Transcripts For CNBC Closing Bell 20140808

Junk bonds too. Well discuss whether this aversion to ris sk a red flag now or perhaps a sign of capitulation. A minor bounce this morning even with the big selloff in asia last night. Up 162 for the peak for the dow now up 135 points. All the other averages higher as well. The nasdaqs up 30 right now, trading at 4,365. And the s p has come back quite a wit bit from lows of last night, now up 16 points at 1,926. Rich peterson from s p capital iq. Monica meda. Bill willis from princeton securities. And Rick Santelli as well. Ben willis, lets start with you on this crazy market day. Is there any doubt now that this market is influenced greatly by geopolitics . I hate to start off this way, but i dont believe its geopolitics. I think geopolitics is part of the fuel thats triggering the currency markets, which is really whats been driving the Technical Levels of this market. We hit 1,890 on the s p futures this morning, a critical line that happened to be 4 00 a. M. Before most of us were even up. But kelly and i were chatting the other day and i said that is the line we were most nervous about. We have been in these technical moves as far as the technicians who have quite frankly not been right all along for several months, but the last few days youve been chatting with art cashin, seeing these numbers. But i believe the trigger has been the currency moves more so than necessarily the geopolitical moves. Let me push back a little bit. How do we explain, then, last nights big selloff in the asian markets when word got out about the president authorizing the military strikes over Northern Iraq . The nikkei finished down 3 last night and then this afternoon, when word got out about the russians pulling back from the ukraine and suddenly we have 162point gain in the dow. Look at what happened the dollar yen market in those carry trades, look what happened against the euro. The dollar actually gave up a little bit today, which its been on this tear which i think has been putting the pressure on the broader indices. But the west market going back to the leadin has been the cleanest shirt in the hamper so, to speak, compared to the other world indices. Weve held up pretty well compared to germany and france and the like. Again, i understand your point but wont give in to it. All right. Okay. Jason, how much is this ill give in to it. Sure, ill give in to it. Bleets real about this. The markets are up significantly from their lows in 2009. Weve gone from ten times earnings to 17 times normalized earnings. Not to say were overvalued dramatically. Were a bit above the historical averages. At the same time, bond yields, highyield bond yields have come down to 5 in some cases. Bank loans have come down. Weve seen a flow inflows into those areas. Now whats happening is youve getting an introduction of additional aspects of risk. The geopolitical risks are really just an excuse for the markets to kind of correct a little bit, take a little bit more of a breather. So youre with well, look, its an excuse for right now because nobody really knows exactly whats going to happen. The base case, the most likely occurrence in the majority of these circumstances is the circumstance unwinds, the fears end up drifting away. And we end up back to highs. Thats just the base case or the majority of the circumstances. There are some circumstances you could outline where the sanctions get in place for a long period of time nape get harsher. Theres an economic impact. That affect earnings and therefore is fundamental in nature. But that has perhaps still a lower than normal percentage chance of occurring. Monica, there is a precedent for this kind of Market Action in the past few years. We expect or think we need 10 correction, we get 5 , then they come back and start buying this market again and it has happened yet again today. Right . Well, i cant tell the future through a crystal ball, but we are seeing a volatility and youll continue to see a lot of it. Theres no reason to feel comfort in the geopolitical environment pip see an angry smile with russia, so i dont believe that things are calming down in that region. What you have here is structural issues with the economy. You have a tale of two cities, some consumers doing well, some consumers not doing well, just coming out with earnings from walmart, earnings from mcdonalds. And we have done very little to actually address those structural concerns of consumers. They still feel a great deal of financial anxiety, and until we make changes in our economy, youre not going to really have the fundamentals that you can count on for the economy. Its a good point. The answer seems, to Rick Santelli, well, just loosen credit standards. Well, we could argue about credit standard. Theres two ways to look at credit. Its what the big boys can get, what everybody else can get. Its more availability sometimes. Listen, after everything weve seen today, the ten years unchanged, five years unchanged, 30 years unchanged from yesterday, obviously were eight basis points lower on the week and looking at a new low yield close on a weekly perspective. You know those holiday globes, you shake them up and all the snow moves around, thats the way best to look at what geopolitics is doing in the marketplace. Yes, it made things murky. This isnt our grandfathers market. Every spectator wants an enl um. Last night in thin trading the s p moves, a lot of speculation. In the end, should this market be taken down in equities or continue a big move the Interest Rates, its not going to be the speculators but the long holders and the long holders will see through the geopolitics and those issues will come clear next week. We can look at european gdp, look at the diamondbacks on monday to see which side of 9,000 its on. Yes, the risk trade in the end has been lagging. Pay attention. But maybe most important of all is that the equity markets in the u. S. Continue to be more volatile and the Interest Rates Pay Attention when it goes down. But as evidenced today, about the last 80 points have been unanswered as the yields stick and i think that the credit markets are still the adult in the room. Maybe its fitting that we save the earnings guy till last year, rich peterson. I mean, the fundamental priority of investors these days. It did seem to take a back seat to some of the geopolitics, ben willis notwithstanding. Sure. Talk about geopolitics, whats affecting geopolitics, is the credit markets. We broke below 240 on the tenyear recently and that could be a benefit in a way to home owners, that they have the opportunity to refinance, put some more money in their pocket. Talk about the correction. Maybe 5 is the new 10 whereby we had to pull back from approaching 2,000 on the s p, 1,900. We talk about earnings again, 10 on the for the Second Quarter numbers first time we broke 10 since the Third Quarter of tweb 2011. Only if you strip out citigroup, right . Including financials. If you x financials, numbers were even better. Seeing big gains in terms of where we started a month ago. A month ago, alcoa reporting. Since then, health care has done very well. We were looking under 7 on health care, now were over 16 . Seeing improvement in materials, improvement in technology. And Third Quarter numbers have come down, this year Third Quarter numbers looking for about 10 . What about the consumer names back to monicas point here . Are you seeing more pressure on the Consumer Discretionary . Granted were not eating as much breakfast cereal, but it is down 17 . You have Consumer Discretionary. You have to look at a wide variety. The home builders, they may be a beneficiary of some of the refinancing and improvement in the job market whereby homeowners or buyers can go out and make a down payment. I think, you know, going forward, you know, we still have the target 12 months out of 2,100 on the s p 500. Speaking of which, ben, what levels are you watching right now . What are you looking for and what are you doing about it here . Im actually pleased to see we got up to the levels we are right now at the 1,920 level. We broke through that, it was last earlier in the week we were asking art cashin as the trap door fell out. Its important for us we continue to stay above that level, we go into the close, otherwise we may visit that 1,911 level again. Hopefully not the 1,890 level. But as rick said, the bond market has always been the adult in the room nap goes without saying. Effect of geopolitics, to your point, bill, the effect will be seen in the bond market, the u. S. Treasury, as a safe haven. Once again the mattress for Equity Investors while they try and figure out what is going on. Jason, as we head into the weekend here, do you think then this mini correction, we shouldnt even use the word correction, but in many cases behind us now or is it possible todays trading action is evidence of some sort of short squeeze and that trend reasserts itself next week . Look, i mean, theres been some information today that pushes us back into positive direct your attention. I dont think were necessarily through all of the news out of russia, ukraine, out of iraq, and abroad. Theres stale lot of things out there. On the whole, whether its this weekend or next weekend or the month following, i still think the base case is were going to be grinding high we are this equity market, even though were already overvalued. The earnings are going to continue positive. The Economic Movement is in the positive direction. Unless we have something material that derails that, were pointing in that direction. It just wont be as strong of gains as weve seen in the past. All right. And that may, you know what, bill, be good news for everybody whos worried that stocks, in fact, were rising too far too fast. Didnt happen this week. All right. Thank you, folks, very much for your thoughts. Have a good weekend. See you later. 50 minutes to go here, the dow up 130 points, about 30 points off the highs but sitting right about 16,500. The nasdaq adding about 28, the s p 16 points to 1,925 here. Meanwhile coming up, customers not exactly loving it right now. Mcdonalds sales taking a hit from a food scare in china, lackluster demand here in the United States. The pros are going to debate if now is the time for investors to bite into the Worlds Largest fastfood chain or not. Grizzly. Also on the docket, a former u. S. Ambassador to iraq weighing in on the latest military action there and if american boots on the ground could be in the future. And when we come back, a poignant story, the World Health Organization declares the ebola epidemic an International Health emergency si. Our meg terrell has the latest. In india we have 400 Million People who dont have electricity and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Signs today of pretty good bound for the stock market stemming a tide of selling it started overnight in asia, continued in europe this morning, but now we are decently positive here. The dow was up 162 points, now its gain of 140. Nasdaqs up about 30 and the s p up 17 points at this hour. The World Health Organization declaring the Ebola Outbreak an International Public health emergency. Meg terrell joins us now with the latest developments on this important story. Meg . New figures out today show the virus continues its spread an additional 68 cases reported in the west african nations of guinea, liberia, nigeria, and sierra leone as well as 29 deaths. That brings the total cases to 1,779 overall, and of those 961 people have died. There are no drugs approved to treat ebola but theres been a lot of talks about medicines in development. This week weve been exploring that topic, when patients turn to experimental drugs as a last resort in all kinds of diseases including cancer. Though a system has been in place in the u. S. Since 1987 patients still fall through the cracks and pressure is building on it to change. Compassionate use is a last resort for sickest of patients, like natalie trawler, a 15yearold, whos been battling an aggressive cancer for two years. When we found this new promising medicine, pd1, we definitely wanted to participate in the trial and we asked for compassionate use but they denied it. Reporter companies can use compassionate use to give patients access to experimental drugs outside of clinical trials. There are three parties in these expanded Access Programs the patient and their doctor, the fda, and the pharmaceutical companies. And all three have to be in agreement if the drug gets to the patient. It is not a simple path, and a swell of public outcries is putting pressure on the system to change. One issue, a lack of guiding industry principles. Is there an individual sort of arbitration process that can be put in place or should there be a universal sort of set of principles that regulators and Companies Might agree to that wont be compromised in the face of a strong public pressure campaign. Another initiative is right to try, a law thats been passed in three states and is being considered in several others. The Goldwater Institute designed the laus, which remove need for the fda to sign off on compassionate use requests. As soon as a doctor tells the patient that there is a promising drug for you, the patient can then go out right away to the company and seek that approval. And thats going to cut down on the time that patients have to wait enormously. The fda counters that the laws are focused on the wrong place. Of 977 applications for compassionate use that made it to the fda last year, all but three were granted. Bioethicist art caplan puts trigt try a different way. Right to big laws. Reporter and he says other that i think chaengs are needed, including funds for patients to get treatment and travel. In addition to getting medicines pushed faster, they can make other changes. The fda probably could be a little more flexible, probably need to have some reform there to say if people die taking experimental drugs we wont hold that against the drug in terms of the approval process. Reporter the focus on compassionate use has risen to a federal level with the push to gain more data on how the systems working. Any changes, though, may not come soon enough for patients like natalie trawler and the many others battling diseases with no good options. Every day that we dont do something or dont try to fight the cancer like thats another day that the cancer can grow and get worse. So we just we always feel that in the back of our mind that pressure, that there is a time limit. So theres a rising tension on the system, and of course the situation with ebola raises questions of ethics and inequity when it comes to short supply of experimental drugs, something the World Health Organization plans to explore in a meeting early next week. Guys . Meg, its great reporting on that. I had nod noed idea that was the way they were considering a lot of these treatments and of course are concerned with the patients and wondering if you have any updates about the patients being treated for ebola in atlanta. Actually, dr. Kent brantly, one of the two being treated there, put ow out sta a statement from his isolation ward at emory saying hes under the care of great people and getting stronger every day. Thats good to hear. Keeping our fingers crossed there. Best to natalie as well. Great reporting, meg. Thanks very much. Thanks, guys. Can we quickly show whats happening with shares of one of the Pharma Companies . Speaking of one of these treatments which may be alouzed to be used for things like ebola. Tekmira up 35 today. Incredible. Its been that kind of a day weather 40 minutes left in the trading session, the dow up 144 points, was up 162 just like that this afternoon. And it looks like were going to go out positive for week with these major averages. A big turn from how things looked in the overnight session. Mcdonalds sales, heres a global indicator for you, slumping thanks to a food scare in china and week waek demand in the u. S. Shares down 8 in the past three months. Should you buy the dip now . Also later well check in live from paradise to see how hawaii is faring from the results of hurricane iselle as it gets ready for julio this weekend. Stay tuned. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. 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Vo are you asking enough questions about the way your wealth is managed . Wealth management at Charles Schwab [ radio chatter ] [ male announcer ] andrew. Rita. Sandy. Meet chris jackie joe. Minor damage, or major disaster, when you need us most, were there. State farm. Were a force of nature, too. Breaking news, more air strikes over iran. Jeb bu according to officials, more strikes occurred on a target northwest of erbil today, the city thats been at the center of so much of this fighting, but the attacks occurred by the United States not once but twice here after the first strike, u. S. Warplanes returned a short time later to hit the target a second time. That reporting courtesy of nbc news Jim Miklaszewski at the pentagon. The Associated Press is reporting a spokesman for iraqs Human Rights Ministry says hundreds of women from the y yezidi have been taken hostage by the group were calling isil. That is central to this whole United States intervention here, what the president is casting in terms of a humanitarian intervention to protect that minority group, many members of which are trappeded on the top of the mountains and surrounded by hostile isil forces. Well have to wait and see what this military strike was all about, whether they hit their targets and whether these strikes continue throughout the afternoon and evening, bill. Does it rule out these atax were basically at the base of mt. Sinjar . The attacks by the United States occurred on a target northwest of erbil today. One of the things the president has laid out is the United States would move in militarily with strikes to protect erbil with the isil forces moving in that direction. This would appear to be related to that effort separate from the humanitarian effort, but thats my reading of the tea leaves here on this reporting weve just gotten in. Thank you very much. Well leave it there for now as we watch markets for any kind of reaction. Not seeing much of one, the dow up 153 points, strong session for the s p and the nasdaq. If anything its gone higher since word has gone out. Problems for the golden arches. Today mcdonalds posted lower than expected sales thanks to that food scare in china and lackluster demand once again here in the United States. Sarah eisen has the story. Whats going on with mickie ds . Pretty ugly numbers for mcdonalds for the month of july. Two problem spots for Different Reasons weighing on growth. The immediate concern is asia. The impact of the expired meat safety scare from a local supplier. Mcdonalds had actually pulled mcnuggets and other items off the menu far bit. Its working to source the meat elsewhere. Consumer trust, though, is going to be hard to predict as we learned with yum brands last year. It also had a food safety issue hitting kfc sales pretty much all year. What we saw in july, its already having a 7. 3 decline for same store sales during the month. Analysts say its going to be very difficult to predict and could weigh on mcdonalds results for several quarters to come. The region is 10 of mcdonalds total business. The other problem thats been plaguing this company and the stock for months now, u. S. Drop in sales and in july it got worse, 3. 2 . Weve been seeing that the lowincome customer, middle, lowincome, mcdonalds core customer, ha had trouble. You see that in walmart, in some of the other fastfood chains as well. Healthier is in, another trend thats working against mcdonalds, chipotle certainly killing it when it comes to same store sales. The competitors, burger king and wendy wendys, have been posting growth the last few quarters. Their moves on menus connecting bet we are diners. It raises questions about management and strategy. The ceo, don thompson, his tenure has been marked by declining sales in the u. S. And abroad. Hes had a number of failed attempts at revamping, emphasizing the dollar and more. The stock has underperformed and the broader index underperformed when it comes to other restaurant stocks as well. Weathering the recession, guys, pretty well, and the few years before that, i mean, amazing growth for mcdonalds for the stock. Well see how patient investors can be right now with some of his new moves as he tries to connect. Was he the ceo when they sold their stake in 2006 . No, he was not. He came on board i believe 2012. I have to check that. But the stock is only up about 5 since he came on and you know what the major averages have done in that time period. Yep. Weve seen what its done the last couple months. Its been tough. Thanks very much. More breaking news, this time with john ford. John, what do you have . Appears a judge in california has denied preliminary approval of a settlement between apple, google, intel, adobe, and tech worker who is allege that a number of firms colluded to prevent poaching of workers from one company to another. The settlement was going to be for 324. 5 million, but the judge saying the settlement falls below the range of reasonableness. From what i can see its judge lucy coe in san jose who was overseeing this, the same judge looking at the apple samsung case before her, saying that this falls below the range of reasonableness, so it appears perhaps they have to go back to the drawing table here with this settlement of 324. 5 million. The judge denying it. Bill . Wow. John ford, thank you very much. Google shares not showing too much of a hit on that but theres a lot of factors the consider as theyre up about 1 for the day. Meantime, back to the highs of the day right now. Dow up 163 points even though weve heard about yet another usair strike over iraq at this hour. As mentioned, rel rheally the Russia Ukraine situation holding the key to whether geopolitical tension reasserts itself in these markets. Speaking of russia and ukraine, in crimea, by the way, was one place where mcdonalds was pushed out and russian local versions came in. Im not kidding. We want to pick up on our discussion about mcdonalds right now, the challenges its facing, lee munson from Portfolio Asset management. Just outlining the difficult july that mcdonalds has had. Kevin, just curious, given the amount of capital looking to return to shoulder here, whether the downside for this name is going to be limited. I think thats right. Youre looking at a stock thats coming up around a 3. 5 dividend yield. The dividend is very, very well covered by cash flow when you look at the credit, the credit is an incredibly good credit. From a longerterm perspective, i would say that this price today makes a lot more sense than it did a little while ago. So if were a longterm perspective, this is something for the portfolio, but there are some headwinds as you mentioned, and the stock could pull back a bit more so be cautious if your perspective is shorter term. For that reason, lee, you are cautious and you dont like the stock here, do you . Well, no. You know, heres the thing. This is the agony and ecstasy of buying individual stocks in a portfolio versus say index approach. Remember in 2008 mcdonalds, walmart, the only two things in the dow jones that went up because the market knew there would be a lot of poor people needing 99 cent cheeseburgers. Fast forward, china food scare aside, every new person that gets a new job in america is going to wonder why am i poisoning my body with this stuff . They had a good strategy with mccafe versus starbucks, other thing, but people are saying why am i going to a grimy mcdonalds if i can save a buck or two more and go to chipotle or panera . Not saying buy those stocks but thats where they are in the business cycle. More efficient ways of hedging a portfolio for a recession. Okay. Kevin . Yeah, well, lee makes a good point. I mean, obviously, you want to own this as part of a diversified portfolio, but also to pick up on what lee was just saying, this company has been around for a very long time. It spun out other businesses that have been very successful. Its transformed itself many times. It has improved its margins dramatically over the last ten years or so. Granted that improvement has stalled out recently. But the Company Keeps buying back its shares. Its going to have to address its menu and pricing. Its incredibly efficient in the kitchen. Its got to improve that further because it is a competitive market. It is a longer term perspective you have to take on it. Obviously lee is correct as far as this wouldnt be your only stock that you would own in a portfolio. You have a longterm perspective. Its a better value than it was a little while ago. You said it, its been around a long time. Is it possible its just mcdonalds fatigue on the part of the public, there are too many options out there for them right now . Yeah, you also mentioned burger king, lots of other companies that have been out there that have been around a long time doing just fine an it doesnt require tremendous growth. This company doesnt need 10 , 20 , 30 growth to sup sport its valuations. The valuations are reasonable particularly looking at the cash flow the company is throwing off. All it need to do is improve its growth rate, get it back um there, you know, fix the menu, do some things to compete and get that growth rate up and you could see some nice judgment side. Its a longerterm perspective. In a word, lee, what price mcdonalds trading at 93, would you get interested in these shares . I would wait untilitis so hated on the street that nobody wants to look at it then basically you say im going to speculate and go fwamable and buy something and put not there now . Going to have to come down a lot longer. Going to have to look like russia in about two weeks before im going to do it. Again, people need to remember, this is an awful lot of work just to try to find a good blue chip. Id rather get unexpected returns in stocks, and if i need something safe id rather buy some shortterm treasuries than try to pick a safe stock, because there aint any. All right. Good to see you both. Thanks for joining us. Thank you. Yep. Heading toward the close, up 165, so highs of the session right now at least for the dow with about 25 minutes left in the trading day here. The s p is up 20 and the nasdaq continues higher as well, up 36 points. That is all as you just heard from eamon javers, a second round of air strikes in iraq. Well gate prognosis on whats next from the former u. S. Ambassador to iraq. The cadillac summer collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Is caused by people looking for parking. In a city thats remarkable that so much energy is, is wasted. Streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. We wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then theres a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. The collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. Citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. So the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. Welcome back. If youre just joining us, your eyes do not deceive you. We are in rally mode, yes, the dow up 164 points, yes, a rough couple weeks but not today, especially this afternoon, when word got out that the russian armies had finished what were called their military exercises around ukraine and they were pulling back and that seemed to spark this rally. The dow is about at the highs of the session here with the nasdaq up 35 and the s p up 20. Among all the geopolitical issues rippling through market, the pentagon confirming air strikes in iraq and nbc news reporting the u. S. Military launched another round of air strikes as well. Joining us, a man with firsthand experience on the ground there in iraq, ambassador James Jeffrey, the former u. S. Ambassador to iraq from years 2010 to 2012. Mr. Ambassador, its great to have you with us, sir. Thank you for joining us. Thank you for having me. What do you make of this latest development and how long do you think this is going to last . Well, this was an important decision taken by the president. The president back in june after the isil al qaeda affiliate o r overran mosul and much of the sunni arab part of iraq, was taking basically a waitandsee approach. We would up our intelligence and our support to the iraqi army and to the kurds in the north, but he didnt really want to do air strikes until we could have a more inclusive government, and the iraqis are in the midst of forming a new government right now. What changed the equation was the isil offensive into the kurdish arias, isolating the yezidi kurd on sinjar mountain and threatening erbil and american interests and personnel and calling his bluff. How shockd are you by this behavior, snams have you ever seen anything like it . There are examples in military history of groups that have moved forward and started conquering lots of territory. The important thing is theyre not working through areas where the population is sympathetic to them. The population as weve seen on sinjar mountain is horrified of these people because these are al qaeda terrorists, will ethnically cleanse them at best, slaughter or massacre them and create many genocides at worst. Thats why they have to be stopped. So, you know, Speaker Boehner has said there need to be a longterm objective to this mission articulated by the president. Do you have a sense of what that is . I mean, is it the destruction of the isis or just sending them back to their newly occupied territory or what do you think that longer term objective should be or is . I think the president laid that out on the 19th of june. It is to work in the region diplomatically. It is to work with the forces that we have good cooperation with iraq. The iraq government. And we want to see it on a new leadership. The kurds in the north and the sunni arab tribes with whom we still have good ties to eradicate and the president was using very strong words back in june eradicate this isil presence in iraq and part of syria. Thats his longterm objective and there can be no other. This is like the taliban and al qaeda in afghanistan before 2001. But its even more dangerous because of writs located in the middle east. What were seeing now though is the other side having a vote and taking the offensive and carrying the fight to other arias, and that fortunately g e givgiv gives us a military target. We dont have to worry about a counterinsurgency to stop these guys. We have to use air strikes from above and local forces on the ground. Thats what hes trying to do. You raise the comparison to afghanistan. Obviously there were boots on the ground in that case and there have been boots on the ground in iraq previously. It seems here as you just said, though, that is not the way to handle the Islamic State, that it is going to be air strikes. Can you just gives us a sense of the scope and you are the ration of this likely campaign against them . Well, i think its going to be a Larger Campaign than perhaps even the president thinks of. Remember, in afghanistan, we have few combat boots on the ground other than special forces. We use local militias to be the ground component along with our air strikes. The same thing in bosnia in 1995, kosovo in 1999, libya under president obama in and alibis on the ground who will fight if we provide them logistics, weapons, advice, intelligence, but most importantly airpower. Are we talking a period of weeks, months . What do you think here . Well, it all depends on how isil reacts. If isil stops its offensive after theyre hammered more from us and are not able to push forward against the kurds or the shia further to the south to the anbar sunni tribes that are fighting against them, theyll probably try to consolidate around mosul, fallujah, in that area, and have more time to carry out the longterm strategy the president laid out in june of a political, diplomatic, military campaign to have a unified iraq that is inclusive that can get the support of all groups and then chip away at isils presence. Mr. Ambassador, thank you for joining us, sir. Appreciate it very much. Thank you. Ambassador James Jeffrey joining us from washington. A look at the markets. Art cashin just came buy biand said the bias is to the upside, more buying to come before the close here. Right now the dow is up 166 points. Coming up next, dominic chu round up todays big movers. And later, were 16 billion in outflows from u. S. Equity funds last week. Are we seeing the start of a correction that wall street pros have been predicting . [ woman ] if you have moderate to severe Rheumatoid Arthritis like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block that contributes to r. A. Symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. [ male announcer ] humira can lower your ability to fight infections, including tuberculosis. 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Just 15 minutes to go and the markets at the highs of the day, dow up 174 points helped perhaps by the reports as just told by art cashin. The nasdaq up 36. To dominic chu and whats moving these markets to wind down what has been another seesaw week, dom. Not too shabby. A big green day on a day we thought might have been red to start. A big day for tekmira after the fda cleared its experimental ebola drug for potential use in human beings infected with that virus. Stock up 38. Sothebys moving lower after posting secondquarter profits and sales. It blamed a higher tax rate for the decline in its core earnings. Off session lows, still down by. 7 . Medivation. That stock up 8 off of its session highs. And well end with post holdings, whose stock is getting absolutely clobbered after the breakfast cereal maker cut its earnings outlook for the full year. Post shares you can see down 16 . At one point it had lost just more than a fifth of its value in terms of the overall day, so not a good day for post shoulder. Back over the you. Not at all. Dom, thank you for now. Got about 13 minutes to go here, markets gathering momentum into the close. As art cashin said, bias to the upside, could be paring off. Alternative investments will pick up big time according to a new study. Find out which categories could be hot. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. What have we got, ten minutes left in the trading session here. Art cashin saying its starting to pare little bit. 16,543. What a crazy rally this has been late this afternoon. The nasdaqs up 37, and look at the s ps, the strongest of the major averages, up 21 points now, or a gain of 1. 2 . Joining us, our friend david darconsistent, bob pisani here. Crazy. We know two things. The markets definitely move on ukraine and to a lesser extent on whats going on in iraq. And we know that we dont know anything. We know that we dont know how this is going to resolve itself. Isnt it amazing to you that the markets move on a tweet from a russian news agency. Im not saying that ear not a reliable source. Im saying isnt it a little strange to you that the world literally moved this morning on a report saying the russians are interested in helping things out . I have even a better market gauge for you. Happy birthday to you were talking about ukraine here happy birthday, dear bill happy birthday to you we had to get you back. We had to get you back. Theres only one left. Youre late for this year but early for next year. Thank you very much. Thank you. Heres the amazing news. Thank you. Coming from the great tenor in art cashin. Appreciate it. Its your 23rd year at cnbc. Yes, it is. I couldnt help but notice that july 17, when we might have had one of these last time, was the high for the market. Now Hampton Pearson has run a test for us. If you look at the performance from july 17th to august 7th, typically the market sells off on average about 0. 6 , considerable, this year 1. 9 . I told you id find a market gauge even more trusty for you. A new indicator. Yes, we do. No, im not retiring. Would you like some cake, gordon . Its your birthday. Would you like some cake . No. Are we even now . Yes, we ear even. Thank you, ralph. No, im not taking another sabbatical. Okay . This is just a birthday thing. Thank you so much. Happy birthday. Now, gentlemen where are we now . Something about iraq going on. Ive foorrgotten. Going into the weekend here. Im going to segue here. I mean, theres stale lot more to come. Germany for one, the dax is still close to a key support level right now, 9,000. Markets will be driven first by geopolitics, second by monetary stimulus, which continues, thirdly by the economy and earnings, and finally by valuations. I would point out valuations, price to sales, pricetobook, the q ratio, which is price to replacement value, as well as the price earnings on the p e, they are all extremely elevated. So its time to be cautious, keep upgrading the portfolios. Thats the message that you want to imbue and imbibe on your birthday. Unemployment numbers this week improving. Trend, sixyear lows in those numbers. Gdp numbers improving. Export numbers are good. People tuning in now saying why is she holding a cake . You didnt miss a whole lot. Stick around. Well come boack with a closing countdown, i think. Thats the plan right now. But the dow is up 178 points. Im going to sneak in a bite. After the bell, find out why retired fourstar general Barry Mccaffrey says hes dismayed over the usair strikes in iraq. You are watching cnbc. Happy birthday, bill. Thank you very much. Rd was tt new car smell and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. 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Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. [b ll rings] time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. All right. Were going out on the high side. The dow is up 186 points right now as art cashin was saying. The bias was to the buying side. And for the week, i mean, look at this volatility. This is this week. Look at the volatility. When all is said and done, a gain of a third of a percent for the industrial average. Were watching carefully the dax in germany as Rick Santelli has been identifying all week, keep an eye on that 9,000 level and we finished this morning right on it. Were at 9,0909 and well keep an eye on that come monday, david, to see what the european markets are suffering, seeing a lot of economic weakness over there again. And mario dragge did not give any additional bird feed to the market, kept it nice and steady. But he did say the progress is the lack of structural reform over there. Theyre not doing anything, especially he singled out italy, not doing anything to improve their labor markets to make it easier to start jobs, move people around, taxation system. He specifically said lack of structural move is a problem. This week the slow growth or nogrowth model paradigm is reasserting itself. Italy now in a technical recession. Two consecutive quarters of negative gdp growth. Thats a warning sign. Dont forget ukraine, but independent of the ukraine, thats an issue. And as far as the european markets go, the German Market is in correction territory, down 10 from its peak. The portuguese and greek markets not exactly the strongest markets anyway over there, but theyre in bear market territory now. And people continuing to buy sovereign bonds of these countries, bill. We were just talking the german tenyear bond in euros yields 1. 06 . Switzerland is at 0. 48 for money. Who is giving the germans money for tenyears at 1 . Its central banks, sovereign wealth funds. That i think will keep downward pressure on u. S. Heels, which will help our market here. You would think. Gentlemen, thank you very much. Have a great weekend. See you on monday. Were going out near the highs of the session with the dow up 180 points and the s p, the strongest of the major averages today with a gain of about 22. Stay tuned now for the second hour of the closing bell with kelly evans and company. Have a good week, everybody. Thank you, bill. Im kelly evans. Orion ringing the closing bell. The best session since april 9th. The s p 500 adding 21 points, better than 1 for its best session since march 4th. And the nasdaqs up 36 today. Looked midday like we would have all our stats guys would be about the worst week, the worst session in some time. Instead, quite the opposite. Joining me is our panel. To wrap up the days action on the markets, fast money trader, guy. Happy birthday, bill. Happy birthday to mr. Bill griffeth. Guy, what accounts for that strong lateday reversal . I guess you saw some of the headlines out of russia. Geopolitical stuff drives the market but a lot is technical as well. I think on monday we talked about 1,915 in the s p being a pivot level. Give or take a few levels thats where we traded. Once we traded back to the upside today the market accelerated. I would imagine you get a quiet weekend youve probably got another 20 handles in the s p. What was very interesting to me, and im sure sarah will be happy to hear this, is the reversal in the bond market. The 18month high, that reverse closing lower. Maybe, just maybe, the bond bears have something to put in their cap over the weekend. I agree, guy. That was the most notable move of the day. Guy and i have a bet. He says 2 before 3 on the tenyear yield because hes in the crazy deflation camp. But clearly there is this voracious appetite for u. S. Government debt. We saw below 240 for the first time all year on the tenyear yield. Much more caution in the bond market. It was interesting to see when you didnt see any kind of spike in gold or the japanese yen or some of the other traditional safe havens, that flight so safety in bonds. Everyone here on the floor had their eye on that all day. You definitely see a divergence between whats happening in those low yields and whats happening in stocks. Are you on the 3 before 2 . I am. Okay. No, no, its not a deflation trade, sara. Its just too much money. Talk that out. Look at the Little Community banks weve rated in the last three months. Theyre all coming out at 150 over the tenyear. For subdebt. Explain in english what that means. What i mean is theres a lot of money looking for yield. They may be running out of high yield, but it isnt about deflation. Its about too many pieces of green pap we are president s on them looking for a home. Thats what its about. Not just pieces of green paper, also colorful pieces of pap we are european figures on them. In germany, a record low, the tenyear almost 1 . Yet the currency is ridiculously strong and remains so. Mark . Isnt the flight out of high yield really a tale of two markets . At the end of the day, most of the flight out of high yield was redemptions, right . Yes. And the big Money Managers had built up large cash reserves in anticipation of this that are actually starting to look to buy. Right . A retail move. Absolutely a retail move. Should always favor retail move. Its interesting, kelly, because as we were looking in the middle of the month as people were talking about retail coming back into the stock market, the canary and the coal mine leading toward correction, then geopolitical consideration took front stage whatever the catalyst, the answer was yes. Absolutely. You knew this market would come back because the factors that took it down had nothing to do with the u. S. Or anything else. Well, i dont know. I think theres an argument to be made that there is a Global Growth concern here. Certainly whats happening in russia. Of course. And the increasing trade tensions, trade wars. Concern with or without russia, right . Well, that would be an impact on u. S. Corporate earnings and on multinationals. Certainly lit slow down europe a little bit according to the economists. Theyre so tied to the russian economy. But we have yet to see that reflected in earnings of u. S. Corporates, right, so there does seem to be a disconnect there between what i would agree should be growing concerns over the growth and the pace of the global economy. I just dont think were seeing that ke re flekted in u. S. Equity markets. Not yet. The reality is this economy is running on half the leverage it was before 2008. Thats right. So youll have less growth. Ill give you an example. I spent time with a new business out of aig, an Aircraft Leasing business that fell apart. Theyre running that business at half the leverage they used to, 21, making tons of money, and yet they told me flat out that the entire industry is like that. The manufacturers would love to see them buy more planes. But theyre not going to do it. If u. S. Consumers or the u. S. Public werent so dismayed generally about how they perceive the economy to be doing, you could argue that these conditions are about as good as you can ask for, that if youre running the economy at half the leverage you had back in the bad old days, yet were still moving along pretty good here, its not great but its pretty good. Particularly in this Interest Rate environment. Right . But isnt the Interest Rate environment part of it . Absolutely. In order, thats a gift as well. Absolutely. The fact rates are so low. Pretty good if youre a prime credit pretty good if youre a Regional Bank that should be issuing these are good banks, solid bbbs and better. Im saying they have no problem raising money if this was a quote, unquote, normal environment, theyd be at 250 over the curve instead of 150. What we learned today is whether theres fundamental concerns about growth or not, were still in a headline driven higher volatility kind of market at these stretch valuations in equities where its sell first on the head lions, ask questions later. We saw that classically with iraq with all the research saying its obvious lay tragedy but doesnt change the fundamental geopolitical and geoeconomic when you saw the headline on the front of the times this morning you knew the market would end up better, right . Had a lilt nervousness. Guy, to your trades in just a second. Again, going back to this kind of question of where are we globally, in fact, market has a nice global pmi gauge that was out today, doesnt get a lot of press but interesting nonetheless, finance arias seeing robust growth, Service Sectors driving Global Growth. Interesting nuggets here, but the point is were still in a financedriven kind of expansion. That can be good or bad. You kind of hope its priming the pump guy for broader strength. The more we see thats happening the better i would think. But talk us through where youre putting money to work now if you still think the ten jere going to 2 . Yeah, i do. Today obviously a little bit of a hiccup on that. But weve seen days like this before in the tlts so im not that concerned yet. Sara just mentioned, german yield are 1 . In my opinion for a number of Different Reasons, u. S. Yields have a lot more to go on the downside. Ask me about a trade, though. Look at mcdonalds. Thats about as bad comp numbers as weve seen out them for quite some time. At a certain point you have to believe it has to be priced in. I think it has to be priced in. Levels weve traded down to before, i think this stock bounces. We talk about on the show all the time, lions gate. Content is king. Lgf had a big selloff but it continues to hold this 28. 5, 29 level. Now were back north of 32. Did i hear some inversion chatter out of lions gate as well . You may have. Youre the inversion girl, not me. Perhaps something along those lines. Could be out there. But regardless, this is a name i think right here given whats happened and what you want to own. Yeah. I find it interesting about mcdonalds because theres your classic whether its seen as a Global Barometer for consumer spendin spending, weathered the recession nicely because its low income, but we learned today its having a lot of trouble connecting with that core customer because of taste changs, struggling fast food is no longer in. Theres this new perception of healthy, especially as the economy improves. Theyve tried to change but havent changed enough for our age group and down. Were not going to mcdonalds. I mean, face it. Theres not much on that menu i can eat. Chipotle . Different story. But burger king and wendys have held up relatively better certainly in the last few quarters. Curious what you make of the changes that fico is making to u. S. , so this is one of the big ratings agencies that for u. S. Consumers, its a big deal what your credit score is, what your Credit History has been, and now one of the big guys saying, well, were going to take into account things like medical debt and other changes, chris. Is this a positive move or one that raises alarm bells . Its not that so much. Fico periodically changes the model. Its kind of a joke. This was recognizing reality, which is that Health Care Costs are the cause of a lot of defaults and a lot of late phenomenon in credit reports so they are trying to rebalance. Im not sure it helps, though, because medical costs are real costs. Ultimately they have to be paid. And what happens is sometimes theres an erroneous late report for an individual, then the insurer pays it. I think that was part of what they were trying to get at. Lets face it, a lot of people end up filing bankruptcy because of medical expenses, especially catastrophic expenses. Isnt that one of the highest causes of personal bankruptcies in this country . Thats right. Im curious, is this going to have anyny impact, these changes in the fico analysis that you mentioned, on the ability for consumers to obtain credit . Lit push scores up, but i dont think it will help them get mortgages. Lit help with credit cards, may help with autos and other types of consumer to that point, by the way, the fed has this new survey of Household Economics in decisionmaking appropriately with the acronym s. H. E. D. 59 of those surveyed said theyd like to become home owner, some are looking, others renting due to economic factors. There is pentup demand for the housing market. No question. Mortgages are for rich people now thanks to barney frank. Next time hes on you should talk to him about that. What changes that . Should it change . What changes that is stop financial repression by the regulators attacking laborers. Stop the ridiculous settlements like with citi, bank of america. Theyll take a third of that money and throw it at consumers. These are politicians pandering to consumers, and investors are paying for it. Isnt this just the pendulum swinging after swinging too far towards a mortgage for everybody, swinging back the other way . The victims of the crisis were investors, yet if you talk to politicians, they would pretend it was consumers. Some consumers were badly hurt by foreclosure, but the numbers are tiny. What happened to all of those investors, pension funds, banks that lost tens of millions of dollars . Dont the settlements partly go toward the relief . Partly. But they dont always. Right. Im on my soapbox on this topic all the time. The shoulder pay the price on these settlements. And who are the shareholders . Main street, firefighters, teachers, cann carpenters. Its crazy, false dichotomy. Look at citi. A third of that settlement goes to Affordable Housing . What are we talking about . Its crazy. Guy, aunt last word . I want a last word about pentup demand for housing. Theres a lot of pentup demand for the yankees, but that doesnt mean everybody can do it. Beautiful day out. I mean, get outside, enjoy yourself, man. Watch fast money. Hang out. We will. Well wait till after 6 00. Actually, well just wait till midnight. Stick around for guy adami on fast money. Investors pulling the plug on risky assets. Is it time to bail out of this risky space or is it time to pounce and buy . And on the negative sentiment well talk about that next. Plus a new report finding alternative investments, real estate, commodities, things like that could be getting much of the money thats flowing out of stock funds. What that says about the state of this market and the Asset Management industry. 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People asked me what this meant. The short answer is im not worried about this yet. Look at these highyield etfs. Hy stshgs the big one, Everybody Loves this. Down about 3 in the last month, but you can see its recovered in the last few day, 3 isnt a huge drop. Heres whats to bear in mind about these. First off theyre extremely volatile. Lots of money flows in and out all throughout the year. This is not that unusual. This week there was a notable decline. The price decline so far of 3 only modest. If you throw in the 5 or 6 dividend yield its been pretty good this year, even with the price declines. Heres the risk you have to be worried about. Credit deterioration and a rise in rates. So far the economy is improving. Theres less credit te tear ration. Thats what im worried about, that rise in rates. If the tenyear goes noticeably past 3 , these highyield etfs, yields will go up, prices will drop more. Depend how much the tenyear goes up. Thats your risk right now. Let me tell you about the decline in the jut flows from the stock funds. I understand a lot of the outflow was from a single group a single series of trades done in the spy. There it is. The biggest etf for stocks out there. Its a huge one. Somebody made a series of bets this week, looks like a single person, and thats big reason why we sold the outflows. I dont know why that happened but overall were up fractionally for the week. Back to you. Bob, thank you. More importantly, the highyield moves seem to be signalling the way stocks go lately so the question is whether theres more of a correction coming. Lets ask David Seaberg from cowan and company. Great to have you back. Hi there. Listen, whether or not its one person or a bunch of people selling out of a highyield space, do we continue to take our cues for the equity markets . No, i really dont, kelly. Weve talked about my longterm opinion of this. I think it depend on how you view the fed right now, going to depend whether or not youre buying this for the long term. I think all the geopolitical stuff and all that really, although its impactful, is a lot of noise, you know, from the standpoint of having a real shortterm or a longterm impact on this tape. So its all about the fed. Weve got fisher coming up on monday. Right. Rosenberg on wednesday . In new york. In new york. What is it about the fed specifically that you have to have in mind to know whether to buy this or not . No, i mean, when you look at what were coming out of, a massive trade right now. Last year you basically hung onto everything and made money. People are going through a digestion process as the economy is picking up, but were creeping up to a point where theres a concern about rates. If you truly believe the fed is going to be, you know, with the zeroInterest Rate policy for a period of time for the economy to absolutely get on its own two feet, then youre in a period where you should be buying stocks on any dip. And im of the opinion the feds not going to be premature in raising rates. Im of the opinion theyre going to make sure they nurture this as long as they possibly have to. Yeah. Bringing in the panel here. We heard this this from Dennis Lockhart of the atlanta fed who told us was it yesterday, wednesday, when we were in atlanta . You know, floif reiterated his dovishness, the idea that he being a little bit of a centrist representing perhaps that point of view that theyre not necessarily going to be in a rush to raise in case anyone was thinking that. Not only, that but they dont have a mechanism to raise it. Theres intense discussion going on inside the fed now, the fed in new york, what do they do . Nobody trade fed funds. Theyve talked about creating another benchmark because they dont have a way other than signalling to make rates go up. Then the question we were discussing, how do you get a market to go up when you have this much liquidity that has nowhere to go . You have big Banks Like Bank of new york charging people to deposit money. There are other big bank who is will put that in place. You think well see more of that . Yes. They dont want the money. They dont want deposit growth because its killing their asset returns. David . Kelly, can i make a quick point . What scares me about this market, just to lay it on the table, i think one of your guests, maybe chris, made the point about frank dodd, the individual investor, sort of holding the bag. The Corporate Bond market scare mayes lot from a liquidity perspective. Lets look back at what frank dodd did to the inventories of all these dealers. Inventories in Corporate Bonds are down from 07. You know, roughly 85 where Mutual Fund Assets are up 2x. So when rates do go up, whats going to happen . The individual investors really going to take it on the chin here. Last point, david, before we let you go, because we have some breaking news to get to, what do you think narps the next leg for markets just in a word . Im sorry, the next what . The next leg for the stock market. What do you think that is . Next leg for the stock market in my opinion i think is up. And i think its up until the end of the year. All right. David seaberg, thank you on a friday afternoon for your thoughts. Really appreciate it. As i mention, we have some new developments now on argentinas debt debackle with our dominic chu. Dom . Kelly, heres what weve got. The Court Hearing over argentinas debt situation has just finished up in about the last 20 or so minutes. I want to bring you some of the highlights from this particular hearing. The u. S. District judge said that the debt hearing was called because of that twopage legal notice ad that was put in the New York Times. He reminded argentina that he told the republic its misleading statements must stop. He also said that its important settlement negotiations go forward in this debt dispute, also saying that ignoring legal obligation imposed by him and the second u. S. Court of appeals was not something they should be going about doing, also saying that false statements do not if the false statements do not stop it will constitute a contempt of court order becoming necessary. The argentine lawyer from Cleary Gottlieb, the firm representing argentina here, jonathan blackman, said his law firm did not aid in preparing argentinas legal notice, the ad that went into the New York Times and said the judge in this case said he was glad argentinas law firm, Cleary Gottlieb, was not involved in drafting this public notice. That big fullpage spread a add in the New York Times being addressed by the court in this particular hearing, he says this must stop and if it doesnt, contempt of court may ensue, kelly. Back to you. Wow, dom. Thank you very much. Incredible story, kelly, for two reasons. One, its extremely usual for a state actor in a proceeding at this level or any level to have that serious threat of sanctions. And the other thing for a firm like Cleary Gottlieb to part ways and disassociate themselves from the actions of the client. As a lawyer i can tell you you either say nothing or you endorse it. Its very unusual to take the step of say igve got nothing do with that. This as argentina wants to take the u. S. To the hague over vie lightweight its sovereignty with these rulings that the judge has presided over. Well leave it there now. The u. S. Launching air strikes this morning and again this afternoon against islamic militants in iraq. Is that going to be enough to protect thousands in Northern Iraq under siege from those militants or will president obama have to send in troops . General Barry Mccaffrey weighs in next. And hawaii getting hit by another hurricane and another hot on its heels. A live report from the aloha state later. In india we have 400 Million People who dont have electricity and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Your studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. The thought of your baby girl driving around all by herself was. 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The u. S. Launched new air strikes this afternoon against islamic insurgents in iraq. Some of those bombs are destroying equipment supplied by, yes, the United States. Eamon javers, how did we get here . Hi, kelly. Well, we got here because the iraqi army, which was supplied by the United States of america and with equipment paid for by u. S. Taxpayers, essentially cut and ran according to u. S. Military experts in contact with the isil forces, the Iraqi Military melted away, leaving a lot of equipment on the battlefield. Were getting new information from the Pentagon Press secretary on the two usair strikes weve seen so far today. What the pentagon is telling us is shortly after 10 00 a. M. Eastern time remotely piloted aircraft, that is drones, struck a terrorist mortar position and then separately at 11 20 a. M. , four f a18 aircrafts successfully struck a stationary isil convoy of seven vehicles and a mortar position near erbil. All of that raises the prospect that the u. S. Military could be in the process of destroying u. S. Taxpayer paid for and financed military equipment. Take a look at this humvee that photographers captured in isil hands. This is apparently an americanmade humvee. The previous one looked like something out of mad max. Clearly isil is using u. S. Financed military equipment in their advance. Ive been talking to military experts, including general Barry Mccaffrey, about what this means. It gives them an advantage on the battlefield in the short term particularly against the kurds but the u. S. Military should be able to deal with it in relatively short order. All right, eamon. Thank you. Lets get into a broader discussion on political and military strategy in iraq. Barry mccaffrey joins us, fourstar general. Welcome to you both. General, in your opinion, is this now the beginning of an air Strike Campaign by the u. S. Against the Islamic State . And if so, how long does it last and how wide is it . Those are all appropriate questions. We have to define the military objectives of this campaign. If its to stop humanitarian violations, all this implies an extended powerful usair campaign. I dont think its going to happen. You dont think its going to happen. No. We dont have significant military power in the area. Its unlikely the turks or the saudis or even the iraqis, for that matter, will allow a significant u. S. Military movement in the country. Theres probably one Carrier Battle Group out there launching pinpoint strikes against what is largely a dismounted jihadist murderous threat. We have to support the Kurdish People to defend their own interests. Tom sanderson, am i long that the Kurdish People were looking for more reinforcement from baghdad and didnt get it . Well, theyre not often looking for more from baghdad indicates establishment a homeland if not an independent state. Going to the generals comments, not only do we not have sufficient forces to do the kind of followon activity there, but we cant want the success of this country more than they do in baghdad, and until there is political reform, i dont think we can expect to see much more significant military activity. You dont think they want success here . I dont think he wants to sacrifice what he needs to sacrifice in order to get success. His definition of success is different from ours. And what the iranians are willing to concede here as well is another issue. I dont think well have a fullscale maximum effort on the part of the United States until we see more inclusion among the different ethnic groups inside iraq. And were not there, not even close to it. That of course was supposed to happen, though. Its clearly not happening, so how intransigent is maliki and what does this mean for the relationship between the u. S. And him but also with iran . Well, things have been looking very bad for maliki with people inside his own party saying he need to go. So he may, in fact, end up going if he gets his wishes of protection for his family, immunity from prosecution and a huge security detail. But who follows him, of course, is what matters. And the influence that the iranians have over this individual also plays a big role here. So, so much remains to be seen. Its very difficult to project what our commitment will be without a settled political environment here. And also not knowing what sort of advances isis is going to make. And general, finally to you, what do you think the pros pepgts are for maliki stepping down, who replaces him and how much of that is standing in the way of a broader effort by the u. S. To launch more air strikes against the Islamic State . Well, look, you know, i think i would argue maliki is reasonably unimportant. Iraq has already come apart and wont be put back together. The kurds wont let the iraqi army into the north for a thousand years to come. The sunni portions of the country have already spun off. Its hard for me to imagine this effective shiite army and police force regaining control. My argue suspect were going to watch this throughout the middle east, this preworld war i boundaries reestablish themselves in a new format and its going to be done through violence, not parliamentarian procedures. Even if they do, that its one thing to erase the borders that were drawn in the aftermath of world war i and beyond. Its another thing for this group, specifically the Islamic State, making the gains its making, using the tactics it is, threatening the populations in a the way that it is, general. This isnt necessarily an article about political boundaries, is it, but an argument about potentially the safety of these people. Well, it certainly is an argument i would agree with your point, actually. I think youve got to stand with your friend. You have to support the kurds. You have to let it be an independent or autonomous state. It isnt going to be inclusive or the next guy, shiite, is not going to be inclusive. The sunnis wont trust them for a thousand years. These parts are splitting apart, splitting asundayer. I do think isis is a threat to the American People and western europe. Weve got to deal with it but probably not through small numbers of naval air strikes and three aircraft dropping water and food to 50,000 people on a mountaintop. Exactly. Yeah. You get the sense of what more may be to come. Well leave it there, gentlemen. Have a great weekend. Tom sanderson and general Barry Mccaffrey. Despite the recent downturn, the s p 500 is still up 4. 5 this year. Thats nothing compared to the redhot gains in real Estate Investments, know. Our diane olick as the details next. And the nfl is kicking off its preseason last night, but its not business as usual for the league, which could see a huge ownership shakeup this year. The impact that could have on your favorite teams. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com in a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back. Real Estate Investments may not be quite as exciting as other stocks lately but theyre dramatically outperforming pretty much Everything Else so far this year. Our diane olick is here to explain how and why. Diana . Well, kelly, just combine low Interest Rates with very solid fundamentals and its easy to see why commercial real estate has been a great play. Real Estate Investment trusts have seen very strong returns year to date. Take a look. U. S. Equity reits return 15g year to date with a dividend of about 3. 5 . Compare that to the s p 500, which is up around 4 with a dividend yield of 2 . Apartments are still the top pick despite concern last year of potential overbuilding. Freddie mac is reporting that supply of new units are being absorbed and fundamentals should be strong for at least the next two years. They point to nearly 4 million potential households that were not formed due to the great recession. Now, those accounted for close to 75 of those were young adults and over the next decade close to half a million rental apartments may be needed each year to meet that new demand. Office is still a bit mixed but analysts are even bullish on regional malls which had been underperforming but which are now improving. Now, another great sector is student housing. We reported on that one recently, and if you want to learn more about that, there is a link to it in todays reit story on cnbc. Com. You can go to that. But one warning from analysts. They do not expect to see the doubledigit reit returns in the second half of the year we saw in the first because they are worried about rising Interest Rates. Kelly . All right, diana. Thank you. Reits arent the only alternative investment, by the way, that could boost your portfolio. And thats according to consulting for mckinsey, alternative investments represent one of the largest growth opportunities, command of up to 40 of global revenues by 2020. For more, lets bring in their senior partner. Welcome. Hi. Its going goimoney going in this space because its done so great or theres nowhere else to put their money . We think the Drivers Behind the growth are structural, including retail excess, towards linking investments to outcomes such as low collated returns, income and inflation protections but its more structural than cyclical. What do you thinks driving it, chris . Its just returns. You cant get any even retail doubled in five years well, its a market thats doubled in five years but with a lot of the retail population out. Hedge fund stocks have bids, and theyre still considered one of the places where these people want to be, right . Absolutely. I think there has been some change in the alternative space as well. But today some of the investors look at these alternative assets as predictable consistent returns. We talk about hedge funds on this show, why am i investing in a fund . Am i investing for alpha . As a true hedge to other elements of my portfolio . Its very true, hedge funds have underperformed, and weve talked a lot about that significantly, hedge fund have significantly underperformed in the past 12 months or longer, but again, you have to think of why were investing. Im curious to know your thought. Democratization of hedge funds especially now that they can advertise to almost joe public. Although nobodys done it yet with the exception of one or two. Do you see the same proliferation of 40 act funds and Investment Companies as i do and duktd that trend to continue . Absolutely. Liquid alternatives are alternative strategies that package as funds continue to grow. And we believe the retail adoption will continue. Notwithstanding, like, theres been some evidence of a edge or strategy decay as you try to take an alternative product with much significant, lower liquidity constraints into the 40 act rubric . I have no idea what youre talking about. I will quid ti to not make as much money as Retail Products as they do a limited partnership. Oh, got it. Sorry. In packaging these strategies on their different vehicles like 40 act funds, you might need to make certain changes down the line, liquidity and investment strategy. But for the most part so far they have not seen huge issues with the performance. Would it be wrong to consider this sort of the cover your rear strategy . In other words, if youre a fund manager, a Portfolio Manager institution, and you have to show quarterly performance, youre worried about historic volatility in the stock market, you think that bonds look too risky and this is a way of kind of going and saying, look, iming to something smart and sophisticated that should give us a better return even if to your point it doesnt . And you have to pay higher fees. I think there are Different Reasons why investors invest in alternatives. Its hard to generalize. But one of the reasons is diversification. Another one is, again, some of these other outcomes whether its income or inflation protection. Another, in my view, tool in the tool kit of the investors. A great point. By the way, the name of the report is the trilliondollar convergence and it does represent kind of the retail and more sophisticated audience. Well leave it there. Thanks for stopping by. Thank you. Thanks for having me. Well, paradise pummeled for only the second time since 1950. Hawaii hit by a hurricane, and a second storm may be hot on its heels. Well get the late frst from th South Pacific next. And are you ready for some football . The nfl preseason kicked off last night. Some of the biggest action is happening in the owner suites though. Dominic chu has the details. Nbcs Jennifer Bjorklund is in oahu with the latest on the storm. How is it there, jennifer . Reporter hi, kelly. We are here where the wind is really picking up on oahu. Theyre expecting potentially 6 to 8 inches of rain as the moisture has stalled. Tropical storm iselle blew in, hit landfall at 2 30 this morning local time on the big island. In a turtle sanctuary populated by about 1,300 visitors and residents. They are now cut off completely. The roads are flooded. They have no power. They have no water. But they could visibly see the bands of the storm in the clouds, in the sky followed by lightning and thunder and up to 11 inches of rain on the big island of oahu, and that is what or the big island of hawaii. Were on oahu. What theyre concerned about for all the island is the flooding that will happen because the storm system as its even moved offshore again and its out over the water is causing a lot of rain. Its bringing a lot of moisture onto all the islands. So we are under flashflood warnings and watches all day today. Kelly . All right, jennifer. Thank you for now. Well be watching. Always an operatic feel it to, julio chasing iselle to the Hawaiian Islands or something. It was sweet revenge last night even though it didnt really count. The Denver Broncos faced the Seattle Seahawks in a rematch of februarys super bowl last night. This time the broncos prevailed. So can the seahawks repeat when it comes to the super bowl this year . Go to cnbc. Com vote. And come monday, our feature, school days the high cost of college returns. A disturbing trend of Single Parents skipping savings for their retirement to pay for their childrens education. Youre driving along, having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. But parallel parking isnt one you do a lof them. Ings great. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. The nfl kicked off its preseason this week at a time the average nfl team is worth almost 1. 2 billion. With only 32 team, nfl ownership is a very elite almost 1. 2 billion. But the clubhouse is on the brink of some major changes. Well, that price is a paper value. Who knows what happens when the franchises actually come to market. They could go for a lot more. Thats why the bills option is getting a lot of attention. Some big names possibly in the mix, donald trump. Jim kelly. Jeffrey gundlach. Terry pegula. Thats what mike newberg thinks. And bon jovi, the rocker, as well. Over the past year, there have been the passing of some iconic owners in the league. The bills ralph olsen. The owner of the tennessee titans. His family trust is maintaining that team as well. And not just because of these things. So many off the field things happening. Jim irsay of the colts, facing charges. And pat bowlen from the Denver Broncos stepping down. Possibly scandals with the browns and the cowboys as well. The giants, 1. 6 billion. The texans, 1. 5 billion. Again, these are paper values. Who knows what will happen. If the deal goes through for 2 billion for the clippers, who knows what the cowboys would be worth. Well, can you talk a little bit about their profitability . Well, we have a guest, can you repeat the question . Rick, how profitable are the top five or six nfl teams, and how do you value them . Its like buying the mona lisa. The teams want to be valued at the highest number possible. Only 5 of the teams have changed hands in the last ten years. 32 teams, and only a couple of them. Bottom line, some metrics. Each team makes 250 million a year. Attendance has gone up 1 . Looking at the metrics and understanding that tickets and television is shared, 65 to 80 of the revenue, youre buying one 32th of the giant business. Again, rick is absolutely correct. You are buying one piece. Theres only this is fixed. We talk about real estate being fixed. They may have some more teams coming down the line. But this is a league highly, highly profitable and concentrated in terms of ownership. Go ahead, rick. I just want to add one more piece to this. The owner of the sabres, 1. 03 billion. He thinks he should get it. Im starting my down payment. Heres my 20. Im in the race. And theyre great investments, and they seem to appreciate to the moon. Rick, a last word . Never sold for less than what theyre worth. Thats the most important piece. Thank you, guys. Earlier we asked you whether the seahawks could repeat as super bowl champs. Here are the results of the poll. Theyre still coming in. No, seems to be the overwhelming answer. A look at whats coming up next week, well be right back. Machines will be sprayed to be made. And making something stronger. Will mean making it lighter. One day, factories will work with the cloud. One day. Is today. [ woman ] if you have moderate to severe Rheumatoid Arthritis like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block that contributes to r. A. Symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. 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Call our specialists today to get up and running. Welcome back. Time for a quick final thought. Mark will start off. I think this week will be very interesting to see if the bull run continues. I happen to think it will continue. Russian tensions easing. Hopefully another ceasefire in israel. Maybe its just the nice weather. Well wait and see. Chris . Lots of uncertainty, but rates are going to stay low. We should relax. Too much money out there, and its all coming to obvious and not so obvious places. Good thing, bad thing . Well, less leverage and less job growth. And sarah . Check out my piece on cnbc. Com. Adult diaper is a hot growth area. Way faster than baby diapers. A 7 billion business. Ageing boomer population is happening. Its no joke. And unfortunately, 86 of incontinence buyers are female. On a different note, next week, federal reserve. We have to mention the fact, we dont have a policy meeting. But we will hear from people in new york, perhaps will move the market. Thank you for watching this hour. Fast money is coming up, with mandy sitting in for melissa lee. Indeed, fast money is starting now. Our traders tonight, good to have you with us, guys. Our top story, the headlinedriven rally. The s p and dow turning positive for the week. Word that russias military exercises near the border have eased. And the