Transcripts For CNBC Closing Bell 20140813

Performers on the dow this year. Can it continue to impress . We will get you the numbers and what they mean for shares first with the best analysis we can offer. And do you shop differently than you did five years ago . I know i sure do. What do you buy, how much do you spend, how do you spend it, what you acquire. We have interest data on what American Consumers are doing and how the retailers are reacting. Stay tuned for that just ahead. And heres where we stand in the markets with an hour to go. The dow up about 85 points, making a run back towards the highs of the session, when it was up 109. The s p 500 up about 11, 1,915 at present. Joining our closing bell exchange, Keith Fitzgerald from money map press, jack brujon from index financial partners, Abigail Doolittle from peak theories. David kudlow is from mainstay capital management, and our very own Rick Santelli is with us as well. Abigail, let me begin by asking you, the retail Sales Numbers, macys numbers are not particularly encouraging today. What is the market seeing that i dont . Thats a great question, tyler. Its amazing the shortterm memory of this market. Last week we were looking at all these geopolitical risks and now the market is rallying on weak retail Sales Numbers, a disappointment. We have not seen the rebound from q1. I think the consumers getting cautious here. Beyond retail sales and macys, from a technical standpoint, walmart, which is reporting this week, target next week, both look set to break down, but i dont think its just the low end. Also nordstrom i think looks like it could get hammered a bit. So, i think the consumer is finally being affected by all these uncertainties, geopolitical risks, the uneven economy. 70 of gdp is the consumer. I dont think were going to see the secondhalf recovery, and i think the stock market is going to reconnect with that reality. Right now, though, i am with you, tyler, its pretty amazing. David, what about you . How are you guys allocating here . Well, we think that the longterm secular bull market continues. Weve had a lot of conversation about this on the show over the past several months, but as we look forward, we see that earnings are with us, the economy will have a good second half, but we are concerned about the nearterm geopolitical tension and also the fed quantitative easing that ends in a couple of months. So, we think investors should still be long stocks but should also be hedging their portfolio looking for opportunities in undervalued areas like emerging markets that offer opportunity and even some hedging strategies, managed futures, hedge firefighters. Futures. Are you worried about one of the president ial contenders dying in a plane crash . I asked because you bring up the emerging markets issue and wonder if there are broader followthroughs that people need to be wear of. Unfortunate for that country because that particular president ial candidate was seen as one that might create a motietype moment for the country, so maybe a setback there. But looking broadly across diversified markets, investors can invest through the diversified emerging market etf. Looking at asia and the recovery from the lows last year. We think there is a long run ahead of us in emerging markets and an opportunity for investors. Keith, is todays reaction in the equity market to these retail Sales Numbers that i just asked abigail about another one of these cases where mr. Market has looked at the numbers and said to itself, ah hah, ms. Yellen and the fed wont raise Interest Rates in march now, maybe it will be april or maybe it will be may or maybe its, we wont raise rates in may, it will be august or september of next year . Is that whats going on here . Ive got to tell you what, i think youre spot on. This is like watching a train wreck in slow motion. It is such a screwed up world that the retail numbers can be as bad as they are, and we talk like abigail does about the falling out of the bottom and the consumer being impacted, no wage growth and a job pool thats terrible. Yet, the market goes up because everybody says, whoa, the feds going to maintain its buying schedule for junk debt in the first place. So, screwed up. Were up 196 off march 2009 lows, so ill take it, but i hate every minute of it. Is that why i dont think this retail sales number will affect the fed at all. Theyre on autopilot and qe. This retail sales number wont affect what the fed is doing at all. Theyre not on autopilot. Theyre making it up. We should mention the markets pricing for that second rate hike did move out to december from i think the october meeting for 2015, so it had have an impact on what people think of course it did. Of course, it will affect what the fed does in 2015. For the day. Yeah, i think youre spot on absolutely. This is what traders are looking for because its more affirmation that everything is going to continue to expand. Rick, you know, i have this sneaking suspicion that what keith just said, you might ally yourself with. The markets up 190 in five or six years. I loiike it, but i also hate is its up 196 off the absolute bottom and im sure everyone in the market picked it to be the bottom, but if you look at 06 and 07, the numbers are a bit smaller and the nasdaq in 2000, the numbers are negative. But having said that, yes it makes absolute sense. Were down testing the low yield close from last thursday, which could give us a new yield close of the lows going back to june under 2. 41 with the flat retail sales adjusted for inflation. Its a concave pancake at best. And i think, yes, zero Interest Rate policy is under scrutiny. And i always laugh when i hear people say, what does it do, change it two or three months . In the current marketplace, the bulls out there are just loving an extra two or three months where they dont have to put on their thinking cap and they just think of janet yellen and these softerthanexpected numbers. But on this one, especially when adjusted to inflation and i urge everybody to go to st. Louiss Federal Reserve website and play with fred, because you can see exactly how weak retail sales is, and we all ought to be looking at these numbers adjusted for inflation, because thats where you get the true message. Absolutely, rick. Jack bouroudjian, what say you . You know what, i love hearing this, because it tells me that there is still so Much Negative sentiment out there. You know, everyones talking about how sentiments changing and its all bullish. And you know, ricky, i could not disagree with you more, all right . The numbers are the numbers, jack. Not retail sales the numbers that came out by Corporate America tell you why the market is trading where its trading. Its not because of janet yellen. Because everyones not at macys [ everyone talking at once ] making money. Cheap debt if we saw speculation in the market the way youre saying hey, give me a trillion dollars, ill give you a good time, too. We would see a multiple of 20 or 25 on this market and that would take it up to 25 or 3,000 in the s p. Were nowhere near that. This market now [ everyone talking at once ] it is still recovering. There is nothing about this market right now that tells me that it is jack on the err of the fed. Not when youre seeing Corporate America doing what its doing the geopolitics doesnt bug you at all this week when geopolitics have been a problem for weather not bugging you today . You know what, youve had geopolitics as a problem for the last 25 years and this markets gone up when reagan was president jack, jack a multiple on it i think we have to take into account the junk bond market. Last week, or the week ending august 6, reporthigh outflows, 7. 1 trillion from junk bond funds, much larger than last year and 2013. Its summer. Its not Interest Rate risk, its credit rate risk in this there you go, abigail, absolutely. Abigail is right. The last time yes. That the junk bonds sold off, the market then followed. I think well see it again. It is absolutely true. Its an early tell. Plus, the commodity complex. We have the crb index down 7 from its recent highs, crude oil down as much as 10 . Theyre not perfectly correlated, but theres still enough of a connection to believe that the stock markets going to fall abby, these are cyclical markets. When youre talking about is exactly what happens its going to catch up with the commodity market its exactly what happens every summer bp. Wait, what about 2011, jack . In may 2011, the commodity complex fell apart. Two months later, the equity markets corrected by 20 . Technically, were setting up for something very similar. So, this may not be just another summer. Abby, i love you, but were not even close to that were not close to that right now why even bring it up, unless you start to were not even there were 10 down on commodities. Its suggesting that the commodity complex is going to continue to correct. I think stocks follow. Plus, when you talk about junk bonds abby, were going to be sitting here in one month at september expiration talking about new highs in these markets. Oh, i dont know about that, jack. There is an underlying bid in equities that just will not go away. I dont know. That is a fact. Small cap and technology looks pretty weak. I think that we could be is the highyield selloff still happening . You guys sort that out. Rick and i will go deal with the debt. The new numbers, kelly, come out tomorrow, thursday. The lipper numbers. Well have to see what those outflows look like. All right, let me ask david a question here, in light of your point of view. Give me one idea that will help me make money in the market you foresee or avoid losing it. I think that right now, what i mentioned earlier, emerging markets or frontier markets. Frontier markets have had a good run this year. Emerging markets are undervalued, trading at lower pe than a lot of the developed nations right now, and thats an opportunity. Also, there continues to be an opportunity and more defensive preferred securities. With Interest Rates still low, weve had a good interest in that sector and we think that continues to do well. So, theres a couple areas where you can have a good total return and diversify away from just domestic equities. Jack may be right, and were even higher a month from now, but weve gone 34 months without a meaningful correction. Investors would be prudent to look and be a little more cautious, a little bit more defensive, not short the market, not go to cash, but look at how you get some noncorrelated positions in your portfolio along with those u. S. Long positions. A little bit of Downside Protection and a correction we know is coming. Im sorry we had to work so hard to get you out of your shells, but it was fun. Thanks, everybody. 15 minutes to go. The Dow Jones Industrial average adding about 81 points, a decent rally. At the highs, we were up triple digits today. The s p holding at about 11, the nasdaq up 40, tyler. And the tech bellwether and dow component Cisco Systems has profits out after the close. We will tell you the numbers to watch out for and well deliver them as they hit the street and then tell you the impact on the stock and the rest of the markets around. Dont touch that remote. Has the auto giant become too pricey after this years doubledigit percentage gains . The pros will weigh in. And up next, the head of the Exportimport Bank will speak with us about fraud allegations at the bank as he battles to keep the taxpayerfunded institution alive. [ 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. Were a force of nature, too. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. Youve been working like a dog if yall year. E me, but you dont need to camp out til labor day to reward yourself. Mattress discounters labor day sale is on now rest those tired bones on a queen size serta mattress and box spring set. Right now, theyre just 397. Get 48 months interestfree financing on the entire tempurpedic cloud collection. Not to labor the point, but this sale wont last long. Mattress discounters a very nice green day for the industrials, for the nasdaq composite and the s p 500, all of them moving markedly higher and have been most of the day. A little off the highs, but nevertheless, a positive day for equities. The battle over the Exportimport Bank continues on. For the past 80 years, the bank has helped American Companies sell American Products overseas, its main function, looking to insure companies against losses if they are stiffed by a foreign customer. At the end of september, the Exportimport Banks charter is up if congress does not choose to reauthorize it. The bank will seize operations. Right now congress is on break until september. With us now is chairman and president of the Exportimport Bank, the man at the center of it all, fred hochberg. Welcome. Thank you. Thanks for having me on the show. You seem confident. Youre out there doing the media. Youre going, you know, congress is on break. Do you feel like you have weathered the storm and that you will get reauthorized . You know, we support a lot of jobs in this country, 205,000 last year, to no cost to the taxpayer. Most of our customers, 90 are Small Businesses. So, im confident. Weve been reauthorized over and over again over the last 80 years. We have a tough sell right now, but im confident well move forward. There are concerns about some of the goings on at the bank, some employees who have left under questionable circumstances. The word thats tossed around is corruption. How do you answer those allegations . Well, i believe we actually have a very good culture of ethics. I actually recently met with every employee at the bank to underscore that. Weve got ethics training. And what happened in these four individuals that you mentioned, all those cases came to light because other employees saw something that didnt look right, that was suspicious, and brought it to the ethics officials and our inspector general. So, i actually feel very good about our employees, very good about that culture. And the fact is, i ran a company, every company, every corporation, nonprofits. Youre always going to have some people who sort of go outside of the law and try to do things that are incorrect. And the question is having a culture and catching them and then correcting them. And thats an open question. Look, one of your employees just pled the fifth on capitol hill. Representative jordan says there are 40 fraud cases being pursued at the exim bank. And again, you know, private sectors one thing. Were talking, again, about a taxpayerfunded institution, one which you happen to spend a lot of money now in the media and marketing blitz to convince people they should stick around. I see it very differently. First of all, those 40 cases are companies trying to defraud the u. S. Taxpayer. In every agency, whether its medicare fraud, Health Insurance fraud, there are companies and individuals trying to defraud. Thats what those 40 caseare. Were talking about four individuals, first time at the bank weve had four individuals under investigation. So, thats really not the case. You know, every august i get out of washington. Frankly, who wouldnt want to get out of washington . I travel the country meeting with Small Business exporters. Im talking to you today from st. Louis. I got our other directors, we are always meeting with Small Businesses, encouraging people to use our services, export more, create more jobs. Fred, if i may, i want to just play you some of the qualms that Richard Anderson, the ceo of delta, raised when we interviewed him in atlanta last week. Take a quick listen. Our objection to the Exportimport Bank is a very narrow objection. We support the Exportimport Bank for small industry, we support it for caterpillar, we support it for all the other industries. We have one narrow issue, which is, when our government finances very wealthy, sovereignowned airlines that have access to private markets, and they take jobs from people in the u. S. Thats our objection. Thats the concern from the ceo of delta, fred. What do you say to that . Well, we support u. S. Companies when theyre selling overseas and they need financing because its either not available in the private sector, or to meet the competition. What Richard Anderson doesnt acknowledge is we are supporting boeing aircraft, because they compete head to head with airbus. If we dont support boeing, people are just going to buy airbus planes. So, we make sure that there is a level playing field, that foreign carriers can choose between airbus and boeing, and financing is not the issue. Thats what we want to make sure. We dont want to lose jobs in everett, washington, and the 15,000 suppliers around this country to jobs going to laos, france, and hamburg, germany. Mr. Hochberg, i dont remember a time when the Exportimport Bank was called controversial. I wonder why you think it has become so and whether were delighted that youre here now, but whether you regret getting in this position where youre having to fight in the media to restore the charter and whether you wish you had fought harder sooner . Let me say this, one thing about this media fight is we are educating more consumers, more Small Business owners about exporting and how they can increase their sales and add to their Employee Base by doing more exporting. So, to me, that actually is a Real Advantage of this debate. This is a large debate were having. Its a little bit of a debate about the role of government, but importantly, more Small Business owners are learning about us and are there outside looking farther beyond our shores to build sales and employ more people. Finally, fred, what assurances can you give to those people out there worried that their money isnt being put to the best use, that these practices arent being corrected . What concrete changes have you made and will be made Going Forward . Well, first of all, ive met with every employee just last week to underscore the importance of ethics. Two, weve instituted a course on ethics that helps them detect fraud from outside companies. Most of the fraud cases we deal with are outsiders trying to defraud the u. S. Taxpayer. Thats one thing were doing. Weve also reinstituted an outdoor ethics training, having employees actually sign an ethics pledge. Were doing a number of things to sort of increase the awareness of ethics. But actually, im proud of our employees. Our employees detected this, saw a problem and reported it to the proper authorities. Fred hochberg, thank you for joining us, the ceo of the Exportimport Bank, waiting to hear if its charter will be renewed come september. Appreciate it. Thank you. Well, weve got about 39 minutes before the closing bell. The dow is higher by 87, the s p 500 by 12, and nasdaq with a gain of about 1 . It sits at 4,432. As we debate just how well the economy is doing, coming up, new data shows bank lending at its fastest pace since the financial crisis and a profit surge. Is this a place to put your money in the stock market, even though banking still faces unprecedented regulations . And up next, have you invested in ford lately . Find out whether ford is a musthave stock in the wake of an analyst upgrade and hot sales growth in china and here in the u. S. 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Another tough batch of Economic Data starting overnight when we found out how deeply the japanese economy contracted. Nevertheless, the nikkei was higher. U. S. Markets also higher after that weak retail sales report. Some think perhaps thats because the expectations for a fed hike down the road have been pushed out a little bit. Regardless, the Dow Jones Industrial average up 89 points. At the moment its about 20 shy of its intraday high, the nasdaq up 11, the nasdaq up 43. All right, ford moving higher after stifle nicklaus upgraded the automaker to buy from hold, citing betterthanexpected sales trends. Is now the time to take fords stock out for a test drive if you are an investor . Colin langen from ibs and joe ma magliano. First, colin, lets talk about ford, your outlook for the name, and lets just begin there. Yeah, were very bullish on ford. A couple weeks ago, we added it to our key call list. We really see for ford three key points to our buy rating. One and most importantly, we did a lot of work around the new ford f150, their aluminum truck that starts to hit dealers by the end of this year. This is really going to be i think a gamechanger in the space. When we did a lot of work, we surveyed about 1,000 consumers, including 800 current pickup owners, and we found that demand for this truck will likely exceed fords capacity, which usually bodes extremely well for the profitability of the truck. More importantly, we found that the current owners are willing to pay current pickup owners are willing to pay over 3,000 for the new truck, meaning the new truck will probably be more profitable, and this really accounts for the majority of fords profits in north america. We also really see good growth outside of north america, as theres almost 1 billion of restructuring savings year over year in europe, and theyre continuing to gain share in china. So, our outlook for 2015 is about 20 on earnings above consensus, and we really see this name attractively valued, trading at three times ebitda, well below its historic average, so this is our top pick in the space. George, colin makes a thro h thorough case. What do you think . I couldnt agree more. We dont pick stocks and really dont get into the details that colin does, but at the end of the day, if you look at it, if i were going to come out with a big pickup truck, id want to do it this year. The u. S. Economy looks like its poised for a breakout. And of course, auto sales are doing much better this year. They continue to gain momentum. And colins right on the mark there with the assessment of that vehicle. This could be a big gamechanger. Theres a lot riding on it. If you dont have to give that truck away and actually make more money off it, this could be a real big plus for ford going on out. George, all the same, i mean, because were talking, again, about the shares here as well. Theyve done great since their lows in about early february, but you know, relative to this time last year, they havent actually moved that much. Now, i know that youre not digging in in terms of Technical Analysis here or anything, but are you confident that there is enough good news on the horizon that isnt already priced in here to these ford shares . Yeah, i think theres more good news coming down the pike. If you look at it, ford has positioned itself coming out with all of their products, theyre coming out at the top end of the price range, all right . And its been a struggle. They gained market share a couple years ago. They lost a little steam. Everybody, you know, its tough in this business. Now it looks like the market is developing, the auto sales market is developing more momentum as the economy picks up steam. And were looking for higher and high numbers. Were going to start to get back in this marketplace the way we were back before the recession. Over the course of time, over the next four years, back close to that 17 million units. And id like to be there, if im a manufacturer, coming out with products that can get higher transactions prices, and thats where ford is right now. That in my mind is very good. Colin, 20 seconds on two worries if im a ford shareholder. One is the executive change from mr. Mulally to mr. Fields. The other is china. 20 seconds. Yeah, i mean, im not very concerned at all about the transition. I mean, fields, you know, was mulallys righthand man, so i think this will be seamless and it bodes well for the transition with this truck being a big profit driver. China, i mean, i think fords in a good position, because theyre gaining share in the region, so even if theyre soft there, which we dont expect, ford will probably outperform because theyve been gaining steadily in the market, just as they simply get capacity on the ground. Hey, george, real quick, what kind of car do you drive . I dont. I live in the city, so i drive one of those yellow cars all over the place. Really . Just i get picked up in taxis. Matches your shirt. Thats right. Yes, thats why. Thank you. Just curious. Well leave it there. Thank you, guys. George magliano, colin langan on ford this afternoon. And weve got about 30 minutes left before the bell rings. About 0. 5 higher on the industrials, almost 1 higher for the nasdaq composite. In case you missed it, wall street veteran byron wien talking about biotechs yesterday right here on the closing bell. I think there are going to be a lot of new drugs introduced in most of the major diseases. I think the biotech area is very favorable. Ah, we will debate. If the bullish biotech call can make you some money, coming up. Also ahead, bank lending and profits are up, but so are regulations and lawsuits and those big settlements the big banks are paying. Banks pros will tell us whether the industry is ripe for gains next. Tdd 18003452550 searching for trade ideas that spark your curiosity tdd 18003452550 can take you in many directions. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. Tdd 18003452550 now, earn 300 commissionfree online trades. Call 18886282419 or go to schwab. Com trading to learn how. 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With us, brett king, author of breaking banks, and Michael Gayed from the beta rotation fund. Welcome to both of you. Brett, let me just start with you. Are you confident enough in the Banking System now and in individual banks in light of increased lending that youd feel safe putting money to work in them . Well, you know, as the economy recovers, youre naturally going to have people lending more money, so youre going to have profitability of the banks return to the mean. But what im looking for are three things, banks bullish on mobile and investing heavily in that, are looking to downsize their footprint of branches and their branch numbers, and have a dedicated innovation fund. And on that front, there are a few banks globally pushing the envelope on that. Bbva is one im particularly bullish on. Bbva, a couple of others. Is barclays up there . Im thinking on the technology front. Barclays, absolutely. They just appointed new ceo, michael hart, who came from a bank out of australia. Hes a very clever guy. I expect barclays and bbva do some very interesting things in this space. Michael, these are certainly different criteria than most Bank Investors are discussing when looking at the best opportunity in the space. Do you like financials broadly or narrowly at all . Weve been underweight financials in our beta rotation sector fund. As much as theres hoopla about the lending and increased profitability, all the lending in the world wont matter if treasuries are right about growth Going Forward given the flattening of the yield curve. All the easing of credit standards is not going to matter if junk debt spreads against corporate highquality paper is going to widen, given this prolonged period of very tight spreads, tight yields. And all the profitability in the world is not going to matter if european banks are anticipating some kind of an event. If you notice, theyve been very bad performers in the post negative rate environment. Anything that happens in europe will negatively affect u. S. Financial institutions. So, i think that when you look at Market Movement and the behavior of various areas of the marketplace on a forwardlooking basis, banks are not really the place to be. So, answer that, brett. What do you think . You know, i think if you look at banking per se as a sector, one of the really exciting things is with this shift in acquisition and distribution based around the smartphone, we have more than a billion potential unbanked customers right now that could come into the Banking System. Traditionally, they have been difficult to bank because the cost of getting them into a branch and opening an account that way has been prohibitive, but thats all changing. So, the potential for growth in the Banking Sector based on the smartphone is huge. Brett, would you bet on the disrupters in this space, the new entrants who will be able to do without some of the overhead or do you have to go with traditional players who can get the resources to leverage their existing depositor base very rapidly . Youre probably going to see a split between the distribution and manufacturing where youve got very Agile Companies who are solving this problem of cheaper Customer Acquisition and simpler, better engagement, particularly on the smartphone. But theyre going to still need banks to hold deposits federally and so forth. Brett, i want to come back. I take your point that the banks that get mobile best and reduce their footprint most may do best, but michael made some very pointed points about how duke all that right, but if some of the other things the companies are banking on dont come true, it doesnt matter. I think thats why youve got to pick the winners, right . Youve got to pick those companies that can transition this. Were in a very highcost environment for the environment right now and the cost of services in branches is going up, so you have to look at the way theyre reengaging customers, looking at simpler engagement. The fundamentals that will matter if the economy tightens up again. I want to ask you about other names, brett, but michael, i also want to ask you about this news today and how it may affect your appetite for some of these names about banks lobbying to push volcker off for years and years in terms of full implementation. A lot of what youve said is kind of like macroeconomic. How much is the Regulatory Environment a factor here as well in your case for staying away from the banks . In other words, if they can push some of the legislation off, does that make it more attractive . Im pretty sure a couple months ago, every time you had some kind of regulatory announcement, some kind of massive penalty in terms of how much a bank would pay, those banks would gaap up. Youre starting to see some opposite reactions. Look, regulations always going to be a cost to banks, but going back to the point that was mentioned by the guest as far as picking winners. The one constant in all markets in all sectors is mean reversion. You dont want to pick past winners. You want to pick past losers because they may become new winners. And i think if youll have any regulatory change on the voelker rule side, that may benefit certain banks, but the overall sector still has to face big macro headwinds, which are at odds with what yellen is telling us about where we are in the economy. In your fund, michael, i gather instead of picking individual companies to play the financial sector, you use etfs. Why . Right. So, were doing a very different type of sector rotation product whereby we go fully high beta or low beta buss based on these awardwinning papers. Etfs are a great way of liquidating on a strategy and elsewhere, the momentum is not there and i dont see how it will become a topranked sector when you have other bigger headwinds still in play. Finally, brett, circling back, you mentioned bbva. We talked about barclays. Any u. S. Names, big or small, that jump out here if you want to invest in the sector along the lines you mentioned . You know, i would look at some of the edge opportunities, particularly, were starting to see some elements of banking being picked away at. You know, weve got square and amazon recently announcing their new payment initiatives, the emv move with square and amazon launching their new register product, but id look at things Like Lending Club and sort of the p to p lending market and alternatives in the issuance of debit cards via mobile app. Square was just acquired by bbva. You have movement, go bank in the u. S. , blue bird with amex and adam in the uk and similar players, so that where id be focused on. Great. And lending club could be a big ipo. Appreciate it. Thank you. Thank you. Kelly, i cant remember the last time i did actual banking in a bank branch. I know. I incidentally was in one the other day, but it had been probably months and months and months. Yeah. I went lately to have some things notarized, but they dont charge for that, so thats nice, for me at least. Anyhow, theres about 20 minutes left before the closing bell. The industrials really stable there, about 80 points higher. The s p 500 about almost 1 higher and the nasdaq 44 points up. Tyler, do you use the mobile app to check Bank Accounts . I do, and i take a picture of my check. Should i just tell everybody my p. I. N. Number . Why dont i just do that . Yeah, i do. Exactly. All right, coming up after the bell, cisco earnings are expected to hit right after the close. It could move tech stocks big time tomorrow. Our josh lipton has the numbers to watch out for next. And later, corporate grumbling over taxes is nothing new, but wait until you hear the list of the top u. S. Companies paying an effective tax rate of 0 or lower in the latest quarter. Thats right, no dollars and no cents, zero, 00. Back in a minute opinion. If energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Welcome back. Heading towards the close here, about 15 minutes to go. Dows up 0. 5 , sitting around 95 points, where weve been most of the hour. The s p 500 up about 12. The nasdaq up almost 1 today. Quiet day today for earnings, by and large. That could change, though, after the bell, when one of the most important reports watched by wall street, from Cisco Systems, will be out. Exactly. Our josh lipton in our Bay Area Bureau has a preview of just that. Josh . Well, kelly, the street isnt expecting much from the tech bellwether. Lets get to the numbers. Analysts looking for eps here of 53 cents on revenue of 12. 1 billion. That would actually be a drop of about 2 on the top line. On the Conference Call, investors will want to hear more about the i. T. Spending environment, new products, and how business is doing in china, which does account for about 5 of ciscos total revenue or some 2 billion. But business in china has been tough. Last quarter, orders dropped 8 . Cisco saying disclosures about surveillance activities by the nsa are concerning some chinese customers. The bigger question, though, for cisco, that changing corporate i. T. Landscape, specifically the rise of softwaredefined networking. Technology that lets users run networks on software and relatively inexpensive hardware rather than the more expensive routers and switches cisco offers. Were going to have ciscos numbers in about 15 minutes. Back to you. Josh, thank you very much. 14 minutes before the closing bell. The dow drifting a little bit higher at 16,651, and the other markets basically sitting roughly where theyve been most of the hour. And still to come, july was a mixed bag for retail. Samestore sales with earnings seeming the same makes us wonder what is the state of the u. S. Consumer . Well take a look and we want to hear from you during that segment. Go to cnbc. Com vote. Are you buying more, less or the same amount of goods as you did five years ago . Think about it. Well be right back. Make a lot s for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Markets up about 89 points for the dow, 42 for the nasdaq, about a full percent there, and the s p 500 up 12 at 1,946. With analysis on the market today, were joined by christine short of s p capital iq and our good friend and my fellow virginian, like you, kelly, dennis gartman. Thats right. Founder of the gartman letter. Christine, yesterday at this hour, byron wien was here, and he quibbled or nitpicked the Earnings Growth numbers that are coming out. He conceded that theyre pretty good, but he said that when you look at eps, youve got to remember that some of that is from Financial Engineering, largely buybacks. Is he being too picky or has he got a point . I think theres no denying this has been a great earnings season with over 90 of the Companies Reporting at this point for Second Quarter. Were at 10. 1 growth. Our methodology for calculating growth adjust for share buybacks. So, i would agree on a companylevel basis you are seeing a large impact from share buybacks. In fact, of the 370 companies that have full data on share buybacks, i believe about 22 of them have seen an increase in eps of 4 or more via buybacks. So, certainly, thats a big impact. Were also seeing cost cutting, you know, still continuing, and theres certain other factors where we can see a pop in earnings per share and its somewhat manufactured, but i think overall, 10. 1 Earnings Growth, the last time we saw doubledigit Earnings Growth was in the Third Quarter of 2011. So, best Earnings Growth in about three years. I would say thats a pretty good earnings season. As people debate, dennis, the momentum of the economy, a setback here in the retail sales report, also i wonder if you can tell us whats going on on the farm . I mean, between deeres earnings report, the drop in price weve seen across corn and wheat, is it too soon to Start Talking about a deflationary impulse coming back into some of the price indexes here . Well, you may well, because this is one enormous crop that we are growing. The wheat crop was spectacular, the corn crop is spectacular, the soybean crop is spectacular. Even the cotton crop is going to be great. So, youve got downward pressure from commodity prices. Were just producing a lot of grain out there. American farmers are extraordinary in their production capabilities. God bless the North Carolina states, the penn states, the ohio states and the month santos, who have shown us how to grow more corn and soybeans on the same acreage. Youre going to see farmers become very upset, though, the fact that now you have low 3 corn on its way to probably low 2 corn, and youll probably have soybeans trading under 10 in the very notsodistant future. That is a deflationary circumstance, but the consumer is going to enjoy this dramatically, because what youre starting to see for the first time in a long while is an increase in cattle and hog herds. I spent a lot of time watching those sorts of things, and if youre a cattleman, if youre a hog producer, a chicken producer, youre looking at the fact that for the next several years, youre going to have very low feed costs, youre going to increase production. Wow. Could be good for Profit Margins. Oh, yeah. So, i guess it comes down to an issue, and christine, you can shed light on this, too. Corporate Profit Margins are at a record high right now. Theres widespread recognition they cant stay there, but it sounds like maybe some of these food companies, instead of you know, they might be able to keep Profit Margins high if their supply costs are going to turn lower little bit. Yeah, i think if you look ahead at estimates for Profit Margins into the Third Quarter, theyre still expected to remain very high. As you said, right now were looking at profit, record Profit Margins, you know, on top of a record from the last quarter. So, it seems right now as though Analysts Expect this trend to continue. And if you look ahead at forwardlooking earnings, you know, to bring into question again how steady is this Earnings Growth, Analysts Expect it to continue into the balance of the year and throughout 2015 were looking at doubledigit Earnings Growth for all four quarters. So, it does look as though its expected to continue. Dennis, talk to me a little built about a commodity that is important on the farm, dont get me wrong, but is even more important maybe to American Consumers, and that is oil. It has been coming down. Talk to me about it and put it in the context of a stronger dollar. Well, i think what weve seen, tyler first of all, everybody should know, the change thats taking place here in the United States, the expansion of production of natural gas and crude oil, whether its in the balkan, whether its in the marseilles, the eagle ford, all shale production, were starting to see the United States moving very quickly to becoming selfsufficient. North america as a whole is obviously selfsufficient as far as energy is concerned, but the United States very soon shall be. That can only accrue to the benefit of the u. S. Dollar, and i dont think enough people are paying attention to that change. Energy drives an economy, and for the first time in my lifetime and also i think in your lifetime ty laler, were gg to be energy selfsufficient. Thats an extraordinary change and it changes the psychology, the demeanor of production. Christine, dennis, thanks very much. We appreciate you being with us. Up next, well be right back with the closing countdown. And Cisco Systems expected to post its results right after the bell. Well get you those numbers, tell you how they could move both this stock and the rest of the tape tomorrow. You are watching cnbc, first in business worldwide. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. [ jackhammer pounding, horns honking ] [ siren wailing ] visit tripadvisor miami. [ bird chirping ] with millions of reviews, tripadvisor makes any destination better. [ woman ] if you have moderate to severe Rheumatoid Arthritis like me, and youre talking to your rheumatologist about a biologic. 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Talk to your doctor and visit humira. Com. This is humira at work. Tawhen the world moves, and visit humira. Com. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. And time for the closing countdown. The industrials at 16,645, up 85. The composite up 43, about 1 . And the s p 500 up about 0. 66 higher. Joining us from the floor of the New York Stock Exchange is bob pisani. Hello were paid to explain why the market goes up and down on any given day. Whats your explanation today . Its the buy the dip rally. Sometimes you cant get too much more analytical than that. Yep. We had a nice rally in japan, and everybody said, oh, my heavens, 6 decline on the gdp, but some people were expecting 7 , 8 decline, so it wasnt good, but it wasnt as bad as some people expected. Half of the s p 500 has been oversold. We had a pretty rough time in the month of august. We regained some of the losses. We had a good friday. You know, we move up almost 300 points from the lows of about four to five days ago. Stocks had a tough time of it. Brents down near the lows of the year, great news for the consumers. A little tough for some of the Energy Stocks overall. And with this low trading activity, the volatility is just dropped down, so the vix is down like four days in a row. I think we just dropped below 13 on the vix right now. Were back with a 12 handle. So, i dont think you need to analyze it any more than the fact that this was a little bit oversold, japan was not quite as bad as people anticipated. And finally, were getting a bounce in groups like Energy Stocks, for example. And there were no, as you point out, other than the japan news, there were really no other big headlines to trade off of today, other than the retail sales number. Yeah. And some people think that folks are figuring that that might stay the feds hand just a little bit. I was very disappointed in macys, i have to say. The whisper numbers on macys were for a beat. Now, they missed by 6 cents. Thats not good, because macys is best in class. Everybody loves macys. Theyre managing their business very well. Theyre going in, essentially discounting the goods at a dramatic level, and everybody thinks this is the best managed company out there in retail, and they miss by 6 cents . That worries me a little bit, tyler. All right, bob. Thank you very much. Bob pisani from the floor of the New York Stock Exchange, where theyre getting ready to ring the closing bell at the big board and at nasdaq. That will do it for me. Kelly will take it forward. Thank you, tyler, and welcome to the closing bell, everybody. Im kelly evans, and heres how were finishing a winning day across wall street with the Dow Jones Industrial average up 90 points as we head out here. Only two stocks, by the way, in the red today, verizon and walmart. The nasdaq, meanwhile, adding about 44, a one percentage point gain as we close out there. The s p 500 up about 12. We are waiting on earnings from cisco. Well get them to you as soon as theyre out. Joining the panel, cnbc contributor stephanie link, nathan back rack from simply money advisers, our own jon fortt, and here to wrap up the markets is fast money trader jon najarian. Welcome to everybody. Where should we start, dr. J. . Well, i think in particular, looking at the retailers and anybody really trying to read a positive into what has been a pretty horrific last three or four weeks, kelly. I think theyre disappointed. Outside of perhaps Something Like gap stores, everybody else really has been missing, but thats not really the full backtoschool rush. I think that will still be ahead of us. I dont think thats part of the reports were seeing now, kelly. Its interesting, this started on a companybycompany basis and was backed up by the report for july, which was a disappoint. And some economists are sifting through saying we dont think this report can stand. Its got to be revised higher. They see higher samestore sales trends despite higher misses. And we will get into what could be changing with the consumer, but briefly, were you surprised by the miss on the retail sales report for july . Was that a step backwards in your point of view . I dont really think so because i look at wage growth, and wage growth, its been 2. 5 annualized kind of thing and really has not gone anywhere. So, without wage growth, youre not going to get really a robust consumer. Youre going to get a very choosey consumer. Theyre going to pick one thing over the other. And i think that there are a lot of Different Things that people want. Is it housing . Is it autos . Or is it just paying their verizon or at t wireless bill . Right. So, i think theres a lot of things underneath the surface. I do think that todays action was interesting, considering we got the bad data on retail sales, but also the macys, as jon mentioned, also china data, japan data, the eurozone industrial production. All that stuff. I thought for sure we would be done, but i think it speaks to the fact that we did get a bit oversold. Sentiment has been pretty cautious and negative, and so, this is kind of a little bit of a relief today. And a buy the dip kind of trade for the last couple sessions, perhaps, nathan, that bob pisani just mentioned. Do you think weve put in the lows here for this recent selloff . Well put the lows in until we find out that all of the convoy trucks that are going into the ukraine actually dont have humanitarian goods and then well go down again, because that seems to me every time theres a rumor about what is or isnt happening in the ukraine, then we either have optimism or not. Keep in mind that currently, the sanctions that we had, the germans have in place with russia, could cost them. 3 on their gdp. They only grew by 0. 1 , so they have a chance to go backwards and germany going backwards would slow everything down. First off, i quote stephanie and sherlock holmes. Theres nothing more deceptive than an obvious clue. When wages only grow 2 , 2. 5 , and youre macys, your sales grow by 2 , 2. 5 . Thats just the way it works. 83 of consumers now say that they buy generic goods. Im sorry, you walk across the street from macys and youre in cincinnati, you run into proctor gamble, who says, gosh, were having trouble selling brand names. I wonder why. That tells you kind of where the consumer is. Theyre shred, theyre saving money and theyre being very careful about buying goods. And im looking at noodles and company, one weve been watching. Last year, the food ipos were so hot. It looks as though theyve missed a little bit with regard to earnings and revenue, shares dropping after hours. Jon fortt . Well, really, im looking at what the techs have done today, if i could back out of that a little bit. Pandora up more than 10 . Maybe thats some on takeoff rumors. We had the cfo on squawk alley this morning. Yelp up more than 6 . Also, palo alto net works, which is interesting, given ciscos report coming up, and on the down side, youve got king. So, while there are some questionable things happening and some downside surprises out here, there are also some companies along the margins that are outperforming. So, it will be interesting to see what cisco does in light of all that, especially because its had such efforts in russia and the situation over there is tenuous. It will be interesting what they have to say about that with guidance. And according to mkm, cisco has reported eps below consensus since 2008. So, fairly reliable beat, just so people know the backdrop. Although the stock is volatile around earnings. Dr. J. , im reminded about king, jon mentioned other names that have gotten whacked when they missed on earnings. Moves of almost 30 . Is this unusual and a sign of poor liquidity in the market or just that its august . Its a little bit of both, im going to say that. Also, ill point to kate spade, because kate spade had that 25 drop yesterday. Yeah. Thats not a tech stock. But any time that youre betting on something out in the future that far kate spade wasnt expected to make hardly any money. They ended up losing a few million dollars. But in any case, these are not big as far as numbers of profit numbers theyre dropping to the bottom line. Youre betting on something out in the future, kelly. So, the same thing with pandora or with a kate spade. I know that kate spades not a tech stock, but they can easily drop 25 . But the magnitude. I mean, just to see drops of this size, is that unusual . No, because again, whos out there to catch them . In the old days, there would be a lot more Retail Investors that would be trading the stock. Right. Right now, i think a lot of retails sort of waiting and seeing, theyre backing off, and or, im happy to say, theyre over in the options, not nearly as many Retail Investors in the stock market. Thats reflected in the volume numbers we talk about every day. And unfortunately, some of the news that comes out about dart pools and all the rest. Im curious what everybody thinks about this, stephanie, i mean, some of these big moves. Well, i think when you disappoint on margins and youre trading at 75 times earnings, thats kate spade, and they missed on margins in a big way and then guided down, and it was a horrendous Conference Call. I also think when overall, when youre looking at valuations, king is maybe not as expensive as zynga, but its still expensive for what youre getting. And so, i think the profitability impact is very important, and when that disappoints, thats when you get a crash. Let me just interrupt this for a moment because i think weve got ciscos Quarterly Results out now and josh lipton is breaking through the numbers for us. Josh . Yeah, kelly. Cisco just reporting. 55 cents on 12. 36 billion. The street was looking for 53 cents on 12. 1 billion, so that is a beat on the bottom and the top. Just looking through the release, product revenue at 9. 5 billion is better than expected. Services revenue at 2. 83 billion a bit better than expected. Cisco saying stock buybacks 1. 5 billion during the quarter. On this Conference Call, investors are going to want to hear more about just the general i. T. Spending environment, new products. Certainly, youre going to get questions about china and important potential Growth Opportunity but a market that has come with its own challenges. And then just the corporate i. T. Market, kelly, and the way thats changing with software defining networking and how cisco is responding. That Conference Call at 4 30 eastern. Ill be on it bringing you headlines as they cross. Kelly, back to you. All right, josh. Thank you, sir. Good stuff. Joining us, eric acceptinger from j p securities, and our panel. Eric, first thoughts to you. Thats great to see from cisco. This is the First Quarter i think theyve actually been able to generate yearonyear growth. So, i think it goes to the point, or it shows the point that cisco is starting to execute on some of the emerging markets, some of the cloud opportunities that are out there. You agree, daniel . Yeah, i mean, this is definitely a step in the right direction for cisco. Youve got to give credit to chambers and his staff, what theyve done there. They definitely have challenges ahead, but when they look at the cloud, sdn and what theyve done with security, youre starting to finally see some gasoline in the tank for cisco. This is good also for large tact and overall i. T. Spending as youre starting to see some optimism going to the second half. Jon fortt, youre looking through the numbers as well . Yeah. I mean, i guess one concern that im looking at, the gross margin line doesnt look particularly strong. I noticed the stock popped. It was up as much as 3 initially when the numbers came out, and i wonder if some folks are digesting that and wondering if they kind of had to pay to get to that revenue point. They also did, it looks like, a little bit of buying back of stock. So, how much of this is Financial Engineering baked in and are they having to discount in order to get the revenue were seeing here, which is about even from a year ago, where they had guided to i think down 1 to down 3 . Eric daniel, do you want to weigh in there . Yeah, kelly, i was just going to say, ciscos done a great job from an earnings perspective for a while. I think that if they can post upside from revenue, i think that gets investors more intrigued than maybe some even if its at the expense of margins . I think investors have been trained that margins are going to be under pressure for a while. Theyve come down some, but the growth story is the bigger focus from what weve seen. And daniel got to agree. Go ahead. Please, yeah. I would agree. Growth is really front and center here for a lot of these largecap tech names, cisco, oracle, microsoft, ibm. Investors want to see, can chambers start to turn this thing around going into next year . Theyve done a good job on cost cutting. But now the key question is growth. Thats really whats going to change investors from a glass half empty to Glass Half Full view. I want to just whip around with the panel here quickly before we go. Nathan, what does cisco represent to you or say to you here . It says that John Chambers continues to walk on water and raise the dead. How much longer he can do that, i really have no idea. I think he should take a book from jack welch, who retired on september 10th, 2001, the day before 9 11. I think chambers ought to figure out how to get his house in order and let somebody take them to the next generation, which is going to be a lot more software in my opinion and a little less hardware and smaller margins. I think he actually retired before that, but in any case, i take your point. Stephanie . I think margins matter. I think profitability matters. And i think i want to get my hands around why margins were disappointing. Guidance is really what i think is going to drive this stock. If they guide, you know, flat, in line to up, thats obviously good. I want to hear what they have to say about japan, what they have to say about russia. Thats about 9 to 10 of total revenue exposure for them. And i want to hear about how this product transition is happening and also whats happening with Service Provider revenue and demand, because we didnt get a very good number from jdsu today. And in 20 minutes that call begins. Josh lipton will be monitoring it for that info. Dr. J. , last word here as well . 300 million beat on the top line. The bottom line beat of 2 cents. Those are two very positive things for tech and for cisco in their sales force. To stephs point, we have to watch and see. I know the gaap gross margin was 59. 9, but as far as the nongaap margin, i havent seen that number yet. If it fell dramatically, then thats a deal. If it didnt, then i think those first two positives trump the margin. All right, and well see if the shares can hold these gains that are showing after hours on what appears to be another beat in what could be a sixyear run for cisco. Thank you, everybody. Appreciate the thoughts. Thank you. Jon najarian is coming up on fast money at 5 00 p. M. Stick around for that. They will have detail from that cisco earnings call. Now, we have a news alert on argentina and kate kelly with the latest. Kelly, talks between at least one Hedge Fund Manager and banks who are considering buying part of that managers position exposed to argentine debt have broken down. In recent weeks, a unit of elliott management, the 25 billion hedge fund, had been talking to jpmorgan citigroup, hsbc, deutsche bank, about the possibility of relieving them of some of this position that theyve been, of course, in court over, and argentina has been in technical default over, but talks have fallen apart over concerns, kelly, that the argentine government simply was not going to negotiate with any holdout creditors, be it the unit of elliott or these banks. Back to you. And kate, this after the judges ruling that if argentina continues to advertise the way it did, it will be in contempt of court. So many moving pieces here. There are, yes. Thank you. The saga goes on. I know, from argentina. Thank you. Macys the latest retailer to blame the consumer for weakerthanexpected sales. Is the consumer really at fault or is Shopping Behavior generally changing . Were going to take a look next. And we want to know whether you are shopping more or less than you did five years ago. You can weigh in at cnbc. Com vote during this segment. So, get your mobile devices ready. Thats coming up after the break. And complaints about high Corporate Tax rates have spurred a wave of tax inversions lately. 20 of the nations Largest Companies actually paid no federal taxes or got a tax credit in the Second Quarter. And somebody here says thats Proof Companies should stop whining. Youre watching cnbc, first in business worldwide. 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. 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Plus, free sameday delivery, setup, and removal of your old set. When brands compete, you save. Mattress price wars are on now at sleep train. Your ticket to a better nights sleep welcome back. Consumer behavior is changing again. Shoppers spending more money on pricier items, and as a result, perhaps buying less stuff. Theyre also buying a different kind of stuff. Courtney reagan is looking at this shift in behavior and how much its changed in recent years, courtney. Yeah, thats right, kelly. Going on nearly six years after the official end of the recession, youd think consumers would be showing signs of strength, but it seems the perception that the recession continues is pervasive and its caused a shift in where and what were spending on and what we value. We took a look at the bureau of labor Statistics Consumer Expenditure survey comparing 1992 and 2012. Its the latest data available. And its clear, americans have shifted spending as a percentage of total spend. Consumers are spending 1. 5 less on food, and yes, were spending 2. 4 less on apparel and services. So, where are we shifting that spending . Well, compared to 20 years ago, were plowing more into education, up nearly 1 , health care also taking a bigger bite out of our budgets, up nearly 1. 5 , and housing up about 1 . And then theres expenses we didnt have or werent nearly as large 20 years ago as they are now. According to neilsen, the average monthly smartphone bill is 93 per person or about 242 per american household, and the fcc says on average, we pay more than 64 a month for our tv services, which has had an average annual growth rate of more than 6 since 1995. Thats more than 2 1 2 times the rate of inflation each year. Plus, consumers are saving more since the recession. The economy down the line perhaps, good, not so helpful now. Thats for sure. Courtney, stay with us. We bring in analyst stacy widlitz. And we want thoughts from the viewing audience. Go to cnbc. Com vote. Tell us if you are shopping more now compared to five years ago. We just talked a little bit about this a couple days ago, when at that time it seemed kind of namespecific. There is something broader here happening, though, isnt there . Yeah, i think there is. I mean, macys said it today, and so did kate spade, so did fossil, so did michael kors in the past week. Theyre telling us that the consumer is incredibly frugal, theyre getting smarter about the way they shop, and by the way, as courtney just said, theyre shopping less on apparel. And apparel has been hardly compelling in the past couple of years. Theyre spending more on footwear and accessories. So, theres definitely a shift going on in terms of the way the consumer is spending. Im curious just what the panel makes of this. Is this just a temporary thing, where buying habits are shifting towards health care, technology and fashion isnt that compelling right now and it all comes back to the good old days again, if you want to call it that, or is this something more permanent . Nathan, youre shaking your head. This is something permanent. Millennials in particular have been watching their parents and watching what they went through in 2008. People were shopping with a budget. 60 of the consumers are now using a coupon, whether they clip it out of the paper on sunday or its digital on their phone. Behaviors are changing, and what were seeing now is going to stay for a long period of time. Were seeing as an example home ownership. If you own a home, youre very happy. If you dont own a home, you dont even think you have a likelihood of ever having one. You put it all together, i think youre going to see its good growth, its nice growth, but its not going to be dynamic because theres a lot of constraints that are on the consumers mind right now. Theyre buying new to me goods. 40 of people now are buying new to me goods, which is a nice way of saying used. Oh, new to me, i get it. Stacy, how much of this is really the lack of fashion . Because we actually saw kate yesterday with sales of 49 and comps of 30 . So, they had the product, right, and people went after it. They just actually had to discount it a little more or had a little more in terms of price competition. So, if fashion comes back, do you think all of a sudden we get excited again and start to see better results . No, i think, stephanie, thats a really good point. If you look at the apparel sector, its been terrible, the fashion over the past several seasons. So, accessories have been picking up, footwear has been picking up. Its a way to express yourself and express an element of fashion in a different way. So, thats been a huge drain away from apparel. If apparel finally gets it together and really has a strong point of view at some point, that easily could shift away. But for now, you know, the consumer, again, is very savvy. Theyre shopping at off price for apparel and theyre shopping for the bigger, better deal. Theyre willing to pay full price on their feet and for accessories, and anything else, thats, you know, its really tough out there. Kelly, i really think that priorities have shifted. I totally agree with what nathan was saying earlier. I think those of us that went through that financial recession, whether we had jobs or didnt, whether we have jobs now or dont, i think it changes the way that we think about things. Our priorities have shifted. Do i really need that extra sweater . Can i make due with the black one that i already have . And if i want to spend more, im going to make sure that that item is quality and potentially multiuse. I want to be able to wear it more than one time. Excess is sort of out of vogue, i think, and that really has chged a lot. I cant live without my smartphone, but i can live without that black dress. And are values shifting overall . Because we were talking earlier in the day on cnbc about car sales being way up. So, its not like people arent spending at all. Sure. Is it just that its on specific things, theres not as much impulse buying, maybe because people arent going to malls and happen to see something. Maybe its more targeted purchasing also. Jon, when you look at a truck, look at car sales, though, youre going to see trucks, and then youre going to see very knisht cars. I think when you look at the next generation coming along buying cars, theyre not buying a portable living room with a v8 in it. Theyre buying something thats very efficient and is very practical. Lets take a look here, now that our poll has closed. People were voting online to say what they thought about their buying habits today relative to five years ago. Only 32 say theyre buying more, trying to focus on the volume, the amount of stuff here. 57 say less. Court . Yeah, im not surprised about that. Again, kelly, i think its a quality shift. I think folks are less readily willing to buy more than one pair of gym shoes, but perhaps save up for that one special pair of gym shoes. And i do think volume has shifted. Its about priorities. Yes, i need a car, but maybe i want a more efficient car and not necessarily a car that im going to show off to all my friends. I think all of that is changing and all of that behavior is a ripple effect. One thing affects Something Else affects Something Else. Were spending, but not in the same areas we used to. It will be interesting to see, though, if wage growth and fashion come back, what that actually does to the consumer. Yes. You cant tell from me, ill tell you that right now. Kelly, its really important to point out, also, weve talked about in the last year or so, people have been spending on their home. You even take macys today. They talked about furniture and mattresses actually did okay, whereas apparel was bad. So, thats been a huge drain. Exactly. This could just be a cycle, perhaps more structural. Sounds like the labor market debate weve also been having. Well leave it there. Thanks to stacy and courtney. And weve got a quick market flash with dominic chu. Weve got a number of names to look at. First of all, shares of amgen are down about a couple percent in the afterhours session. Amgen has an experimental drug for blood cancer, and they said that one of these did not meet its primary goal in the latestage clinical trial. The company says that while unfortunate, they believe results from other latestage trials of this drug could be sufficient enough for regulatory submissions around the world. Maybe thats the reason why the losses, at least for now, are not quite as large as some might have expected. Also, were watching noodles. Revenue of 100 million versus estimates of 103 million, so just a bit shy. Earnings per shy came in short at 12 cents a share, excluding certain items, adjusted, if you will, versus estimates of 14 cents. It the company sees flat growth for the year. Shares are down 17 in the after market. Meanwhile, 3d printing, exone sinking following earnings, reporting a secondquarter loss of 32 cents a share versus estimates of a 14centpershare loss. Revenues also missed estimates, and as a result, bouncing off its lows, but still down, kelly, 8 on the day. Back over to you. Dom, thank you. So much of the afterhours action looks like a staircase these days. These Companies Reporting just a level down. Biotechs have been lagging the Broader Market since early july, but byron wien telling me yesterday on the program that he sees a big opportunity in this space. I think there are going to be a lot of new drugs introduced in most of the major diseases. I think the biotech area is very favorable. Should you follow weans advice and buy biotechs right now . Were going to debate that, coming up. Also, the top u. S. Corporate tax rate may be officially 35 , but new data shows many large American Companies have a defective tax rate of 0. So, are tax inversions and calls for Corporate Tax reform being blown out of proportion . Thats next. Welcome back. Youre looking at shares of tekmira pharma halted ahead of news. This company, youll recall, is developing an experimental ebola treatment. As soon as we get that news, we will bring it to you. In the meantime, theres been a wave of Companies Recently doing deals overseas so they can avoid u. S. Corporate taxes. Dom chu explains exactly how tax inversions work. Tax inversions. Simply put, its a strategy that can be used to help shrink Corporate Tax bills. So, how do you do it . You move your headquarters from the u. S. To another country with a lower tax rate. That could cut tax payments on profits generated from outside the u. S. Right now, the tax on those profits is 35 . A tax inversion could drop that bill to zero in some cases. For example, michiganbased drugmaker perrigo bought irish drugmaker elan and moved its tax base there, which cut its Corporate Tax bill in half and is helping it save an estimated 150 million a year. And theyre not the only ones. New jerseybased actavis bought irelands warner chill cot and did the same thing. Even chiquita and others are relocating tax bases to ireland. Drugstore chain walgreens is also said to be considering a deal to bring it under switzerlands taxing authority. Of course, all of this is costing america a lot of tax revenue, and the government wants to do all it can to close these tax inversion loopholes, which could cost uncle sam billions of dollars over the coming years. We should add that walgreens has ruled out a tax inversion for now, but the debates still raging. Thanks to dom there. According to s p capital iq, 20 big, profitable u. S. Companies actually reportedly paid no taxes in the Second Quarter of this year, zero. Theyre not small companies, either. Take a look. Topping the list is merck, thermo, public storage. We could go on. Joining us now with their reaction and what we should do with Corporate Taxes here, larry kudlow and nicholas kolis. Larry, first to you. I think the point were trying to make is this, all the while theres pressure on these companies not to do these tax inversions. A lot of companies are effectively inverting in other ways to find ways to not pay any taxes to the treasury. Well, hang on a second. Its legal. Its all legal. Lets start with that. Right. This article in usa today is one of these gotcha articles, okay . So, they found 20 companies in the Second Quarter. You dont pay taxes quarterly. Thats just an estimate. You pay taxes yearly. A whole bunch of them, by the way, are Real Estate Investment partnerships, which pay out almost all their money. And some of them are offshore. Youve got 480 companies in the s p who are going to pay taxes. In fact, let me give you this number. Over 5 million businesses in the United States are expected to pay some 450 billion of Corporate Taxes to the u. S. Treasury, that according to the congressional budget office. So, before i even get to my main point, which is to abolish the Corporate Tax altogether, i just want to say, this 20 company zero tax thing is silly. But hang on a second, because that is kind of the Central Point here, nick, which is, is the revenue raised from Corporate Taxes a big deal and something we need to protect, or is it not a big deal and something we need to do away with because of all these bad incentives that its leading towards . Well, its very interesting. Corporate taxes are one of the smallest pieces of the revenue pie for the federal government. Last year it was 274 billion, which sounds like a lot, but its only 9. 9 of all the revenues the federal government takes in. At the same time, that small amounts providing a huge amount of disincentives for investment in growth, that if we removed, or at least ameliorated, could improve the overall growth picture for the u. S. So its a big bang for the buck. What is the reason for having the Corporate Tax at all . The argument goes way back, and it basically says and it was really at its high point in world war ii, when Corporate Taxes were roughly 43 of the national budget. Theyve been coming down ever since, the logic being that you tax corporations and people both, but as we know in reality, corporations dont pay taxes, people pay taxes. Right. Can i just say to our guest im sorry i didnt get your name nicholas. Nick. Youre absolutely right on all counts, god bless. At least we have some sense going on here. Can i make one other point . Even if you stop the inversions, if you look at the levin bill, over ten years, that would raise 19 billion. So, its like nothing. Over ten years, the cbo expects to raise close to 5 trillion in Corporate Taxes, all right . So, lets put some perspective. Nick is right, its a small percentage. Heres the deal. Companies dont pay taxes, individuals do. Heres what the studies show. If you abolished the entire Corporate Tax code, 70 of the benefits would go to wage earners, all right . And 30 would go to investors. And my idea here is to not only abolish the tax, but let investors pay it off of their personal income tax form which is something we heard from Stanley Druckenmiller and others as well. Right. Let them theyll pay, you know, through capital gains, through dividends, inheritance taxes and so forth. I mean, we ought to have some decent Corporate Tax reform. We are not competitive in this country. Firms are moving offshore but larry, there are two issues here. The one youve already commented is that there is a theory that the lost revenue will be offset by increased productivity and hiring and individual taxes, fine. The other issue and one that a couple years ago would have seemed unfathomable that anyone would do anything that would make a potentially larger deficit in the future, even to the tune of 19 billion, how do you offset the revenue . The 19 billion is an estimated cost of stopping inversions, okay . Right. Thats from the cbo. The bigger figure lets take the 10 figure. If 10 goes away because we eliminate Corporate Taxes, how do you fill the hole . Sales tax . I will argue, as larry, hes not a supply cider or even a republican. Hes from boston university. And others have done the work on this. The models show youll have growth. You will create tremendous surge of capital investment. Youll improve productivity. Youll raise gdp. And youll improve wages. In other words, kelly, i think if you it pays for itself. Lowered the tax rate and closed the loopholes, all right . Thats one option, a 20 rate, or abolished it altogether, it will pay for itself. Were on the wrong side of the laugher curve right now, and thats not a good place to be. Nick, best guess, do you agree with this idea that it will pay for itself . Well, i think the bottom line is getting rid of it entirely is probably politically infees yabl. Taking it down closer to the real rate, which larry mentioned is 20 to 23 , is a more doable option. It would also have benefits for capital markets, because as a single stock analyst will tell you, guessing the tax rate is one of the hardest things in doing a financial model. If it were more transparent, youd have more certainty. Other companies do have tax accrual, so its hard to gauge cash flow. If we made it simpler and made the Financial Analysis simpler, i think markets would respond positively as well. Kelly, heres the deal. Again, i agree with nick. Keep the money at home. In other words, for once in our lifetime for once in mr. Obamas presidency, stand up for american businesses, make them more competitive, keep the money at home. Youll get more jobs and youll get more economic growth. Dont let the money go overseas. Right now were pushing these companies overseas. We hear you, larry, although i think thats a pot shot at the president there, but i dont know. No, because for one time, instead of attacking businesses, he ought to defend businesses. Is that a pot shot . Maybe so, but ill tell you what, go down to the Business Roundtable and youll hear the same exact thing. True, true. Democrats will say the same thing. All right. This is virtually a nonpartisan issue. Weve got to leave it there. Corporate tax reform. I love it. You can feel the consensus. I love it. Nicholas, larry, thank you both. Biotechs have resumed winning ways after cooling off earlier this year, and byron wien telling us exclusively on closing bell theres a lot more room to run. Well take a closer look at where the moneymaking opportunities may be, next. And is lyft trying to sabotage arch rival, ondemand Car Service Uber by having drivers request and then cancel thousands of rides . Details of whats turning out to be an ugly battle, later on the closing bell. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. So ally bank really has no hidden fethats right. Accounts . Its just that im worried about you know hidden things. Ok, whys that . No hidden fees, from the bank where no branches equals great rates. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of Fidelity Investments, and low fees and commissions are another reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Welcome back. Tekmira pharma halted reportedly for earnings news and is expected to reopen at 5 00 p. M. Eastern. There will be more coming up on fast money on that name. Biotech stocks have been on a comeback since a correction earlier in the year. Yesterday, byron wien said he still likes the sector. I think there are going to be a lot of new drugs introduced in most of the major diseases. I think the biotech area is very favorable. So, is now a time to buy biotechs . With us for more on the sector is cnbc contributor barbara ryan from fdi consulting here with the panel. Welcome. Thank you. I know were painting a broad brush when we talk about biotechs. Is it fair, first of all, to generally describe the sector as a buy or where do you see opportunity . Well, you know, they all are companyspecific, obviously driven by their pipeline, but i think what we can say broadly are a couple things, as byron said. Theres a tremendous amount of innovation out there. And this is innovation, you know, of a breakthrough nature. And we can say this in oncology, hiv, hcv, liver disease, so many areas. And so, i think that the backdrop is really the strength of innovation. At the same time, we obviously have low Interest Rates and the potential for significant reward is clearly appealing. The trouble, though, is all that would have been true in march, and if you bought in then, you would have gotten whacked. So, whats a Retail Investor to do here . Well, i think you have to not try to time the market as a Retail Investor. And i certainly think this is an area where you have tremendous volatility. So, it probably is most appropriate for Retail Investors to buy this through some sort of index or etf. Do you guys agree . I was just going to ask you, the m a is so important in biotech, for sure, and i would expect that a lot of these Bigger Companies are going to buy some of the Smaller Companies over the next several years to grow as well as pharmaceutical companies will do the same. Do you think were going to see a big deal, though, a Big Biotech Company be bought by a Big Pharmaceutical Company . Is that possible at all . Interesting question. I think that the valuations make that nearly impossible. So, if you look at the largecap pharmas, right . While theyve seen their valuations improve dramatically from being, you know, sort of glorified bonds, if you will, to now, you know, having pes based on Growth Opportunities from their pipelines, theyre still massively below the biotech sector. And the reason that Pharma Companies would do big deals with biotech is really two. One is, obviously, to improve their pipeline, but most importantly, theyve got to accelerate earnings, and those deals would be just massively dilutive. When you look at the winners and losers in this, i think the only way to play if youre a Retail Investor, look at Something Like xbi. I like an etf. An etf. If i had a choice between investing in china or biotech, give that to my son and say in 20 years im going to come back and visit this, i think i like biotech because its going to solve a lot of problems for the entire world, versus china. Its going to be an economic engine, but i love biotech, but its like making bets. When you try and figure out whooz going to win, whos going to lose, which trials going to make it, all of a sudden, that becomes gambling and that is not a longterm strategy. But its go ahead, jon. Its really complicated for me as a consumer to tell whats going on in biotech. I mean, technology, at least Consumer Technology to some degree is easier. You can look at the aisle, say i like this, i use this, i dont use that but biotech . Some of these things we havent seen come to market yet when theyre moving stock, were not going to see them for a long time, if ever. Its based on bets Larger Companies are making about smaller ones. How do you do it . Well, i think the reality is the real investors in these stocks are very qualified to make these assessments, and even theyre very wrong. So, youre takinging about mds, ph. Ds, mbas all in one person that are making these investments. So, i think that, again, you need to bet with the professionals. I think that its very tempting as an individual to rate biostock and see it double and say, whoa, im so smart. In reality, maybe it was just luck. Well leave it there. Barbara ryan, thank you for joining us, of fti consulting. No fun and games for microsoft today. Sony said it sold more than 10 million playstation devices, dealing a blow to microsoft, whose xbox sold half as many. Well see if it makes the hot list, next. And coke versus pepsi, mcdonalds versus burger king, u. P. S. Versus fedex and now uber versus lyft, the two Car Companies pretty much declaring war. Well go to the front lines when we come back. When the world moves, futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. Welcome back. Were just going to go straight to the hot list with our allen wastler. Allen, what is lighting up the hot list today . Right now it is peaches, kelly, peaches basically, the nations largest peach farm was running along without unionized workers. Union came in, said no, no, no, theyve got to be unionized. Workers were like, were not sure we want to pay the dues, big fight about it, eventually a vote back in november. We still do not know the results of that vote because of the Regulatory Panel out there. They say theyre investigating how it was done. In the meantime, theyre about to impose a Union Contract on the farmer. Hes upset with the court. Our readers love this labor kind of stuff and theyre eating it up. No pun intended. I never make puns. Number two, you touched on this before, the 20 Companies Paying zero in taxes. Another hotbutton issue for our readers. And then finally, a story dug up by our own christina gustafson, basically, lands end really stepped in it. They have a program where they send magazines to people who spend more than 100 bucks online with them. Great thing. Well, its backtoschool season and all these parents with kids that go to religious schools bought the School Uniforms from lands end. They all got this very racy gq magazine in the mail a couple days later. Oh, no. And they are not happy. In fact, we have a croppeddown version of the photo on the story that were doing because its definitely rrated. Im kind of surprised they even put it on the cover. Anyway. Oh, my goodness. People are into that one, too. So, there you go, kelly. Allen, thank you. I can only imagine if that had happened in our household growing up. Its the fight between ridesharing apps and its heating up. Lyft claiming uber employees have tried to sabotage its drivers with thousands of fake ride requests and quick cancellations. Uber firing back and claiming lyft has done the exact same thing but worse and that the company is phishing for a takeover bid. Well try to get to the bottom of this rideshare war, next. 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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. Welcome back. We are getting more details. Important color from the cisco Conference Call. Our josh lipton has it for us, josh. Kelly, initially you saw that pop when cisco reported that beep on the bottom and the top, now guidance. Q1er that seeing revenue flat up to 1 . You saw it turn lower at 4 40 eastern. The u. S. Was up 5 . But those emerging markets were weaker. China notably very weak. The chamber saying listen they were stronger in q2 and q3, those emerging markets, now hes saying he doesnt know when the growth in the emerging markets is going to return telling analysts it could get a lot worse. We will stay on the call, give you headlines as they come. Back to you. Well get back to you. Thank you. John ford on the panel. We were already discussing some of these headlines, what stand out the most . Do you guys think emerging market weakness will move markets most tomorrow, potentially . I think the comments that it might decline is very disaponteing for sure. As i said earlier, you have japan and russia being 101st of exposure. Thats a big nut right there they have to overcome in the middle of a product transition cycle. So i think thats disappointing considering there are 27 buys on this stock by analysts and 15 holds. Its definitely skewed towards the positive. I think putting this into context, though the genes is actually pretty good. Flat to up slightly. Quarter over quarter is what youd expect and the revenue this quarter was stronger than expected given that, though the stock has been trading near the high end of the range where its been bound. The fact that its not moving that much on this, down a fraction of a percent after hours, not that much. I dont think we can gage necessarily water going to happen tomorrow morning based on this move. But the fact that hes saying that geopolitical things happening in russia and elsewhere are affecting their growth, thats something. I wonder if the impact may come more from other names sensitive to the space opposed to cisco to rely on some of the u. S. Growth to keep its guidance where it is, nathan. Well, i think at the end of the day, all the guidance is going to get tainted by russia, which will put a cloud over earning, until we get cloud out of the way and putin lets us worry about whether estonia is going to be next or not. I think every report is going to get filtered. But there arent that Many Companies that have this level or degree of exposure to russia. But what you got is a continent thats got an exposure to russia. Thats the one that bothered me a lot more than cisco. Thats europe. Well leave it there. Thank you, guys, keeping an eye on cisco. Macys kicking off the earnings parade, tomorrow we get results from nordstrom and jc penney the panel will preview those. 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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. Welcome back. Lets rehash earnings, especially ahead of a busy day, to a large extent the story was about the u. S. Consumer, suddenly its international thanks, to cisco. It has. Ethink overall, though, the news isnt that bad. We few there was this geoinstability. It issued relatively strong gains, not sure exactly how investors will take that tomorrow. There is good news and a bit of bad fuse. It goes stephanie back to the debate, you were saying this as well, russia weakness, europe weakness and the extent to which that prompts further policy moves there. Sure, we wonder why the rtlo has not been implemented so far. The comments have been disappointing. I wouldnt be surprised if europe is in a recession. Hopefully they will act soon. That is definitely needed for sure. Italy certainly is. We know german i advisor kaufdz is verified. Investor kaufdz already tanked, nathan. You dont have to look any further than the ten84 treasury back to 242. Why is it down to there if happy days are here again. America is doing fine. Cisco is a great example of american ingenuity. It seems everything that is going to affect us is happening beyond our shores and away from our control. Its to say a lot of International Weak spots and yet some surprising resilience here at home, john. Thats the bright spot, though, isnt it . The last time we were talking about Southern Europe it was taking down instablt and yet a company like cisco mansion to deliver. There has to be bright spots in there somewhere. Its like im okay. You, im not so sure about. Again, we are not okay about this one. We will hear from jc penney. Who are you watching most closely . I am watching jc penney looking to see if theyre taking shares back from the macys and kohls. I think theyre getting their shipts in order. Well see to what degree tomorrow. Thank you, everybody. Fast money coming up in a few moments. Mondayy. Thank you very much, kelly. We, of course, will be talking about cisco, you heard two seconds ago john was saying there was good news and bad news and the indecision in the after hour trade reflects that. We will ask the traders, we will get all the reaction as well on what we should do with cisco stocks. So, indeed, fast. Starts right now. We are live from the Nasdaq Market site in new yorks times square. Our traders tonight are pete nigerian and guy adam my. Take down cisco, a wild ride after beating earnings expectations in the last hour, it was originally up 2 . It has moved to the downside in the next quarter. Cisco ceo John Chambers saying he is concerned about emerging market growth. We will bring you the latest details as they develop throughout the hour t. Conference call is ongoing. There is good for everybody, good, bad, what do we latch on to . I think cisco is really the story of the market here, right