Transcripts For CNBC Power Lunch 20091016

well that's it for "the call." have a great weekend. i'm melissa francis. >> and i'm trish regan. >> i'm larry kudlow. see you tonight. right now, "power lunch" is next. happy friday, everybody. welcome to "power lunch." the business council in carey, north carolina, will join us in a second. stocks sinking this hour on earnings news. financials leading the decline. mcdonald's once again among the dow winners. a developing story wie we'r tracking now. the fbi charging six people, including a leading billionaire, in a $20 million insider trading case involving a hedge fund. press conference set next hour. we'll have that breaking news. i'm michelle caruso-cabrera. major book war brewing between walmart and amazon.com. both slashing prices. who will come out on top? we'll take a look. bill's at the ceo summit. what are you working on, bill? >> what we're working on is the watch word at this summit right now, michelle, is not cautious optimism but cautious hope. we will talk with the ceo of mcgraw-hill. terry mcgraw, they just sold one of their beloved assets, "business week" magazine to bloomberg. we will get his future of the media business now. that's coming up. here's what's on the menu otherwise today. >> i'm jim goldman here in the silicon valley bureau. intel, ibm and google in the books. get ready for apple, microsoft, yahoo! ebay, texas instruments. the tech earnings bonanza continues and the pressure is on to keep this momentum alive. >> i'm jane wells in l.a. we have a slew of positive, hopeful signs about consumer spending this holiday. how many consumers will lie about how much they spent? find out later. >> that's what my mom used to do with my dad. let's get to the developing story in the hedge fund world. the fbi charging the founderle galleon group and five others for insider trading. we're all over the story. she joins us with the latest developments. >> that's right. this year he ranked on the forbes' billionaires list but today he will be in court. press conference expected to get under way in about an hour. galleon founder, raj rajaratnam, former senior manager and others are charged with an insider trading scheme that netted at least $20 million, dating back to at least 2006. according to the charging documents by rajaratnam, received inside information on an amd deal during the summer of 2008 from chiesi, who worked for new castle. they cite phone conversations of chiesi tipping off the fund manager, and apparently feeding chiesi on the investment side of the deal. new castle ultimately did not profit from the deal because it closed in october during the financial crisis. federal investigators say rajaratnam did see a profit of about $3.5 million that fall from inside information on another deal between amd and akamai, allegedly passed on by another defendant who worked for intel capital, the investment arm of the chipmaker. we have a call to intel on that. a total of five defendants are named in the complaint. the press conference, again, set to begin at 1:00 this afternoon. this is one of those things that people hear about, they surmise about and here they do cite recordings, they do cite transcripts. >> wow. we will have that for you live when it happens at 1:00. right, den snis. >> we'll have a former s.e.c. lawyer will come on to discuss the case. meanwhile, let's get to the market action. bob fasani at the market exchange. >> big thing, how do we end the day? options expiration day, so bear that in mind that. does have an impact at the close. take a look at the big three, big three on the dow. reported earnings today, bank of america, our parent company, general electric, and ibm. ibm better bottom line and better top line, but ge and bank of america had top line a bit weaker than expected and bank of america was disappointing pont bottom line as well. bank of america, pretty simple story here. the debate goes either way. some people think credit quality's improving overall in the big consumers. others do not here. credit card delinquencies were more on the stable side for a lot of these companies for september. take a look at the other financial names. the important thing is we're going to be getting a lot of big companies that are in the regional group next week. keycorp, zions bancorp. you will hear a lot about commercial real estate problems at that time. take a look at the s&p 500. you wonder if there's a correction going on, it's only one down day. we are up for the week overall. but the average correction is 4% since the march low. that's 4% from the 1,100 high we just saw. we're about 1067. that will be the average correction. that's only 20 points away. trader talk.cnbc.com. scott, we're up on the nasdaq for the week as well, but we are down here for the moment. >> technology, bob, thanks so much, is weaked to. nasdaq down about 1.2%. that translates to a loss of 26 points or so. google, clearly the strandout story, better-than-expected earnings and good commentary as well from ceo eric schmidt after the bell yesterday has translated into a real positive move for the stock today. it's up 4 1/2%, another new high. jim goldman at the top of the show was mentioning the slew of huge tech earnings. next week is a blowout week for the technology space. apple is among the companies reporting. apple's down 1%. microsoft's weak, research in motion, dell, and some of the chip stocks as well. that's weighing on the sector specifically that chips face. semiconductor off 3%, intel among the stocks giving back today. i want to highlight an ipo up 14% right now. cric, china real estate information corporation. the stock opened at 12. it's a successful ipo, although many of the ipos we have seen of late have not gone well, but this one apparently has. let's go to sharon at the nymex. >> oil prices positive for the year, over $77 a barrel know but down slightly on the day. overnight -- over $78 a barrel, fresh 2009 high. but are oil prices ready to take a little bit of a pause here? we have seen a decline this week of about 7%, and in fact we're poised to have the biggest weekly gain for crude oil prices we have seen in two weeks' time. what has helped to lead prices higher? of course, it's been the decline in the dollar, rise of the euro. but also the rise in products, in heating oil and gasoline this week. up 8% or 9%. that is also contributing to oil gains. we will see if we continue toward that $80 mark in the week ahead. rick santelli, to you in chicago. >> thank you very much, sharon. we continue to monitor the ten-year note against 350. ly give you a couple good reasons why in a minute. look at the one-week chart. we're only three or four basis points higher. we closed at 338 last week. hasn't been a lot of huge movement, although we snubbed up to significant levels. you look at the one-week chart of the dollar index, really september a very good week. it's down about two-thirds of a cent. the day, of course, still ongoing. we have 3 1/2 billion roughly of agency purchases. now, we all know that the treasury purchase programs only got about 3 billion left. started out at 300 billion. might be a reason, some traders think, to be more aggressive in the agency arena. why? if you look at agencies, there's 60 billion left to the 200 billion it started with. if you look at mbs, they started with 1.25 trillion and there's 310 billion. do the math. maybe they're going to follow where the fed's money is still going to be buying. sue, back to you. >> i'd love to do the math but i don't have a calculator with that many spaces on it. thank you, rick, very much. earnings disappointments taking a bit of a toll on the stock market today. next week, as scott mentioned, when we will see earning season give into high gear. what can you expect to see? let's gather our "power lunch" markets insiders. joining us is mike hollland, chairman of holland and company and the business council, bill is there as well. mik mike, i'll start with you. you think in general earnings will be good enough to get some of those sitting on the sidelines into the market? >> yes. i think when you look at the companies like ibm and google and intel who have reported and say things are getting better, and you look at ibm selling at a very modest multiple of earnings, i think people sitting in money market funds with less than half of 1% yield on them, you're probably looking to do something, yes. >> brian, what do you think about today's drop? is this about ge and bank of america, or is this -- boy, we've had a good run. you can expect a pullback at some point? >> i think it's more of the latter. i think it's more of a really good run. the market has come up, even in the last week we had a big run higher. a couple days ago we moved higher on the jpmorgan, csx news. i think maybe this was a little profit taking, stepping back a little bit. it's not really a big move lower. we hit the lows for the day. we seem to be bouncing off of those lows. so i think it's relatively stable and to mike's point, there still is $3.5 trillion sitting in money funds that clearly isn't sitting there because of the yield. i think that's what's providing some of the support here for the market. >> mike, in terms of earnings outlook -- >> i was hoping some of the earlier earnings we saw will auger well for a bunch of companies. but what if instead we're seeing the weak and strong super separate and there's no so-so okay earnings in the middle. you're doing great like jpmorgan or doing horribly like bank of america and citigroup, and it's much harder for investors to choose in that case. >> dennis, i think that's where we are right now. i think the closer one is to a company -- a company is to the consumer, bank of america and ge in its consumer area, the worse the numbers are, the closer you get to people who solve problems like ibm, intel, where they are providing solutions to people trying to cut costs. those are the winners. so the darwinian environment continues. >> i will say, guys, i'm down here with some of the highest profile ceos in the country at the ceo summit. these are people who are by nature optimistic. they have to be. they are growing their companies. but the story i'm getting, much of it behind the scenes is -- and i got it from bob johnson a couple of hours ago, while they do pursue growth opportunities, they still see a lot of head winds and credit is still very much a part of that story. these folks are still mindful that this is a consumer that is not rated a step back in. these are investors who are very skeptical about this economy. and they don't feel it's time to take the training wheels off in terms of government stimulus right now. mike holland, i have to say, i am a little surprised but maybe not greatly surprised at the lack of real optimism for the short term on the economy as far as the ceos go. what do you think? >> bill, i think you put it right on the money as usual. the condition ssumer is the pro. jobs are the problem. housing is related, foreclosure numbers we have been getting the last couple of days, it's all related to the consumer and credit problems. throes aren those aren't going away any time soon. the closer the company is to those, the worse they're doing. closer to the solution to the problems, the better they're doing. read that ibm. so i think people who bet in that direction, read that at goldman sachs, they're making a ton of money. i think what you're doing is giving evidence realtime of what's going on in the marketplace. >> bryan, it's easy for us to watch the stock market index, isn't it, and realize stocks have begun to recover in a major way. what better met terrorirics can at in the credit markets to see if they have come back and healed or how far they have to go? >> i still think there's a lot of work to be done clearly in the credit markets. bill's pointing to what he's hearing behind the scenes. i think part of what we're starting to see is people are moving away to the big money centered banks and there seems to be a lot of activity in the small, regional banks. they seem to have money to lend. we are seeing a lot down to the credit union level, which will be for smaller, midsize-stipe businesses that are able to find credit. that side of it, that seems to have loosened up. the big money center guys haven't loosened up and that's where the lines are driven towards. >> you like health care prescription benefit managers and consumer staples. mike, i will finish up with you. a lot of people are wondering how they can hedge their portfolio. some are doing it in gold and commodities. you think tips might be the way to do it? >> yes, for the viewers who want to get out of the money market funds, low-yielding stuff and go in stocks after they come off 60% their lows, people worried about inflation or continued deflation, the tips misnomered as inflation index are actually deflation index. people should, for their i.r.a.s, 401(k)s, look at treasurydirect.gov and take a look at these things. they protect you in both directions, up and down in terms of price. mr. geithner, mr. summers not with standing, want to be protected from whatever they're going to do, in case it's a mistake. >> guys, appreciate it very much as always. coming up this hour -- big day and big week for earnings, of course. a lot coming up next week as well. michelle and matt nesto are on duty, and it's basically a big smackdown as well. it's walmart versus amazon. and it's a price war over books. we will tell you about that. get ready for the "fast money" halftime report coming up in about a half hour. and let's head to bill back in the business council. who's coming up, bill? >> we will talk to terry mcgraw. ceo of mcgraw-hill will talk about the sales of "business week." but look beyond that as well. how does he grow mcgraw-hill down the road? fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. charlotte. the overall averages may be down but some stocks are hitting 52-week highs, including walgreens, $40 a share on the nose, a gain of .4%. let's head back to bill griffeth at the business council's ceo summit in carey, north carolina. still code there, bill, you poor thing? >> the sun came out, dennis, but it's still chilly. we have terry mcgraw, the chairman and ceo of mcgraw-hill with us today. i have to start with the sale of "busine "businessweek." that was a long of it time beloved asset for your company that. had to be a tough thing to sell. understandable, losing money. >> good to be with you. absolutely it was. it was bittersweet. tugged at the heartstrings. it's 80 years old. it's our flagship. but, you know, it's time to go in a little bit of a different direction. as a global information services provider and we have spent less time on some of the pure media side, and we have transitioned the portfolio. so we're looking to build size and scale and global presence with our major brands and financial services, education and business information. >> what can bloomberg do with that asset, though, that you couldn't? i mean, they plan to -- >> you need to have multiple channels for your editorial base. if you just one function, as in the magazine, or even on the online part, you need to have multiple ways of using your editorial and journalistic capabilities. i think for bloomberg, it gives them a terrific opportunity to find that way to do it and maybe alter some of the business model so that you've got more subscription-based, fee-based revenue. not just advertising-based revenue. >> that's the thing. everybody's scrambling to find a workable business model, profitable business model, the traditional magazine model is dead, don't you agree? >> that's right. you have to be able in anything to build a scale and leverage it. if you don't have that and you're a smaller, as we have been in on that one, it makes it more difficult. >> now to grow the company from here. you have the two divisions otherwise, financial and the educational division. >> right. and our business information side, too. >> right. >> and the whole investment services side of s&p. we are very excited. we're looking forward. the economy is starting to turn around. >> do you sthaenense that? >> yes. >> that was surt havethe survey getting yesterday. in the immediate term, i'm still hearing a lot of trepidation. >> there's two parts to that. clearly, you know, we thought we would start to see recovery in the third and fourth quarter and we are seeing it on that one. our businesses are being positively affected by it now. that's the good part. the second part is what kind of recovery are we looking at? for the most part, most of the ceos here don't think we're going to get beyond 2% gdp growth next year. we have it at 1.8%. you have got to be at least at 2% or maybe 2 1/2% in order to get unemployment to go down. so if you're under 2%, the unfortunate part is that unemployment's going to live with us for some time. and so it's one thing to get the economic growth going again. we have to get after that job recovery. >> quickly, the last six months have been better. are the next six months going to be better? >> i think it's going to be a slow, you know, lazy year t will start to recover and it won't feel robust at all. but i think by the time we get to the end of next year, we're going to see a lot more demand-led growth, and i think it will be good for our business. the good part is we're not where we were a year ago, which was very dire and we're starting to see those kind of recoveries. >> very good. terry mcgraw, always good to see you. >> thank you. >> terry mcgraw of mcgraw-hill joining us in carey. see you soon. >> look forward to it very much. it's warming up down there, too. coming up -- next week will be bigger. matt nesto will be over the names and numbers in earning central. we may have a down day on wall street but there are a number of stocks hitting two 52-week highs. estee lauder, google, mattel, programar just turning negative but harley davidson turning a new two-week high as well. . he returns everything. keep your friends close and your receipts closer. and this is his new chevy, what sold you? 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i'm just the 800-pound gorilla in the room. don't worry. i'm here. want guaranteed income for life? axa equitable is redefining what you expect from annuities. ooh, peanuts. some earnings disappointments weighing on the markets today. the dow jones industrial average off 1%, 101 points. nasdaq is off 1% as well. and s&p is off a full percent too. there are 52-week highs. united technologies is one of them. if you compare it with ge, our parent company, it obviously is not today. it is down 19% year to date. you see the open, you hear the music, that means we're here at earnings central, matt nestor and i. we are here in one of the most important weeks in the earnings season this year. matt, you're going to check the pulse so far. >> exactly. where are we now? it didn't seem like 12%. 61 stocks notice s&p 500 have reported so far. if you take a look, the better-than-expected ratio that was at a record high in the mid-70s, in the second quarter, is already beating us here at 79% so far have come in better-than-expected. 10 missed, 11 were in line. but this is also really important is those that have beaten up that 80%, 24% has been the average beat above estimates. so if you take a look at the dow alone, we're about a third of the way -- no, we're about a quarter of the way through, 7 of 30. what do we have here? >> this is the heat map. >> actual versus estimates. those in green, six of seven, have beat on the eps. notice there's only one. we will give him the frowny face, bank of america. alcoa, jpmorgan, ibm, intel, better than expected. on the revenue picture, this is, of course, the revenue quarter -- >> which a lot of people argue is more important than the eps. >> 6% on the eps. on the revenue, only three of seven. a lot less green, ibm, jpmorgan and alcoa coming in better than expected on the revenue. interestingly, only two of seven were higher from a year ago, and that was jpmorgan and ibm. if you take a look at what i will call ing sectology, that's what i will call it, financials was a disaster. it goes from 59% to 98%. >> this is estimate over earnings growth? >> exactly. you can see what it's done this week, we improved to minus 22% for the quarter. >> one week ago analysts thought the s&p 500 would dea decline of -- >> october 1st. >> a decline of 25%. now the decline so far will only 22%. >> ratcheted up. improvement. and discretionary is also an improvement. they were going into the month at plus 17. it's now plus 20. we saw good results from costco, marriott and home depot. the big picture is, i think, on the market's reaction, is the underperformance of the nasdaq 100. dow and s&p are both on track for a second positive week. if you look at the nasdaq 100, it's up -- they're each up 1%. nasdaq 100 is up only about a quarter percent. >> interesting, considering the tech numbers we saw. good stuff, matt. thank you. sue, over to you. >> thanks, michelle. coming up next -- the numbers are out. the stimulus plan has created or saved 30,000 jobs so far. but only a handful, literally, in the states with the worst unemployment. so are we getting our money's worth or not? that is the "power grid debate." >> that will have lots of sparks flying. coming up at 12:45 eastern, get ready for the "fast money" halftime report. melissa, what are you looking at? >> we will focus in on the biggest drives on the dow, and that is big blue, ibm. we will get the traders' take on whether or not this stock is a buy right now. also, we'll take a position on apple. we're looking ahead to monday's earning's plate. and we will give you a hot options trade on a biotech name, amgen. first, more "power lunch" after this. [ ring ] [ "catch the wind" plays ] what is the sign of a good decision? in the world of personal finance, it's massmutual. find strength and stability in a company that's owned by its policyholders. ask your advisor or visit massmutual.com. welcome back. we're almost halfway through the trading day. the headlines at this hour, stocks sinking on earnings news. financial stocks leading the decline today. we have 15 stocks still hitting new 52-week highs. that includes google, mattel and harley davidson. during a coverage call, bank of america's ken lewis said the banks may have peaked in terms of total credit losses in the quarter and the fourth quarter will be challenging. and in just a short while, we'll go live to the news conference. billionaire hedge fund boss is among five men and woman arrested by federal authorities. it's a $20 million hedge fund insider trading case. that news conference, you're looking live at the picture in new york city at the podium there. it's scheduled to begin about 1:00 p.m. eastern time. we will have it for you live. michelle? >> new reports, sue, show the stimulus plan created only a handful of jobs in states with the highest unemployment rate. was the $780 billion plan worth it? firing off is a spokesperson for president clinton, now a cnbc contributor and terry holt, national spokesperson for the bush/cheney 2004 campaign. you guys know how it works. you both get 20 seconds to make your case. terry, let me start with you, why was this not worth the money? >> well, young president comes to town, has plenty of political promises to pay off. what's more perfect than a big, fat spending bill to make all of your new friends happy? that's exactly what happened. generally republicans like tax relief but there wasn't enough of it in this bill. >> wow, did it in 14 seconds. all right. >> i practiced. >> terry -- joe, let me go to you. >> i agree with the new president part. new president comes to town, economy in free fall. he takes a number of steps. stimulus is working. banks are stabilized, housing market is stabilized. this economy is recovering. it is fragile but is recovering. the stimulus worked and is a big part of it. >> okay. also 14 seconds. neither one of you cited any statistics here. 30,000 jobs created, 6 in the state of rhode island, 400 in the state of michigan, 159 in the state of nevada. joe lockhart, that's good enough for you? >> listen, that's a very narrow look at the stimulus program. it's 5%. there's a much broader -- you take michigan, imagine where michigan would be if we hadn't stepped in and helped the auto industry. so you can take these numbers and make whatever you want. look at the broad economy. it is recovering. we're not out of the woods yet. i don't think anyone argues that. the stimulus is say big piece of getting the economy going, getting confidence back. look at where the markets are now. they understand we're going in the right direction. the stimulus was part of that. >> you know, last year republicans and the republican candidate for president, john mccain, were exscorated by democrats for saying the fundamentals of the economy were sound. now we hear the same mantra out of the white house. well, tell that to the 10% of americans who are unemployed, who were promised big payoffs as part of the stimulus package in the form of jobs. that have not materialized. i think what sounded like a good idea in january with this big spending bill is going to turn into a bill political liability for voters concerned with tax increases and rising debt in this country that our children will have to pay for. >> terry, knows who believe that the stock market is a diskounling mechanism would say the huge rally we have seen is suggesting that the economy is going to get much better. how do you responded to them about that? >> i agree that the economy is getting better but the political argument made for the stimulus package and democratic programs have fallen far short to the promises they made to the american people. >> the fundamentals of the economy were rotten when john mccain said they were good. >> they were. you made a political fight over it. >> and there are plenty of parts to the economy -- there are still plenty of parts to the economy that are still suffering. unemployment always lags. there's no comfort to someone who doesn't have a job, but if we didn't -- if president obama didn't come in and take bold steps to do something, continued along the path that had already been set, this economy wouldn't be recovering. >> joe, six jobs in rhode island. six jobs. >> listen, look at michigan and if you look at this -- >> i know it's a small state, but -- >> you look at the narrow reports and say there are jobs. this is working. it is a two-year program. >> 400 jobs in michigan. what's so impressive about 400 jobs in michigan with unemployment 15% in that state? >> listen, imagine what that number would be if they hadn't done other things like the auto program and there are a number of other benefits. the bottom line is, look at the economy. look at what economists say. it is recovering. it is going in the right direction. stimulus was a key part of that. it is working. the job isn't done yet. the money isn't spent yet. but it is working. >> i will tell you, though, i think that the cash for clunkers program, which a lot of people took advantage of. it was sort of a surprise, though. it's done more for the detroit economy than anything the stimulus package did. and after all is said and done, it seems to me that barack obama's boldest economic policy was to follow the essential policies of the bush administration and what happened with the t.a.r.p. funds at the end of last year. >> all right. guys -- >> just to make -- terry's making my argument. cash for clunkers was part of the stimulus program. it's a broad program, and it is working. >> thanks. good discussion. joe, terry, see you later. >> thank you. coming up -- call it the book brawl. walmart says it will sell ten hot books for $10 a piece. and amazon matches the price cut. walmart said $9. what's going on? who's going to win this war? and you thought books were a dying business, guys. the market's on the down side. but there are a number of stocks hitting new 52-week highs. halliburton is one. cameron international, just turned negative. a couple -- the market's seesawing back and forth today in terms of the 52-week highs. the last one on the list, united technology, still remains at a 52-week high. we're back in a minute. right now, the dow jones industrial average is off 100 points. nasdaq is off 1%. s&p off 1% as well. now, what's contributing the most to the dow jones industrial average drop? well, a good portion of that is ibm. it's down -- it's at 121.86, down $6 on the trading session. there is a major book battle brewing between walmart and amazon. we're just looking at the kindle, too. walmart triggering the war by offering $10 prices on upcoming hard cover releases such as sarah palin's "going rogue" and josh grishham's "ford county." that's 60% or more discount from the regular price. walmart offering free shipping. amazon is firing back matching the $10 price but now walmart is taking its offer to $9. amazon is announcing it is pricing books at $9. michelle, you brought the kindle out and it seems they have gotten more aggressive. >> yes. looking at $9.99 for "the lost symbol" by dan brown. some of these prices are being matched. i'm looking up another one here, "ford county." some of the stuff isn't available yet. >> if i'm getting a $10 hardback paper copy, the digital copy ought to be a lot lower. it cost a lotots to make it. >> i would agree. >> that's a good point. >> that would take that price down to $3 or something. >> i agree. but sometimes they put a premium on the kindle persian because it -- version because it's a hot reader. >> it depends what people want to read in the country, hold a hard book or not. >> what i'm surprised about in that part of the story is the publishers. i think this speaks volumes, to coin that term, about the state of the publishing industry now. once upon a time, they never would have stood for a retailer like walmart coming in and discounting books as much as they are. the fact they're allowing that to happen now tells us, i think, the state of the publishing business right now and it's not great. so -- and i think the only two retailers who could get away with this are walmart and amazon. amazon has done won wonders for the publishing industry with the kindle and now walmart's stepping in. >> i want to see what's happening to amazon's stock. walmart's waking up online and amazon gets hurt here. >> bill, come back soon. we miss you. have a great weekend. see you monday. >> i will be back monday. have a good weekend, guys. breaking news with mary thompson. what you got? >> here's an update on the madoff case. you might recall back in august, madoff's -- bernie madoff's ponzi scheme master cfo frank dipascali did plead guilty to ten counts. at his hearing, the judge rejected a bail package that was proposed by the defense and prosecution and said if you come back with strakter one, i will consider it. today the prosecution and defense are coming back with a stricter bail package for mr. dipascali, who has been remanded to prison since pleading guilty to the ten counts back in august. under this new bill package, he has to put up a $10 million bond signed by 9 financially responsible people. he will be subject to global positioning satellite or home detention with an electronic monitoring. he can only leave his residence under the escort of at least one special agent of the fbi. and it's basically he's leaving his home will be limited to meetings with federal authorities in connection with his ongoing cooperation in the case. keep in mind dipascali said he would cooperate with authorities in trying to dig deeper into the madoff scheme. back to you. >> thank you very much, mary. coming up -- "fast money." then we're keeping track of the market sell-off. and then at 1:00 p.m. eastern time, the feds lay out their insider trading cases against the major hedge fund. we will take you there live and hear the charges against the head of galleon. back in a moment. for a smarter way to trade online. only fidelity lets you back-test your strategies against an entire portfolio of stocks. plus you'll get advanced, customizable trading platforms. and you get the kind of execution you'd expect from fidelity... ...with a dedicated specialist to talk about even your most complex trades. they'll even help expedite the account transfer process. trade like a pro. trade with fidelity. welcome to the "fast money" halftime report. we're getting to the heart of the action as it's happening. the market is retreating following weaker-than-expected e con data results from ibm and general electric. how do you protect your profits? let's get to the word on the street now. the governator, mike from power global, brian sutland and mike grasso. mike, let's kick it off with you. out of the gate after the bell, ibm set the tone. that is the biggest dragger now. are you getting any sense that clients are getting an itchy trigger finger wanting to get back to the markets on the sellback? >> i think the major things are the financials. guys are looking out at the floor as these are opportunities to by gold at a discount. you will thank yourself in the next couple of weeks. but definitely under pressure. guys trying to pick weakness as we said going forward. jpmorgan out of the box strong but doesn't really translate after goldman. >> after such tremendous run in the financials, there were some concerns. technology, though, seems to be the perennial favorite here. there's still optimism surrounding technology. on this throwback, do you think it real it tell will be the end of the trading session to see if people will get in the on the pullback on technology? >> exactly. whether we're above or below 10,000 is insignificant. the momentum that got you up to the levels are seeing a counterbalance. right now the equities are getting what they wanted, which is a positive earnings release and starting to look at how the doctor's reacting right now, i think if you see a stronger dollar here, it will help these equity markets out. right now i find support is creeping up the marketplace. i'm starting to see better buyers in here actually. >> bill, take a look at the charts for us. tell us what you see for the s&p 500. this is in fact our chart of the day. >> well mashgs li, melissa, we bullish. i talked about the s&p going to 1,100, 1,050 back in july. so we pretty much hit it the other day got to 10,096. i think we will push as high as 1200 but the much bigger spoipt we're at or close to the top of the range. i want to be in the harvest mode. take my profit, unwind some of the long position and take a step back, rather than be an aggressive buyer. >> bill, don't start fading on me now. don't start chickening out. hold on to it. you have been calling 11,050. stick with it. >> guys, let's get to brian sutland. if you want to hold on to it, you can protect your profits. bryan, the volatility index is historically low. in fact, we saw pretty much six-month lows a couple days ago. what is your recommendation in terms of investors out there? they don't want to save this but they want to protect. >> bill's saying maybe trend up to the 1,100, 1,200 area. and if we do, we close up at 22. people may be out there harvesting, take profits and you can do that by selling calls. you sell some calls. the upside is great but you take in premiums and you don't mind if the market trends sideways. on the other end, if you're looking for protection in case you're frayed the market may rip lower, the vix has come down tremendously. it's a great time to add push side to your portfolio and collar yourself off in that situation. >> absolutely. before we leave the conversation here, ibm, i'm sure a lot of people are looking at the 5% fallback thinking maybe this is my opportunity to get into this name. what i notice on ibm is that it's a couple buck as way from its 50-day moving average. >> melissa, i think if you look at the sector as a whole, one of the interesting things it tells us is that we may be toward the upper end is that the nasdaq has come basically hit its objective off the march close. that's the strength of the market, the whole march rally. that's one of the things that makes me a little bit more cautious on, you know, anything that's tech related. so, again, i want to be a little bit careful up here. we caught a nice fly. i'm more of a profit taker. i still think you have a little bit more to go to the upside. but i'm not an aggressive buyer here. >> i bet you don't go to vegas. >> several -- several times a year, melissa. >> i would like to take bill with me to vegas. maybe i would leave with some of my money one of on. you mentioned the financials leading the push lower on the back of the bank of america earnings. the company saying it lost more than $2 billion, warning that credit losses. steve grasso, certainly we have had a drum beat of analysts, meredith whitney, we also had christopher whalen coming out yesterday downgrading goldman sachs after the bell. isn't it cautious here to take profits? to take a page out of bill's book? >> oh, geez. wow, i didn't realize -- it is way too cautious to be locking in some profits here. i think -- >> for financials? >> yeah, for financials. i think what you're going to see is a real chase for performance in november and december. i think what you have to do is make your bed accordingly. i think october is the last month -- is the last month of the fisal year for mutual funds. you will see them start to enter the game probably middle of november. i think that's when you will see the real chase for performance. that's when it's going to happen, in financials as well. >> i don't know. bank of america earnings, citigroup earnings, they're making the markets a little nervous. you have to be careful in terms of that chase for performance. >> one of the things i'm looking at, are you kind of telling me even though they made a crux of their business opportunity in profits on trading that you think that it's going to be harder to make those trading scenarios on the next quarter or after that? and right now if you're telling me you think volatility is going to die down a little and it's going to be a harder trade, maybe that does make sense. i'm starting to see dynamics in other parts of the globe, especially in emerging markets. i think the goldmans of the world will do very well if not exceed expectations. it does make sense to start pulling back the reins on some of the estimates, but i'm very encouraged by the trading community and what they've done so far. i think this year speaks for itself and where it's going from here with better fundamentals below it. i don't see why you can't exceed that. the financials as a whole, i think the business is thriving to a point where you're going to start seeing better returns quarters out. i don't see a problem with that right now. >> want to move on and talk about what is working today. certainly google shares are up by more than 4% after the company's earnings release last night. pay per click, the highlight out of that report. we have a lot of positive analysts. we had them before, but even more so at this point. the most bullish estimate on the street in terms of the price target, 700 bucks. bryan, $700. very capital intensive play at levels currently a very capital intensive play in the options market. tell me about how much it costs in terms of the implied volatility here. >> certainly where google is at right now, you want to look to the options market because it is cost intensive. if you're playing that ride to $700, which seems a little late to the party, but if you are you want to look to more cost-effective ways in the options market. one thing i have been looking at advising people to take a look at is you sell some put spreads here. it seems like this gap up in google right now and the move up and analysts getting behind the stock is putting a floor on the stock. somewhere around this $550, $525 level. that's where you want to look to sell put spreads. sell a put and it's okay if you get put to your stock if the stock were to fall below that price target point because you're comfortable owning google at those levels. in the meantime, you collect some premium here and in volatility in the whole marketplace continues to decline, you pick up that premium in case we get sideways movement. >> let's move on and talk about the next trade. dollar trading to the upside sending crude lower snapping a six-day winning street. what's the best way to play the commodities into the weekend. addison armstrong, where do you see crude going? you seemed to have a crystal ball in recent calls wr. do you see it now? >> we're still fighting to try to break through that $80 level. i'm doubtful we're going to get there. it may happen on a spike, but this market is overextended. we've been up for six straight days. it's a natural place we should be pausing, doing some consolidation and pashth tarofi. >> addison, great to talk with you. >> thanks, melissa. ja addison armstrong. got to take a pause on the halftime report. we'll tell you how to protect profits and ride out a potential storm. after google's blowaway quarter, "power lunch" looks at what lies ahead for apple and ebay next week. "fast money" halftime report continues after this. what brings us up can take us right back down. with even blue chip earnings giving investors the spin, fast money busts out the pep tto and has your trades for the turbulent times ahead. and another strong quarter for apple? the tarot card reader makes the call. plus, the next botox? it's the latest cosmetic craze but is the pit boss liking the results on america's post market show tonight. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. all right, opportunity. well, say you're looking for it in new places, like working with a supplier in china and a manufacturer in germany to reach new customers in the u.s. well, ups can help bring it all together with efficient solutions like paperless invoice that can help make customs a breeze. hey, the opportunities are out there. seize them with ups. you know, it's hard drawing those perfect circles. to the all-american meal. french fries, and our national passion for them, are legendary. classic. iconic. but times change and people want better foods. so cargill helped a restaurant chain create... a zero trans fat cooking oil for their french fries... using select canola plants... and innovative processing techniques... while preserving their famous taste. because no one wants to give up a classic. this is how cargill works with customers. ♪ welcome back to the "fast money" halftime report. time now to call the close. let's go around the horn. do you buy or sell going into friday's closing bell? mike, kick it off. >> i'm definitely buying here. i see a lot more momentum coming down the pipeline. i think a lot of earnings will continue to surprise, and i think the dollar in itself will start rebounding off these peak resistance levels and that will help the equities. >>. >> i'm going to stay long for that 1100, 1150 target area. >> bryan? >> i would be buying. >> i would be a buyer. i think the sell-off is overdone. bill, i'm picking you up to go to vegas this weekend. >> oh, a date. that does it for us at the halftime report. on "fast money," a top-ranked analyst gives you the best play on the stock ahead of monday's report. a billionaire hedge fund boss. that news conference scheduled to begin? just a few minutes. "power lunch" will bring that to you live. >> we have a terrific show coming up. as you mentioned, we're going to go live to that news conference with the head of galloeon. we're going it talk to one of the key gentlemen in the music industry about how his industry is going to change given the new technology like twitter that's out there. and then at 1:0 p.m. it's the trader triple play. we will see you in just a moment. ibm shares are down about 5% today even though the earnings exceeded wall street's estimates. ibm accounts for nearly half the dow's losses today. industrial production rose 0.7% last month for the third straight monthly advance. and the university of michigan monthly consumer sentiment index comes in at 69.4% for early october, down from september's final reading of 73.5%. that's cnbc.com news now. we're first in business worldwide. i'm courtney reagan. welcome back to the second hour of "power lunch." you are looking live at a shot from lower manhattan in new york. the breaking news, prosecutors getting ready to hold a news conference in lower manhattan. involves a $20 million alleged insider trading case involving the founder of hedge fund firm galleon group with about $7 billion under management, and it involves allegedly insider trading in a couple of key and well-known stocks. >> i have been reading through the complaint. i know a lot of focus will be on raj rajaratnam who is the founder because he's the one being charged here along with a group of several other individuals. what is more interesting though -- and that's video of him there. when you read these complaints, it's clear that there is a confidential informant, a cooperating witness, who made a living out of collecting individuals at various companies all over the country, whether it was moody's, market street partners, an investor relations firm, the investment arm of intel, or individuals at k companies. he would collect insider information and then arbitrage it to other individuals who worked at hedge funds. >> which is one of the things that make this is particular case fascinating and also different from other insider trading cases that we have seen in terms of the breadth of which it spanned different companies all across the globe. >> yeah. absolutely. i mean, clearly this cooperating witness -- let me give you an example. had a source at moody's who covered hill to be. hilton calls up this analyst at moody's and says we're going to get bought by blackstone. the analyst at moody's according to the complaint calls this confidential witness. he tells him that information. raj puts on a big trade ahead of the news, makes a lot of money and the guy at moody's gets an $10,000 kickback from this information arbitrager who we know has agreed to cooperate. >> we allegedly have text messages and cell phone messages and conversations. >> the middle man who got the insider tip from the analyst who heard from the company and then he gives it to this raj guy allegedly. raj is paying him for that information? >> it's not clear exactly what kind of money gets transferred. i don't see actually any evidence of that, but clearly the evidence is him putting on trades in the wake of receiving text messages. >> it's fascinating because hedge trunfunds so much trade o rumor anyway. that blurry line is going to be very interesting. >> you also don't know, sometimes you get a tip and sometimes the stock reacts the opposite. you can lose anyway. >> one of the stocks that's involved or several of the stocks involved that you might know, hilton hotels, which michelle mentioned. google, ibm, advance microdevices, sun microsystems. some very well-known names. the interesting part of one part of this alleged insider trading scheme is that some of these deals that we were apparently tipped off on or allegedly tipped off on started to take place during the september/october period of last year. so the anticipated gains in these stocks never took place because we were in the middle of the financial crisis. >> $20 million, madoff case was billions and billions of dollars. this is a big press conference. from what i read, the s.e.c. and justice rarely do things together. they're doing it here. they're making a big deal out of this. >> i read this as only the beginning. to me this confidential informant i'll bet was arbitraging with a lot of different people, not just this guy raj but a woman who worked at a former bear stearns hedge fund as well. >> i have been waiting for a sign, when the run on the banks happened, the stocks were plunging, is that an orchestrated effort? >> you're thinking there might be a link. let's talk about that with our guest. >> joining us is steve, partner and white collar defense attorney. steve was formally with the u.s. attorney's office, specifically the securities fraud unit that brought this new case today. also with us is tom gorman, chairman of the s.e.c. litigation practice group. formerly with the s.e.c.'s enforcement division. steve, let me start with you. you heard us describe essentially this case. anything you want to add or i assume you've had a chance to look at the complaints here? what's your assessment? >> i have read the press reports about the case. my assessment is first you mentioned something about the s.e.c. and the u.s. attorney's office not working together. when the securities unit bring these types of cases, it's almost always the situation that you do these kind of cases in tandem with the s.e.c. so that's actually very common, but you're right, they don't often bring press conferences about insider trading cases. they arrest a lot of people on insider trading cases -- >> does that lead you to believe perhaps this is just the tip of the iceberg? >> that's a good question. from a prosecution standpoint, you might not want to take down a case if it's really just the tip of the iceberg. people with means at that point can try to flee, they can try to destroy evidence. so there's a lot of reasons that you stay in the weeds as we would put it until you're ready to surface and arrest people. so i have some doubts whether this is just the tip of the iceberg in this case. rather, because the defendant at the hedge fund is such a high profile person, they're trying to make a statement and they want to publicize this. that's why you see the perp walk. >> if a guy calls me and says, hey, i hear a big takeover is going to happen, and i go and trade on it, but i don't know that the tipster is telling me actual information from an insider, am i just as liable for insider trading charges because i traded on a tip that turned out to be true? >> no. if you pick up a tip, some market information some place and then you go and check it out and you decide ultimately that you want to go and trade on it, there's nothing wrong with that. you really have to know or have some really good reason to believe that, in fact, this is inside information, and given what we know about this case, i would suspect that that's going to be one of the key issues in this case is what did they know about this so-called informant and his arbitrage scheme. >> the s.e.c. hasn't done that successful a job, has it, at extending it -- i know they've gone after bartenders who heard a rumor who heard it from a person who heard it from a person who was sleeping with a person. in the martha stewart case they were never able to win on the insider charges. >> once the information gets attenuated from the inside source, it becomes exponentially more difficult to prosecute the case. the criminal cases have tended to be more confined to direct information where the trader actually got the information. some of the s.e.c.'s civil cases have pushed the edge of the envelope a little bit farther out, but it does get more difficult for them. >> if we know this guy paid for that information, he's a dead man, isn't sne. >> it depends how you will be able to prove it. certainly as a prosecutor putting on my old prosecutor hat, if you could prove that these guys were paying each other and showing those transactions around the same time that the information was supposedly being traded and shared, that's strong evidence that you're going to use to try to prove your case. >> tom, what about the environment that we find ourselves in now? we're still recovering from the biggest economic downturn that this country has seen in quite some time. some would argue that it has ever seen. and a lot of blame and finger pointing is going on at the banks and derivatives and trading. how much of what's happening now in terms of pushing to prosecute and pushing to execute on insider trading cases like this one perhaps comes because of the environment we find ourselves in? >> well, the environment creates a twofold problem here. on the side of the hedge funds, it's going to push them to try to push the edge of the envelope to make a profit because it's obviously harder, although the market has clear bibeen doily b better in runt months. on the prosecution said, it's no secret that the s.e.c. has been battered from this scandal, that scandal, this failure, that failure. this past week they've been getting battered because of the bank of america case. so they need a win. they really want a win, and this case looks like maybe they think this is their win. >> all right, guys. hold on a second. we'll take a break here. >> we will be back in just a minute. we'll keep our guests around. we're watching not only this developing and breaking story unfolding in lower manhattan about this alleged insider trading case, but also watching the market which has been down triple digits with the dow jones industrial average off now about 95 points on the trading session just off the low. we're back in a minute. announcer: in today's markets how can you get your retirement plans back on track? consider oppenheimerfunds, whether the markets are up or down, we follow a consistent investment approach. ask your advisor about oppenheimerfunds. and see how our numbers can lp you reach your destination. call your advisor for a prospectus with complete fund information. read it carefully and carefully consider fund investment objectives, risks, charges and expenses before investing. mutual funds are subject to market risk and tility. shares m the right way alue.merfunds. we are awaiting the beginning of this joint news conference between the fbi and the s.e.c. it involves an alleged insider trading scandal that netted reportedly and allegedly some $20 million, and it involves the founder of galleon which has about $7 billion under management. we will bring you that when it does get under way, and after the opening remarks are over, our lawyers are standing with us, staying with us, and we will get back to them in just a few minutes. first, because the market is down about 95 points, bob pisani is going to join us and give us a rundown on what's happening in the market. we're off the lows, but still a downside day. is it earnings or as michelle merntioned easter mentioned earlier is it just a little profit taking? >> you see gains of 40% in bank of america, 15%, 20% in ge, yes, that's the answer. it's about time that they took a little bit off. the average return, average downside has been only 4% in terms of corrections. take a look at the big names. ibm, bank of america, ge, they have gone sideways all throughout the morning here. that's the important thing. if you look at next week's earnings, let's show caterpillar, dupont, united technologies. the big question is how the international world is going to be looking for them. look at this interesting story. h hair rherrod's being buying gol. we'll talk more about that in the next hour. trader talk.cnbc.com. it's mostly a down story that we're telling today, except, of course, for google, and better than expected earnings. pretty good commentary as well from the ceo there. google shares up 4%. another new high. that story continues. otherwise across big cap technology today, you're finding a lot of red on the screen. mostly other wide held stocks. ebay, cisco, microsoft, intel. the semi-conductor index is fairly week. it sets the table next. you will get a number of huge earning reports, including apple. let's go to sharon at the nymex. >> is the gold market poised for a correction? we may end up in positive territory for gold for the day, but gold prices are down about $20 from the all-time nominal high hit earlier this week, and so what is happening, a lot of the higher gold prices are causing an impact on jewelry sales in india, a very important buying season for the da wali festival. that could cause a correction in gold prices. meanwhile, a lot will depend on the dollar and, of course, the dollar versus the euro. there are some saying it will continue to decline, perhaps as much as 20% over the next two to five years, and what impact will that have on crude oil? crude oil prices likely to go higher. we're looking toward that $80 mark for next week. rick santelli, to you in chicago. >> thank you, sharon. i wish i could say it's a wild day this treasuries. it isn't in terms of movement. but it is an interesting day in terms of purchases. the treasury fund is about done. there's only about $3 billion left. but today we did an agency purchase, and there's a combined $370 billion left for agencies and mbss. of course, now everyone is handicapping. is it time to go long agencies, short treasuries? lots of compression. maybe you're going to see fewer longs. as far as the dollar, it was bound to happen sooner or later. yes, we have an up day, and, yes, even with our up day, the pound is still higher than it was yesterday. michelle, i'm going to send 2 bait back to you. and peter and i are going to go talk. >> they don't even have me in the camera. >> good to see you. thank you, rick. >> as we await this joint news conference between the s.e.c., the doj, and the fbi on this alleged insider trading case, let's bring in our two attorneys who both used to work for the s.e.c. steve feldman and also with us a tom gorman, chair of the s.e.c. litigation practice group. tom gorman, how do you defend these guys? they've got tape recordings. they've got instant messages. they've got e-mails. they've got a lot of stuff here. what's your inclination, first thing you have to do if you're defending them? >> first thing tough do is take a look at the information source because all of this is going to trace back to the informant as far as we can tell. the question there is going to be, where did the informant get the information? what kind of information did he give to the traders? what's the credibility of the informant? remember, at the beginning of all of this, the informant is making a deal. he's got a reason to give the government what it wants. so his credibility is going to be critical. >> steve, it is interesting, is it not, the diverse group of stocks that allegedly were involved in this scheme. i mean, usually we will see it in one, maybe two stocks, or a specific deal that was pending and fell apart or went through, but you've got, you know, hill torn hotels, ibm, google, amd. goes on and on and on. is that unusual in your experience or not? >> well, i think that speaks for the length that this scheme must have been going on and the government was monitoring it. there are often cases where people have been doing this for years and years before getting caught, and there can be a wide variety of stocks. in this case they traced this back for a couple years, and so they've been monitoring this. they've been doing according to their allegations wiretap information. so what they want over the wiretaps is to find out as many people who are involved and trace this over time and see how far this actually spreads out and who the people are who are allegedly involved. so the breadth of the number of stocks speaks to the length of the investigation and what was going on with it. >> all right. we're going to take a quick break, gentlemen. stay with us. we're waiting for the news conference to start. we'll bring it to you when it does get under way, and then we are also watching the market for you as well with the dow jones industrial average paring its losses a little bit. we're down 79 points on the trading session. we're back in a moment with more on "power lunch." ♪ yes, you're lovely... ♪ what do you think? hey, why don't we use our points from chase sapphire and take a break? we can't. sure, we can. the points don't expire... ♪ there is nothing for me... ♪ there's no travel restrictions... we could leave tomorrow. we can't use them for a vacation. you can use the points for just about anything. i know... ♪ the way you look tonight ♪ chase what matters. get your new chase sapphire card at chase.com/sapphire. just a reminder that we are waiting. this should begin moments from now, this news conference between the s.e.c., the fbi, and the department of justice. they're coming up to the podium now. they will make some introductions and some thank yous. we will let them get that out of the way and then when the meat of the news conference begins, we will bring it to you live. >> we've got also google shaking offer the recession in its most recent earnings report. earnings were surging it said last night. apple an ebay are among the big names to report earnings next week. jim goldman will give us a preview. jim? >> intel, ibm, and google in the books. if you thought this week was busy, get ready for next week. monday we'll hear from apple and texas instruments. tuesday brings us -- >> jim, i've got to interrupt. >> virtually all of the alleged insider trading took place in those hedge funds. those defendants are, one, raj rajaratnam, portfolio manager for the galleon technology funds. two, daniel casey, an em ply at new castle partners. formerly the equity hedge fund group at bear stearns. and, three, mark kurland, a top executive at new castle. the other three defendants were high level corporate insiders at intel, ibm, and mckin i did and company who gained and gave away confidential information about fortune 500 companies. this information allegedly included advance information about earnings, planned joint ventures, and still secret corporate acquisitions. those three defendants are, one, rajiv goel. two, robert moffat, a senior vice president at ibm. and, three, anil kumar, a director at mckenzie and company. on stock after stock as the complaints allege in companies like hilton and google, these defendants allegedly conspired with each other to cheat the market and enrich themselves by trading on inside information to turn profits of more than $20 million. i am joined today by our law enforcement partners in this case, joe demerist from the fbi and robert kazami, the director of enforcement at the securities and exchange commission. i'm also joined by the chief of this office's task force and the assistant u.s. attorney who is are handling the protiosecution. i want to thank all of those individuals for working so hard over the last period of time on this significant case. now, i want to emphasize that this is not a garden variety insider trading case. it is unprecedented for at least two reasons. first, with alleged profits of more than $20 million, this case represents the largest hedge fund insider trading case ever charged criminally. second, we believe that this case represents the first time that court authorized wiretaps have been used to target significant insider trading on wall street. all the defendants charged today were ultimately caught committing their alleged crimes over phones that we were listening to. now, this aggressive use of wiretaps is important. it show that is we are targeting white collar insider trading rings with the same powerful investigative techniques that have worked so successfully against the mob and drug cartels. as i said, the defendants charged today worked across the securities industry from hedge funds to fortune 500 companies to an international consulting company. they used their access to inside information to gain an unfair trading advantage, if i could just take a moment to take you through the first chart. as you will see from the complaints that are in your materials, there were a number of well-known stocks that were part of the insider trading scheme. google, hilton hotels, sun microsystems, polycom, clear wire, and ibm. a variety of different types of information that was tier and nonpublic that was disclosed -- >> we have heard the charges against the defendants. i'd like to go, tom, to you first. our lawyers are back with us. he said basically that this is the first time that a hedge fund has been involved in this alleged type of activity. is that your recollection as well? i know we've had individual insider trading cases, but that a hedge fund, per se, that struck me as unusual. >> what he's saying is this is the largest insider trading case involving a hedge fund and i think that that's right. they have had larger insider trading cases in terms of money, but not involving a hedge fund like this. >> does it make it more difficult to prove given the nature of how a hedge fund operates and trades? >> i don't think being a hedge fund per se makes it more difficult. hedge funds are not transparent, so their operations are always difficult to look at, but insider trading by its nature is a difficult charge for the s.e.c. or for the government to find and to establish. >> steve, they made a big deal about the wiretaps, first ever use of wiretaps. is that such a big deal? >> well, it is a big deal in this way. if these were brokers at a reputable brokerage firm, they record their telephone calls. so every time a broker is on the phone making a business call, that's recorded. in this case in the hedge fund, it's different in that hedge funds often don't record the phone calls of their employees. they have to use an alternative. that's why it does make it tougher to do a hedge fund prosecution. >> and they compared it to the mob and drug cartels. the same techniques with he use when it comes to the mob and drug cartels. is this an acknowledgment in the past white collar crime has not been treated as aggressively as some have argued it should be. >> i think it's an acknowledgment they're changing the techniques they're using. insider trading traditionally came up in a more circumstantial way. you had people who said i have some information. i want to tell it to you, and you had to go on their beliefs, on their statements. here what they did is they put the time and the resources into doing a title three wiretap. that is an extremely intensive process. you have to have people on the phones listening to these phone calls all day long and making sure that they are monitoring the appropriate information and sending it on appropriately. >> tom, it's great that they're going after this insider trading $20 million case, but in the meantime, you know, hedge funds and speculators and traders, they lost billions of dollars off the value of the big bank stocks during the meltdown. we were all terrified, and some people on wall street have said they feel like there was a conspiracy going on where they went from one bank to the next, wachovia, washington mutual, and they were orchestrating, yet that doesn't involve insider trading. how can the feds pursue a thing like that and should they? >> well, the question that you're raising is about the so-called short trading, and there has been a lot of speculation that on wall street, in fact, people were starting rumors and theven un using it t drive down the price of a stock and then shorting the stock and making a profit on it. there's been a couple of cases that the s.e.c. has brought where they tried to do that. they have one case where they found the traders with text messages. they prosecuted the case. those are probably even more difficult than the kind of insider trading case we're looking at here because you have one or two people doing a couple of things and you have to be able to find them. very difficult cases for the government. >> and as you might recall on that, last fall they were doing a rumor sweep. they sent subpoenas out all over wall street trying to find whether they could prove people were using rumors to drive down prices. we have never heard much about that since. it apparently was harder to prove than they were hoping. >> thank you, gentlemen. appreciate it very much. >> thank you very much. >> following the case as it goes through. up next, retail rebound. new data giving us a bit of optimism about the outlook for consumer spending. the question is whether it's going to continue. jane wells is working that story. plus, twitter getting into the wine business? i mean the wine you drink. seriously. the label more or less is going to have 140 characters. you are watching "power lunch" on cnbc. we are first in business worldwide. well, with ups, you could eliminate warehouses. streamline your supply chain, and even reach new global markets. so your business is more adaptable, more efficient and more profitable. hey, the opportunities are out there. seize them with ups. is anybody else thirsty? and at ge it means innovating, inventing and building things. it means everything from shipping a new wind turbine every 4 hours to creating some of the world's most advanced healthcare technologies. manufacturing is part of ge's belief that the american renewal is making things right here in america. the american renewal is happening right now. ♪ [ bicycle bell rings ] [ bell dings, kids cheering ] ♪ ♪ [ cheering ] [ female announcer ] sharing. that's video on the human network. cisco. welcome to the human network. welcome back to "power lunch." here are some of the stories we're following at this hour. billion hedge fund hot shot one of five people charged. raj rajaratnam alleged to be a key player in the case. feds say the accused made $20 million in illegal profits. bank of america posting a third quarter loss of $1 billion. third quarter earnings at ge, our parent company, sliding more than 40%. profits were still $2.5 billion. that beat expectations. ge capital once again was the company's weakest link. dennis? a new study out showing some optimism in the retail sector. the question is whether that optimism can last throughout the holiday season. cnbc's jane wells takes the temperature of the consumer for us. jane? >> hi, dennis. we're getting all kinds of information coming in. the latest from morgan stanley saying its skeptical the stimulus problem is having any meaningful impact but it sees signs of sustained modest growth. at the mall there are more people but fewer shopping bags. the top ten bags carried, nordstrom, macy's, steve madden, gap, and gap's old navy, express, victoria secret, and self sephora. >> look at real housing prices, and the pace of decline has slowed. all of these are positives, which is what's driving our consumer spending index to increase. >> what stays ji was saying there is that real wages are better because prices are lower and housing prices are declining less. all of that is good. it all is sort of a predictor of better spending. many e-tailers expect to build on gains from last year. saying they were more profitable in 2008 than '07. however to cut down on e-tailing chargebacks, a multibillion dollar problem, when customers call their bank to reverse charges saying sometimes they never received the items or they returned items that were clearly used, a new website called badcustomer.com allows mer chanmerchants to share lists of customers who do this. the website tells me it has 5 million names on this list. finally, sue, western union has one-third of consumers plan to hide holiday purchases from their spouses this year to avoid an argument over how much it cost. >> i believe that. i believe that. >> do you? >> never. >> bought it for each other, you have to hide it. >> thank you, miss jane. appreciate it. well, if you have been keeping some cash on the sidelines, things are looking up. so what's the best way to put that cash to work? payoff your mortgage perhaps? or invest in the stock market. joining us is the founder and ceo and wealth adviser at the firm that bears his mind and melanie is the managing and founding partner. welcome to both of you. >> i'm going to start with you, nick. you think that getting that 30-year debt off your back, the monkey off your back as you say, is worth it. that now is a good time to do that. >> oh, definitely is. if nothing else from a quality of life perspective. the psychology of paying your mortgage off is just awesome. clients of mine have done that. they just feel bet. >> even with interest rates where they are now? >> you know interest rates being low is great for folks in a higher tax bracket which is another issue. when someone is approaching, say, retirement, their tax bracket issues aren't as much of a concern. in my opinion, it's best to pay that mortgage off and get it off your back. >> i realize we got ourselves in trouble by looking at our homes as an asset, as a financial asset, yet aren't homes likely because they've crushed in value so much, aren't they likely to go up a little better than stocks over the next couple years? >> melanie? >> i think there's certainly emotional benefits to paying off your home. however, we encouraged our clients to be rational rather than emotional when it comes to making financial decisions about their money. the truth of the matter is that if you're going to be -- if you're going to be drawing out assets that you've had invested over the last few years in the market in order to raise capital to pay off your mortgage, then it may not be the best time to do so. in addition, if you're taking money from let's say a retirement account or a 401(k) account in order to pay off your mortgage, then not only are you going to be facing a devalued asset, but certainly taxes as well. so -- >> you'll make more money on your stocks than paying off your mortgage. nick, what do you say? >> well, i think it depends on every case. what really makes a case for is really good wholistic planning. hob shounobody should ever make snap decision without really consulting with a professional first. i believe from a stress perspective purely and a tax perspective, it's really not a great idea to keep money in the bank at least. it's better to pay off the mortgage. >> it depends where that money is coming from. if it's sitting around doing nothing or -- >> what does suze orman always used to say. you stant lican't live in a sto certificate. >> that's true. >> appreciate it. >> thank you. >> coming up next, we're going to break through dow 10,000. we're back above it. off the lows of the session. how do you position yourself for next week's auction. >> there's a lot of action in some of the other markets out there. and we've dramatically pared our losses. we were off triple digits. now only off 58 points. nymex crude has also reversed. the ten-year note is moving as well. the yield is 3.43%. we're back in a moment. they say imports always get the best mileage. well, do they know this malibu offers an epa estimated 33 mpg highway? they never heard that. which is better than a comparable toyota camry or honda accord? they are stunned. they can't believe it. they need a minute. i had a feeling they would. introducing the 60-day satisfaction guarantee. buy a new chevy and if you don't love it, we'll take it back. there has never been more reasons to look at chevy. another stock hitting another 52-week high. joining us is bobby. from the cme we have holly. and from the nymex, tom riley. goods, good to see you. bobby, all this week we traded on earnings. next week is the heaviest week when it comes to earnings. >> i think a lot of it, like you said, have absolutely everything to go with earnings. we've got some big ones coming out. apple on monday, wells fargo on wednesday i think, and i think morgan stanley is due. so i think especially i'm looking at the financials to see like if they're all going to like scatter as far as earnings is concerned. we're hearing some real good and some not so good. >> what turned the oil market around? we were down earlier after a decent run this week. what's going on and what are you expecting next week? >> i expect pretty much the same, following the dollar and following the stock market. we kind of popped when the stock market rallied a little bit. it was down over 100, and we were down. when that came up, we started rallying as well. >> holly, what's going to drive everything next week? i know bonds seem to respond to stocks. the stocks took off. we saw some selling in treasuries. what about supply and data next week? what will be the big driver do you think? >> i think at this point it's going to be more economic data related and also related to what the fed is doing. we get a beige book next week. that will give us an indication of which way they're leaning. this economic data is mixed. we're seeing good production numbers but not much out of the consumer. i think the interest rates will be also related to what's going on in the economic data to see if we see the consumer step up to the plate. >> bobby, times like these i believe in small dreams. can we close above 10,000 today and can we stay above 10,000 next week? >> well, i think 10,000 is more of a psychological level than like a real technical level as the charters go, but the way we rallied so far in the last half hour or, so i think 10,000 is reasonable to expect and i'm tepidly optimistic about continuing to rise next week. >> bobby, are you -- >> we got a lot of alerts saying to be careful. there are outages in philadelphia, but it didn't really make much impact down here. this whole week we've been a little higher volume as far as option trading is concerned, and we've handled it fairly well. >> tom, we've seen a lot of cold weather in various parts of the country and a lot of people are watching the nat gas and the heating oil contract. are you seeing any reaction in some of the other components of the oil market on the distillates to what we've been seeing? >> probably a little has to do with the unsonaunseasonably col weather we've been having. i mean, i think we've kind of moved away from fumendamentals d we're trading like a currency. if the dollar stays weak, oil is going higher. >> holly, this morning i heard someone predict a yield of 7% in the next couple years. you have other people saying it's going to 2.5%. have you ever seen such divergence? >> that's what moves the market, so that's actually somewhat of a good thing. but if i had to guess, i'd say it's more going to that 2% than 7%. we've seen the inflation numbers at this point are not bad. they've been very tame. inflation, unfortunately, is the type of thing, it's tame right up until it's not. as long as the numbers continue to be good, i think the fed will keep interest rates low at the short end of the curve. i think there's a lot of room for the long end rates to go much lower. if you look at the spread between fed funds and ten-year, they're double their long-term average that. tells you either the short-term rates are going to be going higher. doesn't seem very possible right now. or that long-term rates are going to be going lower. if you're a big believer in reversion, i would say those ten-year lats are more inclined to go lower, maybe not 2%, than they are to head to 7% any time quickly. >> thanks, everybody. appreciate it very much. >> thank you. >> have a good weekend. well, they still love them in new york, and they still hate them in boston. 31 years after bucky dent hit a big home run, he's in the sports memorabilia business. should you buy in? we'll ask him. >> you won't want to miss it. plus take a look at some of the s&p lead efforers. estee lauder, google, halliburton, cardinal health, and mattel. we're back in a minute. there is only so much water in the world. but demand is increasing. it takes about 35 gallons to make a cup of coffee. 700 gallons to make a t-shirt. our team is thinking of ways to make water management smarter. nanotechnology that removes salt from water. smarter factories... ...that run on reclaimed water. smarter farms that use... ...less water to grow more food. if we can't make more water... ...we have to be smarter about the water we have. that's what i'm working on. i'm an ibmer. let's build a smarter planet. all right. don't hate me in california. the new york yankees will take on the los angeles angels of anaheim in game one of the american league championship series tonight. go cc. we're joined by legendary yankee bucky dent along with brian steiner who is selling and auctions off pieces of oyankee stadium. we have some of it here. bucky, nice to have you here. brandon, pleasure to have you as well. >> thank you. >> bucky, what about this weather? in football they play through the weather. in baseball this is a crisis. what's going to happen? >> they're going to play tonight, and i don't think it's going to affect them. you know, as a player, you just go out there. once you start getting loosened up, you don't even worry about it. >> it's cold out there. not just raining, it's cold. >> i know, but when you start getting heated up and you start -- you know, the intensity starts to flow in your body, you kind of forget about that. i only thing i ever worried about was the dampness of the ball, having to throw it and stuff like that. but as far as the cold, you make it through that. >> brandon, let's talk about some of the seats we have here. what is it, $1,500 for a pair that you choose, two grand if you want a specific pair. are those prices accurate? >> i know you like to get right to the money, darren, but did you buy your seats yet? number one. number two, don't forget about the bleacher creatures. those are a little less expensive. actually a whole selection of seats on steinersports.com where you can see there's a commemorative seat. >> this one is signed. >> we have the bucky dent seat. is that available, world series mvp? >> that one is available. you have a pair of seats signed by derek jeter. mariano rivera. >> does it increase the price? >> it increases the price a little bit. we have a pair of seats signed by 40 yankees. so it's pretty cool. >> really? >> a limited edition of those. don't forget, we pulled out the black in center field which reggie jackson is autographing. last week we found these bricks from the original yankee stadium from 1923, old brick company. we're going to start to sell those starting this weekend as well. >> bucky, let me ask you this question. you know, bill buckner has made a whole lot of money off the mookie wilson '86 world series moment. do boston red sox ask you to sign bucky bleeping dent? >> all the time, but i won't do that. >> you won't do it? >> no. >> good for you. >> actually mike torres and i have done a lot of things together over the years. he was a great guy. he was my teammate in '77. yeah, i won't sign it that way. >> bucky, we've got this economy that is starting to recovery, but obviously things are very tough for a lot of people. the sports memorabilia business, there's a debite out there. is it recession proof because you're buying a memory, buying something that really means something in your heart. or have you guys really seen an impact from the economy turning down? are people just saying, you know what? i can't very much in this right now. what are you seeing? >> i have seen it go down a little bit, but when you're talking about stuff from like yankee stadium, like the seats and things brandon is talking about, those things are special, and i have got a couple seats from yankee stadium. i have a couple from the 0e8d yank old yankee stadium. when you're talking about a history like new york and the house that ruth built and all that kind of stuff, that's stuff you're going to keep for an awful long time. it's really, really special. >> and, brandon, you have an auction, you have been doing auctions all year. december 6th is when the next steinersports.com auction ends. i have seen some cool stuff, including a ticket booth which currently is selling for about $4,300 i think, and it hasn't met its reserve yet, but you have some pretty unbelievable items here. >> you're talking about the lockers, mariano rivera lockers, all the keepsakes from -- we're talking about the greatest stadium of all time. if you check out the auction, you will see, i am not saying it's recession-proof, but you know people are bidding with their hearts and with their passion for maybe what is one of the greatest games of all time. bucky played on some of the greatest teams of all time in that stadium. when you talk about '77, '78, reggie jackson hitting those home runs. >> it could work to your advantage, couldn't it? people are buying something that's really important to them. they might actually choose to invest more in the sports memorabilia item than they would, you know, something they get from a department store. i'm trying to make it work for you. >> i have to tell you, the seats are going great. people are buying them like crazy. i think we're going to be sold out by the end of the year. the auction if you go on the weeb site steinersports.com, the bids are tremendous. this is a little different. yankee stadium, when you talk about the brand, we're having a lot of fun with t itit. it's a great stadium. >> and if the yankees win i somehow think there will be more money coming in. >> what do you mean if the yankees win? >> i'm just being a journalist, darren. >> and i'm no longer welcome in my previous home state of california, i think. thanks, gentlemen. appreciate it very much. >> thank you. would you believe twitter selling wine? herrod's selling gold. what is the world coming to? dennis kneale will weigh in next. pretty dramatic comeback for the dow. we're still in the negative but only by 64 points. we are off well over 100 points. >> i'd really like to end the week above 10k. give me that. let's talk a little more about walmart and amazon. we're going to learn whether price is the barrier to reading in america. when you cut a hard cover book to 10 bucks, does it sell more? if walmart is finally focusing on the online retail, if it tells amazon we're going to undercut you on books which you sell more of, what if walmart were to say now we want to undercut you on dvds, music cds, on everything you sell. >> is this the biggest threat amazon has ever faced? >> i think it is. unless it's just ten books and it will be done. walmart rarely does anything without big plans. >> especially we're getting near the holiday season. if it works well, they continue it after the holidays. >> look at amazon shares, down almost a percentage point. it's barry' acting. >> i'd be terrified of walmart. i hope walmart never starts a business news network because it would be terrible for everyone here. >> maybe the littler guy can do well here. what about twitter and wine? >> yes. >> do it yourself wine making. you can go online, this is is do it yourself winery in san francisco, they will do virtual tastings online. >> what's the point of a virtual tasting? >> i don't know. >> in san francisco it's the do it yourself is usually growing pot, so this is kind of interesting. finally twitter is trying to find a profitable business model. >> all right. michelle and i are wondering whether this indicates a near term top in the gold market. harrods, the amazing british department store, is now selling gold bars in various different sizes. you can get a little gold bar if you're just a little worried ababinflation or a big gold bar, but you know what? it's one of those main street indicators. >> exactly. >> the sentiment indicators that a lot of traders look at to suggest we're near the bottom. >> how do you price that when gold is so volatile? >> you do it on a daily basis. >> you guys have a great weekend. >> you too.

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