Transcripts For CNBC Closing Bell 20140829

Britain has raised its terror level alert, saying an attack is now likely. We will hear what Prime Minister David Cameron said and have expert reaction. And is the market in for a rough september . Some now wondering if investors will come back from vacation on tuesday and wake up to the global turmoil thats engulfing the world, from the Russia Ukraine mess to the growing Islamic State threat. The stock market has largely ignored it all and continued to make new highs. Can and will that continue next month, again, when everyone is back from the beach . And call this, kelly, game of drones. Google in the drone business in a big way. Is the objective just delivering stuff or is there something bigger at work here . We will explore that all. In the markets right now, the dow is off 11 points, the nasdaqs higher by about 15, the s p 500 is higher by about 3 points. A mixed session, and one, brian, where the s p has been hugging that 2,000 level, frankly, for most of the afternoon. And ive often said this market needs more hugging. Joining us now on our closing bell exchange, patty edwards, rob morgan, rich peterson, jeff taylor from digital risk, our own Rick Santelli and alice the maid in the center square. Patty edwards, august was the second best month of the year. Are you surprised by the resiliency of stocks . Were pleasantly surprised. Weve had a slightly below consensus earnings estimate for the year, and we actually, based on what weve seen from the earnings thus far, have now raised our estimate and have actually raised our target on the s p up to 2,060, and that just happened this week. And i see that you raised it from 116 bucks, patty, to 117. 50. Theres a nice piece by justin l layhart in the wall street journal, pointing out that earnings may not be as high as we might think because a lot of companies have been accounting for depreciation of capital goods in various ways, helped by tax incentives that are largely going away. It might sound a little bit wonky, but its actually quite important on a toplevel basis. Is anybody here, rob, worried about that . You know, it certainly could knock down the earnings estimates a little bit, but as patty said, i think the general trend here for earnings is up. And with a healing economy and stocks that really arent that expensive on an earnings basis, even though were hitting record highs, i continue to like stocks, too. So, i would go with stocks versus bonds here. To go back to the reason i like the piece and the way that justin points out whats really happening under the surface with corporate profits is that a lot of people have to wonder, can profits, can Profit Margins keep growing from here . Were pretty much at alltime highs. Right. Well, and thats and of course, the bears usually use that as a case that what goes up must come down. And im not saying were going to just continue to see rapid growth in Profit Margins heerks b here, but i dont necessarily see the reason now why they necessarily have to come down, just because they are at somewhat elevated levels. What matters the most here, jeff . I mean, we talk about profits. Id like to believe that earnings, which are theoretically supposed to be all a stock is, right, buying the future value of earnings, matter anymore, but with Everything Else going on, its hard to know . You know, it really does matter. Look at different stocks. Look at rental reit sector, up 30 this year. Its not that people walk up overnight and the markets that hot. Its that the supply chain from 20092011, that was basically dead. So, now we have all these americans, firsttime home buyers, who have yet to really come back into the market, are actually getting into the rental market, making a very, very strong rental reit market and rental market in general. Its up over 25 this year. Thats a point, and theyve performed that well. Rich peterson, just watching the index today, the s p 500, you know, the fact that the vix has declined is one thing. Actual volatility is unbelievably low here. What do you make of it . Well, complacency is one fact yorks but bringing some lightheartedness into this, you know, buoyant month. This is very much of a stanley cube rick market, because here we are, nearly a 2001 odyssey. The reason weve seen for the bulls has been the paths to glory. For the bears, its their eyes are wide shut. And for those that have been following the economy, its been a shiny moment because we had a 4. 2 number for Second Quarter. But looking back to earnings, earnings are going to be expected to be up around 6 or so in the third quarter. I think the concern is europe, and were seeing some projections of maybe the euro will trade with a 1. 2 handle. That may impact corporate earnings, especially the large industrials that have a large market share overseas. But all things considered, i think were looking for, you know, an upbeat economy, upbeat market. And i think for september, while historically half of the months of september have been negative, if you look over the past, you know, ten years, eight of the last ten years, september has been positive. Now, theres been some horrific moments in september. Obviously, the september 01 terrorist attacks, the september 2008 lehman bankruptcy. But all in all, i think were going to see a month ahead thats going to anticipate reporting thirdquarter numbers. Another one you want to look at is as we go into consumers, spending money and the economy is going to drive earnings. Were looking at the jobs number coming out next week. And while the numbers are ticking up, one thing that baffles me is, in 2006, the jobs being lost were about 60,000 annual run rate. The new jobs being created are 40,000. Thats a gap of 30 . So, they dont have as much affordable, Discretionary Income for the big purchases like autos, houses, et cetera. So, it will be interesting to see how it plays out the second half of this year. Rick and not to mention, look at that saving rate today. I mean, Rick Santelli, i wonder what you think about the fact that Consumer Sentiment is rising again. Some of the factors beneath the hood. As youve mentioned, with the jobs report not always as encourages as the top line, but sentiment rising, people are saving more. Do you think that accounts for the real choppiness weve seen in the Retail Sector . Well, listen, if youre a central banker and you see more savings, youre totally bummed out by that, because they are totally the salmon swimming against the current. Everything central bankers do is for consumption, even in europe these days they dont want savings. And with regard to some of the jobs data, of course thats going to be especially important. But i have to say, i was rather impressed this morning with chicago pmi. Consumer confidence michigan, yes, all important, but really, youre shadow boxing with a delay. The level of equities, Much Research has been done in that camp. But chicagos 60 service, 40 manufacturing, all ball up into one. It says chicago. The respondents are in chicago, but their business is global. So, i think that was a very optimistic read. All the internals were quite strong. Listen, you know, after all these years, id like to see the traction. This is the area to Pay Attention to and the other thing to Pay Attention to is the spread between bunds and 10s. Because if theres any, and i mean any hiccups for any reason where bunds or gilts start to see the rates rise up, its going to have a huge delta effect with our rates reversing the socalled relative value trade. So, that spread really let us know seven months early that you wanted to be long treasuries when their rates were going down, but at some point, the opposite may be true as well. Did you quickly hey, rick, rick, delta effect. The only delta effect i know is when my legs fall asleep in 36d in coach. What are you talking about . Wh whats that mean . It means youre going to get more horsepower out of the trade. In other words, were arguing with under 90 basis point bunds. Its compressing a bit, but you can see that the u. S. Is going to be in this 2 low 2 . But if the bund went to 1 toy. 2 the 10year would go an equal distant move beyond. Are investors safe, patty, in the Broader Market here as some of this plays out . Would you recommend they get sort of tactical with sectors exposure . You know, we really do think that you want to be looking at specific sectors. So, we like industrials, specifically some of the automationtype plays, looking for efficiencies, looking to feed the world. We like technology, once again, to keep those Profit Margins up, we think companies are going to have to be spending on technology in order to get the efficiencies. Those would be the first two places id be looking. Rob, ill go to you, then. Give us an outlook for early 2015, a look even more ahead. What are you advising your clients to do . A lot of people are probably surprised by the strength in stocks. Some people are thinking maybe nows the time to get in after missing out on the last couple years. What are you advising . Well, brian, eventually, the fed is going to start raising rates, and thats when we have to be a little more concerned that theyre going to take away the punch bowl and stocks will have a correction or a bear market. Dont expect it to be that early in 2015, and stocks will continue to rise into a fed rate hike campaign. But thats when im going to start to get a little nervous. The other thing that makes me nervous right now is that the Retail Investor finally, after a fiveyear bull market, is finally getting back into stocks. And that, of course, is bad news. Thats a contrarian sign. Once again, im not calling for anything immediately, but those are things that concern. But heres my point, and i made it in street signs, 2 00 eastern time, right before this nine show, which is this why are we so concerned that the markets going to pull back . If people are concerned the market will pull back, they will sell. It will become a selffulfilling prophecy. But even if they do, mark, and the market goes down 5 , 10 , 15 , if your timeline is 20 years from now, isnt that a good thing . That would certainly be healthy, but from a client standpoint, i think all Financial Advisers want to be advising their clients to take a little bit off the table or certainly get more defensive. And i heard patty talking about the sector she likes. Im kind of with her. I like cyclical sectors, industrials, financials, technology, but if we but you just said defensive. Start to also, take a look at the financials. Right now the banks have taken a beating with all the mortgagerelated litigation over the last couple years. But this might sound counterintuitive, but i think as Interest Rates start to rise a little bit, youre going to start to see them take a harder look at loosening the credit card, getting into mortgages right now. Because Interest Rates are so low, theyre utilizing that capital for other strategies, like buyback strategies for the stock, et cetera. So it will be interesting to see, but financials is what im following. Thats for sure. By the way, we have a couple Retail Investors coming up in our monthend roundtable. So well ask them what theyre up to and rob, you can react accordingly. Thank you all. Have a great weekend. Appreciate your time. Thanks a lot. 15 minutes into the close, brian. The dows off 18. The nasdaq and s p are both slightly positive. Yeah, and i can hear the hooting and hollering behind you, kelly. We wont go into that. Stocks notching impressive gains in august, but did british Prime Minister David Camerons terror alert set the stage for a shaky september, or will we keep on rolling . Dom chus going to have a special report on what might impact the markets next month, kelly. And up next, did you know that four out of five actively managed funds are underperforming their benchmarks this year . 80 of them are underperforming. But are they now poised for a comeback . Were going to ask, next. Not if the market goes down. Plus, we want to know, would you rather invest in an actively managed fund or a passive one that simply tracks a larger index . Cast your vote right now at cnbc. Com vote, unless youre driving. Vote in our live poll right after the break. Were back in a moment. trader vo i search. I research. I dig. And dig some more. 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Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid long term injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Welcome back. Well, according to s p capital iq, 80 , 4 out of 5 active Fund Managers were underperforming their benchmarks yeartodate. We want to know, would you rather invest in an actively managed fund or pass at one that tracks largest indexes like the s p 500 . As we begin this segment, head to cnbc. Com vote and let us know. The polling begins right now. Well bring you results on the screen throughout. Brian . Yeah, its very interesting. Aaron task is editor in chief of Yahoo Finance, alongside me with our own jeff cox. As always, we remind viewers that cnbc and Yahoo Finance have a contentsharing deal. Now that weve got that out of the way, jeff cox, man, eight out of ten . Thats not good. Yeah, its pretty ugly, actually. Its terrible to make the case for active management, you have to view the glass as 20 full. Really, the math doesnt add up. Youre talking about 1 to 1. 25 fees right off the top, you have additional fees, and you put that up against passive index management, youre talking about a fraction of the cost for those things. So i mean, when you look at performance, when you look at all the factors lining up against active management, its a tough, tough case to make for the active side. Aaron . It is a very tough case to make and i am not here to defend active Fund Managers, because there is no defense for 80 of them underperforming the market. I guess i would look at it from the other side. I think theres become this cult around indexing and we have an index for everything now, and people believe that theres safety in indexing. Well, you werent safe in an index fund in 2000 and you werent safe in an index fund in 2008 when the s p was 40 financials. So, i just want people to think about the other side of the coin, that just putting your money in an index fund, yes, youre going to perform what the index does, but youre also taking a risk there. And i do think that over the next five or ten years, there is an opportunity here for active Fund Managers to push back against this idea that theyre going the way of the dodo, that they can outpermoutperform ort have value in your portfolio. Almost to aarons point when you look at the longterm returns from the stock market, youre talking about a 4 average since 2000. So, i think its a little harder case to make for active in that case. I mean, at least if you were in the indexes, you recovered your losses along the way. Heres the biggest problem as far as stockpicking and active management, its the Federal Reserve basically. To win in a stockpickers market, you need volatility. And as we have this massive intervention from the fed, weve seen where volatility is, and it makes it so much harder to pick winners and losers out of that bunch. I dont know go ahead, aaron. Its very hard to pick winners and losers, and im certainly not saying it easy, but would you rather have ten years ago but your money in apple or google when it went pup publ or in the s p 500 . Theres a place for people like bob alstein and lee kuperman and sir john templeton, people who can pick stocks better than the rest of us and theyre worth the fees we pay them. Of course. Aaron, as we showed on our program last week, you know, under armour is up almost twice as much as even apple is. Theres a lot of Good Companies out there. Thats right. This is, though and im not going to defend hedge funds, but i will say this, this is the worst of all environments for hedge funds, is it not . Very little volatility. Were trickling up. You know, hedge funds will tell you, or at least theyll try to explain, because they want to keep their money, which is, our job is to protect you on the down side, when things go really bad. Thats the argument. That were not able to make a lot of money when things are sort of good. Exactly, and i think thats been a misconception, that hedge funds are there to get you alpha and theyre going to outperform the market. Its supposed to be a hedge against what the market is, so, youre right. In this kind of environment but aaron, have they actually been a hedge, because im pretty sure the financial crisis put a good number of them out of business and didnt really see any general outperformance. Thats right, because they were all basically chasing momentum. They werent hedging. They were all just trying to play the market. Im sure they were deeply leveraged in the financials that blew up and mortgagebacked securities and things of that nature. Again, i am not saying its easy and im not saying you shouldnt be in an index fund, because that is the right investment for most investors. Im saying this idea that active Fund Management is dead and they have no place in your portfolio, i just think that maybe we should be thinking about whether thats really true. Heres where i think you might have a future here. Weve seen such a proliferation, theres so many funds out there. Now, where you might see managers take these passive instruments and actively manage them, because theres so have options that you have where you can start to see. We know a lot of atfs trade like stocks anyway, so you may see that as a future where these guys can blend strategies. Smart beta being one of them. Aaron . Theres also this idea that a lot of socalled active managers are really just indexing and charging you a higher fee for it. So you know, again, it gets to that point of you have to know what you own and you have to do your research on who youre giving your money to if you invest. But again, there is a place for active Fund Management, and this idea that all you have to do is index and everythings going to be okay, i just think people should, again, go back to 2000. If you just owned the index then, you werent going to be too happy in a very short order. Yeah, and jeff, we also need to be careful listen, theres a lot of people out there that say tv is dead, and those people tend to run digital video companies. A lot of the people who say active management is dead have a vested interest in passive sure. Youve got to be careful, just make sure who the messenger is as well. But wait a minute and theres always a guy out there looking for the next apple and the next big thing, so there will always be a place in the world for these guys, definitely. The polls closing, brian. Well bring you results in a second. Is this really a debate about performance . This is ultimately about fees, isnt it . The performance gap actually becomes nominal over a period of time. Great point. But it truly is about whether its ever worth paying more than you absolutely, absolutely have to in fees for exposure to the market, period. Yeah, you are absolutely right, kelly. And i think over time, Fund Management fees are going to continue to come down because people understand that, what are they paying for . Theyre not getting any return on that investment, quote unquote. So, i think as fund fees come down for active Fund Management, youre going to see more people start to think, okay, its worth paying an extra basis point or two, as opposed to five or more to possibly, hopefully, get better performance than the market. Basically, a level of Creative Destruction in the industry. Exactly, like Everything Else. Yeah. Well, 72 of stats are made up 41 of the time. 22 of the people know that. And 53 of our voters think active funds are the way to go, brian. Wow. Surprising. Thats why they come to Yahoo Finance, yes. That is well jeff cox is over here sitting active, active, active. I was watching him on the computer screen. He voted 100 times. I threw it. Thank you both. Jeff cox and aaron task from Yahoo Finance. Thank you. Weve got what, 38 minutes before the closing bell . The final bell before a long weekend. The Dow Jones Industrial average, i think the official term is not doing squat, down about 14 points, but the s p and the nasdaq, kelly, are higher. And coming up, how are main Street Investors setting themselves up for september, which has statistically been a rough month for stocks . Our Retail Investor roundtable is straight ahead. Also ahead, chock one up for the little guy. Market basket employees protesting the ouster of their ceo get who they want back. He is on the job, so are they. Kellys going to speak with him coming up. Shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. But parallel parking isnt one you do a lof them. Ings great. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. All right, heres the question, will we end the month with the s p above 2,000 . Folks, were at 2,000. 12. Its going to be a nailbiter for the next 35 minutes, but theres a lot of movers inside the market. Kayla tausche also working long hours for us today. Kayla, are you driving the van home as well . Yes, and i have a great driving record, too. Today might be a quiet tape, but there is some earnings noise. Average vago and splunk. The chipmaker beat estimates, raised its outlook and analysts are raising price targets on a hopes of a boost in business from the iphone 6. Splunk an upsize surprise last night, with the company saying revenues are going to be better than betterthanexpected in the back half of 2014. Splunk up 19 . Its a different story for big lots. Execs said in q3, you could look for a wider loss than expected on a weak consumer, despite beating on the top and bottom line and announcing a buyback. Big lots down 2. 5 . And Digital Ad Firm criteo spiking higher on a report that publicists after digitaling a merger, could look to buy the digital ad agency. Sources say rumors are unfounded, but investors still look the prospect of a deal, up better than 21 . Guys, back to you. So, there are some big individual movers in this market. Kay kayla, thank you. Earlier this summer, arthur t. Demoulas, ceo of Market Basket, fired by the board of directors led by his own cousin. This, in turn, fired up the employees, who have been longtime supporters of their ceo. Youre looking at pictures of the organized walkout. The protests by the employees. Even a customer boycott ensuing for the rest of the summer, in which many are protesting employees were fired. Yesterday, arthur t. Finally reached a deal with his cousin, arthur s. , to buy a majority of the company from him and reclaim his role as ceo. Arthur and the rest of his Management Team are now going back to work at Market Baskets all across the northeast, kelly. Yes, and customers are already back in the stores. With us now is Steve Palanka with Market Basket, who was on this program earlier this month when he was fired for the protest. Alongside him, his friend and colleague tom trainor, a District Supervisor who was also fired. Welcome to you both. Its great to have you back. And steve, first of all, what is your Employment Status with the company . I believe were reemployed yesterday, thank goodness. And tell us what that was like. A lot of hugs, a lot of tears, a lot of bended knees, but it was in prayer, not submission. Just a lot of joy. It was the fulfillment of a lot of our effort, a lot of hopes. Tom, what did you hear from customers who showed up at the store . I know a lot of the Market Basket stores have personal relationships between shoppers and employees. And what does having arthur t. Back mean to you . Well, i was in the stores all day yesterday and again today, because thats my job, but it was amazing, because we still dont have fresh product in the store. Theres not produce or chicken or seafood yet. I mean, that will be there this weekend, but the customers were coming back in droves. They were hugging employees. They were hugging each other. I was in a store this morning and a customer hugged me. Its just you know, they took ownership of this boycott, and theyre taking ownership of the win, and theyre going to take ownership of the rebuild. Yeah, we heard that customers were, in fact, during the boycott taping their receipts from other supermarkets they were shopping at to the windows. We know the managers who were put in during that period tried to hire a new staff and had difficulty doing so. And so, steve, during a period of weeks that you were without work, what happens to that pay, to your benefits . Where do things stand now . I have no idea. The whole parameters of how a corporate entity reacts and involves with its customers, its vendors, its associates. I think thats something we can all take from this. But as far as me personally, i have 100 facing the man whos never lied to me. Steve, this is a company thats been around nearly 100 years. 1917 it was founded, multiple generations. What happened . Pardon me . What happened . I mean, why did the family break apart like this . You know, its a family dispute going back a long time. And for us, it really wasnt a shareholder issue, it was more whether or not, you know, 25,000 customers were going to go quietly associates were going to go quietly into the night and let the whole company and culture be changed. Well, we have vendors that have been with us generationally. Sons are Running Companies that their fathers started. We have and i know its difficult for a lot of people to understand, but our customers, you know, this is old in new england. They dont like to be pushed around or told what to do. Its very difficult to find a home up here that doesnt shop at Market Basket or doesnt have someone who works at Market Basket or doesnt know someone really well who works at Market Basket. We have 25,000 associates who are from day one taught, you all have merit, you all have value, none of you are worth more than the next, and you add that all up and you cover it with a leader like arthur t. , its almost you have a guy thats like an arthurian legend or something out of a movie script, except hes real. And everything youve heard from him and about him is true. You wrap all that up, and you have an unstoppable force. And i think thats why we preva prevailed. It took a while, longer than i thought, but between the vendors, the customers and the associates and our leader, i think we did pretty well. And gentlemen, these cheers may be in part for you, but we should mention, down here at the new york Stock Exchange, a couple of things about to happen, including that friday whoopwhoop before a long weekend. Tom, i just wanted to ask you what lesson you think a lot of people across the country can learn from this experience you both have just been through at Market Basket . Well, you know, a lots been said in the media about, you know, the start of a new revolution or the last stand of the middle class. And quite honestly, we just wanted our boss back and we just wanted our Company Culture and Business Model to stay the same. I think for what happened at Market Basket that happened nationwide or to other companies, you need everything that happened with our company. You need an arthur t. You need a loyal and dedicated workforce. And you need a loyal and dedicated vendors and customers for everything to go the way ours went. I think a company like walmart may have a very difficult time trying to duplicate what we did. Thats a fair point. Gentlemen, we want to thank you both, congratulate you on having your jobs back. We hope they can work out some of the pay and benefits that went during that period, and good luck this long weekend, because i already know people who have been thronging your stores looking for the 5 olive oil and various other Market Basket specialties. Thanks for being here. Thank you. Thank you. Thank you both. Brian, we have 30 seconds to go before 3 33. 33. Might have something to do with the whoopwhoops you hear, but it also might have to do with lou pastina leaving the Stock Exchange after years with the company and plenty of people on the floor here to wish him well. Its been tough at the nyse over the last ten years. A lot of people have left, but theres been a lot of longtimers like lou who have been around. And you can tell the nyse really is a family. You know that, kelly. Youve learned that. I do know that well. Theyre not booing, theyre louing. There is a lot of activity down here, actually, and lou pastina who led the cash equity operations on the big board is leaving as part of the takeover of the new york Stock Exchange by the Intercontinental Exchange or i. C. E. And there have been several highprofile departures. We know just the other day, of course, we saw Duncan Niederauer leaving as well and celebrating his departure with his 90yearold mother ringing the closing bell here. So, there has been a lot of turnover during this period. Yes. Its been a long time in coming, and our congrats to lou as well. Kelly, thank you. All right, up next, will it be a september to remember, or one wed rather all forget . Dominic chu has a special report on what traditionally the worst month for the stock market will bring this year. We also have stock trader almanacs editor in chief weighing in. Were back on closing bell in a moment with the dow down 12 points. 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And most of the afternoon, we did finally get to the point on the s p. Dominic chu has a special report on potential trouble spots ahead. Kelly and brian, remember, september is shaping up to see a host a market catalysts, so, lets run you through what might send stocks soaring or sinking next month, depending what happens with the data. On the International Global side of things, september 3rd, next week, president obama makes a trip to estonia. Thats a former soviet republic. Given the tension between russia and ukraine, this meeting could lead to some important headlines, if you can hear it over the applause in the back of me right now. September 4th and 5th, youve got a nato summit to keep an eye on. Ukraine russias going to be on the agenda and whether russias going to face further sanctions or not. On september 4th, the ecb meets to go over Interest Rate policy. Then you go through september 18th and youve got the uk scotland may or may not vote to go independent. So, lets get back to the home front. Youve got next week shaping up to be a huge week for data. Tuesday, september 2nd, youve got ism manufacturing. On wednesday, september 3rd, youve got auto sales, then adp and the fed beige book. On the 4th, next thursday, ism services. And on the 5th, of course, the granddaddy of them all, that jobs reports. On the micro front companywise, apple events on september 9th. Finally, on the 16th and 17th, youve got big rate meetings from the fed. So, again, a lot of stuff happening you can see here, even on the floor, perhaps some stuff happening before the long weekend, but certainly as we head into september we are going to have some catalysts and they may set the tone, kelly, brian, for what happens, not just in september, but for the rest of the year as well. Back over to you guys. Thank you, dom. And a reminder for folks who are looking there. Lou pastina, leaving the new york Stock Exchange after a 31year tenure. He was head of cash equity market operations, brian. The latest executive to leave, again, as part of the integration here between the new york Stock Exchange and Intercontinental Exchange. You know, can i jump in here for just one second . And kelly had an anecdote. I first reported from the floor in 1988. Things were a lot different then and a lot of people have lost their jobs as the market has gone electronic, but i will say, especially for whatever your industry is in america right now, you know, when you retire and people clap and hug, its nice to see that even with all the nastiness of negative headlines that there is still humidity in corporate america. That is a nice thing to see. Its wonderful to see. And by the way, a lot of the employees, longtime employees who are leaving in the wake of the i. C. E. Acquisition have received a similarly warm sendoff, brian. Again, lou pastina there. Our well wishes to him. What will this september bring, as we turn our attention to the month thats coming up . Its especially dicey, considering all of the geopolitical turmoil, so far not brought the market down. The question is whether that can last. Youre all choked up, we know, kelly. Its already. Btigs chief global strategist, steve greenhouse along with almanacs editor in chief, jeff hirs hirsch. Dan, i know theres a lot of serious stuff going on in the world, but since, you know, first going on the floor of the new york Stock Exchange in 1998, there has always been a lot of serious stuff going on in the world, and this market has proven often resilient. You see it continuing. Yeah. Listen, i mean, september weve been talking about it all day. Doms done a couple of reports on it. Lost in all the talk about september being the worst month, and it certainly is, going back many, many years, lost in all of that talk is the fact that in roughly speaking eight of the last ten or eight of the last eleven years, septembers been a positive month. The only two down months that i found were in 2008 and 2011, interrupted, of course, by the credit crisis and the debt ceiling debate. So, i dont think september lately as as bad as people say it is, and with stocks, i dont see why just because its september, that will be interrupted. Jeff, the line for september is when its good, its good, and when its bad, its real bad. What do you think it would take for a similar september like we saw in 2008, 2011 to play out here this time around . Something would blow up overseas or something systemic in the market. But its not necessarily the entire month, per se. Theres parts of the month weaker than others. The first half of the month is strong, but that weekafter trip of witching and the end of the month where the window dressing portfolio restructuring goes on at the end of the third quarter, thats where you see that trouble. The week after triple witching is down about 20 out of 24 times, the last 24 times on the s p with a minus 1 loss for the Standard Poors 500. Its not necessarily the whole month, but intramonth, there is a chance for volatility. But you know what, jeff, follow up on what dan said. I thought he made a great point, because lets say the first 100 years, the first 55 of them i do x. The next 45, i do y. I can say that more of the time, x happens than y, but the Historical Context is lost because it was, you know, it hasnt happened in 45 years. Dans point is september now is a good month. Its our time frame that may be screwed up. Well, the first half of the last century was a totally different economy. Was a farming economy. Now its industrial service. Bingo. I think august lows will hold for the rest of the year. Any mild correction would come with the week after trip of witching and higher for the end of the month. I think well keep going higher, a correction before we take off in the Fourth Quarter, which is like a sweet spot of the fouryear cycle. If i can add quickly to jeffs point, lets take this a step further. Nobody knows whats going to happen in any given month, september or whatever, but seasonalitys really strong at the end of the year here. And so, for a lot of our viewers, its important to remember, brians right, theres a lot of headlines, ukraine and the like. But theres the seasonalitys really strong here. And if you go past september, december is almost never down, except for like 2008. I think you can go back to 1982 and find maybe two, maybe three decembers that have been down. The seasonalitys really strong at the end of the year. Fair point. Even stronger in midterm years and Even Stronger in the second midterm year. The Fourth Quarter of the midterm years a sweet spot of the fourth cycle. More to the point. I was only going to ask how relevant any of these rules of thumb are in this market. I mean, snell may certainly hasnt been working. Um, it hasnt been working perfectly, but its been more sideways during the sell in may period, the may through october period. This seasonal pattern, this seasonal patterns are there as a setup, you know. You have the fed in there supporting the market, youve got the yellen put now. Thats going to trump the seasonality. Thats why were not extremely cautious right now, a little with the september pullback, but yeah, the fed and good economy are trumping the seasonality, and you use seasonality not as a gospel, its a setup. You know, if the market presents itself fundamentally and technically in that seasonal period, you jump on it. Otherwise, there are other factors at play. Let me add to the sell in may point. This is another thing that people get wrong. When you look at averages, the average can be skewed by large outliers, obviously. Thats why i tend to favor median, but thats another conversation. Sell in may and go away has a terrible average track record. But the fact is, more mays than not, that period is up rather than down. Its just, as kelly noted, or it might have been brian, i apologize, the large, downward moves are so large, it skews the average to the down side. And its not sell may 1st, its not sell may 31st. Its an expression of the time frame from may to october, where the market is softer and more flat than up. Jeff, dan, guys, interesting discussion. Have a great weekend. You, too. Thank you. Just about 15 minutes now before the closing bell. The question, i guess, kelly, on everybodys minds is can we close above s p 2,000 . Well, its looking a little more likely now that its hitting 2,002 and the dow is positive now, up by about nine points. Well, latenight may be in his rearview mirror, but jay leno has plenty of open road ahead. The longtime talk show host is a car collector and brings that passion to cnbcs sunday night in a new special. We talk to him, coming up. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of Fidelity Investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Open port twentytwoohoneseven on the firewall for customer db access. Install version twopointthree of db connector and ensure verbose flag is set in case of problems. clapping sound isnt the cloud supposed to make business easier . Get the one that can connect to the systems that you already have. Today theres a new way to work. And its made with ibm. Tigers, both of you. Tigers . Dont be modest. I see how youve been investing. Setting long term goals. Diversifying. Dip you got our attention. We did . Of course. Youre type e well, i have been researching retirement strategies. Well thats what type e s do. Welcome home. Taking control of your retirement . E trade gives you the tools and resources to get it right. Are you type e . You need to see this. Show em the curve. Do you know what this means . The greater the curvature, the bigger the difference. [scifi tractor beam sound]. Sucked me right in. Its beautiful. Gotta admit one thing. Cant beat the view. Introducing the worlds first curved Ultra High Definition Television from samsung. Well, the nasdaq in the green today and melissa lee is there for what has been a pretty hot august, well, not for the weather, but certainly for technology, melissa. Been a great month for tech it has been a fantastic month for tech. And brian, certainly one name in particular really helping the nasdaq for the month of august, but also for the year, and that is tesla, today racking up yet another new high. A couple headlines here. China unicom and tesla announcing that they will build out 400 charging points across china. Also, wall street journal report that china could consider a gas pack, which would help evs, electric vehicles, so tesla climbing. Also, kandi is a chinese maker of small evs. Interesting move here in terms of a reversal. Premarket got a pop on all this positive news for evs, but quickly reversed after it announced a private placement of stock at a price well below where it was trading. So, were seeing kandi shares under pressure, down about 6. 5 after a massive run of about 281 over the past 12 months. Also, really strong, two in particular based on apple resumeors. Nxp semiconductors, a report in the ft backing up a report in wired that the iphone 6 will actually have an nfc mere field mobile Payment System in the new phone. Were taking a look at that one. New high on this stock. Also, look at invensense. They make the chips that sense motion. So, there have been many reports that they would be involved in an iwatch. And of course, that big event is coming up on september 9th, so bids for both stocks. Goldman sachs just about a week ago or so issued a note saying that for both of these stocks, q4 estimates would be at risk. They downgraded the stocks, brian and kelly, but the thing is that those calls have been terrible, because these stocks since that call have actually been outperformers versus the Broader Markets. Back to you guys. Ouch. Thats a good point. Melissa, thank you, for now. Weve got breaking news on a e networks and Julia Boorstin with the story. Hi, kelly. Vice, the content company, is in talks to sell a 10 stake to a e networks in a deal that would value vice at 2. 5 billion. This comes after time warner pulled out of talks to buy vice. And also just a year after 21st century fox invest in vice at a 1. 4 billion valuation. Back to you. And vice has done some excellent reporting from the Islamic State. Julia, thank you. There are nine minutes to go into the close here, brian. Art cashin said now 1 billion worth of buy orders on the close, that may have helped turn the dow positive, now by about 7 1 2 points and the s p still sitting at 2,002 here. Yeah, it is. Well have to wait a couple minutes more to see where it ends up, kelly. And so much for yesterdays upward revision to economic growth. Ceos from the biggest retailers warn consumers are still struggling. Our own sara eisen rounding up their comments. Were going to discuss what the ceos are seeing that cannot be reflected in a simple economic report. Were back. 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Earnings rates are growing at a nice pace and with the economy picking up, earnings are going to pick up some more, so theres reasons to be bullish, not to mention that the fed is going to continue to be supportive, and that lays a pretty good floor underneath stock prices. Well, we need to be supportive of our sponsors, so i told you a quick block, but the interview will be continued. Up next, well get adam and olivers opinions on these markets and where to invest. The closing count down after this. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. 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Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. [b ll rings] time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. All right, welcome back. As you know, we in the media like bright, shiny things and big, round numbers. Adam persia and Oliver Thurgood are joining us. Looks like this close on the s p, adam, do you care or is it just a nice, shiny thing . I think its a nice, shiny thing. The number that im more concerned about or looking at is the s ps pe ratio. Were seeing it at 18 now, about 1 1 2 points above the 60year average, but whats interesting, if you look back over the last 60 years, the markets traded at a pe of 18 or more 33 of the time. So, while were frothy, we still have room to steam ahead, and i think the macro backdrop supports that. Will the e get bigger, oliver . Because if the e gets bigger, i am not worried about 18 1 2 times earnings. Yeah, we think earnings will continue to climb. We certainly saw it in Second Quarter earnings and didnt see downward revisions or warnings for the rest of the year, and thats important. And thats going to help drive stocks higher. I would add, keep in mind that when we look at some of these historical numbers, they need to be or they are distorted because of what the Federal Reserve and other Central Banks are doing. So, thats important to keep in mind. Gentlemen, listen it was a very short interview and a long weekend. Guys, i apologize it was so brief. We had some breaking news. But thank you both. Have a wonderful labor day. And kelly evans, as i send it over to you, i want to point out that ive now cohosted the show with you and both times it was a record s p 500 close. Coincidence . 100 , but im just saying. Yes, welcome to the closing bell, everybody. Im kelly evans, and we know what this graphic means. It looks like yet another record high close here for the s p 500, going out at a level of 2,003. Heres, in fact, how were finishing the day across wall street, with the dow turning positive towards the very end of the session there, closing higher by about 17 points, just shy of 17,100 mark and off its record closing high of 17,138. But again, the s p 500, after sitting most of the day right on the 2,000 mark, a latesession push to 2,003, still below its intraday high of 2,005 from the 26th. Finally, look at the nasdaq today, also closing higher. Looks like its adding about 22 points finally, although that one, well, for now, anyway, still well off its nominal highs. Lets get straight over to dominic chu. Dom, what in august . Im sorry, dominic chu is not with us. So, we can talk about what an august it has been here as we go out. Joining me on the panel, our very own jon fortt, investnets Zachary Karabell and rebecca patterson. Welcome, one and all. What do you make, rebecca, of this august performance here . I am not surprised, in part because we did have a bit of a selloff in july and the beginning of august, so valuations got more attractive. And when you took a step back, the fundamental backdrop hadnt dropped that much. Oil prices lower, gasoline prices lower, good for the consumer, good for keeping inflation in check, which keeps Central Banks in check. And we continue to see steady job gains in the u. S. So, im not that surprised, frankly, to see markets coming back in august. Weve been overweight equities and very happy about that. The fundamentals strong, zach, but theres a lot of nervousness about whats happening around the world right now. So, theres a real distinction i think weve got to make between serious geopolitical issues, which there are. I mean, ukraine and its continual devolution, whats going on in Northern Iraq and Eastern Syria with isis or isil, depending on how you call it. These are real issues, right . But unless they start to impact either the Financial System or actual Global Consumer behavior, theyre not market events. We talk about them as market events largely in lieu of that theres nothing going on, but looking at geopolitical crises, youd be hard to find these making a difference, except to the price of oil, and these are oilrich areas. But other than that, you know, these are not and i dont want to downplay them as important events. Im just saying, no matter how bad things get in Northern Iraq, i dont know how it affects apples iphone 6 release. And no matter how bad it gets in ukraine, does that affect minimum americans buy postgazett proctor and gamble products. And to zachs point, let me read you off the list of tech stocks i follow up 15 or more in the past month. First one, twitter, up 29 . Then goufz the viva, linkedin, yelp, gopro, and finally, arm, which is up just over 15 . A lot of those had had nice runs, high valuation. I mean, especially diva, which had a run of, my goodness, quite a bit just today, up 20 . These are kind of hope stocks. Theyre Growth Stocks. So, some of that cautiousness that had been in a little bit earlier, maybe a little bit out, at least with the people who are trading in august. It has been a light volume month. Id say, kelly, the one area thats kind of breaking this pattern so far in august was europe and germany specifically, and thats a place, zach, where i think we would agree that the ukraine is having an impact. Its affecting business sentiment. Theyre putting capex plans on hold, theyre putting job creation on hold to a degree, and that does matter for the world, potentially if it gets bad enough. Although thats also converging with a europe still in stag population and draghi and the ecb are trying to figure out what to do about it. Its hard to figure out which of the causal factors is most real, and youre right, they certainly compound and make for an already somewhat grim situation. And thats the other thing a lot of these stocks i mentioned, the tech stocks have in common. The ones that are particularly strong in developed markets, in the u. S. In particular, dont rely so much on europe or emerging markets, are the ones that are running, are the ones that are giving these betterthanexpected results, like your sales forces, for example. Thats a great point. Dominic chu wants in now. Hi, dom. All right, guys. What i was trying to do was get a sense from the floor about whats happening here, and obviously, everybodys trying to get their books closed out and head out on their long weekend vacations here. But what we have in terms of the august month that we just had, it was a very, very good one. You take a look at some of the bestperforming industries and sectors overall, even with stocks broadly up about 3. 5 , 4 just for the month of august. You can see in terms of august, the best and worst sectors in the entire s p, health care and Consumer Staples companies, and then energy and telecom were live laggards, even though energy was still up nearly 2 in the month of august. As you drill down into where the topperforming stocks were in the enspire s p 500, i mean, monster beverage, youve got to look there, up almost 40 . Of course, cocacola took a big investment in that company. Also, Avago Technologies helped out by a positive earnings report. Gilead sciences continuing that biotech hot streak, at least as of late. And then the bottom s p 500 performers, you can see here, walgreen. Remember, they may not perform that tax inversion, theyre not going to go that route. Wynn resorts on the casino side. Also, time warner down about 7 . So, there are interest themes developing here, although one trader just said, you know, dom, these are just themes. Its like threads in a sweater that you kind of pull a little bit but dont pull out completely. Nobody has yet to see anything develop fully. And zachary and rebecca and jon have spoken about this in the last couple minutes here, you dont see a huge amount of catalysts that will move the market one way or the other, but maybe next week it will come to fruition. Sure. And one thing at the beginning of august, the beginning of august was a terrible week where everyone was starting to talk about is this correction going to start . And then we have this roaring three weeks. So, its really not like the market is without some volatility. And by the way, lets take a quick look at the airline spait space, not because of the knee defender, but we have news with susan lee. Orbitz saw a big pop just before the markets closed, up some 3 on the back of this news. Just released a statement saying that now those that go to the website, orbitz. Com, can book their seats on American Airlines and us airways as well. So, this resolves this dispute earlier on this week offer booking fees where orbitz. Com actually physically removed booking access on American Airlines and us airways. So, this is moving the stock, as you see, an outperformer today on the u. S. Stock markets. Back to you. All right, susan. Thank you very much. Now lets get back to the floor here. Art cashin joining us, head of floor operations for ubs. Art, you told us there was significant amount of buy orders on the close, and sure enough, the dow turned positive there at the bell. Yes, it did. In fact, shortly before people were anticipating there was over 1 billion on balance to buy. And when people saw that, there was a little Short Covering and people getting out of the way. Kelly, ordinarily, the market on Close Program might add maybe 100 to 120 million shares. This one added nearly 240 million. Wow. So, that gives you an idea of the size, and thats why it had such a major influence. Art, are you surprised, especially because we were wondering earlier in the session today if people, in fact, would be coming back from their vacations, back from a quiet august, looking at the world around them and thinking they dont want exposure to equities here. Are you surprised with the strength of the markets going into this long weekend . Not entirely. As we discussed earlier, friday before a threeday weekend has a 65 to 70 upward bias. Its the shorts who are the most nervous, because when youre short and something goes against you, your potential loss is infinite. If youre long, you can only lose what you have invested. So, historically, shorts tend to cover going into long weekends. And even with the somewhat scary news that we had, apparently, history lived up to its name. And art, we know that youve been watching all the guys around here, certainly investors all around the world watching that Russia Ukraine border importantly as for market direction over the last couple weeks. Will that be the catalyst in the weeks ahead or does it shift for example to iraq . No, i think you will find that the geopolitical events will remain very important, and i dont think that ukrainian situation is fully resolved. And unfortunately, i think the isis problem will remain. So, nothing so far, thankfully, bad enough to dominate whats going on, but enough to give us some little scares. We have to make sure that we dont get too complacent about it. Thats for sure, art. And we will let you go now. Kick off that long weekend and enjoy it, please. Art cashin from ubs. And again, just going back again to the volume that weve seen today, guys. You mentioned it was a little bit lighter than usual. Thats been the case, though its the end of august, no huge surprise on that front. Yeah. I mean, i wouldnt expect people to be rushing into the markets. And look, were all curious about whats going to happen in september, if theres kind of a finally people took a summer, right . Its been a very volatile two years. We had the Government Shutdown looming last year, the euro implosion in 2011, and we could go back every year and there would have been something really bad. And so, theres the question of, okay, whats this market going to be . But i think you have to look at the fact, this market has been up because earnings its not just earnings, its revenue, right . Secondquarter revenue is a lot more important than secondquarter earnings, even though we trade on earnings, because revenue you cant fudge nearly as easily as earnings. Rebecca, did the bears go on vacation this month or did they capitulate . I dont think the bears have gone away. You know, its interesting, when s p touched 2,000 for the first day on tuesday, within ten minutes, i must have gotten ten emails from people saying is it time to get out. So, i think whether you call them bears or just anxious animals, theres a lot of anxiety out there and the animal spirit. And i think in a way, thats good news. You know, we only saw net equity inflows into mutual funds and etfs last year for the First Time Since this crisis. In 2014, the equity and bond inflows have been the same. So, the market is not overowned and i think that anxiety is part of the reason why, but that may prevent the market from getting overdone. We should mention, dominic, whats unusual about august isnt just that 2 t was a strong month for stocks dom has left the building. August wasnt just a strong month for stocks, it was also a strong month for bonds. I mean, the performance there. Yeah. These two Asset Classes are rising in tandem i would be more worried about the bond side, just because some of that is the geopolitical fear trade, a marginal one. And jon would know this better than anyone. We keep saying the nasdaqs at its highest point since march of 2000. I guess thats supposed to evoke a feeling of, oh, dear, were back in that territory, but you can flip it around and say it took them 14 years, right . That is a very long time in market land. And were not back to the high. Were back to the yeah. It is a very long time. In march 2000, i was about three months into my cub tech report in silicon valley. I had come in in december 1999. I remember that first drop, and things rebounded a little bit from there, dropped further. But look, i mean, i think whats interesting about this particular moment in time is september, the month were going into, becomes a showme month. Theres been all this anticipation for the ali baba ipo. Well, we expect to actually have it then. That should draw investor attention. There is anticipation, is apple going to unveil the iphone 6 . Is it going to make me fly, you know . Is it going to make me better looking . How huge will it be . You know . And were going to get the reality and see if people are disappointed by that or if theyre excited by it. And also, you know, wearable device, when will it actually ship after we see it . So, a lot of things to draw peoples attention, consumers attention, retailers, investors attention to the markets, and will it be sell on the news or pile in . I dont know. That question remains, and that will hover over the long weekend. Well leave it there. Thank you, everybody. The Holiday Weekend may be here, but the threat of the Islamic State has the whole world on edge. Uk Prime Minister David Cameron taking to the world stage today to talk about why his nation increasing its terror alert status, the First Time Since 2011. Up next, well discuss what that means for the u. S. , the markets and you. And later, will the threats Impact Investor sentiment . Well talk about views on these markets. Youre watching cnbc, first in business worldwide. Act i. Scene 3. Open port twentytwoohoneseven on the firewall for customer db access. Install version twopointthree of db connector and ensure verbose flag is set in case of problems. clapping sound isnt the cloud supposed to make business easier . Get the one that can connect to the systems that you already have. Today theres a new way to work. And its made with ibm. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of Fidelity Investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Welcome back. Terrorist threats in the mideast causing grave concerns throughout the west. Uk Prime Minister David Cameron saying in a Statement Today that what we are facing with isis, or the Islamic State, is a deeper threat than weve ever faced before. We are in the middle of a generational struggle against a poisonous and extremist ideology that i believe well be fighting for years and probably decades. We will always take whatever action is necessary to keep the british people safe here at home. Joining us now with his thoughts and reaction to all of this is john brown from euro pacific capital. Himself a former member of the British Parliament and the conservative party that David Camerons there. John, welcome. And first of all, there was a striking difference between the tone of David Cameron and president obamas remarks on this in the last 24 hours. Yes, there was. One has to accept that, of course, David Cameron now has uk at his back, which has been calling for tighter immigration controls and passport controls for years. So, he has a reason, domestic reason for saying this. But nevertheless, i was very proud of the way he did it because it was realistic, and he answered questions very succinctly, and hes totally right in saying its a very longterm war or battle, and that in the shortterm, we must be vigilant and much, much tougher on passports, profiling and that sort of thing. The style certainly is different, john, as weve said. What about the substance, though . I mean, what is it truly that the uk is doing above and beyond what the u. S. Is doing at this point . Well, i just dont know that. What theyre doing now is clouded in secrecy. But i think what he said openly is that theyve made it much tougher on passports, taking them away from people, not granting visas and things like that. I think hes said that, and that will happen. But as far as the Clandestine Operations to get intelligence on the ground where special forces, mi6 and those sort of things are used, that is all under cover, and i certainly have no inside track for that at all. But i think he means business. He was forced into saying this, and the style is very different, as you say, to president obama, who looked like he was already on holiday and just about to go back in the golf cart. I was stunned. And that he would say he had no strategy yet i thought was an amazing admission, because he need not have said that. Its quite understandable that the strategy is not finalized until he has talked to his nato allies, but to say it openly i thought was very demoralizing and bad for him and the cause, really. Zachary . Zachary karabell. There is a bit of a difference between the british reality and the american in that you have at least 500 british nationals serving in what we seem to think isis and other groups, compared to 100 in america and obviously, 500 in a British Population of 16 millibillion is much greater. So, there is a domestic reality in britain that makes this a bit more acute right now, is that not the case . Yes. I totally agree. Its 200 americans. But even then, your point is very valid. Absolutely right. But of course, the subtle point behind it is that ukt, of which im a member and i was a former conservative, sort of similar to the tea party in america, has been forcing him and saying, youre leaving these open borders under the European Union and people are flooding in here, including potential terrorists. And at last, hes been forced, and i think the disgusting murder of james foley will go down as a martyr murder, because it awakened the west to this insidious and very quiet but disgusting threat that we all face. Britain is closer to, obviously, to the middle east, than america, and as you rightly say, the populations are different and there are more of them in britain. In fact, in some city centers in britain, sharia law almost rules already. Its a disgraceful situation that the British Government has brought on the british people. Ukip is the uk independence party, we should clarify for viewers. John . Yes, exactly. John, im wondering, from your perspective, does it seem like president obama and the United States are trying really hard not to get out too far ahead of europe . I wonder in this case, given the war fatigue, if hes constantly trying not to get too aggressive, trying to get europe to take the lead, not only when it comes to isil, also when it comes to ukraine, despite the clumsy, it seems, execution here, is there perhaps a strategy behind it . Yes, im not a natural supporter of mr. Obama, but the fact is, i think youre correct. Hes going to an extremely important meetings at nato next week, which regard to isis and ukraine. And i think its foolhearted for him to come out with an open strategy before those meetings. Hes got to wait and sound who will really get to be supporters. For example, germany, the key country in europe, is already in secret negotiations with russia over energy and has been urging the west ukraine government to reach a compromise with president putin. And so, germany is the key player to watch. And i think it would be foolhearted for obama to have stated a strategy before that. It was just an unfortunate turn of phrase to say he hadnt got a strategy, and i think that was a big mistake, but i understand the reasons for him not coming out with a strategy. And well leave it there for now. John browne, thanks, from euro pacific capital. Happy labor day weekend. Thank you. Thank you very much. Its game of drones, and in this version, its not the lansters not looking to expand, its kingdom google looking to get in on the drone market before amazon and other players call it a game of drones. Thats next. Plus, surf is up and so is the surfing business. Morgan brennan making waves on this story down on the jersey shore, and shell joining us from there, ahead. [ 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. You need to see this. Show em the curve. Do you know what this means . 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Were going to start off with a company that was basically flat for the month, that is up until today. United therapeutics shot up on a positive court ruling on some of its drug patents. Todays move puts the biotech back into the black for the year for the First Time Since january. Lets keep up with the health care theme and a number of stocks are rising following pennsylvanias decision to expand medicaid under the Affordable Care act. Tenants health care is one of the biggest winners on the s p 500 today. Ubs says tenet is as well as Community Health and lifepoint hospitals will be among the stocks that benefit the most from pennsylvanias move. And thats a look at the stock movers, kelly. Back to you. Susan, thank you for now. Well, end the jokes and watch out, amazon, there is a new player looking to claim the drone throne. Google announcing project wing yesterday, a Delivery System using drones. Google says its just beginning to develop the technology but has tremendous potential. Whats googles end game here . Does it want to be the official drone provider, or is this just taking aim at amazon . Here to weigh in on this epic game of drones, lou basanese from Disruptive Tech research. Lou, welcome. First of all, how much of this is, you know, a neat project coming out of google, versus the next big thing . Yeah, i think its definitely a shot across amazons bow, but i think we have to be careful not to assume the obvious. You know, remember the secret of barges, everyone assumed that was going to be some neat showroom space for google glass. Nothings really materialized there. Here, the obvious implication is that google is going right after amazon. But i think we have to consider the possibility that this is more of an infrastructure play. Googles got tremendous expertise in data in mapping, in analyzing data. This research, this secretive Research Product that leaked really could be them developing realworld expertise on the data side, on how to handle the infrastructure for drone delivery. Whats interesting here, and im interested in your take, too, is that google made its riches in information delivery, helping people to find virtual things. And amazon has become very good at physical delivery, but its paying a lot for that last mile or last several miles. So, both of them have an interest in getting the humans, getting the cost out of that last mile or last few miles, again, of physical delivery. Isnt that fundamentally what this is all about . I think youre absolutely right. I mean, i think people have a hard time thinking maybe google and amazon are going to work together, but if you look, this is a perfect strategic fit for them. Like you said, amazon focuses on the physical products, ecommerce, google more on the information side, and here they could bridge, they can make that connection in that last mile to enable the delivery in realtime via drone. Hey, its rebecca. Just wondering, its an amazing concept. Its kind of a cool thing to think about. When do you think we could actually see whether its google or amazon, some sort of reality around this . I mean, we are seeing driverless trucks now used in certain countries, in certain parts of the world, especially in big construction projects. So, some of thats already becoming a reality. Are there certain uses of a drone for delivery of things, whether its a hardtoreach place, farmland . Is there something practical we could actually see coming out in the next, 6, 12, 18 months . No, absolutely not. I think were years away. I mean, amazon says its five years. Googles a little bit more ambiguous, saying several. I dont think anyone in society is ready to have their neighborhood invaded by drones, either. But on the practical side, you have regulatory factors that have to be figured out, these obstacles. The faa has allowed for virtually no commercial uses of drones. On the technical side, youve got to figure out and make sure that we can precisely deliver. You dont want your package going to your neighbors doorstep, who is, you know, 5 feet away. And also from the safety side, you have to have the detectandavoid technology at a point where youre not going to have midair collisions, running into power lines, even wildlife. So, i really think this is probably one of those things that you see in the next decade, but definitely not in the next one to two years. As much as it might gall amazon to pay whatever it pays to u. P. S. And fedex, has anyone gamed out what the potential costs of even doing a Minimal Network of this would be, just as some ballpark we could begin to get our hands around . Yeah, i think its a great question. Ive been following drones since 2007 with aerovironmeannt and tt was mostly military applications. Costs were prohibitive for personal use. So i think thats the key lever in this. If costs dont get driven down to a point where drones become commercially affordable, i think this is really just a cool science experiment, and i dont think the costs are there yet. You think about amazon prime, you can ship something for 3. 99. Can you do that with a drone . I dont know if right now the economics even come close to working out. Thats a great point, lieu. Before we let you go, do i owe you an apology on apple . Rolling my eyes, lou, about your point on apple going into mobile payments back in january, wasnt i . You were, but you know what, i havent been vindicated yet. Well find out september 9th. What do you think, jon fortt . I think its likely. They talk about the 800 million plus credit cards they have on file. They have touch i. D. Authentication. Now its possible theyll roll out nearfield communication in some manor. So, theyre banging on the door of that. Well see if they kick it in in the fall. Lou, thank you. Good to see you this afternoon. Thank you again. Have a good weekend. Latenight may be in his rearview mirror, but jay leno has plenty of open road ahead. Hes a wellknown car collector and brings that passion to cnbc sunday night in a new special, and jay leno is coming up here to tell us about it. And on this last trading day of the summer, we also want to check in with our Retail Investor to get their take on where portfolios are heading. Thats next. Why are we so obsessed with turbo . Because we like giving you power, but we also like giving you fuel efficiency. Like the sporty jetta. And the turbocharged passat tdi® clean diesel. Okay. And the iconic beetle. And the powerful tiguan. Okay you cant forget the cc. Guys, this is going to take a while. 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The pros have seemingly ignored them along with all of the geopolitical fears, but what about the Retail Investors . Its time to check in for the roundtable. Joining us is susan noyes from makeitbetter. Net, and back with us is thomas vitkowski. Welcome to you both. Thomas, have you moved into cash . Have you put on some more defensive bets . How do you feel about markets here . Actually, i moved up my cash position the last time i was on, i was 15 to 20 , now im closer to 25 . The one thing i do find interesting, though, is if you look at the dow 30 stocks, 21 of them have underperformed the s p, and 9 of them have actually lost for the year. So, im taking a look at those, especially considering ge has been the worst performer on the year, and that was one of my holdings. So, i actually added to that position recently. Got it. So, still seeing opportunity, even if a little more caution. Susan, what about you . So, i really invest for the long term. And for most of my stocks, im staying there. Im not putting more in cash. Im probably going to sell off amazon, because i really do think that if anybodys going to suffer in a tech bubble, that would be it, and theyre a little bit too predatory for me. So, susan, you see a tech bubble out there . Well, i dont know if there is or not, but it makes sense that there could be. Want some reaction here from our panel. Jon in. Thomas, im curious, you talked about moving a little bit more into cash. Whats your strategy for getting back in, either if you prove to be wrong or if the market turns down . At which points are you planning to maybe buy back into equities . I dont have an exact point in time. For example, in february, travelers was the worstperforming dow stock, and i just thought it was a Good Opportunity and i jumped in. I ended up making 15 on that trade over three months. Basically, if it drops to 190 on the spider, thats probably when ill put more cash to work. And the reason why i havent taken more stocks off the table is because i dont know where the top is, you know . The next 20 points could be up, the next 20 points could be down. I dont really know. I still want to be long and have that exposure. Rebecca, how does this line up with some of the institutions or some of the wealthier investors that you hear from, that you interact with . Sure. I mean, one point that jumped out to me is that a lot of investors today point to the dow. Its been a lackluster year for markets. And its interesting because the dispersion, the gap, if you will, between the s p and the dow this year is incredibly wide. Its very unusual. And at some point, it will close. I think it will get the dow resolving higher. If that happens, maybe we get a little more nervous. On the geopolitical fears, i just say that history tells us, and i dont meean to underplay the Human Element of this, but history tells us that geopolitical events normally provide buyin opportunities. Thomas and susan both, id like to know whether you from your friends, colleagues, peers, hear more people talking about getting into the stock market, or is it the opposite . Thomas . I think when you have the markets near the highs, thats when everyone starts asking me, what should i do, what should i do . And that may not necessarily be the best time. Susan . So, i dont think that my friends think that we are near the highs, and everyones still talking about how to invest and where to invest. So, thats got to be somewhat encouraging, zachary. I have a very big question for a very small amount of time, but im wondering from both of you, what do you do to try to separate the noise, and to some degree, this is noise. It doesnt mean its unintelligent noise, from substance that you feel you can act on . Susan . So, i actually try to take the longterm perspective and look for a longterm value and whether or not it feels like common sense to stay there. And we should add, susan, some of your holdings go ahead . So, that makes it easier for me to not listen to noise, because im not listening for one month or two months. Im thinking about it for one year, two years, ten years. And your daughters helped a little bit, too. Yeah, thats exactly right. She told me michael kors was going to be hot and she was right. Thomas, what about you . Its stockspecific. I want to see what the earnings are, what the news are. And if i feel comfortable with a stock. You know, apple was down a lot when i had it in january and i held on, and that ended up being pretty much the best call that ive made, you know. 45 since that point. So, i want to look at the individual stocks. And if the news and the earnings are good there, im not going to sell. I love it. Stock pickings not dead after all. Susan and thomas, thank you both this afternoon. Have a great long weekend. Thank you. You, too. Thank you, kelly appreciate it. Jay leno is moving from latenight to prime time, and thats prime time here on cnbc. Hes going to join us to tell us all about his carcollecting special, jay lenos garage. Thats next. And still to come, we head down to the jersey shore to ride the waves with our brave Morgan Brennan. Surfing is on the rise. So, can you catch a good investment by hanging ten . Thats just ahead. Good vibrations it. Until boom,y the wayt its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed. Right now, all beds are on sale. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. 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Nbcs jay leno left the tonight show earlier this year, but he didnt drive into the sunset. Among his many projects is a cnbc special sunday night at 10 00 p. M. Eastern time. Its called jay lenos garage the ultimate car week. And jay leno joins us now from, is that your garage, jay . Were in my garage right now. The crew just showed up here. Im sorry im not dressed, but i was working on my car and they said, we want to do an interview, so i said, great so, thanks absolutely. Good to have you here. First of all, were stunned by just how many cars you have, how much youve invested in this. You talked with our robert frank at the monterey show not long ago. Is there a bubble, jay, in cars . Some of these valuations are insane well, the ones that bubbled back in the 90s, and that burst pretty quickly, because that was mostly speculators. Buyers are a lot smarter now. Theyre buying the right cars, the cars that have good prom nance. Those are the ones that go up in value and continue to go up because theyre not making any more of them. So, those are the ones you want to do. Youre seeing a lot smarter buyer out there. Its a lot like the art market. A little painting of the scream like this is 120 million. Well, i mean, a work of art thats beautifully styled and designed and made of metal, i dont know why that cant be the equal to that. Whats the best return, jay, best investment youve ever made in one of these cars . Well, the best investment i ever made was probably a mclaren f1. It was a very expensive car. I bought it in 96 for 800,000. The last offer i got was 11. 5 million on it. And i turned that one down. So, ha ha to my dad who said youre wasting all your money on these cars. Well, i was just going to ask, this must have started out as a hobby, but jay, youre one of the wealthiest men in the country, im sure. Youre talking about millions youre able to invest, and are you putting it all into cars, more or less . Well, you know, you buy what you like. And if youre reasonably astute and reasonably smart about what you like, chances are, other people like it, too, and it goes up in value. I had this discussion with a friend of mine, hes trying to convince his wife why he should buy a porsche. And i told him, if he had put a new kitchen in in 1986 and spent 30,000, that kitchen now would be worth maybe 800 in scrap parts, but had he bought the porsche instead of putting the new kitchen in, hed have 87,000 sitting at a bank right now. So, i just throw that out for the guys who need to convince. Jay, it used to be that houses went up in value, too. Yeah, well, the houses could go up, but the kitchen itself, that gets thrown away. The car, ha, that will last forever. The reason im asking really is that for a lot of people here, i mean, we have Wealth Advisers all the time coming in telling people how to diversify their portfolios. They rarely mention cars. And i just wonder, you know, are all your eggs in one basket here, or are you investing in alibaba on the side or something . But i think they rarely mention art either. You know, the nice thing about art or automobiles or china or silver is if it goes down in value, you can still enjoy it. You can still have fun with it. These cars are great fun. I dont intend to sell them. If they go down in value it doesnt really affect me, but chances are, they dont, because the ones behind me are well over 100 years old and theyre roadworthy, and they were built when labor was cheap and technology was expensive. Now everything is flipped around. Technology is cheap and labors expensive. So, consequently, you cant recreate these cars anymore for any kind of reasonable amount of money. So, thats what makes them valuable. Are you sad, by the way, to see whats happened to cars in this country, at a time when i think youve said that for kids, it used to be that it was all about the car, and today its all about the iphone . Well, yeah, i mean, i think youre seeing smarter, trimmer companies, i mean, chevrolet had their greatest year i think last year in the history of the company. General motors is doing fine since theyve, you know, redone everything. Ford is doing just incredible. And even chryslers doing okay. So, i think youre seeing more manufacturing coming back to the United States. As china gets a strong middle class, theyre tired of working for a bowl of rice and 5 bucks a day, so their health costs, their everything goes up. And gradually, i think youre seeing more and more manufacturing with the advent of 3d printers. Were able to drive the cost of manufacturing down and do it with less people but do it here. And last question, jay. I mean, given look, you have better knowledge of a lot of these industries than anybody. So, are you really not making any other corporate investments . Are you planning any kinds of ventures on the side . No, not really. Im kind of keeping it to i keep like i say, i keep it to what i like. Im a pretty conservative guy financially. Im one of those people i take my money, i put it in a hammock. Money, you relax. I will go to work, okay . Ill work. I want the money to relax. If that money is still here when i come back in a year, thats thrilled if theres a little extra in there, fantastic, but ill work and i just want the money to relax, take it easy, youll be fine. Well, forget putting it under the mattress. But jay, now we know where to find it, so you might want to rethink the hammock. Jay leno joining us this afternoon. There you go. There you go. Really appreciate your time. Good to see you. Hey, thanks a lot and tune in this sunday for the premiere of jay lenos garage the ultimate car week, 10 00 p. M. Eastern and pacific on cnbc. The state of the consumer may not be all that it appears. Sara eisen has been digging through earnings reports and that 2. 5 spending number in the gdp report may not be entirely real, and thats next. 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. Having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back. Sometimes numbers are too good to be true, and maybe thats the case when it comes to consumer spending. Our sara eisen has been doing some digging beneath just the surface numbers, and she joins us now. Whatd you find, sara . Well, that company, kelly, paints a much more pessimistic view of the consumer than some of the recent economic data. So, i went through Conference Calls and comments for the Second Quarter for all sorts of consumerfocused companies, retail, restaurants, food, beverage and household products. The most popular word used to describe the environment for the consumer right now, challenging. Heres a little sampling for you. In north america, the overall retail environment in our categoryremained challenging, with soft traffic and permanent promotion in a retail environment for most of the quarter. That was the ceo of guess. Challenging economic environment, according to kimberlyclarks cfo. Our outlook for the fall season reflects confident optimism tempered with the reality that many customers still are feeling the impact of an economic environment that at best is improving very gradually. That, interestingly enough, came out of macys cfo. Macys has been faring a little bit better than other retailers. Thats just a sampling. I have many, many more examples on cnbc. Com in my piece. But all of this may help explain why that personal spending number for the month of july out earlier this morning showed its first drop in spending since back in january. Looking forward, there are reasons for optimism, despite all the gloom from the companies this season. Restaurant traffic, for instance, gained for the first month all year in august, according to guessmetric. Gas prices have been down. That helps the consumer. In fact, this labor day, cheapest gas price since 2010. And Consumer Confidence continues to climb. The one final thing ill leave you with on the optimistic beat is that the commentary from the ceos this quarter has been, especially on the retail front, backtoschool shopping season, much more upbeat than what theyve been seeing over the past few months, kelly. And sarah, its a great point, though, its still very hard to tell, rebecca, what the trend is. Maybe its not worth talking about the consumer broadly anymore. I agree with you. I think you do have a bifurcated economy and that means a bifurcated consumer. You have to think about whos in the shops where we get the comments. I also think that cfos and ceos almost religiously underpromise and overdeliver, thats part of the game. But to sarahs last points on looking ahead, she mentioned gasoline prices and confidence, home prices gradually rising, but still rising at an 8 annualized pace. Consumer confidence continuing to rise and job creation. Next week, we have payrolls. Were going to get another healthy number. So i think the backdrop for the consumer, its not even at every level of society, unfortunately. But it is moving in the right direction. Also, sarah, that was great work, doing that sort of look through at what these cfos and ceos were saying on the calls. I wonder, though, if there is a disjuncture, just to add to your bifurcation word, between how people are talking about this thing called the economy and cfos as well and how they are behaving, ie, you know, people can feel really bad and still spend money, as long as theyve got income. They can feel really good and not spend it or spend it on credit cards, do you see any of that disconnect . Retail therapy. What youre seeing is that Consumer Confidence numbers. Consumer confidence at the highest level since 2000, and yet that spending number for july was negative. So theres one thing to feel and another thing to do. On the other front, in terms of the ceo and cfo commentary, a lot of these consumer brands, retailers have been doing a little bit better, but Consumer Products and Consumer Staples, they have been struggling with topline growth, which suggests that those comments actually are true. Youve seen it from walmart, seen it from target. Yes, they have their own execution problems, but its been difficult, especially on that theme in the bifurcated consumer, the lower to middle income consumer. And the one thing were not seeing is wage growth. And thats going to be a key piece of this puzzle. And another thing to watch next week. Sara, thank you for now, great stuff. Have a great weekend. It is the last Beach Weekend of this summer, and our Morgan Brennan has gotten a jump on most of us. What are you doing down at the jersey shore . Im checking out the surfers and hanging out in the water. The surfing industry is riding a huge wave, and i dont mean the ones behind us. Some multimillion dollar business set to keep growing. Well break down all those numbers right after the break. Can we say, surfs up . Yeah, im married. Does it matter . Youd do that for me . Really . Yeah, id like that. Who are you talking to . Uh, its jake from state farm. Sounds like a really good deal. Jake from state farm at three in the morning. Who is this . Its jake from state farm. What are you wearing, jake from state farm . [ jake ] uh. Khakis. She sounds hideous. Well shes a guy, so. [ male announcer ] another reason more people stay with state farm. Get to a better state. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. At a special site for tv viewers; shouting location. Heres the location that matters the most. Here. Or here. Or here. Its wherever this is. To get customers to come here and stay here, youre going to need an app that connects to all your systems. So they can bank, shop, do what they need to do, and you gotta do it fast. Before the competition does. Its tough out here; you better be on the right cloud. Today theres a new way to work. And its made with ibm. Who would have thought masterthree cheese lasagna would go with chocolate cake and ceviche . The same guy who thought that small caps and bond funds would go with a merging markets. Its a masterpiece. Thanks. Clearly you are type e. You made it phil. Welcome home. Now whats our strategy with the fondue . Diversifying your portfolio . E trade gives you the tools and resources to get it right. Are you type e . Welcome back. And so our Morgan Brennan, i think, braving the frosty theyve got to be frosty waters of new jersey. Its not the warmest summer friday, is it, morgan . Reporter actually, the waters pretty good, its just this rip tide is really, really strong right now. But you know, weve had these big storms on both coasts, theyve kicked up big waves, so weve seen a lot of surfers like the ones out here taking advantage of these big waves. And speaking of surfing, Global Industry analysts one of the only Research Groups that actually tracks the sport, says this sport is growing and growing fast. Its expecting it to be a 13 billion industry by 2017. Not only that, but participation rates are growing by double digits and theres a couple of factors contributing to all of this. That are boards like the ones im holding, also bigger events and media platforms, the association of surfing professionals say that theyve been striking new partnerships thanks in part to new tech like gopro and drones that are allowing them to strike these partnerships with broadcasters and also digital streaming. But i think one of the most interesting factors contributing to the growth of surfing is actually whos doing it right now. So if you look behind me, you see some kids and some millennials, but its 30, 40, 50yearolds. Its genxers, theyre the ones who have time and money to buy boards like this and wet suits like this. Jon fortt . I hope you dont put on any masks. That rip tide looks strong as well. But we know how gopro is making a lot of these action sports, giving them a totally second leg. It was up about 6 today. Alltime highs, and it will be interesting to see, morgan, whether they can really create a platform that continues to power not just surfing, but their own business. Are you seeing people out there today with gopros . We havent seen anybody out here with a gopro, although we have seen drones out here. They were out here filming folks earlier this morning and their surfing activities. We did speak to gopro for the video. They said there are hundreds of thousands of surfing videos that are getting uploaded to our surfing channels. Weve spoken to local retailers like ron john, they say theyre seeing increased sales for gopro. This is definitely something thats complementing the industry. Morgan, thank you. And as we said, careful out there. Great reporting all day. I know zachary here is inspired to now pick it up. I am. I dont know why were here and why we didnt do this on location with morgan. It strikes me as an illogical way end to the weekend. Rebecca . Absolutely, next time. Okay. Well, i have your word. And well leave it there with the panel this afternoon. And with the s p 500, going out on this friday, the last trading day of august, at an alltime high, turning in one of the best august performances weve seen in over a decade. And fast money is coming up on all of that in just a few minutes. Melissa lee, whats on tap . Weve got a lot of names moving ahead of the apple one, so weve got your apple playbook. How to trade all these stocks ahead of that big date, september 9th. Oh, yes. Im looking at our jon fortt, and i think expectations are getting pretty high. And pushing a lot of these stocks to new highs. What do you do at this point, especially if have some Huge Authority interests. Over to you. Fast money starts right now. Live in new york citys times square, im melissa lee. August in the books. Wrapping up the month with another record close for the s p 500, as the index locked in its best august performance in over 14 years. Our top story tonight, a big loser in august, crude oil, its down 5 for the month, and that move actually helped the retailers with the s p retail etf blocking gains of just over 5 . Today, though, a crude surge on oil concerns. What is the oil trade at this point and could todays gains mean