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tv   Power Lunch  CNBC  July 8, 2009 12:00pm-2:00pm EDT

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$155 billion over ten years in government payments to help pay for president obama's health care overhaul. and six people have surrendered to the fbi in connection with a securities fraud case. that's news now. s don't you hate it when the computer's not working? >> drives me crazy. >> can you hang on just a moment? i'll be ready momentarily when my computer works and i know now that the i.t. guys are hearing this, they're all going to come running down here. welcome to "power lunch" for a í wednesday. i'm bill grfeth. stocks down at the moment. we've got health care, utilities materials, the best performers at the moment. we're waiting for alcoa to kick off the crucial earnings reporting season. that happens after the bell later today here. >> and i'm sue herera. president obama meeting with g-8 leaders in italy, talking about the global economy, trade and currency. a live report from l'aquila, and also a debate about the state of the u.s. dollar, straight ahead. >> and i'm michelle caruso-cabre
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caruso-cabrera. you've got to watch at 12:35 eastern time. something very cool is going to happen. all i'm going to say. and jpmorgan's billion-dollar man is waiting in the wings. he's bullish on the economy and stocks. he says the recession is dropping right now. we'll grill him on where he's putting his cash to work. first, let's get you up to date on the markets. oil back down to $60 a barrel, the dow falling three of the last four days. gold, copper, silver sliding as well. we'll start with sharon epperson at the nymex. >> and we'll start with the crb index and look at the four-month chart there, because it's broken below the four-month trend line. we're seeing a sl-off not only in oil and metals, but in commodities across the board. the crb index down 6.5% just in the last week. a lot of investors not willing to take as much risk anymore, and you're seeing that play out across the sector. in terms of oil, the real problem here has been what has happened to supply. the fact that gasoline and distillates built so much in the past week, more than expected, as demand continues to fall.
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that is weight on oil prices. gasoline supplies are now up four straight weeks and distillate demand has fallen over 20% in the past four weeks for the four-week average. now i'm going to send it to bertha coombs at the nyse. >> thanks, sharon. that's what people are watching, those levels on the indices and the s&p is one that everybody watches, because that's the broad market barometer. and last week we had a test to the up side. one trader telling me today now we are testing to the down side to see if we break through. all of this happening on low volume. a lot of traders saying people just seem to be pulling the triggers, doing trades based on these levels. alcoa started the day higher, but with that commodity sell-off, it's looking lower here today. were expecting somewhat upbeat news from alcoa. the ceo yesterday with some upbeat comments, but won't necessarily lift the market here, and that's not until after the close. let's move over to brian at the nasdaq. >> bertha, as mr. pisani always
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says, you can still go broke on low volume. we're down 3%-plus in a two-day span. the news of the day, google basically announcing they are getting into the operating system business. we probably won't see it until the second half of 2010, but they're going square after microsoft right now. it's going to be based on the chrome. it's going to go toward the low end of the netbook segment. we'll see what happens there. amgen, great test results on the breast cancer drug, up 15.6%. mixed results for research in motion. it's initiated as a buy, but piper jaffray says june sales at at&t and sprint were weaker. and i also want to point out, the chips are underperforming the market right now. someone who never underperforms is my man rick santelli in chicago. >> you know, the ten-year auctions today, let's look at an intraday chart. you can see yields are down to 3.40. look at a three-month chart. last time we had a close below that yield was may 21st. so, it's been a while. this is a big day for the 10s,
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but don't look for any horrible news in this auction, but continue to look at the auctions. the last chart is by far the chart of the day here on the floor. it's the dollar/yen two-day chart. just in the last hour, the dollar is really getting hurt against the yen, and the mantra on the floor is maybe the carry trades back. will that have something to do with commodities at these levels? let's wait and see. bill, back to you. >> thank you. we'll check back with you next hour. there's a hearing on capitol hill right now looking into where the billions in stimulus money is being spent, even as there had been some rumblings that maybe there was a second stimulus package being talked about. our chief washington correspondent john harwood is at the white house following the money. what have we learned so far this morning, john? >> reporter: bill, it's an interesting point in the economic debate. even as congress is tackling health care and energy legislation, the second stimulus debate is heating up, and all of a sudden, republicans believe for the first time in a long while they've got democrats on the run.
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darryl isa in the meeting this morning said he thought at the economic record of the first few months of the administration with rising unemployment showed that the stimulus spending enacted earlier this year was bad for the deficit and bad economics, too. >> in fact, i believe that the discredited keynesian economic theory behind the effort is misguided, and i am convinced that it won't work. unfortunately, recent economic data has validated my opposition. the u.s. economy lost 433 net jobs in june, bringing the unemployment rate to 9.5%. >> reporter: now, that puts democrats in a rather ticklish position, because they argue, as governor ed rendell of pennsylvania did on cnbc this morning, that the stimulus has, in fact, worked, but they admit that the economy may need a booster shot. >> without the stimulus program, every state budget in this country would be in far worse shape. tons of state workers, county workers, teachers, police would have been laid off.
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but i think there was too little of basic infrastructure, the projects we can start right away, the shovel-ready, fix-it-first projects. there was about $100 million of that. i think it should have been double or triple that. and if we do a new stimulus, it can be modest. it can be $200 million of all infrastructure. that's what gets people back to work. >> reporter: so, what's going to happen? i can tell you, bill, that the officials at the treasury and the white house are reluctant t ek a second stimulus. they got some encouraging news in a new cbo report out today indicating that the stimulus money has actually been spent somewhat faster than expected, although it was critical of some of the controls and understanding that states have in how they're supposed to spend that money. so, this debate's going to go on for a while, but i do believe that the deficit concerns within the administration, democrats in congress for now are going to trump the calls for a second stimulus. bill? >> are we even talking about the possibility of a second stimulus package because the jobs report thursday was much greater in
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terms of the job loss than had been anticipated? there seemed to be a seat change in thought about the economy once that report came out. >> reporter: absolutely right, and this has been building for some time. you know, president obama said a couple of days ago that he thought the unemployment rate was headed over 10%. we don't know how much higher that's going to go. that timing problem has always been a big concern for the administration because when they get to next spring, and democrats in congress are trying to protect their majorities in those 2010 elections and the unemployment rate tops 10%, people are going to be saying, what are you going to do about it? >> indeed. thanks very much, john. our power grid debate will be coming up and we'll talk more about that. >> you'll definitely see the sparks fly. should we be doing even more stimulus? two sides of that issue. earnings season officially kicks off today when alcoa reports after the bell. how important is this reporting season and will july prove to be a make-or-break month for the bulls? our insiders are ready to answer that question, coming up here. and as michelle just mentioned, we're going to plug into the "power grid" and debate
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that government and the latest trial balloon to pump even more money into the sagging economy. then we take a look at the dollar falling again, especially against the yen today. could the greenback really be in danger of falling out of favor as the global currency? all that, plus the "fast money halftime report" is waiting in the wings. consumer names are bucking the trend today. so, should you be placing your bets on that group as well?
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as you know, g-8 ministers are meeting in l'aquila, itly. it's been an interesting session, to say the least. the chinese premier has left. there was some talk that perhaps he would put out the issue of the dollar as a reserve currently. steve sedgwick has made it into l'aquila, which is no easy feat, and he joins us now to tell us exactly what's happening. good to see you. >> reporter: sue, really good to see you. it's a wonderful evening here in l'aquila. we actually got here, eventually, a 147-kilometer drive from our base, but let's learn what we discovered on the first day. first, chaos italian style works. despite the fact that this is an earthquake-ravaged zone, most of the old town behind me is empty, it is a ghost town, but we got here, the world leaders got here, the 3,000-plus press got here. so, silvio was right, we were wrong, it worked. second point -- g-8 is a symbol, as exemplified by the fact that
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the chinese have gone, and they're not even in the g-8. they're actually part of what's called the extra g-5 of the bric nations as well, but that's one of the headlines today, the chinese have moved on. does that mean we're not going to get anything substantial from the talks? i'm not sure. there's still a big delegation here. we learned that the g-20 back in april wasn't quite the triumphant moment gordon brown and president obama thought it was. yes, we got lots more money for the global system, but clearly, with bad data, these markets falling out of bed, everyone's yet to be convinced that the stimulus still worked, let alone being withdrawn as perhaps angela merkel might have mooted at one stage. and we've still got enormous issues on the table, too, including climate change, including aid, including free trade as well, and president obama's going to be trying to push a few of those, indeed, tomorrow and beyond. back to you guys. >> all right, steve, thank you very much. one thing you don't want to make journalists do is drive four hours round-tripto get to the summits that they have to cover. not a good idea.
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there's a lot of chatter right now on the street, a lot of people looking at charts, trying to figure out where we are in this market. there's a formation that chart-watchers keep an eye on called a head-and-shoulders formation, which can signal a top in the market. this is the s&p year to date, and some people are noticing a head-and-shoulders formation forming right now. there's the left shoulder. here's the top. now, if you thought the market was going higher, you'd want to see another top over here, but now they've seen a top here, the right shoulder. are we heading down to the neckline for the right shoulder there to complete the whole formation, which would mean the market could move lower? that occurs, by the way, at around 877. some fear that 830 could be the next stop for the s&p. but watch this. that's year to date. if if you brought it out just a bit here, go back a whole year for the s&p, are we building a reverse head-and-shoulder bottom in the mket?e
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last fall at the bottom, at that moment, could be considered the left shoulder. the bottom on march 9th could be interested the head. are we in the process of moving lower if it indeed does go to 830? could that be the right shoulder and then we move higher from there? just something to think about, sue. >> indeed, it is. let's talk about that, in fact, with our guests. joining us now to strategize about this market is heath brae from wells trust arizona and jessica is a fixed income derivatives analyst. welcome to both of you. appreciate it. >> thank you. >> bill laid out some interesting technical patterns that a lot of people were watching closely to decide whether or not to allocate cash into the market at this point. you're long-term bullish, but a little bit cautious on what july may bring for us. why? what are you watching? >> we've been anticipating the q-2 numbers for earnings season come out, and the real caveat is obviously what the analysts'
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expectations are. it's obviously going to be a big year over year depression from last year's numbers, so are the analysts overestimating or underestimating what the numbers are going to be? the situation we just got through has brought us with a very heavy cash balance in our portfolios and we're being very cautious how we deploy those balances and being very patient with new cash assets that come on board. >> why? are you waiting for earnings season to see the results to see whether or not the analysts got it right, overestimating or underestimating? >> right. there's so much uncertainty, we're not going to dump it in now and hope it goes up. we'll wait and if we miss points on the way up, we'll be fine with that. >> jessica, a lot of this is going to be pinned, if you will, to what happens on the interest rate front, what happens to the dollar. today's a perfect day to talk about that, which we will do in a moment. but you know, after we get past earnings season, how do you look at this market right now, especially on the interest rate front? >> well, on the interest rate front, at least in terms of the earnings season, the treasuries will react to the equity market's interpretation of how the earnings panned out. i think you do see a little bit of a sequential gain in the
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earnings, given the very soft comparisons. however, i think guidance for the future will be very cautious, and i think that only highlights how the economic recovery has been overpriced. and we are moving into a stagnating economy. historically, if you look at treasury yields during periods of economic stagnation, they do trade sideways to lower. >> how do you think the ten-year auction's going to go? >> i think the auction will go fairly well. the last reopening of this 5.19 issue, the cover was 2.62. granted, part of that was due to the fact that treasury yields were about 50 basis points higher, but i think that given the outlook for economic recovery and also what you're seeing in the mortgage market, you'll probably get little bit -- you'll probably see an average to better auction. >> so, heath, you said you are still waiting to see what's going to be the deciding factor, what earnings are going to have to do what before you get back in? >> we're not going to try to time. it let's be clear about that. we'll average in slow and try to buy on the dips, if we can.
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we have a strong currencies currently. we're talking about allocating the cash we have. we'll definitely try to be fully invested before q-4. >> go ahead and time the market. didn't you see the reverse head-and-shoulders there? >> i was listening before about the reverse head-and-shoulders. that's one i have not heard yet. i was talking about the other one this morning. >> well, you heard it here first. >> there you go. >> thank you, both. >> thank you. >> cnbc kicks off earnings reporting season today, alcoa reporting after the bell. "closing bell" will have the numbers as soon as they cross the wires with instant reaction. earnings season on cnbc, something you truly cannot afford to miss. >> no, you can't. coming up next, just when you thought washington might finally be ready to put the checkbook away, think again. another stimulus package could be on tap, all while the first one has barely gotten out of the gate. our "power grid" debate just after the break. plus, a cyber attack on the
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fourth of july. it's not a movie title, it actually happened. a bunch of government websites were hacked, including the treasury department. how vulnerable is our system to hackers and should we basically anticipate a major attack on the web at some point? we're going to talk about that and the implications of it. fair, raight-forward pricing. that's what td errade stands for. think about it. why pay investg fees you shouldn't have to? or account fee thatren't clear? kenactivity fees? or maintenance fees? it's not right. and you ow it. and the thinis, the other investment fir know it. but they do it anyway. and that's ju not fair or straight-forward. td ameritrade. investors.ce is the spit that drives america'sst l
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family dollar store a big gainer in today's trading session. it's up 10.5% at $30.68. as y might imagine, stores and franchises like family dollar v have done well in this recession, and as a matter of fact, this company, family dollar, upgrading its outlook for the rest of the year. it's up $2.92. michelle? shocker, congress holding another hearing today, and they want to know, where did all the stimulus money go? $800 billion, and they've spent less than $49 billion so far? let's debate that and whether or not we need even more, because there's talk of it. trent duffy is a republican strategist. democratic strategist julia roginski, you know how this goes, 20 seconds each. trent, i'm going to start with you. there's talk of a second stimulus package. do we need one? >> well, i sure hope not. i mean, we were sold that the obama plan would create 3.5
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million jobs. it hasn't done that he told us it would keep unemployment at 8%. hasn't done that either. tax cuts would have been a far better plan to go on. we were told about shovel-ready projects. there's a lot of shoveling going on nesht was but it's not creating jobs. so i hope there's not another stimulus plan, because the deficit is exploding. >> what's the problem? this one's not working? do we need another one? >> this was scheduled to kick in in the second or third quarter. the administration never said it would happen immediately. we need shovel-ready plans to come on line. and people have been saving their tax cuts, not spending them. that's not the way to stimulate this economy. i thought from the beginning the stimulus package was too small. i still feel that way. >> trent, she's right. why are they starting to talk about a second one? >> because they're terrified of the electorate. they were promising this bill would provide jobs right now and keep unemployment under 8%. we argued that we needed more tax cuts.
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obama himself had more tax cuts in his initial stimulus plan, but backed off in the face of democratic opposition that pushed for pork-barrel projects. this is a bad plan. >> michelle, i love that people talk about tax cuts at the same time the republicans are screaming about our deficit. the bottom line is you can't have it both ways. tax cuts are not spurring the economy. we see what happened to the tax cuts in the stimulus package. all people do -- >> they weren't big enough. >> it doesn't matter. >> yes, it does matter. >> let me tell you why it doesn't matter. because what people have been doing is paying down their debt. we have a credit crisis right now. people have been paying down their debt or saving, not necessarily spending -- >> because they were way too small and well off target. >> the bottom line is this stimulus package should have been bigger from the start. they underestimated the unemployment rate. as a result, we should get a second stimulus ready. whether we need to pull the trigger or not -- >> watch interest rates. good-bye. good-bye housing recovery. >> no. you know, this is the problem. this is exactly what happened in 19 -- >> you have a point there. we've already started to see
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interest rates at the long end of the curve start to climb. people are getting nervous about the level of debt. and you've got to admit, all those shovel-ready projects, very little of the money was actually meant for shovel-ready projects. we're not going to get that money -- >> michelle -- >> can you trust congress to get it right? >> michelle, i don't disagree with you that we should have had more money for shovel-ready projects -- >> so you want more spending on top of the $800 billion and on top of $1.6 trillion in health care? >> in fact -- >> where does it end? >> that's exactly how you stimulate the economy. >> it's not working. >> the market right now is not fulfilling -- the free market right now is not fulfilling the needs of the stimulus, so you need government to step in. >> sounds like you're arguing more spending, regardless of whether it's effective or not. >> no, no, no. i'm arguing more spending targeted at shovel-ready projects, but again, i do underscore, the obama administration never once promised that this was going to happen before the third or fourth quarter, that we would see any kind of effect. and i will furthermore say that this is exactly the same lesson we took out of the great depression, where in 1937, people started worrying about
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balancing the budget and the economy slid right back into the recession. >> and they started raising taxes in order to count act it -- >> no, what they started to do was worry about the deficit -- >> and they raised taxes dramatically. >> and they stopped spending the stimulus money and that's exactly what happens. >> people paying about mortgages are worried about the deficit, too. it's not just politicians. people have to pay out of their own pockets for their mortgages. and if you want to restart the economy, one of the places you've got to start is the housing market. when the interest rates are starting to push up, you can forget about a housing recovery, which is a huge source of up growth, and furthermore, tax cuts do work. after the 9/11 economic hit from the terrorist attack, we had some pretty worthwhile tax cuts that got into the economy quickly and were spent. >> i don't know about that one. >> you're comparing this to the mild recession? that is insane. give me a break. this is the biggest recession we've had since the war. >> good discussion. thank you. well, in the currency markets, a lot of noise out there, especially from china about replacing the dollar as
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the world's main reserve currency. is the dollar really in danger or is all of this talk just a lot of luster? and what does it mean for investors? we'll look at that coming up here. then at 12:45 p.m. eastern time, it's the half money -- the half money, it's the "fast money" -- >> i knew i was going to do it! melissa's going to guide us through the "fast money halftime report." >> exactly, sue. we are watching the oil trade as well as the commodity trade in general collapse today, so we'll go into the chart, see what that means for the direction of equities. also, we're all waiting alcoa earnings after the bell to kick off earnings season. we'll see how options traders are betting where alcoa will trade after its report. you might be surprised given this is a dow component that misses just about half of the time it reports. that and much more.
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welcome back to "power lunch." rick santelli here on the floor of the cme. well, it's all about foreign exchange, isn't it? and in one area in particular today, the dollar/yen. look at the short-term chart. we've just reached 92. look at a longer-term chart year to date, we haven't been at these levels since february. of course, there is always the
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talk that it has something to do with the carry trade, but follow the money. doesn't look like it's going into equities. doesn't look like it's going into commodities. will it? maybe. is it just repatriation? these are the questions. the dollar's center stage. michelle, back to you. >> do a dollar discussion right now, but first, we are four minutes away from something very cool. stay tuned. sue? >> indeed, we will. all right, let's talk about whether or not the dollar is really in danger of being replaced as the reserve currency, or is all this just really saber-rattling and talk? the director of currency research at gft, marc dreier is with us. and "making sense of the dollar," mark, we're trying to do that right now. the chinese premier because of economic unrest in his own country has been forced to leave the g-8, but they have been calling for the dollar to be replaced as the reserve currency, but you don't seem to be convinced that the dollar's in danger of that.
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why? >> i think the chinese comments are really meant to obscure and confuse us, and so, we're not looking at the chinese trade surplus. we're not looking at the fact that the chinese currency has been trading at a less than 1% range this year from high to low, 0.66%. so, i think that the chinese talking about this has essentially rested the agenda away from the u.s., which had been up until april almost at every imf, every g-7 meeting. the u.s. is saying china, make the currency less flexible, let it appreciate. and china has learned that the best defense is going on offense. they've changed the agenda, but the facts haven't changed. chinese currency is not convertible, won't replace the dollar any time soon. >> boris, though, when you think about it, the seeds are being sewn for a lower dollar anyway with our borrowing going up exponentially and the economy as weak as it is right now. >> yes. that's the big bear argument. i actually couldn't agree with marc more on all of this. i don't think the dollar is in any immediate danger, and i
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think the chinese comments are really structured to contain fiscal discipline in the u.s. they have a tremendous amount of exposure with $2 trillion in reserves to u.s. financial instruments, and they just want to make sure our fiscal deficits don't get out of hand. all this talk about diversification is much less about the actual move away from the dollar and much more on trying to keep the u.s. fiscal authorities disciplined in terms of their spending going forward. >> marc, the other issue is -- and you wrote about this this morning -- is whether or not we're going to see intervention in the foreign exchange markets in a concerted way and whether or not that intervention would necessarily be to the benefit of some of these other currencies that may be feeling the effects of the weakness of the dollar and the strength of their own currency. >> i think they have best to con kreev of interventions like a big ladder. and the top wrung is the coordinated intervention, but the officials haven't even taken the early steps. some countries have complained about their currency strength, but as you can see, despite the talk about the dollar weakness
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and the excesses of fiscal spending, the dollar's actually very strong today. over the past year, it's up over 11% against the euro. my sense is that intervention is not really being discussed. out of all the problems that policymakers and investors face, currency market is not really a major problem. >> has intervention ever worked, marc, and can they afford to right now, given how strapped governments are at the moment? >> well, i think you're right, has intervention worked? well, there are cases, of course here in new york, we're familiar with the plasser agreement in 1995 that drove the dollar down. most of the intervention that's taken place in the last several years, last couple decades, really, has been to support the currencies interventions by selling the u.s. dollar. think about october 2000, where the foreign central banks intervened in coordinated fashion for the federal reserve to support the euro. that seemed to mark the bottom of t euro back in 2000. >> so, boris, what's going on today specifically as it pertains to the yen? you know, we mentioned the carry
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trade, but i'm not convinced. >> it's funny you mention intervention, because i agree with marc that interconventn really doesn't work and coordinated intervention is not on the cards. that said, however, dollar/yen going down to 92, breaking 92 handle, very, very toxic for the japanese economy. i think japanese officials are really concerned about this. and if it drops below 90, perhaps into the 85 zone, they're going to try to at least do verbal intervention and try to pick it back up, because the japanese are facing two terrible choices -- a much stronger currency and an export-driven economy with final demand just going down, and that could be very, very damaging to their economy. >> thank you both. appreciate it very much, boris and marc. good luck with the marc. >> what's about to happen? >> it's 12:34, and in a few seconds, it will 12:23 and 52 seconds of 7/8 of 09.
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>> this has already happened now in newfoundland. >> we're very excited about it. there it is! 12: 12: 12: 12:34: 56789. >> it's our version of the harmonic conversions. i feel better already! >> is that a song? >> yes, it was. >> we should have brought the lights down and put some fireworks up. okay. >> what just happened here? >> up next, we're going to talk more about mortgage fraud. as you know, unfortunately, it's exploding. it's a billion-dollar-plus industry. diana olick shows us what the feds are doing to stop that surge. ♪
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we're just getting an e-mail from the new york stock exchange. they have been informed by authorities that their public website,, has been the subject of a denial of service cyber attack. >> they said that the nasdaq was hit as part of this attack that started july 4th. >> right. >> and various other entities beyond the federal government. >> the treasuries, the federal government on the fourth of july. >> so, now, apparently, the new york stock exchange. but this is new now, right? >> yes. it doesn't list a date, so i'm assuming that means it's new. it says the attack is not and could not impact the trading and
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data systems of the nyse euronext markets because they will operate on a private network, but it certainly is very interesting, and we're going to continue to follow that as we take a look at that cyber attack a little later this hour. >> no impact on trading, they're saying? >> right. more grim news on the home front. apartment vacancy rates hitting a high in the second quarter. rising unemployment and leasing demand during the peak season and they're falling fastest in the markets that dropped white-collar jobs like new york and san jose and in markets where the condos have been turned into rental counties, las vegas, orange county, for example. bill? it's now 12:39:31 for those of you who wanted to know. the grim news doesn't end there. the fbi now says mortgage fraud is rampant and getting bigger by the day. diana olick is here to tell us what's being done to try to stop the madness. diana? >> reporter: that's right. the warning signs were all there. the landscape was ripe, due to the crash of the mortgage
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market. it made the landscape ripe for all kinds of new mortgage fraud. now, the fbi is now reporting losses of $1.4 billion to financial institutions last year due to mortgage fraud with cases rising 36% to close to 64,000. fbi filings through march put fraud reports on track to top 70,000 this year. fraud hotspots range coast to coast, and the report blames falling home prices and rising foreclosures for fueling a climate fraught with opportunistic participants desperate to maintain or increase their standard of living. and today' boowers are an and today' boowers are an increasingly ey target. >> they're increasing because u have desperate homeowners. u have desperate homeowners. you have desperate homeowners who, where else ar they goi to ? to ? are they going to go -- you know, either their home or live under a bridge underpass, you know, with a family of four kids. >> reporter: now, just over a month ago, president obama signed the fraud enforcement and recovery act, committing $500 million to fraud prevention enforcement across the fbi, the
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u.s. attorney's office, the s.e.c. and other government agencies. it also expands the justice department's authority to prosecute mortgage fraud. still, the fbi report notes that various programs instituted by congress to save the housing market could actually provide more opportunity for the fraudsters. for more on all this, go to the blog, realtycheck dot >> thank you very much, sue? there is other financial crime news. six individuals surrendered to the fbi in connection with a $140 million securities fraud case. those individuals include ross mandel, founder and ceo of sky capital. the s.e.c. alleges that the six ran a boiler room scheme that left investors holding worthless securities. in the old days, $140 million? we would have all that kind of coverage, but now it's small potatoes in the wake of madoff. >> in terms of madoff, yeah. coming up on "power lunch," the chief market strategist for jpmorgan funds. he's in charge of about $500
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billion. david kelly will tell us where he's placing his bets in this topsy-turvy market. a quick break, then it's time for the "fast money halftime report." where are the options traders placing their bets ahead of alcoa's earnings? melissa and the gang will tell you. we'll see you on the other side of "fast money." ♪ lk at this man ♪ so blessed with inspirion ♪ ♪ i don know much ♪ but i know love you ♪ and tt may be ♪ all i need ♪ to know (announc customers love ge rcraft engines almost as ch as we love making them. innovation tod for america's tomorrow. with annuities from fidety. turn your savings into incom-- guaranteed,
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welcome to the "fast money halftime report." getting into the heart of the action as it is happening. the sell-off intensifying midday financials leading to the decline of the etf that tracks the financials, the xlf down about 4%. where can we still profit in this? let's get to the street. zach kara bell, john kosar, brian schaffer and danielle hughes of divine capital joining us from the stock exchange. zeke, we want to start with you. if you look intraday, we are seeing tremendous weakness in the financials, previous leadership in the market. we're seeing a similar take for technology and for energy. what do you make of this move here ahead of earnings season? >> so, everything that was doing well march through june is doing badly. it's the obverse or the inverse or some verse. i think you can look at this market two ways. the trading side is a bias down. in my view, the fundamental side of the market is bias up. what i mean is that we head into
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earnings season, certainly you'll have negative earnings, but i think you're going to see a lot of moderately better-than-expected news. so this is a good point to get in fundamentally. clearly for the next three to four weeks, you have a kind of downward trading bias and you have to weigh which you're going to be on. short-term negative, long-term positive. >> brian, do you think traders have factored in earnings season bad on t run-up fro march ws? >> i don't k if it's so much the rnings season, but i think everybody anticipated a paradigm shift and we're just not seeing it, meaning, hopefull the writdos would go awa and banks would go back to good lending standards and potentially start to form solid balance sheets again, and it's just not happening yet. and whereas i still think you need to be a buyer on the dips and the banks, you know, you can't get ahead of yourself on this. >> buy on the dips or banks. you're seeing a lot of banks sell off sharply. morgan stanley is down 4.5%, goldman sacks is down 4%. are there any buying opportunities, john kosar? >> i think there are. we're looking at the utilities
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sector and the health care sector, kind of a play you would want to put in place if the market is weak. so it kind of fits in with what we're seeing with the s&p 500 today. >> but not in the financials? you would say get completely out of the financials and go into the more defensive sectors you just listed? >> yes, that's what i'd be doing. >> and danielle, you're saying look at the dividend-paying stocks, even though the s&p came out with a handy dandy study saying the number of dividend decreases reached a record in the second quarter. doesn't seem like a surefire way of investing anymore. >> nothing is a surefire way of investing, that's for sure. i think you really have to look at the dividend facts, though, for the long-term haul. you're getting paid to wait, which is important for any investor. and frankly, you've got to be where the trade is. no matter what the fundamentals are doing, we have to look at what's moving, when it's moving. it's all disconnected and it's about the liquidity of the market. >> give us some names, danielle. >> for the dividend stocks? htf pays about 15.7%, which is a
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mortgage company, believe it or not. they have recently raised their dividend for the past two quarters 5 cents each quarter, and i also like bp. if you go back and look historically at the carter administration, when we had some really bad economic times as well, and you can kind of call this the second term for carter. bp and all the oil companies did well. they paid nice dividends and i think we'll see that this time around. >> i think you've got to be careful, but you're right, it's a 15% yield as long as the stock doesn't go down 20%. you've got to weigh those two things. this to me is a good point in time where those things leading the market, except financials. i think financials are essentially a crapshoot. you have to be careful wherever you are because it's not like there is any more transparency than there was, but on the technology names, on some of the wireless communication names, oil services are looking interesting now because they've pulled back 15% in like, what, two weeks? >> right. >> so, i think in this case, i swore i wouldn't say buy on the dips, because it's the most overused cliche in the world, but you know, i'm saying it. >> this is the dip you're buying
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on. >> this is a dip i'm buying j. >> let's move on. oil is now trading below $61. opec slashing the prospects. is the next stop for the market $50? john, walk me through the chart and tell me what you're seeing in terms of the relationship. this is back to the chart of the day. the relationship between oil's direction and the stock market in general. >> okay. here's our chart. >> go ahead, john. the trumpet sounded. >> ever since october 2007, when stocks peaked, crude oil and the s&p 500 have started to trade together. they're actually about 76% positively correlated since then. people have been looking at oil as a way to try to judge where the economy is going, and that's why stocks have followed it. so, we're seeing oil starting to break down here, and i think that was one of the fuses that started the slide in stocks. we're looking at $59 to $55 area in crude at the least. if we get that, then we should
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keep stocks under pressure during that time. >> the other pressure at that time. >> in terms of the charts and commodity trade, more broadly and we're seeing here it is trading below support levels. does that indicate also that stocks will remain under pressure or is this an opportunity perhaps, commodity costs are coming in and maybe some of the staplesstocks could benet from that? >> i agree with that, i think you have to be a buyer on the commodity dip. the s&p 500 crude spread scares the heck out of me. at one point and i understand october its worth. the geopolical issue is where moat of the risk lies right now. if you look at korea and iran, iraq and nigeria they are as stable as most mental patients. again what's scaring me is the some sort of geopolitical issue that will push equities down and push crude higher. >> family dollar fdo up 10%,
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reporting better than expected results. shares of the related companies, the dollar trees and wal-mart higher. are there buying opportunities are these stocks trading too high at this point? >> i would stay with the discount retailers and on the electronics side. you go to the mall and see four different stores that sell everything from skateboard wear to surfer wear, there is can be a lot of consolidation, go with the big box houses. >> i think the problem is, 10% pop, like to be there yesterday not today. if people start pouring into the names, consumer staples, low end consumer names worried about the market. if we put back to 7700 on the dow and have movement up again come late august, early
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september, these are the not the names to be in. i don't thing you would be to be there now. >> let's ahead to the fast line and get in options. action. we're waiting for alcoa. scott joins us on the fast line. what do you see in terms of action. >> alcoa in the past week jumped in, it is really where you can look for sharp relief on the fear that we see overall in the market over the past week the applied volatility jumped just below 62 to over 77. today we see lots of option traders taking advantage of it, particularly in the july 10 call. selling that in front of the number. we have nearly 24,000 of those trading today. implied volatility continues to move higher in alcoa and traders taking advantage by selling short term calls in front of the number. >> volatility goes up but you
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can collect and that's what they are doing. this bad on the direction of the stock, scott, in terms of we actually believe the stock will go higher? >> there's actually a couple of bets. the first one implied volatility will follow once earnings are released and that is almost always the case. plus, they are butting against the company a little bit. they are not real worried that alcoa will move from 9 to 10 in short order. >> scott, thanks for in a analysis. do not miss "fast money" as we break down the alcoa earnings. first, coming up, "power lunch" talks to david kelly on where he is putting his money to work in the topcy turfy market. all of the afterhours action as the dow commodity stock reports, will management point the signs the global economy is on the mend? as the g 8 begins will unrest
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welcome back to your halftime report now. a chinese name takes advantage of the rise of the middle class in china. >> everybody has been looking at chinese stimulus package, the industrial spending and commodity story, really interesting is this emerging consumer story, emerging middle class. new oriental education, edu which is meeting university of phoenix goes to china. it does english education and also does professional education f you're a middle class guy or girl and want to get a degree to help you get the management position, you take a course at edu, the stock has been holding
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really well and pe trading around 12 or 13. and this is a name that can keep going and going because they have hardly begun to penetrate the second tier cities. >> education is top priority. parents will do everything they can to send their kids to the best schools and part of that is learning to speak english. >> this is the cheaper version of it you can pay for your course, and get your job. >> time to call the close. do you buy or sell, john? >> after about o months of gog nowhere, it looks like we're starting to roll down. i'm a seller. >> i think investors have an extreme okay of my oep ya and no reason to buy until we hear more news. i'll be i seller until the bell. >> i think i'm a buyer here. sold at the end of this quarter. investor my op ya sounds
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like a redundancecy. i think long term buy in that you have good fundamental entry points. >> inthat does it for us. "power lunch" instant analysis and what else we're working on. >> we're following the comments by one of the fed presidents, mr. evans, saying better times are ahead. does that mean the fed will start to take back? and j.p. morgan's half trillion dollar man and lucoil executive speaks out and cyber attacks, are we ready? making some comments about that. all of that when we come back. robert neighbors says the administration is not discussing a second stimulus plan.
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he told congress the folk as you say on implementing the plan already in effect. the new york stock change says the website has been subjected to a denial of service attack the trading and data systems are totally unaffected. that's news now. i'm mike huckman. d our power lunch continues right now. getting rather bullish comments on the economy from one of federal reserve officials, but stocks do continue to move lower. we have the results of the latest ten-year note auction and we'll have the numbers and reaction for you in a moment. federal regulators looking to crackdown on oil speculation, jim cramer isn't pulling any punches when it comes to the energy markets. we'll get trader reaction to his
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latest rant. google wants to smash windows. the company is taking on microsoft by launching its own operating system for pcs. we'll get one take on what the showdown means for investors. >> we're joined by david kelly, the chief market strategist for j.p. morgan funds. federal reserve president of chicago on the wires saying he feels the recession appears to be ending. he feels the housing market is showing signs of stability and factory decline appears to be over all though the labor market is still weak. he sounds pretty less down beat, i guess is how we should put that there. >> it's a very big shift but does appear to be turning in the global economy, we're pretty close to zero growth but we had big negatives at the end of last year that started this year. i think production may turn up retail sales may be a bit better in july but we're still going to
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be losing jobs and plenty of riffs out there. we're turning but still need to be -- >> even in the wake of friday's employment report which turned a lot of sent. me me ment, they started to change they are mind. even in the wake of that number, you're still positive? >> i expect the jobless numbers to be bad through the end of this year whatever happens. there are enough other indicators, the pieces out of the ism, i think the labor market is slowly improving here. >> let me interrupt you, we have the results of the ten-year note auction and rick santelli joins with us the details on how it was received. >> reporter: you remember sanford and son, that's about the way i feel -- a barn buster auction. we're looking at the bid to cover and i don't think it's a typo 3.28. $3.28 running after every dollar's worth of those reopened
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tens available. the percent of indirect bids in the high 40s. i don't know i trust history. they changed it. and a yield of 336 and a half and market trading around 340. lower yield, higher price. my grade has to be an a plus for this auction. >> appreciate it. we'll track the auction reports in terms of market impact and see whether or not it can help the stock market and step in with bertha coombs about that. hi, bertha. we'll get her mike in a second. try it again. >> reporter: we're coming off the lows, 8125, the dow poised to push below 8100. we've been watching s&p levels and that one is coming off a well. hit a low close to 870. this is what folks are watchi, a lot of traders saying what
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ey are seeing is program trading as we help the stops pushing lower here. traders had been looking at these levels. it was led by the breakdown in commodities. saying the meltdown in the commodities as much as everybody worries about inflation and what that does, does nothing for stock. energy following lower, commodities moving lower and financials are following them as well today. take a look at the declines in the regional banks. really a very negative taste. improving on the back of that auction though. >> just -- should we be thrilled -- or should we be nervous that investors are embracing less risk? david kelly? >> as a taxpayer i'm please the government can finance the debt at the very low debt. as a long-term investors would be nervous at these yields
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because the u.s. economy will turn. as it does, we're going to see higher rates moving back up towards the five. i think it's fine for right now. but i think it speaks to a very conservative investor. i don't think it makes treasuries very good investment right now. >> does it make you nervous about the markets. if we see so much for vanilla treasury, does that mean there's less appetite for stocks? >> the real question is can traders and investors affect the real economy by bidding yields and treasuries down. all of these financial stocks fell and it affected the banking system itself, it crunched credit. i think the real question, will this affect some global turnaround in the economy. if the global economy can get its act together even with negative investor sentiment. it doesn't worry me too much. >> can the global economy do that? mr. evans is saying they won't take back accommodation until they see sustainable and that's the key word, sustainable signs
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of growth in the economy. >> you have to treat this region by rblg. in asia the rebound is a reality already. china has seen gdp growth and japan and korea close to 10%. i think the u.s. is about to turn here. europe will lag. i think the fed ought to continue to be accommodative until the financial system is stable again. >> would you be buying gold here? >> i'm not worried about inflation down the road. gold, i wish the speculators would move out of oil and into gold. that's a nice place for spek laters to play. i wouldn't want to make a bet there. >> does that mean you like the decision or talk coming out in terms of who will be allowed to play in the oil markets? >> i do -- i don't want to speak about the specific proposal but the general idea of more regulation and taking more care
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of this oil market i think is important. it's like a currency. central banks defend currency value they real list stable exchange rates are important for the global economy. a stable price of oil is important for oil producers and consumers, we all ought to grow up to try and get oil prices more stable rather than allowing markets acting in a very speculative way pushing prices too high and too low. >> can you elaborate why you're not worried about inflation, but what about those who point to all of paper being printed and the other aspects of the economy that do signal high inflation? >> it's a complicated story, the reality is the relationship between the growth and money supply and inflation completely collapsed over the last 25 years, we have no evidence in modern history that a sharp increase in the money supply caused inflation.
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the reality is, if we've got all of this excess supply in labor markets and all of these empty rea tail stores and factories, we will not get inflation going. i'm worried about deflation than inflation. >> we have more to come ther >> like where he's investing that stuff. >> straight ahead, the feds want to crackdown on energy speculators and now jim cramer is ranting about that. what's going on here? what does it mean for the markets? >> speaking of oil prices, the interesting dynamic we've been talking about here, the gold market is down $20, crude oil down 3 3/4% and we're about to crack the $60 mark on crude oil. playing throughout ) ( clunks )
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the oil futures market, it's a total farce. even i, someone who accepts that however awful it might be a certain amount of legal manipulation is always going to be inherent in the game. regulators are almost totally captured by the financial industry, even i many completely stunned and outraged by the
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phoneyness of this oil futures market. which is the total traf vesty of a mockery of a sham. >> travesty of a mockery of a sham. that was jim cramer sounding off on the big push to crackdown on speculation. he and i disagreed in things on the past and i disagree as well. sharon, how do they feel about being called a total farce? >> reporter: they don't like the talk about tighter regulations either, whether coming from france or britain or anyone else. there's a lot of concern as we look at oil prices, near 147, falling to $3 a barrel and up to over $73 a barrel. in a week's time falling to look like below $60 a barrel. mean even today i'm joined by a trader on the floor and independent trader, mike. we talked about this so much, so
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many people have been telling me today, sending me e-mails saying it has to do with electronic trading. once we went electronic, that's when the volatility started. that's a tool that lie lights how volatile the market has beme. >> we uld say that and sound bitter down here. that'sot our goal. there's a lot more that goes on in these markets other tn whatd u see on the floor. if you want to point your finger at the price ooil, i don't think you point down here. >> all of the banks and money that's been flowing into the market. >> you can talk about yesterday traded 226,000 lots and based upon the price but have nothing to do with trades -- >> it's amazing they don't want to use the oil markets as the message that it could be. in sted of acknowledging oil is
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telling us something about what we're doing to the dollar, all of this money we're printing, ey want to trap down the messenger. >> we gave the banks $100 billion at the beginning of the first quarter, we didn't tell them what to do with it. isn't it quite interesting crude went to $70 a barrel. >> 147 last year before they ever ge ge them a dime. >> cramer was late to the call. didn't seem fundamental when the crude will to $145 a barrel. >> last summer we had a money in the commodity and it came back out as prices went down. the fact we're looking at 125 billion in these indexes. >> a lot of us are concerned about what happened when you do try and put constraints on markets and dealing with a lot of pension funds and commodity funds and endowments that have
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been in these markets. what happens if indeed these requirements do go through? >> oil is a single most important commodity in the world. if it shoots up, it can put the economy in recession. that trumps the need to make short-term profits through trading strategy. i agree a lot has to do with investors putting money into commodity as an asset clause. that's all well and good. >> can you really differentiate. >> you don't. you need to do -- there are world governments, oil consuming nation that's have a vested interest in controlling the price of oil and what they should do is take an aggressive substance, if oil shoots up unjustifiably, they step in overnight and agree to sell a whole pile of oil out of the strategic petroleum reserve they control and do this in
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coordination with opec and basically --  >> you wan to layer it on. >> would thatwork, mike? >> i think -- that's asking for a lot for worldwide government coordination to si nies what the oil prices should be and things like that. you're asking for a lot. >> david, you could argue that coordinated intervention has not had a lasting impact successfully in the currency market. >> but you don't need it to have a lasting impact, you need to regulate the pace at which things change. the dollar has come down gradually about six years here, seven years but has come down -- >> david, you know how it would work, the moment the markets got a whif that the governments want to have a concerted intervention, they would throw cold water on that and bury that intervention. >> some of it already seen. what we've seen in terms of the price decline, it has to do with
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what we've seen on the proposals or consideration of further regulations, how much further will we fall? >> can we agree that an oil price which goes to 147 then down to 30 and up to 70 does not reflect economic fundamentals. >> it's telling us something, don't you think? >> you know what, we've got somebody who might be able to answer these questions, medvedev telling the g8 it is impossible to regulate oil prices via administrative measures and suggesting 70 to $80 aarrel is a fair price for oil our next guest is from lukoil, also along with david kelly at jp morgan funds. can we do something about the price of oil? does it make any sense, the
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government regulations they want to put in place in the united states? >> or in france or england. they talk aboutt as well. andre? >> i can hear yo thanks. >> he's thinking about it. >> i am thiing about. as producers who would like to see more stability in crude prices and crude bouncing all the wayrod from 35 to 140 does not help i terms ofonger range planning i tnk thiss something that we're our stand has been for a long time. we felt that t fairrice for oil, at $53 a barrel is still -- >> in your view, is a market that goes from 147 to 30 back to 60, is that a market run amuck that needs reigning in or is there a message there as michelle seems to suggest? >> i think that this is
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something that some cushion that the governments can do in terms of intervention in the market can be helpful. >> like what? >> well, you know, there were some suggeions about sbr being used -- >> you would be inavor of that? >> that is not my part -- my cup -- >> you would be in favor of various governments using some of their reserves to tr to stabilize pricof oil? >> all i can say ishat definitely on the producer side we would like to see more stability in crude prices. >> jim cramer says and a lot of folks are arguing, producers like you and buyers, the real hedgers, people that need the commodity markets are no longer using them because they are run amuck and the only people in there really are the financial folks. do you agree with that? how doou sell your product? >> well, we doell our product on sort longe term contracts, but they are still tied to a market price.
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so we are affected with that posted price. and it's interesting, you know, you say the price has been all over the place and there has been a lot of confuonn the market about the fact that -- but even in $40 abarrel, lukoil has been able to generate close to a billion dollar in profit. >> david kelly, one of things that's worry some about the prospect of these kinds of lations or measures on oil market, where do you stop? i take your point about crude oil being perhaps one of the most important commodities to the global economy. could you not also argue that about the credit market and what's to stop the government from putting in tighter regulations on different types of financial instruments, it's kinds of a slippery slope, is it not? >> a slippery slope in the people doing regulators are
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stronger on the political side than the technical side. i do worry about that a lot. the difference between saying we should have good regulation, we should have regulation, i do worry about that. look what happened in the last year, different markets were allowed to run amuck with no regulation and that didn't dough very well either. i think we have to have careful regulation and flexible regulation and i don't -- >> you think that will happen? >> i'm not an optimist on that. saying i think the world should be rather than the way it is. >> what about the demand for oil over the next year, therice of oil. what are you saying wheit mes to the global economy an dend forour prodt? >> for o thing, i do want to say th regulation does not have to meaort of ice regulaon. the interventions in the market is something that is practiced in different markets by the governments as well.
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so i don't see any problem of that mechanism being more widely used. no. where e demand is right now, we tually don't see significantecrease of demand in russia,but, of course, the dema has slumped qui significantly in old city markets and this is something that is putting pressure on prices now. >> i'm not going to tell you how to do business in the u.s. with retail stations. when i pass by a lukoil station it usually has the same price as exxon and all other stations around. try dropping a nickel and see what happens. see what happens then. let's get prices to go lower here andre. thanks for joining zblus we surprised him with our questions about regulation. >> david kelly sticking around by the way. dozens of the most powerful media mog you wills are talking deals trying to figure how to
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make money in a sector that is changing fast. is twitter on the block. we'll have that next and media analysts as well. (announcer) we sak car.
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here to reink wealth management. a new wealth manageme firm here to swer... your questions.morgan s. welcome back to "power lunch." rick santelli here. we moved 19 billion ten-years, arguably some of the best metrics i can remember. a bid to cover that is over $3, unheard of. what has it done to the rest of the marketplace? as you look at the chart, you can see ten-year note yields well performedafter the results and brought the equity markets up almost enchanged.
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look at the year to de chart. we finished the last quarter to 266 and ten. quarter number one. had a high water mark of 4%. do the average, 3.33, exactly where we're trading, a very significant level. >> the yield curve is doing a pancake thing. >> it is starting to flatten ouxt i don't think banks are happy about it but a major force to reccen with. >> as we mention, heavy hitters are gathering at the annual media and technology conversation in sun valley, idaho as media moguls look to grow their business. what is the climate for deal making right now? looking very much part of the aura there in sun valley. julia in. >> reporter: allen and company host the $10 million annual
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event with hope of drumming up merger and acquisition activity. this year they face head winds, debt financing is it scarce and making them reluctant to give up stock or sell at this price. stillach have billions of dollars of cash sitting in sidelines. microsoft has 25 billion on its balance sheet.s microsoft has a track report of strategic investments in new media, buying up a piece of facebook in 2007. and google and microsoft trying to tackle the future of digital advertiser. what kind of deal should we expect? twitter is the it company this year's conference, don't necessarily expect a sale. zero revenue and evan williams said he's not planning to sell any time soon no matter what the offering price.
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expect smaller deals, $80 million acquisition of people media and strategic deal between media giants looking to reduce overhead by preserving revenue online. deals like comcast, time warner's recent partnership for tv everywhere. >> julia, stay there. more now with today's power player david kelly. all about the deals right now isn't it. >> i'm not there in sun valley with julia, but i can confirm from new york, there's a lot of literally tens of billions of dry powder of cash with the media conglomerates looking for compelling deals. what we're seeing in the center right now is a multi-year correction which has been triggered by the recession of course, so i think a lot a lot of moguls looking for strategic
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deals that can have -- >> tuna, one of issues they face, there's a decline in revenue because the economy is bad, then there's a decline in revenue because of a completely secular shift away from advertising on television to advertising on the internet which isn't nearly as lucrative? >> absolutely. you hit the nail on the head right there. the shift that we have seen is actually a longer term trend which has been going on for past five years now. i think the con glom rat trying to protect from the threat of cannibalism, as well as to capitalist on the shift you mentioned. that has led to convergence being on the front burner, a lot of the buzz word we're hearing, convergence of the television and internet, that's why you heard the deals julia alluded to. >> you have a buy on disney, why do you like disney?
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>> we like companies that have aleast diversified revenues which are less vulnerable in this kind of environment. disney a combination of advertising and subscription as well as a theme park and film, et cetera. cbs, for example is predominant exposed to advertising and when you talk about advertising this environment, the fact we're getting are still negative. tv market is in gridlock. this is the first year up from the stretch through the end of the summer. >> how do you play the media? >> well, i try to be a little broader in terms of investing. but overall, at the forefront of technology industries, it looks -- i think a lot of positive things going on in the global economy will be connected with the spread of just different ways of getting your message out there. the problem is it's changing so fast it makes it competitive and
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hard to build a fence around your cash flow. that's what i worry a little bit about. >> less comment, julia. >> i spoke to john malone about the issue earlier today. he says the problem is people are consuming more content but used to not paying for anything online sot media con glom rates have to team up to make sure people keep paying. espn is one of disney's strongest assets and you have to wonder if people will continue to pay for sports coverage. that's a good thing to keep our eye on. >> tuna, thinks for joining us. >> david, come back and see us sometime. >> programming note, next hour on "street signs" er inn burn net live from sun valley at the top of the hour. it's the google boys versus
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steve bomber and company. taking aim at the windows developing system, developing their own software. meanwhile, here's a quick look at both of the stocks and see if they are reacting to the news. google is higher and microsoft not budging much, $22.32 a share. in these markets, i'm ad i turned to fidelity foan annty with guaranteed income f life. that's right, guarante income for life. it's guaranteed, matter what happens. if granteed income for life sounds good to you, do what i did -- let fility be your guide. callidity at... for details out guaranteed income for life. the gold delta skymiles credit card...
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as you know, we had a strong ten-year note auction. that has translated into the dow jones industrial average pairing its losses as well. down nine points at 8154.07. >> google making a direct assault on microsoft's turf. jim goldman has more details on the latest chapter in the google versus microsoft saga. >> cheeky indeed. as google enters the operating business or announces plans to do so. google shares rallying on this
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news even though the company says the google chrome os is still more than a year away and even then that will be the beta version. will cut to the core of microsoft's business to do it. for its part microsoft is down playing the entry saying windows 7 will be on the market. and already does everything google says it will be working on. the irony here is when microsoft unveiled its search engine bing was laughed off but the google announces mere plans, it's viewed as a windows killer. trying to my great the operating system with rumor that's hp is testing it out on a new netbook. of course, whether google will have the infrastructure which
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could affect the cost and expense structure. it's one thing to ship an operating system but something far different to support it. this is going to be interesting, indeed to atch. >>ou next guest, $480, benjamin with bad point am tack. what do you ink ofhem? >> we've been talking abo this for a ti. you look at google from a high level, this has been about a battle with microsoft since day one and this is another step forward. >> will they be good at it? >> we'll see. so far they'll been successful with a number of products and other products have not been so successful. >> bearing in mi microsoft has an 80% mart share. wod te of market share would they need? >> they need to begin pushing against microsoft. it's about getting more and more people onto the internet.
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that's how google wins, they think of it as a way of pushing internationally and getting the more developing economies online more rapidly and cheaper. >> how long before we see some rt of bottom line impact for em, if any, at all? >> i don't think they have any plans toharge for this any me soon. just like wh they've de on cell phon, begng to push forward and helpinto move more and more people online. not necessarily do they charge for this particular package -- >> is it hard to begin to charge if you get it for free for a long time. people calli into question whether that's a good strategy. >> i don't think their folk as you say on charging for the software. if more people use the internet, more people will search and make more money. >> you have a buy rating on this stock, not because of this announcement, you don't expec this to add to the botto line. >> we're not changing our numbers at all on this. it's another step forward.
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>> if they go after the operating system, even though they won't take this lying down, i'll bet they start a search engine of some kind at some sort -- oh, wait, right. >> look at what they are trying to do with bing, taking little bits and pieces. our companies have tried to unseat microsoft's dominance, look at apple, enjoyed stu pen douse growth. google by getting there a year from now, we'll see what happens. >> bing, still my favorite name right now. thank you, benjamin. jim, we'll let you get back to work. when is the last time you saw an interview with the ceo of american express? probably been a long time. erinburn net will have him online. we'll talk that over in a couple of seconds. >> that's not all she has, shares of american express
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trading today, down 11 cents. >> what? >> who wrote that, kind of suggestive. >> what could be suggestive? >> we have a documentary coming up later. >> we'll talk about that coming up as ll. >> stay tuned. mo "power lunch" to come.
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john merry weather, his firm, long term capital management collapsed in 1998. today there are reports he plans to close the current hedge fund. you may remember that long term
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capital lost more than 90% of its $5 billion in assets in the weeks following russia's currency deval situation and bond default. it seemed like an astronomical bailout, $3.5 billion to calm fears that the firm's lenders and trading partners would be dragged down. it all seems like chump change in today's environment. a $5 billion hedge fund, we were like, that is huge. >> the story of the year. a number of years. it will be a block buster show coming up at 2:00 p.m., "street signs"er rin burn net has an all-star lineup including an exclusive interview with the ceo of american express. >> that's not all she has. >> reporter: you guys do a better sell than i could. it's been amazing, you've been hearing julia talk about the conversations happening here. as we've been seeing, media
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players are here. you have world leaders and business people from around the world and one of big focuses this morning on the panel that i was on at sun valley on the state of finance. american express will be here to talk about the stast american consumer and whether there is any improvement in the economy or not. what he has to say will surprise quite a few people. he will be with us. then we'll be having an exclusive interview with jimmy lee, the vice chair of jp morgan chase, jim cramer's site did a profile of him calling him the trillion dollar man. they dress casually here and have a good time. he got credit as you know with inventing the syndicated loan, the market has now completely gone away. will it come back? we'll talk about that with him. tom brokaw will be with us to talk about health care and we have a little bit of media news, and we're going to have that coming up later in the hour. a lot coming your way and we'll see you soon.
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>> it's interesting american express performed so well in the last year. a lot of people thought therapeutic so vulnerable with the credit card default rate and tied to the upper income borrower. wall street is convinced there's hope, even though it's down a little bit today. >> reporter: sue, i'm so glad you mentioned that. year to date, american express is the best performer on the dow and ken chen all explains it, saying it will make credit more xpentive, but they still rely on the fees, where you pay the annual fee for the card. on the high end card they have not seen pressure on the fees at all. that was a pretty amazing thing to say in terms of stability. that's what he's saying and that's why that stock outperformed. >> we'll see you later. >> it is gorgeous part of the world. we'll take a quick break then check this out.
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hackers taking down major federal websites in the last few days on the fourth of july, no less. we're talking treasury secret service. how is this possible? how could we be so vulnerable to a cyber attack. could someone toss me anleven sixteenths wrench ovehere? re you go. elev sixteenths... (announcer) from designing some of e world's cleanest and most fuel-efficit jet engines... to building mo wind turbines than anyone the country... the people of ge are working together... thanks! no problem!
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i'm scott cohen, we have just learned that members of congress have just completed hearing from the sec staff in the stan ford investigation, a briefing that members of congress requested because of concerns of how the sec conducted itself. sec staff we're told according to bill cassidy who attend thd meeting, denied the long running suggestion that the sec had stood down in difference in the department of justice and the investigate of stanford. according to the sec staffers as re llaid by representative cassidy, they have taken leave in the fall of last year as the investigation intensifies, this
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is something we reported on for quite a while. this is something the sec staff did in response to a congressional letter. they'll go back and decide what to do, would stop short of saying he was satisfied with what he heard. michelle? >> thank you very much, scott. >> just an hour ago, we learned from the nyc, some sort of denial of service attack on the website a programmer accused of stealing a proprietary code, and shut down in a cyber attack that may have been engineered by north korea, same attack targeting both nyc and nasdaq. adviser to president bush and now president and ceo of information security forum, roger krescy, president of good
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harbor consulting. how serious is this situation when we hear all of these sites being attacked? >> well, this is serious, this has escalated something we see taking place on a day to day basis. most handle the service attacks they normally take. to have it to be such a magnitude and attack major sites. >> aappointing a cyber security czar. realistically what could the government do to try to prevent the attacks. >> the short answer is not much. government networks are constantly under the threat of attack. the real question, what s resiliency of the networks, if the website is taken down, that's unfortunate. if the faa and air traffic control network being targeted,
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that's far more serious. we're seeing nuisance at the federal level, but that doesn't mean it's not serious. >> can they take the next step that roth certificate talking about and really start to affect the major executions that they have to complete? >> well, that's always a possibility. but it's very difficult in these circumstances because as we do a better job about hardening the system themselves and protecting against people breaking into them. the bad guys fall back and say we can't break in. we'll deny access and create a major traffic jam so you can't use the services. >> are they toying us to let us know they are there and could do more damage? right now we're calling this a nuisance. >> the big question is, who is it? if it's a state being involved here, certainly that's far more significant. if it's a group of individuals, even if they are sophisticated enough to drop access to websites, that's problematic.
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what you really about are state level actors at this point. >> we should point out analysts in south korea and south korea an government was also hit and their analysis seems to suggest that it is people either connected with north korean government or people in the north korean government right now. >> we've seen the reports from south korean intelligence that it's the potential north korean sympathizers, until we get confirmation it could have been someone like the north koreans, we only have one source of data. how do we harden our systems and show whoever does attack them ultimately fails. >> he would argue the company should call them for advice. >> that would be a good start right there. >> thanks for joining us. up next, porn on the front cover "the new york times" today. we'll tell you why after this. >>ome conservatives think -- hey mom i needsome min.
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water cooler time and we have adult entertainment on the menu. today on the front page of "the
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new york times" below the fold a big article on how the porn industry is throwing away the scripts. shifting from feature length films with story lines -- to short action scene that's can easily be uploaded to the web and sold in several minute chunks. >> that's all they ever watch any way so they tell me. >> did you order a pizza. >> something like that, delivery. >> let's get reaction from melissa lee. first person w thought of, fate would have it working on a special presentation airing a week from today called porn, the business of pleasure. >> this is actually a shift we've seen in the industry going on for quite some time. we have a by fur indication where they are spending big bucks, $8 miion, the most expensive budget for a porn movie ever in the fall of last year. we are seeing very light script porn who's budget is among the
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lines of 15 to $30,000, where it is an 8 to 16 page -- >> what cost $8 million, a volume of people or -- >> volume of adult performers -- >> numerous people are in it. >> but also there are huge elaborate sets and computer generated graphics, they are very elaborate these days. >> a lot of it is transition to the internet. that really has changed the game, hasn't it. >> that has. this is the same problem that a lot of other entertainment businesses are dealing with. they have internet and mobile and everybody has to figure out a way of monday tiesing this. the reason why it is so watched, the industry, that is, not necessarily the product, because it has been on the forefront of technology. >> in the very early days of internet. >> blu-ray over hd dvd, for example. >> arewe seeing an industry that is struggling like
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traditional hollywood is, seeing bootlegging? >> what's happen sg akin to what happened to the music industry, so much free importaporn on the internet it is attacking the business modsle. >> who has the higher rating, yours on porn or mine that airey last friday? >> it's called porn, business of pleasure, debuts next wednesday night 9:00 eastern time on cnbc. >> we'll see you tomorrow, that's it for "power lunch." street signs gets under way in 30 seconds. stocks have erased losses after a much stronger than expected treasury auction of 19 billion in ten-year notes, former major league outfielder lenny dykstra


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