states, of course, but we have growing businesses in emerging economies around the world. we're able to pull the lever to invest in china, for instance, when southern europe is weak, and southern europe has been the issue for us. those economies are very weak. some of our brands like timberland has a big business in
that market. >> eric, the national retail federation says back to school spending will be down 8% this year from last year. what are you seeing so far? >> we're not seeing that in how our customers have placed orders for our products for fall. we have an important back to school business, particularly around our jeans wear segment and our jeans wear business in the u.s. is growing. it had decent growth in the second quarter, and we're expecting it to be up mid single digits for the year. we're expecting a good fall and we have orders to support that. >> what about the price of cotton? how is that looking now and when you are ordering merchandise, eric, going into next year s that going to be as much of a tailwind for you guys? >> i don't know that it will be a tailwind for us next year. in fact, there may be a little bit of cotton inflation, but we just announced a five-year plan to investors back in june, and what we said at that time is we're getting 50 to 60 basis
points of growth margin expansion a year from our business model. by that i mean to the extent our international business and our direct to consumer business grows faster than our domestic wholesale business, we get gross margin expansion, and that's what we're seeing. >> eric, a lot to watch, whether it's the international as kelly mentions, the material costs. thank you so much for coming to the phone. we'll see you next time. >> thanks very much. >> eric wiseman, the chairman and ceo of vf corp today. it's 11:32 eastern time. you know what that means. markets have closed across europe. let's bring in simon hobbs with a look at what's been happening. >> slightly lower on the session but for the week it's been good for the top stocks in europe. they're up 1.3%. the dow is up about 1.4%. an outperformance from europe overall. i want to show you some of the major trends that have emerged during the week. obviously we're reporting in europe, the reporting season at its height. a lot of companies are naming china, either the chinese economy or competition from china as a reason why they're
disappointing. sap and nokia, that was a major theme through the week. the other thing is the european central bank relaxed the rules on collateral for asset-backed securities. so there are more abs that are available to be posted at the central bank and the discount on those is less. that helps the spanish and italian banks in particular, and you will see, therefore, the bonds have rallied substantially in both those markets. the yield is lower for the week overall. a lot of good news at the remember pif ri eriphery. ireland passed its. mf test. itly passed a vote of no confidence. portugal passed a vote of no confidence last night. they have to agree by sunday on the austerity. the other major factor is the pushback you have had from the germans. angela merkel pushing back against this idea that the
greeks should get a second haircut on their debt, mainly the debt held by the central banks and the governments. angela merkel adamant that's not going to happen because of the consequences for the rest of europe, and her finance minister, daniel is in the lion's den, went to athens yesterday and lectured the greeks. this is what he had to say. >> i would make one very serious remark. i would like to ask all of you not to continue in this time this discussion on a new haircut. it is not in your interest. they have agreed the second program for greece and it was difficult to get it, i tell you. >> and with that the wagging of the finger of the german finance minister, have a great weekend, guys. >> thank you very much, simon. let's get to bob pisani who is watching what's moving at the big board. >> not a lot of energy in the dow, but great relief down here on the floor because the
industrial numbers for the big companies came in a little bit above expectations and that was a relief after google and microsoft. not surprisingly, industrials are leading. that makes a lot of sense because they're the ones that matter. health care, energy, and materials, today they're the one that is matter, on the upside. of the big companies, four big ones we talked about, three of them industrials. one of them a consumer company, all beat here. take a look, general electric, five-year high. our old company doing very well today. ingersoll rand doing well. honeywell set a historic high. whirlpool, that's got to be close to a historic high if it isn't. so the important thing that's going on here is we're seeing nice momentum overcoming disappointment of google and microsoft last night. now, here is where we are in the earnings. 20% of the companies are reporting. earnings revenue up -- earnings are up 3.7%. we have stronger momentum going into the close yesterday. microsoft and google are slowing that down but ge is helping that a little bit.
revenues are down 1%. that's a clear disappointment. we haven't had any revenue strength in quite a while. my sense is the market is a little stretched right now. the problem is it hasn't been a great earnings season. the guidance is okay, not fantastic. the fed is not as big a tailwind as it was before, and, finally, we need better u.s. and global data. we're not getting it. what we are getting is we promise you, folks, things are going to be better. the great example is whirlpool. they missed this morning, one of the only ones. they came out and said things would be better in the second half. they did specifically talk about raising the guidance. they said their unit growth which is the key thing in north america, their main market, would be better than expected, 6% to 8%. kraferl, the major point is again, folks, we promise you, the second half will be better. ge's jeff immelt essentially said the same thing. that's the reason the markets are holding up. >> they're definitely doing that. thank you so much for that. speaking of which, d-day for the markets. raymond james calling for a 10%
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traying the google/microsoft aftermath. what does it say about tech and the rally. mcdonald's is up 13%. why are some of our traders not loving it. and follow the money or buck the trend. the amount of money in u.s. stock is at prerecession levels but is it a bad sign for the markets? we'll see you in about 15, 20 minutes or so. >> looking forward to it. thank you, scott. how is this for a headline. our next guest says today is d-day for the markets. he's call for a 10% to 12% correction in stocks. the managing director at raymond james. jeff, we've been talking about this all morning. explain why you're so confident you see weakness ahead. >> market can clearly do anything, but we have targeted july 19th for the past, i don't know, six to eight weeks, from a number of quantitative timing models and tech nenical timing models and things like when the s&p pulled back from the may
22nd high to the june 24th low, it only corrected 7.5%, but you had a 17% correction in the breadth, and that tends to proceed some kind of decent or meaningful decline. if you're looking for a news backdrop, i think revenues and earnings will dispoint and i think you will hear some saber rattling out of washington, d.c., before they recess. >> certainly we're going to face that debt ceiling argument again and earnings haven't been spectacular, jeff, but is this fundamentally a call then on these technical levels and what you're talking about there with regard to the breadth of the recent decline we saw? >> yeah. it has to do with that, but it also has to do with the news backdrop. you don't know this about me, but i spent a long time inside the d.c. beltway and have a pretty good network on the hill. i think you're going to hear some rumblings about sequestration starting to take a bite. i think it's going to unsettle the market. i think the pullback is for buying because i think we'll be higher by year end and i think there's a decent chance we're into a new secular bull market
but i'm a little cautious here. >> jeff, what do you make of some of these inflows in the past week at least into u.s. equity funds, biggest dollar amount since '08. do you think mom and pop are waking up? >> no, do not. we have 3 million retail accounts, and i still think they're frozen to a large degree like deer in the headlights of a car. the big rotation that's been happening since last november has been out of non-u.s. centric equities and into u.s. equities. i was just up in montreal and toronto speaking to institutional accounts and over in europe and the big move around the world is to increase their weighting to u.s. equities and i think over the longer term that's a very bullish thing. s it's just on a short term to intermediate basis all my work suggests you should be cautious. >> what about the role of the federal reserve here? bernanke seemed to be kind of hinting at stocks, the behavior perhaps of equities when they
were marching higher before he started talking about the taper in may. do you think the fed has gone from being a friend to a foe. >> i do not. i think people have misread and san luis obispo interpreted ben bernanke's comments. he's been pretty consistent in what he talked about. i think the street misinterpreted the pullback on tapering as a rate rise and i don't think that's the case. i am of the view that bernanke is not going to do anything between now and year end. >> and, jeff, are you basically hoping, praying for a 10% to 15% correction so you can buy here? >> we raised cash over the past few weeks. if that's the wrong call we'll have to adjust our strategy, but coming up in the chesapeake bay, an old sailor's adage is you can't change the direction of the wind but you can adjust your sail, and if that's what happens, that's what we'll have to do. >> jeff, our picture of you has no mustache. i assume that's still accurate? >> that's been gone for three years thanks to my wife. >> just making sure. jeff, thanks. jeff saut talking some markets
today. >> given what the market has done, he better not grow that one anytime soon. scorching weather still sweeping across the country. many forecasts showing 90 degree temperatures or above in 47 states, but don't worry, there is an end in sight. weather channel's julie martin has more on that. good morning, julie. >> good morning, carl. the break is coming here in the midwest. this evening we're still going to have to deal with another long, hot day though. we have heat indexes well up in the triple digits from detroit, chicago, all the way over into the ohio valley today before a line of storms this evening and a pretty strong cold front is going to knock down those temperatures, although we could be contending with some severe weather here. for today though, check this out, chicago, 93. 88 here in indianapolis. 86 in minneapolis. keep in mind though those heat indexes again dangerously hot. well into the triple digits. but by sunday we're looking at sweet relief here. 78 degrees for you in chicago. going to be feeling just like heaven there after such sweltering temperatures. same goes for you in the east. just going to be a little later.
two days of excessive heat stretching from philly, d.c., all the way up into new york city. jfk hit 100 degrees yesterday. we could be coming very close to that. boston, another city we're going to be watching today for record-setting temperatures. we're already up to 94 in boston. and check out some of the feels-like temperatures here. we could be climbing up to 112 degrees in terms of a heat index in new york city. so pretty hot time, but the break is coming saturday in through sunday. carl and kelly? >> wow. 112. julie, thanks very much for that. hope people keep an eye on the elderly in particular in this kind of weather. the heat wave may be ending soon. some forecasters say it will ease into next week but it's causing surging demand on the nation's power grid. that's putting ewe tills to the test and may be putting a premium on some new technology. scott cohn is here to explain. >> reporter: at this lab in edison, new jersey, they're working on electricity storage, basically battery that is a
utility could charge up and use on peak demand days like this one. eos energy storage working with big utilities including caan edison in new york says its secret is zinc, much cheaper than the lim yum in your phone or computer battery. >> the promise of a rechargeable zinc battery has been around for decades and decades, but no one has been able to solve that technical problem. that's the technical problem that we've been able to solve. >> reporter: without the ability to store electricity, utilities typically build small power plants they can fire up when demand is high. batteries could accomplish the same thing at half the cost if the technology works. >> there needs to be a pretty significant decline in the cost of batteries. we would say basically 50% to 70% cost decline from where we are today. >> reporter: the technology would allow utilities to buy or generate electricity when demand is low and the power is cheap and then sell it when demand is high. that's not a bad equation. it all comes down to a series of
building blocks. these zinc batteries put in a module like this and then multiply this by the hundreds, about the size of a shipping container, and could you actually power an entire neighborhood, a small neighborhood anyway, for a couple days. there's also interest here from real estate companies that could use this to power a building. in the future, a building, batteries included. back to you. >> great spot. thanks so much, scott. earning season of course in full swing as microsoft, google, and ge making big moves. our earnings squad will tell you everything you need to know when we come back. the pursuit of a better life for our children is something we all share. but who can help prepare them for the opportunities ahead? who can show them how to build on your success, but not rely on it. who can focus on making your legacy last for generations to come? that someone is a morgan stanley financial advisor.
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welcome to the earnings squad where we dissect the earnings story everyone is talking to, help you trade the stories you may have missed. i'm melissa lee. herb is off today. i'm joined by mandy drury as well as courtney reagan. let's get to the scorecard. 21% of s&p 500 have reported so far. 65% beat their eps targets, 12% have met estimates, 23% of reports have come in below forecasts. let's get to some of the top earnings movers of the day. ge, general electric, posting its best daily gains. we're seeing that move by about 4.7%. as the stock posted better than
expected earnings. also we're watching manpower international. we're seeing a big move in that stock as that stock is up by more than 4%. better than expected results, upbeat guidance on margins. shares of intuitive surgical trading at a 52-week low after slashing 2013 sales. so mandy, what are we looking at here? major disappointment, especially given the company already warned. >> they already warned and then, of course, they came out with disappointing numbers in terms of what they're expecting for 2013. but i would also, first of all, really like to give a big shut out to herb greenberg who has been following this stock closely. did a big documentary as well. he would say if he was here, you had been warned. he did raise these red flags. they slashed 2013 sales forecast and it's because of disappointing demand for their di vinci robots. here is another problem. they say also that u.s. regulators are issuing a warning letter to them after they did an inspection of their facilities. stifel nicolaus said you really
don't know how big of an overhang that fda letter will be and what exactly they were warning over. obviously intuitive sirl has come out and said we're going to take steps to resolve any concerns they have. we've seen a couple down grades today, one from s&p capital iq to strong sell from hold. and downgrading from a market perform to a market underperform slashing the price tag $275 is their new price target. >> strong sell. you know, a lot of these concerns were raised back in february. there's a general of american medical association article questioning whether or not it's cost fek you have to to use di vinci robots in hysterectomies. the ceo said growth is going to be coming from new applications of the di vinci robot. this is a major problem here. >> and what you are referring to there as well, they made reference to it. and they said it was partly due
to that negative press. >> never a good thing when the fda gets involved. >> let's talk about advanced microdevices. this has been a rise, a major rise in the stock based on turnaround hopes because this company is getting into the console business. look at the outperformance year-to-date. even with today's decline, still up about 63% compared to the gains that we've seen in the philly semi-conductor index. the problem here is that revenues came in better for the console business but margins came in about half of what the street had been forecasting. so a lot of analysts today coming out saying we're downgrading the stock. the turnaround doesn't look as good. i will highlight what dan niles said to us on "fast money" yesterday. the reason why we pay attention to him is because he made his name as one of the leading chip analysts on the street at lehman during the height of the tech run. take a look at this. he says the console business could still add 40 cents when it fully ramps. the stock could double over the
next two years. he said he's in this market buying in today's session. interesting contrarian pc play. >> by the way, this is also one of the stocks that was picked in the cnbc stock draft and -- i think it was mandy's mavericks. maulers is another great game. the stock did extremely well up until what's going on today. >> quickly, courtney, cmg, chipotle. >> what's not to like. a beat on the top line. we're seeing increasing traffic. i like everything i see here and who doesn't like the new margarita recipe. >> that's it for the earnings squad. join the conversation. tweet us @earningssquad. nt and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.
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to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. detroit, the biggest municipal bankruptcy in u.s. history. who is owed what and what could the fallout look like? kayla tausche has more on that. >> good morning. detroit couldn't reach an agreement with its creditors to take a fraction of the $18 billion in debt that it couldn't service. instead they went chapter 9 and here is what that looks like. the largest percent of that dut comes from unfunded pension and retiree benefits. $3.5 billion. it's earmarked to pay current
retirees and existing city employees that haven't retired yet. they will have to negotiate with the employees. $7.5 billion in health care costs that remains unfunded. the rest of the city's $9 billion in debt comes from bonds, $1.4 billion bond was issued in '06 to plug pension gaps. investors in that largely foreign banks. the same investors who likely scooped up $500 million general obligation bond. those two bonds very secured -- very unsecured rather and very risky. the only part of the detroit that wall street has exposure to, $6 billion in security debt that covers detroit's water and sewer system. in the case of bankruptcy, residents' lights still worked and toilets still flushed. those debts secured by utility bills. that's why fid elt, j.p. more gone both own it. jpmorgan spokeswoman affirming the position is completely separate from the bankruptcy and
insured as well. the buy side has been eyeing the bonds today but there could be effects on the sell side. a lot of them are on tap for next week. six michigan based munis in the pipelines as well as deals for new york city, the ohio turnpike and the bay area bridge authority but munis have been falling out of favor. $15 billion in outflows just in the last month. psychological effects from detroit not going to bode well for borrowers. carl and kelly? >> that's for sure. thank you very much for that detail. john morgan chase also losing two its directors. david cody is leaving the board after five years saying he wants to reallocate his limited personal time to other activities. ellen feder has served on the board for 16 years. she's president of the american museum of natural history. the company plans to appoint new directors later this year. both of them, carl, had received low support we should say in the latest shareholder meeting. >> been an active week for headlines in jpmorgan.
regarding the energy trading and so forth. dow is down 35. people still talking about google holding in almost at 900 despite the results last night and we'll see where it leads us this afternoon with the s&p at 1687, right around those may 22 highs. have a good weekend. >> you, too. >> see you monday. back to headquarters, scott wapner and "the halftime." thanks. welcome to halftime show. four hours to go until the close. on the wall is how the friday looks on the street. it's somewhat of a down day. s&p getting hit the hardest. here is what we're following. follow the money. investors pouring the most cash into u.s. stocks since 2008. smart move? or danger sign? who is loving it? with mcdonald's set to report earnings, should the stock be on your value menu? and speaking of earnings, our top story,