Fiveday losing streak since december. Now over to kayla who has todays headlines. Goldman sachs technical error caused erroneous options trades yesterday. Many trades may be erased but it could cost upwards of 100 million. They do not face material loss or risk from the issue. Maury tomhr Mary Thompson will join us with more. Jpmorgan is reportedly close to naming two new directors with finance and Risk Management experti expertise. The bank identified the candidates but the board has not yet voted on them. The decision is likely to come next month. Two directors stepped down earlier this summer. Facebook wants to get more people online. It is called internet. Org. The goal is to make Internet Access available to the twothirds of the world who are not yet connected. The groups plans include developing cheaper smartphones and using mobile data more efficiently. Joe . Thank you, kayla. What is 75 of twothirds of the world that the nsa could then watch . What is 75 of twothirds. If we had two thirds of the world connected and we could watch were not going to miss anything, are we . Well talk about that story later. Especially in our executive edge. I wanted to ask you quickly, kayla, how is your memory . Is it good . Was it a quarter was it one quarter where Goldman Sachs didnt have a losing day in the enron account, a quarter or a year . A quarter. A quarter. I dont think anyone has done it in a full year. How many days are in a quarter . Like 90, but not trading days. They make money mostly. 100 million. Lloyd was at dinner last night with they had an 800 bottle of wine instead of 1500 bottle of wine, which is why scott cohn is here, which is why eric holder is after these guys. Attorney general eric holder says that he expects to announce what he calls significant matters related to the 2008 financial crisis. He made his comments in an interview with the wall street journal. Senior correspondent skcott coh is here to tell us what holder may be referring to. There will be no fast and furious subpoenas or irs subpoenas to himself on this. This is different stuff were talking about here. He didnt say hes not going to do that. Well just have to wait and see. This was enough to really got me up early. This is a red letter day for you, to get the crooks. We looked into it a little bit. It turns out holder wasnt signaling any specific cases, but he gave the interview to pushback on this idea that with the fiveyear statute of limitations on securities fraud coming up, time might be running out on the dodgj. Anybody who inflicted damage on the Financial Markets should not be out of the belief that they are out of trouble because of the passage of time. If any institution is banking on waiting things out, they have to think again. The statute of limitations can be as long as ten years and even in the case of securities fraud there are ways to stop the clock. But ive been told there is a push from high levels in the Justice Department to get these cases done already, for his part, holder told the journal he expects to be there to announce the significant matters, hell be in office and it is believed holder has been planning to step down by the end of the year, though he didnt go any hints on that. That means were looking in the coming months. But holder said most of the firms are too big to jail. Is this a change of course to have said that in the spring and now to be saying were going to bring significant charges against a lot of these institutions . That was tape out of context. He was talking about the fact there are consequences to charging these firms and there are and something they look at. But they have been looking at these cases and the tricky part is making these cases stick. Theyre very complicated cases, have to convince a jury beyond a reasonable doubt and there are smart lawyers open the other side on wall street that did a lot of disclosure when the deals were being done and it is very hard to poke through it. How many people are in the house . You said any individual has to if you had a pal, how many would that would that be 500 . The people who left office he did not mention enablers or i dont know if he was asked about it. I want to understand two things. Do we think hes going to go after firms on any type of firmwide basis, and do we think there are individuals that are still in the cross hairs that we thought were off the list and when i say off the list, dick fold, anybody at Lehman Brothers i thought was off the list, are they on the list . Stan oneil, angela mazillo, anyone at countrywide, bear stearns. You can make the list, but most people, the expectation was, game over. Heres the issue, and they ran up against this back in 2009, first of the financial cases that blew up in their faces. They sued two Bear Stearns Hedge Fund managers. You dont have necessarily the cooperating witnesses to work your way up to the ceo. And thats been a problem. Not just that it sort of took the wind out of the Justice Department sales, but the fact that defendants or potential defendants were emboldened. Maybe i dont have to plead guilty. Maybe i can wait this out. It is go to be difficult to get the guys at the top. And are those cases over, meaning i read pieces, i talked to people who suggested months ago, if not years ago, that some of those cases around the high profile people, that they stopped investigating. They made a determine tlgs is no case to bring. Is this a suggestion that there is Something Else going on that we dont know about . It is kind of a suggestion. The idea of getting to the top is very difficult. And, yet there is this push that i know for a fact in the Justice Department to bring this all to a conclusion. It has been five years. How much of this is a stunt, were at the fiveyear mark, unlikely perhaps even based on what he said youre going to see i thought maybe what you would see is on september 15th, you know, they decide theyre going to arrest five people just for the show of it or at least in terms of the timing of it, but even that suggested forget about september 15th, forget about this, were still pushing away and we have in some cases up to ten years to do this. There is a lot of symbolism with september 15th. Five years since lehman went bankrupt. Theyre not bound by a statute of limitations in all crimes, but you got to wonder if there is will we see a perp walk that day . Ill try to be around. I dont know of anything in particular. You have signed us up for a washington, d. C. Show to go down there on the anniversary of that, to talk to barney frank and talk to barney frank and chris stein, right . Is there going to be enough material for andrew to write a sequel is the bigger question. Yes. Thank you. Sequel for what . Too big to fail. Too big to fail. Is that the okay. You need to mention it, if youre going to bring it up, you need to mention it. We reported this and others did yesterday, leslie called welcalledwell will be nominated to be the head of the criminal division. Shes been in private practice for the last seven, eight years. And so she knows a thing or two about public pressure to bring indictments. Youre coming back, i just heard, we can wrap this up. Were going to come back. Were going to hammer this thing. Do you think holder has been watching a lot of american greed . Lets hope so. A lot of people do. Thats where you see a lot of you must think, you know, look at whats going on. I havent done anything. When i what struck me today, wolves arent the scariest thing on wall street. You know that stupid movie with leonardo dicaprio, like a hemorrhoid on history. It was a bunch of people that basically would be robbing banks if they werent at this bucket shop. The lowest, like, lowest form of life. But the usa today says this is business as usual on wall street. These arent the guys you need to worry about. The real guys are the ones that youre talking about at the goldmans and the jpmorgans, these guys are small but theyre putting the guy that ran Stratton Oakmont together with the big investment banks. Which is where we are right now. Dont you worry the public does that . I do. I think thats where we are. Thats the optics of the whole situation. I think thats what holder is responding to, it is right in the cover of the whoever did the story, it says right in the top that the temperature in the country for something to get done is what is spurring him to do it, which probably isnt the best reason for an attorney general to take action. And im not sure that is, but theyre conscious of it. Any prosecutor you talk to, they know whats going on, they know what the talk is, but they will tell you, we go the temperature of the irs scandal must be much lower because he doesnt seem real like anything needs to be done there. Or at least not doing an interview about it. Exactly. Maybe in five years. All right. All right. Thanks for that, scott. See you back next hour. An earnings story were watching today. Lowes reporting earnings of 88 cents a share. Revenues topping expectations and it also raised its fullyear forecast, comes a day after home depot reported blockbuster earnings moved the dow up in the premarket. Lowes is seeing some of the same reaction today. Up just about 1. 5 in the mash et yesterday. Thats a chart from yesterdays market close that were looking at. Unclear how it is trading in the premarket. But it is topping estimates by 9 Cents Per Share. That is lowes ticker low. Mash ets this morning, we saw the futures are indicated lower. And yesterday we said 30 points, 30, 40 points of upward indication, early in the day, is not enough to guarantee a higher close for the average. Once again, it was unable to hold on to those and did close down. I think some of the other averages were up. So there were things in the dow that didnt help. Today, were looking at the dow down 22 points. Everyone says that the fomc minutes could indicate whether september or december for the tapering. Lets look at oil boards. We have 104. 82. Some people are surprised were still over 100 given the economy is not going other people wondered why were not happening with what is happening in egypt. They arent a big oil producer, but they could shut down one of the canals over there, which one . The suez, right . It was a state of emergency. They didnt shut it down, but oil rose even when it was just tensions were raised there. Really interesting for me looking at the journal yesterday, said back the generals. Today, bolton, back the generals and next to that story, abrams, cut off aid. We dont seem to know what to do. It is the you see the deaths and youre just there is no way youre going to be able to say anything positive about the guys that are in force now. You worry about Muslim Brotherhood and whether you would eventually have another antiamerican theocracy in the least, which is the last what do you do . It is a minefield, is it not . Where are you on this . Im wondering. I want your opinion on everything. She asks me if i read too big to fail. I live too big to fail on a daily basis. Im aware. What do you do with this . I dont know. I dont know. That was a huge buildup . I know. If i went one way and then when you watch the news, it is an unfortunate you hate to see it. Then i watch someone that was fairly reasonable representing the government over there, and said, yeah, we have fired into crowds but were firing at people in the crowds that have already i dont know whether thats true. Regardless of where you stand on it, it is clear that washington needs to be more vocal on it, more than the president calling in from marriage wmarth Marthas Vineyard saying, im aware of the situation in egypt. Guys yelling at him, were on the tee, lets go. Hurry up. What are you doing over there, barack . Youre on the phone again . Youre up sorry. Lets go to we could go across the pond for a moment, time for the Global Market report. Carolin roth is standing by in london. Carolin . Good morning to you, guys. We are in a bit of a Holding Pattern ahead of the fomc minutes and seeing european markets pulling back just a little bit. Were off by around. 3 off the session lows. We did have a couple of earnings reports which will come to just a little bit. Let me show you the markets one by one. The ftse definitely an underperformer, off by. 75 . Keep in mind about the stocks, hsbc trading today, the xetra dax is up by. 25 . Back to the earnings. We had two beermakers in europe report numbers and both were a little bit below expectations. But the share Price Performance is divergent. Carlsberg in denmark up by almost. 9 . Again, numbers were hit by weakness in russia and western europe and the outlook that the company gave us, that was fairly bleak as well. It is saying that the uptick in uf europe is going to be very, very slow. Heineken off by 3 . Net profit in the Second Quarter dropped by 16 and the company gave us an extremely muted outlook. So were seeing a lot of pressure in those shares. Finally, a quick check of the forex markets where the dollar is gaining a little bit of ground against the euro and the yen. Sterling dollar at 1. 5687. Euro dollar back below the 134 level. And dollar yen sitting at 97. 44. Back over to you guys. Carolin, you doing what are you doing, Climate Change week . Is that what youre doing over there in europe this week . Is that something that is happening . Absolutely. We have really exciting theme weeks. Last week was that was crime, Financial Crime and this week it is the green week. Yeah, green week. I saw something very unsettling that some climate warmers now are predicting cold, wet, hot, dry summers as a result of this of what were seeing happening. Hopefully youll be conferring that a little bit. Thats last thing we need, cold, wet, hot, dry summers. Thank you, carolin. I dont know what that means. Exactly. To the u. S. Markets. Joining us, keith springer, president of springer Financial Advisers and john lonski. Why are you laughing . Trying to get a rise out of people. Whoo did you hear the joke about this . No. Never mind. Lonski, where are you on the fomc Meeting Minutes . The fed is going to taper. Does it really matter much whether or not they announce it in september or at the end of october . I dont think so. Doesnt matter . It seems to matter. I think the 65 chance theyll go ahead and announce tapering the september 18th meeting and the market has priced that in quite a bit thus far. I wouldnt be surprised if as that as the tapering approaches, the announcement we see the tenyear treasury yield make a run for 3 if not a little bit higher, which i think is not going to hold. I think thats a bit excessive given the fact that this remains the weakest economic recovery since the second world war. Thats a word nobody likes. Do you think the world is going to take over in terms of setting Interest Rates higher regardless of what the fed does . Yeah, good chance that is going to happen. They lose control or will it be an orderly way . I think early on theyre going to perhaps overdo it on the upside, but were eventually going to see an adverse reaction in the United States by the Housing Market, equity market and what not and that will bring bond yields back down to a range that might prove you mean initially the rates will overshoot and it will look like theyre losing control, but will come back to earth. Right, precisely. A painful process. More volatility, well have wider credit spreads, problems with the Housing Market. That leaves a lot of volatility. I dont think the fed does taper. It was a shot across the bow a couple of months ago. I think the economy no tape nerg november or december . I think theyll be forced not to. I think it was a shot across the bow. Had it coming across as being responsible. Doesnt want to be irresponsible. Hes leaving. He wants to say, im about ready to do it, but also a student of the depression. And he knows full well 1937. And doesnt want to relive 1937. Hes going to wait for, you know, hell go the side of caution. I would imagine very strong economic numbers are going to force him to taper and we wont get that. The economy is going to slow, continue to slow. We have seen earnings come down, earnings expectations coming down a bit. I dont think hell have the room to do it. I think you want to say, hey, look, im in charge, ready to do it if we need to. Until then, when . Not for a couple of years. I dont think so. I think the demographics push it out a number of years. I think individual investors need to be very, very careful, because so many of them take so much risk. So many are just long roll of the dice and dont want to do that. I dont think he tapers anytime soon. He wants to give the impression he will. And in fact i dont i dont think theyre going to do it. I dont think they can do it. When do you see slowing . Profits are coming down definitely. Gdp is expected to continue going up. Where exactly do you see the metrics not adding up to this . Gdp of 2 to 3 is not enough. You pull back the stimulus, you go back to 1 or below. The big thing for me is deflation. Theyre scared to death of deflation. I think they really want that 2 inflation rate. We barely saw it with Consumer Prices last couple of weeks ago. I think theyre scared to death of a japanese style inflation situation. Theyre afraid of pulling it back. Not so much a slowdown on the economy. It is lack of inflation or negative deflation is what scares them the most. Thats the real reason they dont taper. You were saying, doesnt really matter. What have you been watching the rupee . India is apparently thousands of miles away, right . You have emerging markets that are moving on the prospect of a possible taper at some point in the future. How can you say it doesnt matter september or december when the entire world seems to be tapering has to come to an end. Were you surprised you were seeing flux in the emerging market . I think it is overdone. It is an exaggerated response to an end to tapering. I dont know why theyre so fearful this is about to come to an end. At one point, when quantitative easing was in full flex, we were looking at a junk bond yield of less than 5 . And if thats not speculative behavior what is . Perhaps it is not a bad idea to tray to bring quantitative easing to an end, to tell Financial Markets youll have to go out on your own, wont have the clutch of Monetary Policy any longer. I think that will help to reduce the risk of financial asset Price Inflation that i think worries the fed right now much more than consumer Price Inflation. Should everyone get out of bonds then . I think theyll have a ride a roller coaster ride. The yields are going to go higher, then come down. You have to have a strong stomach right now to be in bonds. I think thats an analyst approach versus someone who is on the street every day. Analyst approach, we have to start to look responsibly. Is it the right thing to do . Absolutely. We have to start to taper, no question about it. The reaction on the street, the reaction of the investors, i have to deal with individual investors every day, will be feared. They want to see the fed will pump money in. If there is a fear theyre going to stop, i think if he tapers by a large amount, the market comes down. A lot of it is built in, bond yields, a pendulum. Bond yields bounce around, theyll go much higher because of the fear. But difference between the analyst versus you dont think there has been irreversal of damage done by all this qe at this point . No. I think consumer Price Inflation is well contained. We really didnt have all we can get out. We can get out cleanly with that . Yeah, i think as long as we try to exit slowly. The rupee and stuff like that, you wonder. What else bothers me, youre having problems in india and some difficulties in china at the same time in the past month, i believe industrial metal prices are up by 9 , thats scary. Why are we getting base metal Price Inflation at the same time that we find emerging Market Countries struggling. Those are bounces, though. I hope it is a bounce. Thank you, gentlemen. Thank you. Great to be here. New details show broader nsa surveillance reach and attention history buffs. Nixon tapes will be released today. Lets head to the Weather Channel and check in with alex wallace. Good morning to you. We have showers and storms moving through parts of the midwest, here across the northern portions of minnesota now, seeing it fizzle out, but we could see those reignite later today. This is thanks to cold frontal boundary marching through the region. That could bring us some strong storms later today. Anywhere in the red, from parts of the plains all the way to the western great lakes, we will be watching for the threat for damaging winds, hail and we cant completely rule out the chance for an isolated tornado. Active storms here in the upper midwest. Eventually that same front is going to march its way into the northeast and help to bring us stormy conditions. Ahead of it, moisture levels increasing, feeling a little more muggy in these areas. That will add some fuel to the storms. Storms tomorrow, and into tomorrow night, heading into the east coast. Squawk box coming back in a bit. Welcome back. It is time for the executive edge, our daily segment focused on giving Business Leaders a bit of a leg up. Thats what were going to try to do now. First story, the wall street journal reporting that the nsa has built a Surveillance Network that covers more American Internet Communications than officials had publicly disclosed. The paper saying the system has the capacity to reach roughly 75 of all u. S. Internet traffic. In some cases, the program has the ability to keep the content of emails sent between citizens within the u. S. And also filter domestic phone calls made with the internet technology. Guys, we thought this was the case or i thought some of this was the case, this is more than what snowden ever said, bo potentially and i think more of what we heard about in reality. Take great pains. You looked at it. They take great pains to say any domestic calls have to be related to following a chain that leads abroad. Start in the u. S. And end abroad or start abroad and end in the u. S. Or be entirely foreign but pass through for me it not too much. I think it is hilarious this has been going on for it seems over 15 years. The names of the programs lithium is a station i listen to on sirius xm. These are the names of the programs. Yes. Fairview, oakstar, stormbrew. I had a case of those yesterday. Just quickly, to differentiate what is going on here, there was the p. R. I. S. M. Program. And all the tech servers they could act as all of their users communications, right. And one of the examples given is around 2002 olympics in Salt Lake City saying the government partnered with quest communications, a publicly traded telecom company, to intercept communications in a sixmonth range before and after the games just to make sure nothing questionable was going on there. But it has been going on for quite some time. It is an enemy of my enemy thing again. Where are you on this . I can maybe figure out my focus more if you let me know. Are you okay with it . You know your buddy is on the far left and this is im not okay with it. Matt damon broke up with the president because of this. I heard about that. I come at this as sort of all is fair in love and war. My view is the government can do what they want to do. At the same time, if snowden is out there who wants to expose it and journalists want to write about it, they can do had they want to do and maybe thats the life we have to live. It is weird. I dont you have to assume i think it is frustrating, nerve wracking and i want to protect us. You can always say, if you got nothing to hide, you got nothing to hide. You have to assume you have a benevolent government that is not going to be interested in your political views to somehow attach irs scrutiny to it. Hopefully that would never happen. Then you would worry about the government knowing all about a dragnet of transcripts you can control whenever you want. People who havent had their coffee yet, this is what theyre referencinghow to reach the twothirds of the world that dont have internet. The final installment of the secretly recorded phone calls and meetings from president Richard Nixons white house, theyll be released today. The recordings cover the tumultuous three months when watergate was closing in on the president from april 9th to july 12th of 1973. Thats the day before the existence of the covert reporting system was revealed to a Senate Committee probing watergate. Those tapes are from a period that includes the resignation of two white house staffers. I watched all the president s men years ago, i want to hear what the tapes have to say. It is a 40year anniversary. My reference point, right . So many scandals. We had so many scandals that at this point, i look back on that, there was a coverup. I remember that. It was a break in at a place where it looks oldfashioned now, down in d. C. , at, you know, the circular watergate towers, it is so long ago, we had so many im not it is like i have no idnterest in this for some reason. I dealt with my feelings toward tricky dicky. Im okay with it now. So many things have happened since then that i think overshadow this, it bores me to some extent. Plus the technology back then, it was one of those tape recorders with the big and Rosemary Wood probably did and you where were you in 1973 . I was in my previous life. You worere . You were a glimmer in your grandmothers eyes. In my mothers eyes. Not yet, though, probably. No. No. All right. Close. All right. Okay, guys. We have a couple of other stories well be talking about throughout the rest of the day. Coming up, tech joint hewlettpackard set to report before the close. Watch shares of staples today. They fell short of street estimates on both the top and bottom lines. The company says the retail performance is weak but it saw online sales grow. I again heartily accept the nomination for president of the United States. People have got to know whether or in the their president is a crook. Im not a crook. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. 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Call 18882800149 now. Optionsxpress by charles schwab. And choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Every day were working to and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. Welcome back to squawk box. Hewlettpackards Quarterly Results due out later today. The question will be will the pc giant see improvements this quarter . Brian marshall works for isi group. Good morning to you. We talk about a pc maker probably unfair given the two biggest segments of the Service Business and the printer and ink cartridge business and then we spend all this time, you know, talking about the demise of the pc. How much should we be focused on the demise of the pc . A lot. It is declining double digits year over year. Pcs and printing represent half of hewletthewlettpackard. Thats a problem for them going forward. We need to be acutely focused on it. If there were top two things, when the press release hits the wire, what are you looking for . Revenue decline, the street expects high single digits. Were a little above that. Thats one of the issues. Lets see how they do on the cost cuts. Hp has been able to maintain around 23 , 23. 5 . They have been beable to mainta in margin. The key here is hp is a company that has over 300,000 employees. Many levers to pull. And they can take down costs any given quarter. Thats what they have been doing, why they have beaten on the bottom line. Still fundamental issue remains the top line. The report card on meg whitman, is she any good . Is she overrated . Underrated . What is the story with meg . Shes an elder stateswoman in the tech sector. Shes done a phenomenal job. Doesnt mean you have to be respectful. Go ahead. This year she called a fix and a rebuild year. I think shes fix something things, but i dont think theyre rebuilding anything. You look at it, revenues continue to climb. The other half of the business that is nonpcs and printing, enterprise business, storage, networking, all these markets are growing. Emc, cisco, but for hp, theyre all declining. Meg and others at hp talked about the potential for revenue growth. What is meg supposed to do . If you whisper in her ear, what are her options . I think they need to break down the company. I think thats the last catalyst that remains. Look at what ibm has done over the past ten years, got out of pcs and printing. She made no effort and said nothing to the effect she would really consider that a meaningful way. I think they said thats off the table, but i think it is something they have to tackle. There is no growth for a tech company, look at ibm, declining, hp, declining. Our recommendation would be, you have to make the company a lot smaller, refocus and rebuild on some key assets that should be growing. What is why did she have to prove what do you mean is she any good . Not good with this company. Should she be running this business . From the tone of your questions, makes me think you dont youre doubtful. There are people who are skeptical. Is it women in general Running Companies . Oh, thats you dont ask the same questions about thats not true at all. Thats not true at all. Marissa mayer, youre wondering whether shes any good, yahoyahoo, is it because alibaba is up . What about sharyl sandberg. I think shes a terrific executive. Romney, is she okay . Shes done a terrific job. Look at the stock prices. It seems like your tone just im not getting into this one. Wow. Just your tone. I think shes you know what else, she was a republican too when she ran for office. That has nothing maybe thats it. Maybe it is not antiwoman. Did you say goodbye to i have not said goodbye to brian. I want to say goodbye elsewhere. Didnt you hear the tone, like youre supposed to say shes got this rep, but she shouldnt be running. I did notice a tone. Wow. Let me ask you a different question you dont even hear it. I heard it. I know what the tone was. What if meg was in the vogue shot. Would have been a glamorous shot. One of your favorites too . Disingenuous again. We should let you brian, thank you, very little. Thanks, guys. Good one. What do you think . Caddie shack. Did you know that was caddie shack . Will hp meet this beat or miss wall street expectations of 86 cents a share. Go to squawk box or squawk. Cnbc. Com. Comeback companies, especially cnbc series. You should be doing that. Series focus on the road to recovery, one household name next. Alert. The beach on your tv is much closer than it appears. Dive into labor day with up to 50 off hotels at travelocity. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Welcome back to squawk box. Jackie deangelis is live on set with the story of whirlpool. Just washing machines, jackie . A break from a colorful Television Conversation during the bra eke to talk about washing machines and microwaves. A bumpy ride for whirlpool stocks, but the stock has made a come back, up nearly 140 in two years, up more than 30 year to date. Part of the reason for that is because the Housing Market has seen signs of recovery, albeit slow, and also as we see new Home Construction and existing home sales rise. Now, more appliances, of course russia purcha are purchased to furnish the new homes. The company Just Announced it will acquire a majority stake in a chinese appliance company, believed to be the number three manufacturer in china. The Company Makes washing machines and microwave and in addition, management also reiterated full year guidance for 2013 of 9. 50 to 10 a share. However, of course there are risks to the story. The first is the very thing that has driven the stock and that is the high correlation to the housing recovery. It is dependent on Consumer Spending which seems to be recovering but slowly. And keep in mind that roughly 30 of the Company Sales come from its international operations, operations outside north america and theyre typically more volatile. Having said that, Raymond James estimates that the 2014 eps for the company will be 12 a share and has an outperform rating on the stock, which means it expects the company to outperform the s p 500 over the next 12 to 18 months. This is definitely one to keep an eye on. You talked about lowes earlier this morning, home depot as well. Some enkourmging si inencouragi those retailers. Whirlpool, you think about the housing recovery, there is so much focus on rent to own and rental properties. A lot of private investors, private equity firms getting into the space, buying up foreclosed properties, redoing them, furnishing them and renting them out to consumers. There are a lot of buyers who are furnishing the homes to rent them. They have the cash to buy some of these and appliances are part of that story. So definitely one to keep an eye on. Thank you for that. Coming up, a Goldman Sachs trading glitch could cost the firm more than 100 million. Mary thompson will bring us the details of that story when we return. I hav e low testosterone. There, i said it. See, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. Serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. Tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. In a clinical study, over 80 of treated men had their t levels restored to normal. Talk to your doctor about all your symptoms. Get the blood tests. Change your number. Turn it up. Androgel 1. 62 . Welcome back to squawk box. A technical error could cost Goldman Sachs hundreds of millions of dollars. Details on what happened yesterday. Fat fingers . Interesting day. That technical error caused golden sacks to fled with trades at the open of yesterdays session. This marking the latest in a number of computer related glitches to impact the markets. In a statement saying the exchanges are working to resolve the issue and the losses wont be material to the company. The ultimate number on that loss will depend on how many of these trades are canceled or busted by the exchanges, and where gold man settles with remaining counterparties. Some of the trades were canceled after they hit the market. The nyse reportedly told traders they believe most of the trades will be busted. According to a person familiar with the situation, as a market maker goldman sax puts together every day to reference internally when clients call. Its believed that changes to the firms Computer System caused the list to be sent along with rereasonious prices at the open of trading tuesday. So if goldman put a bid ask on an option these numbers along with an order to execute the trade was sent. When there is a big gap between the bid ask and the order the exchange will bust the trades. If the order price was closer the trades need to be reviewed and can be appealed. Its not known how many of these bad trades were executed or busted but given the exchanges are working through them will likely have a better idea on that later today and then of course the final number on the loss. We may not know that for a while. Its not expected to be material, just for example, if lets say goldman lost 100 million the bar value at risk is 81 million so its something they could absorb. I dont understand. They have an internal list. Individual equities . Equity options. Its like somebody keeps a memo when they accidentally email to the somebody . Its a spread sheet. It has to be in a system. Its in a system. I dont know exactly where its kept or who references but they do have that together, they have that put together every day. Because they need to know if someone calls and thinking about doing this, here is the bid ask. Here is the issue. The issue is not that happened to Goldman Sachs who can afford the loss, if it happens at some other place. Capital last summer it ended up buying a bunch of shares it didnt want and had to do a fire sale and Goldman Sachs is one of the firms that ended up buying those at a profit and was able to jack up the price so they made a lot of money on the other side of that trade too. The goldman statement almost seemed to indicate they were blaming the exchanges. No. I dont if you read that it said well the exchanges are working on the issue. Didnt say goldman is working on the issue. I think to resolve the issue . Im not speaking for goldman sac sachs. I would be surprised if they werent working on the issue w the issue they are referring to is looking at the trades to determine which ones should be canceled or busted. Again, because there is a huge gap, the exchanges will flag it immediately because they know its a bad trade. I think when its closer then it requires more review. These things happen. 100 million the number . It could be more, could be less. How much more . You know, some reports say 100 million but thats according to some of the market makers. Goldman wouldnt comment on what the final number might be. The department of justice nearing a decision on a number of probes involving large Financial Firms, new cases from the financial crisis could be coming. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Good morning. Welcome back to squawk box here on cnbc. Kayla tausche is in for becky quick. Beckys not here. Maybe they would be in the green. The dow is off 30 points. Nasdaq open up 12 points. No kidding. The market goes up when women are around . If becky were in the market. Gender with you. Oh, man. The whole world is viewed. We have news. S p 500 off about 5 points as you know i love women. Lets get you through some of the Morning Headlines. Objects. Were going to watch shares of lowes, the retailer beating estimates on the top and bottom lines as home depot did yesterday. Raising its forecast for the year. More on lowes in a few minutes so hang on to your seats and hats. The fed to release the minutes of its meeting. Investors looking for clues when the fed of course is going to start or not start the tapering that Bond Buying Program though there is increasing speculation it will happen at the next meeting in september, were going to talk a little later to our good friend steve wiesman. And European Bank officials are in athens checking in on how well greece is doing in meeting its bailout obligations, the next batch of aid money due in october. Attorney general eric holder saying the doj nearing decisions on large Financial Firms. New cases stemming from the meltdown could be coming. Scott joins us with more. That sure got our attention when we heard about that. But turns out the attorney general didnt get into specifics and im told what he wanted to do was send a signal with the 5year anniversary of the crisis not to get ideas about beating the statute of limitations. Thats really what he said. Anybody who is inflicted damage on our Financial Markets should not be of the belief they are out of the woods because of the passage of time. If any individual or any institution is banking on waiting things out they have to think again. Of course holders Justice Department and the Obama Administration have taken heat for the lack of high level prosecutions over the meltdown in 2008. There havent been cases but the record is mixed. In 2009 two hedge understood managers beat fraud charges. That was a setback. Better luck when a cup of traders pleaded guilty and a third this year. Lots of action on the civil side. The new York Attorney general working with the doj sued jpmorgan and sued bank of america and Standard Poors among others. We know there is a push from high up in the Justice Department to move other crisis cases along. No specifics from holder other than were not done yet. You know, its interesting, scott, that this stuff is just starting to bubble to the surface even though the 5year statute of limitations is approaching. When i was looking at some of the Bank Quarterly filingses a couple weeks ago they did start to disclose the doj is investigating us for mortgagebacked security cases. Almost every bank in the Mortgage Market disclosed that. When i talk to people they said that was because at the staff level the bank had been informed that the staff had recommended that the doj bring charges. It seemed like some of that stuff was relatively near term. Are you getting that sense or you think its going to take longer . There is a sense and holder said in his interview she going to be there to announce these significant actions, and if you believe the reporting that holder may be out by the end of the year, that suggests its coming up. The other thing you have going on, remember the last state of the union speech president obama announced this mortgage fraud working group. Thats been getting going. And its a lot of agencies working together and that may be a reason why were seeing a lot more in the area of mortgagebacked securities. Interesting that its come up so recently with the crisis happening in 2008. A lot of people saying its been five years, set aside the statute of limitations for a few minutes, that doesnt always apply. Whats going on . And this seems to be the answer. Back to the answer for a second. We talked about this a little bit in the 6 00 hour. Do you think these are new cases we have no idea about or do you think these are the the old names that we thought were off the table . I think thats the big question this morning of people waking up reading this going whats happening here . The question are we going to see Top Executive former ceos perp walked. The answer is if you do the math and look how things have gone, and this is just me talking, that doesnt seem likely because you dont have the lower level people who have been pleading on the way up. You look back, this isnt this isnt dick fuel back, jimmy cain. Dont know. Holders not saying. But theres a lot of things that have to happen before that were to take place. You have to implicate them, knowing about these deals and knowing about alleged fraud having criminal intent. Is the expectation, we hear about these suits or whatever happens are we going to say what took them so long or say oh, we didnt know that was even in the cards . I think it may be a little of both. What youve been seeing on the civil side of things with civil cases, might portend what may happen in the future. They say they can make these civil cases. The burden of proof is a little lower. And they can look at these individual deals and whether there was fraudulent intent. The other thing they have been doing is this statute from the savings and loan crisis. They may be having some success with that, its held up so far in court. And so you may see, again, more civil cases related to that. Are they misunderestimating what a good word. Was that bush or that was bush. All right. No, hers was refudiate, which is another word thats damn good. As a decider. Do you think as with fabulous fab that they got a little emboldened but thats misplaced. He is this low level nobody, i mean, that gets nowhere near fabulous fab was the securities and exchange commission. That was the first that stuck. It was the first one that stuck, really stuck on the sec side. Thats the kind of thing they are looking at whether there was disclosure. Your dads a lawyer. What would you say jimmy cain could be charged with . I have no idea. Failure to supervise . Signing a Financial Statement . Related to markings . What about dick fold and erin calins. Supposedly they new full well some of those things. They have to get these executives on it would be securities fraud, it would be signing off on a financial samt or sec filing knowing what that they are doing is false. Thats a tough charge to make especially you have instruments that have been gone over by lawyers and accountants. You have hundreds of people you could finger, hundreds of firms caught in these crosshairs. You think the government has the resources to actually find in that haystack the needle that they are going to want to find . Thats a good question. Not only do they have to find it, they have to prove it beyond a reasonable doubt. To a jury. You always get asked why has no big name person gone to jail. Theres more people with more incentive to try to find the crime and bring the charge, right, a prosecutor wants to make a name for himself. Frankly, a journalist. When i was writing my book i remember thinking if i could find a crime, wow, id probably sell more books. It would be a better story if you find ultimately, throughout all of you know, my good friend wrote the book the devils are all here. And none of them are technically criminals. Its so difficult to find intent. People screw up, absolutely. Hosh mistake, absolutely. You know, there is a whole side of people that say that this was totally enabled by not just a government push toward greater housing ownership but a societal push. 100 . Flipping houses and taking home equity loans. If you are a Mortgage Broker and the fed says here is more money than you ever need and you get paid by living loans. I was a stockbroker. I had to get paid having people send me money. Can you imagine you sending money to people. Thats a good racket. There is a story about a guy who lied about his income, he got sent to jail. But his broker who recommended it didnt. None of the major Media Outlets are pushing for prosecution of the dead beats that were unable to make good on the contracts that they went into. All they want is more money from the banks for the people that should have never got at any the loans in the first place. Here is whats interesting. What about franklin rains . The big round of accounting fraud, enron, worldcom and so on. Its not that much different. Heres the biggest were these were isolated companies. Nobody had seen the size of enron fall like that in a space of weeks. It was by itself. What do you mean. Where is the similarity between a bank america or a Merrill Lynch and enron . Well, if you look at all of these companies that have deals off the Balance Sheet, enron had deals off the Balance Sheet. I know. The way enron what enron was doing with those deals and the way they approached it was totally different. How so . Just, i dont think its e n even actual you think the devils are all there ready to be prosecuted. I dont think there is anything, if they could have done it i think they would have. Thats what im saying. Im saying if they could have, they would have. Im not saying that all of the devils are here. Im suggesting there are people that made very bad mistakes. Holder doesnt want another office, this is not a shakedown. We saw spitzer. That was his deal. He extorted firms for running for future office. Holder has no reason to try to extort money, right. You have schneiderman, a lot of people. There is, everyone has an incentive to do this. My point with the accounting scandals of the decade ago is that there was also this greed and this need for companies to make their number. In the case of enron. But creating a product that packaged mortgage and allowed the Rating Agency to give it a aaa and giving it a product that they wanted is not a crime. Thats right. Neither is moving a deal off the Balance Sheet making it impossible, cooking your books. I dont know. Scott, thank you. Throwing the grenade. Coming up, a chemical attack in syria. Richard engles that details on that next. And then lowes is matching home depot with an upbeat quarter. And then later, a new message from the fed. Dont fear the taper. What they may say and talk from jackson hole and the fed symposi symposium. Steve is going to give us the inside skinny. In a world thatsg faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back to squawk box. There are now reports of a possible chemical attack in syria. Our own Richard Engle joins us from cairo with the latest. Good morning. Reporter good morning. Not just a chemical attack, rebels tell us a series of chemical attacks. This morning starting around 2 00 a. M. Syrian rebels tell us there was a chemical weapons attacks on at least ten different towns and villages to the east and north of damascus. That this barrage of surfacetosurface missiles fired by the regime, missiles tipped with chemical warhead these claim, lasted several hours. They say the death toll is over 1,000, weve seen videos showing many lifeless bodies, many of them women and children. Witnesses say that some of the symptoms before death included constricted pupils, foaming at the mouth, Syrian Government denies that it used any chemical weapons. This comes at a time when u. N. Weapons inspectors are actually in damascus looking into the fact if chemical weapons have been used. The weapons inspectors are staying in hotels a few miles away from where these alleged incidents took place. Richard engle, thank you for that. This is unbelievable story. Richard, with egypt, is this the best i hate to say syria thinks they have cover to try this now with the world focused on egypt . Reporter its hard to know if there was direct timing between whats been happening in egypt and syria. We are focused on events the last two weeks or so the war in syria has been developing and continuing on its own pace. But they are interconnected in a global sense. You look at the pend you lum of the arab spring, moving the last few years for a while there was mo men twum the rebels on the street, the protesters, now it seems to have shifted back the other way. The military taking over here again in egypt, a generally positive reaction to that from egyptian people. Saudi arabia embracing it. Kuwait, the uae, a lot of governments saying they think having the militaries come back in power is a good thing. That certainly helps the Bashar Al Assad regime. I dont know if that g geopolitical shift had anything to do with the alleged atrocity in damascus. If the generals in egypt werent pilloried by the street, then it almost embolden seem to embolden other government there is to put down demonstrations maybe the same way and not worry so much about a backlash. Reporter certainly Bashar Al Assad likes the fact that the military has taken over here in egypt and is turning the tide against the Muslim Brotherhood and other islamic groups in this country. So juz jordan, so does a lot of countries. It bodes poorly for the rebels in syria long term, makes people feel maybe a strong hand is the right kind of government when youre looking at the alternative which is the last three years of chaos. Syria, however, is an extreme case where you have now alleged chemical weapons use, i dont think the people in the arab world even if they support a return to a strong government in egypt will accept what happened. Whats the Obama Administration, they are getting people are criticizing you know, what were doing with egypt, the red line has now been cross that was supposedly drawn in the sand. Its a huge, another additional problem for how to handle it for hagel and the rest, right . Reporter it certainly is. President obama had previously said that the use of chemical weapons was a red line. This is not the first time chemical weapons have been used or allegedly been used in syria. This would be a dramatic increase in scale, however. If you remember, the white house promised to start sending lethal aid to the rebels in syria after u. S. Intelligence had proof that small amounts of chemical weapons had been used. That was after small amounts. What about today if these reports, ten towns and villages, 1,000plus dead, many of them women and children. If crossing the red line already happened, today it sounds like syria and the ba shar regime jumped over that red line which is going to put the Obama Administration in a difficult position. How do you take action and then come out and say well, were still with the Syrian Government. I think you may have youre going to have a policy of, well, inconsistency here. Richard engle, thank you for that report. Were going to be watching to see what type of reaction we get around the world today. Theres another big story in the corporate world that is lowes reporting a profit of 88 cent as share, revenues topping exspiktations and raised its full year forecast. We have the director of Furnishings Research joining us with reaction. Good morning and thanks for being with us today. Looking at lowes and home dae depot beating estimates and bolstering the sentiment. What are your takeaways from the report . They posted a very good quarter. As you said, comps 9. 6 . We were in print at 5 i think consensus maybe 5. 5 . Better than us on the bottom line at 11 cents showed that the sales leverage was pretty good. The beat for us came 4 cents at the from operating expense and 4 cents from sales and a penny from gross margin at the operating line. For depot much the same, not quite as much leverage at the operating line due to probably acquisitions last year. Trying to read the tea leaves on the housing recovery from the reports. There has been a lot of talk how refinancings are going to slow down. Thats affected by rates rising. Do you get the sense some of the activity, the ceos saying the recovery is long, does that mean the purchases are going to come up too throughout the year . I think that both of them raise guidance for the year and frankly, in our note on depot published last night, early this morning, we actually went a little ahead of their guidance. Lowes raised theirs as well. I dont know where numbers will come in above that versus that guidance but i wouldnt be surprised to see them go above guidance. I think people are feeling fairly bullish about the do it yourself retailers and their prospects. Housing is certainly an important part of that so is the improvement in gdp though thats moderated a bit. The overall businesses of both Companies Look similar in a lot of ways and the outlooks look similar. One of the differences thatableleys talk about is the facts that lows is a bet on the discovery of the suburbs. Do you see the sign that lowes is doing so well, better han than home depot, as a sign that the small town recovery is catching some wind . I actually dont think its quite that way. You may say some of that. We find a major difference in the professional customer. Depot has a 35 penetration of pro, lowes about 20 . Depot has 330 a square foot in sales, lowes about 260 a square foot. When do you that math you see that the consumer side of the businesses are relatively similar and the difference is explained by the pro. So the pro do it for me. Depot has a first mover advantage because they have been at it a longer time and the pro doesnt move easily unless something goes wrong with the existing provider. One more quick take away from you which is do you think valuations are too rich . Whats your target for lowes . Well, our valuations are too rich. We dont put a target price on the stock so we dont have positive ratings on. Both pretty much in lock step with the market, a little below the overall retail index so were looking for better entry points. These are world class corporations. We would like to recommend the stocks but only do so when there is more up side to the stock as opposed to downside or equal risk. Well leave it there. Thanks for your time this morning. Thank you. Coming up the Fukushima Nuclear plant experiencing a leak. That next. 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Japans Nuclear Watchdog may be raising now an assessment of the situation to a level 3 which is a serious incident. The Plant Operator says around 300 tons of contaminated water leaked from a steel storage tank at the plant. The tank is about 300 feet from the coast, so the leak doesnt pose immediate threat to the ocean. Four other tanks have experienced similar leaks since last year. The fukushima plant experienced multiple meltdowns after massive earthquake and tsunami hit japans northeast coast back in march 2011. Coming up next well talk about gauging the qe exit strategy. The markets paying attention to the fed minutes released this afternoon 2 00 p. M. There is a lot of disagreement among members and the statement could help investors understand the mindset of policymakers. Well discuss that and more when we return. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. And this is my home team. This is my large lecture hall. This is my professor. And also my coach. This is my booster club. This is the guy whos graduating ready for a great career in technology. [ male announcer ] in 2012, 90 of Devry University grads actively seeking employment had careers in their field in 6 months. Join the 90 . Learn how at devry. Edu. Box. In the headlines were going to get a fresh read on the Housing Market later this morning. The National Association of realtors out with july existing home sales at 10 00 eastern time. Economists look forge a 1. 4 increase. Royal caribbeans celebrity Cruise Division has canceled an alaska cruise in mid trip. Its mid trip, due to a mechanical problem. Passengers are getting a full refund, i hope you get more than get a credit toward a future cruise im told. To me i think you would want more. They give you airfare home, canceling the next four scheduled cruises on that ship while the problem is fixed. Why are there so many problems on these cruises . Im not a cruise guy. The world also being flooded with 6second videos. Here is news, this is for carl. Twitters vine now has 40 million users up from 13 million 2 1 2 months ago. Analysts have been watching these figures closely with Facebooks Instagram unit introducing a short form video application. Carl is mr. Twitter, vining like crazy. Mr. Kiernen. I have target and looks like it might be a penny shy of 96 cents. 611 million. The adjusted number, 1. 19 which would, and we normally would use adjusted. Way above. Whats the stock so far . Its down. Were going to see whether there is whether we use adjusted or not. There is also an adjusted estimate for the Third Quarter which is yes, it is adjusted. 80 to 90 cents, the estimate is 88 cents, so at first blush looks like this actually is above expectations. And 17. 12 billion is slightly below the estimate of 7. 264. We probably should go into the actual release itself. You never know whether analysts are all on the same page in terms of special items that would have caused the adjusted net to be so far above where the not operating but just the net number we have. Looks like more sentiment like walmart, nordstrom, like macys. The ceo quoted saying our u. S. Outlook envisions continued cautious spending by consumers in the face of budget pressures. That could come down on the outlook for the rest of the year. Shares are down by about 1. 5 kayla, doesnt make sense to me, is the company now sees the adjusted earnings per share near the low end of a 470 to 490 view. The estimate that the street is carrying right now is 432. So, 432 either is not based on adjusted or the street was already down quite a bit from where it would have been from where it would have been earlier. So you see what im saying. 432. Saying 470 to 490 which could still be above the 432 where wall street a lot downgraded walmart. Now the companys catching up with some of the expectations. Target says this Current Quarter is above the range. Targets Second Quarter adjusted earnings per share at the top end of an expected range, despite a softer than expected comp sales increase of 1. 2 . The 95cent number which is gap was at the midpoint. It expected 21cent dillution of the canadian segment. If we have an analyst well ask him whats causing the weakness in the shares. Could be i would say i dont know how they are going to miss the year number. The 470 to 490. In the the year we had people looked at this, great year for stock market, housing up but i think people underestimate the effect of the payroll tax hike and in Middle America it isnt that good. Incomes arent going up fast. People havent gotten over the tax hike. If you are up scale or on line its fine. But i think a lot of basic consumers are just not feeling it. Not feeling much better and arent much richer. Thats what i think is causing a lot of broad mainstream retailers to have a hard time achieving these Comp Store Sales that they need. Was it yesterdays quote . Was that todays trading . Where was it . Its up now. It was down 2. 5 . I hate trying to explain when a stock is down and its up. It should have been up. They beat by a huge amount. Could be the Comp Store Sales number. As best buy, jc penney owe good number, its not a negative. That says something, though, in fifth year of recovery not having a negative Comp Store Sales. A buck 19 versus 96 cents is pretty good too. That is good. Lets get get a preview of the fomc minutes. Stocks have been pulling back amid rising Interest Rates and speculation about the tapering, whether its around the corner or no. Joining us from washington is the Financial Times u. S. Economics and trade correspondent. David kelley chief strategist at jpmorgan funds. Great to see you. Havent seen you in a long time. Good to see you, too, andrew. Give us the view from washington right now. If you were going to handicap the tapering, september, december, sometime in between . I think they are really still on the fence. So i would say a small taper in september is what people are probably expecting at this point. You know, i think the employment number at the beginning of september is going to be crucial to fed thinking. I think the hawks on the committee believe that theres nothing in the Economic Data the last few weeks to stop them from tapering. Probably not enough evidence. Well see what happens with the payroll report and you would have to look at inflation. I think the growing consensus is maybe a small taper in september, then well see how it goes later in the year. David . Whats your answer . I think they will announce what they are going to do in september. They may start it in september but thats not the important point. I think the sfed overestimating the ability of this economy to grow. So even if you get 2 to 3 growth the second half of the year we have no productivity growth, zero. Weve got pay rolls growing faster than gdp and so what that means is even a moderately going economy is going to push that Unemployment Rate down. One of the problems of Forward Guidance it only works if you have a model which is correct. What youll find is even a mediocre economy, im not so much interested in where it starts. Im convinced where it ends. Yeah. And by next summer when they have a trillion of purchases out. Do you care a lot about who the next fed chairman or woman may very well be . I do. Its not so much the personality. I want them to have a balanced view of what the capabilities of the Federal Reserve are. What does jpmorgan want . Im not going to speak who do you want . Who would you prefer . Come on. You must have a view. Who would be a better chairman or chairwoman for you . For the markets. Immediate and long term . Im not going to give you a name. Well, im not miss yellin or you wouldnt preclude a person because she is a woman, would you, david . Of course not. After our earlier conversation if yellin were fed chair were on this. We saw the meg whitman. This is like the way we play politics. We focus on personalities and end up with bad policies. The issue is understanding what the Monetary Policy can and cannot do. It cannot stimulate an economy on its own which is flat on its back. We need supply side policies which enable us to grow. And im much more interested in the policies enunciated by the Federal Reserve chair. Neither one of the persons were talking about are supply siders. I think thats a problem. Thats a zombie idea. I think what were hearing from both the current fed chairman and a lot of the candidates is that they think just more on the tear stimulus will help and it wont. James, give us sort of the backroom dealings right now. The handicap is that larry somers gets the job. I hear yellen is still campaigning. You used to cover n and a. Hes done a lot of back room dealings. Whats happening . I think what youre seeing is the inner circle around president obama seems to be rooting for larry summers, but the outer circle, the Broader Community rooting for janet yellen. Youre seeing this war behind the scenes at the moment. And president obama seems to want space to make the decision. What that means is unclear. But there is this tug of war going on. When we hear the answer . The white house has said in the fall, technically that means after september 22 but could be after labor day. Im not sure they would have made his decision on holiday. One other question. Lets say they announce this person in september or october. When does bernanke step down . What is the mechanics of all of that because i think theres going to be a lot of uncertainty in the market. Im trying to get a gauge for the timing. I think ben bernanke is expected to go through his full term until next year. And i think the markets would be pretty happy and pretty comforted by that. So i think the idea is to have him serve his whole term and ensure the longest transition time. What nobody wants is a protracted confirmation battle. I think the important thing is for ben bernanke to lay out the tapering plan in september. Whether he starts it then or not. That way who is nominated can say me too. Because here is an opportunity for ben bernanke to say this is an update, this is where we are. But that way at least you dont have the uncertainty of no tapering and now a new person. I think thats true, but in a way, ben bernanke has already laid out the tapering time table. Its just that its subject to economic conditions. We dont know whats going to happen. James, thank you for the insight. David, youre sticking around. All of this suggests to me that you dont hear about the until october. No ones wearing no one wearing white pants. Another way of looking at. White will be. James said after labor day. Isnt that when you stop . Thats where you stop. Thats when i stop. Through november. There is a winter white. Yes. Coming up, were going to hash out the target earnings. So we are going to see this. Now its down a little again. The world premier obstacle race is coming this fall. Just read about it. That will not be me. Well talk about tragedy and success of these races. See, that you wouldnt expe expecting. Well have joe desena next. 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We modeled ourselves after ironman. Iron man has a shorter, medium and long distance. We did that model. Three miles, eight miles or 13. 2. Along the way its not what you would experience with an iron man. Its not traditional where you are running or biking. Youre climbing, crawling, in some cases youre crying. You make men and women cry. And you take pride in this. Not pleasure but pride. Pride and pleasure. Its exciting. Its didnt. Its primal to get out there and sweat and work the way we used to work for thousands of years. Its only the last few hundred that weve gotten soft. I was in a makeup room putting makeup on. Thats not great job. Thats not normal. What kind of circuit would this be, whats the prize money . This year 65 events, around the globe. 650,000 people that compete. Its extremely exciting. Its getting people up and off the couches. A gym membership which we all have done, that doesnt motivate people. If it did we wouldnt have close to 100 Million People that are obese. This motivates people. They change habits, they change friends, go to bed early, stop drinking. No age . Ive got 75yearold, male and female out competing. Whats the body count . How many get injured after they do it. The typical race has 8,000 to 10,000 people. Were going to see 50 injuries, those are going to range, ankle breaking, a strain. You want people to think they might die. What if someone does die . Thats the extreme we didnt talk about. We have a race called the death race. Spartan race were speaking about is a baptism its an exorcism. Youre going to do that too . We do that once a year in vermont. Thats how this started. You call it a death race. That will be 72 hours, 90 hours, and you could die. But thats very extreme. Thats to emulate climbing mt. Everest. Even for the normal races you have to sign a waiver saying i understand i can die. You can die walking across the street. This is a little more extreme than that and you need recognize the risks. So joe swims, a mile a day. You could die swimming the mile. I feel like that sometimes. How would he need to train for this . Says he wants to do. Joe and i and kayla and becky were to prepare for this what would we do . A lot of body weight. We clearly do that. Clearly. Pullups, rope climbs, pushups, a lot of cal a stenics. And running. Pull hups i need to work on. There might be i might get stuck like a third of the way through and never finish. And not climb a rope. And so what we do, you need to finish the obstacle. You need to train. If you dont you do burden of proofes. The ultimate exercise. So its a jump up, jump down to the ground. A demo . I would love to. Im attached to wires here. For nbc what is the what they sign up for now, whats the potential. Mma, people didnt think that was necessarily its huge. Yeah. I think what reebok and nbc recognize is sports are fun to watch, traditional sports but people are not doing that on the weekend to stay in shape. People are going out and doing races like this and doing the p90x and so it motivates people and they recognize that and so nbc and reebok want to be part of it. Did you see reebok sales up 11 . They contributed to spartan. They did. They did. Its in the reebok gear . Reebok is making specific spartan gear. What does spartan gear look like . Its a little more rugged. Not a head dress and armor. Not like the old spartan gear. Its got like little grip on the side of the shoes so you can climb walls, special knee pads built in. Just so you feel more comfortable next time. When you guys race. Have a wireless mike so actually do some burden of proofees for us. Are there people who are emerging as the clear winners. Theyre serious. About 10 of our 650,000 are very serious threats, whether they were high school, college, olympians are coming out to compete. This year weve got the World Championship 10 . 90 stuck where i am. Trying to climb the stupid rope. 90 of couch potatoes. 30 ever female. I think its fantastic. By the way, beating the men. Gumming up all of the works. I cant believe you would Say Something aloud. All right. Wouldnt it be exciting to do one . I have thought about even mini marathons. My knees at three miles and my knees the control room is saying my window, my past, i dont know. Work on a marathon. Late 70s. A woman that looked like flo from the brady bunch going through. This will help. Oh, well. I dont know. Im signed up. Ive got four kids. I do. Hes only got two. Only two. You have four if you start racing. That is too late for someone i know. Its off the table. Thank you for coming in. Good luck. Dont leave yet. You can do a burden of proofee. Coming up after a strong day for Retail Stocks yesterday investors focus on the sector we focus on target and its latest earnings next. Make sure you log on to our facebook page. Your chance to tell us what you think hewlettpackard will report following the bell. Go to the squawk box facebook page. Ody know where flo is . Are you flo . Yes. Is this the thing you gave my husband . Well, yeah, yes. The name your price tool. You tell us the price you want to pay, and we give you a range of options to choose from. Careful, though that kind of power can go to your head. That explains a lot. Yo, buddy i got this. Gimme one, gimme one, gimme one the power of the name your price tool. Only from progressive. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Target earnings are out now. After looking through the onetime factors the proper number, this is important, for comparison is 98 Cents Per Share, thats 2 cents above estimates, the company did break out of a 21 cents of die lugs related to targets canadian segment. Analysts factored that in. Revenue slightly short. Lower guidance for the year. Were going to be on the low end. Where they were before, i think. Than previously. Thats the lower version of the guidance if you will. We should say thank you to david kelley who spent the hour wisconsin. You wouldnt tell us whether larry somers or jack kelly. Youre going to . Give it up . We only have 20 seconds. No. I want us to focus on what the fed can and cant do. Its more important to get policies right. Which of them would give us the right policy . I think both of them are talking about too easy money. I think we need to get back to a more balanced supply side is so yesterday, isnt it. Arent you frustrated its written off . Yes, because were were so focused on demand of the economy were forgetting were doing nothing to create supply. Were going to run out of workers, run out of machines. Thank you. We thank davidle kelly for spending the hour with us. Hopefully well have you back soon. We have the Morning Headlines up next checking the futures into the break, still lower, just about 17 cents, 17 points, rather, on the dow. [ female announcer ] a classic macaroni cheese from stouffers starts with freshlymade pasta, and 100 real cheddar cheese. But what makes Stouffers Mac n cheese best of all. That moment you enjoy it at home. Stouffers. Made with care for you or your family. Every day were working to be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. Time line for tapering . Well get an inside look at the minutes from the latest policy meeting at the fed and bring you live coverage from the Central Banks retreat at jackson hole. Emerging markets feeling the pain from the feds paper talk. Find out if your investments are safe. And a hedge fund manage here uses his financial gig to fund his professional tennis career. Were going to ask sam barnett what lessons from the world of finance have helped out on the tennis court. That got you right in the throat. The third hour of squawk box starts right now. Welcome back to squawk box here on cnbc. Im joe kernen along with Andrew Ross Sorkin and kayla tausche. Becky quick is off today. She has time off. Glad that kayla is here and having her here probably has no influence on whether the market goes up and down. Im wearing pink. Its not red. Its not green. And you said after labor day, andrew. Only winter white which is more of a beige. Weve had a lot of news. Target earns 98 Cents Per Share for the Second Quarter, 2 cents above estimates. The company expect full year profit at the low end of its prior forecast. We have Home Improvement retailer lowes returning earnings of 88 cents a share. Revenue also topped expectations. It said it raised its full year forecast on a strong housing recovery. U. S. Equity futures are in the red, raising a little bit from where they were earlier in the show. The s p would open about two points to the down side. The dow would open about 9 points to the down side. The nasdaq would be down by just about with five. And hewlettpackards quarterly reports are due. Expecting 86 Cents Per Share. Are you a user, an analyst, just an armchair analyst . Will the company meet, beat or miss, take our armchair poll. One of the talkers of the morning, news that people are talking about, attorney general eric holder telling the wall street journal the d. O. J. Nearing a decision on a number of probes involving large Financial Firms and new cases from the economic meltdown, they could be coming. The attorney general sending a message people and institutions involved shouldnt think they are going to beat the statute of limitations. Were coming up on the fiveyear anniversary. Given that nobody has been perp walked the expectation was that this was over. Now a suggestion maybe this is back. We have news the wall street journal posting a story on an outside review of bloombergs Data Compliance and news reporting, you might recall a couple months ago there was that news around bloomberg and whether reporters were using inside information getting from the terminals only accessible to people who worked at the company. This new review revealing the company didnt curtail reporters access to subscriber data two years ago when concerns first emerged due to what they call an internal misunderstanding. This outside review we should say was conducted by a Prominent Group and the law firm hogan lovells. Is he still there . Former. And also clark hoyt, a bloomberg editor, used to be the public editor of the new york times. There are two instances they found reporters using this data. We should highlight what kinds of information they were getting at the time. In one case, apparently journalists reported on the pricing of a mortgagebacked security offering by using data that the reporters could only get by looking at the terminals. The other a case where one of their tv reporters, and they went on the air with this, i remember when this happened, was using some information from the terminal about when people were working there and when they werent, whether they are on the terminal or not, looking at the scandal at ubs. The trader that lost 2 billion in an obscure group. What they did in trying to identify who that was, they looked at who at ubs worked in the group and found the trader that had not logged on. I think a lot of people expected this review would find that bloomberg reporters misused information whether the so called london whale had been logging into his computer or not logging in and they used that information to report on jpmorgan. This report didnt find that. Well see what this means. Goldman sachs came forward with this. Well see if this report makes everybody pleased or not. In the meantime, the Federal Reserve kicking off its annual retreat. Steve leaseman is there live. Ben bernanke is not. Good morning. A little monetary mayhem in the mountains where we begin this annual retreat for the Federal Reserve with really unprecedented amount of uncertainty over the fed. The leadership, nearterm guidance on the policy and of course the effectiveness on the policy. Were calling this a jackson hole in the fed here with as you said no bean bernanke, no drogge, and a lot of governors and Bank President s. No clear policy guidance and no clear timing when we get that as to whether there was a september taper. The bernanke successor is uncertain. There will be a lot of debate whether quantitative easing was successful. And of course the taper guidance has been murky. Lets look at some of the pluses and minuses of the two big candidates that people are talking about. First there is larry somers, the former treasury secretary and janet yellen. And the pros on larry that were hearing is his crisis management. Everybody says he is a brilliant economist and maybe another aspect is he is unattached to the current policy which mean he needs to pivot off of it he doesnt own that policy. The cons, he is politically divisive. Its going to cost president obama some Political Capital to get him approved and there are issues about his leadership if he is a consensus builder. Janet yellen. She is known to be a leading moan tear policy expert, respected throughout the Federal Reserve and Monetary Policy circles also known as a consensus builder. She is untested at the helm in a crisis, she did support ben bernanke and she owns the current policy. I think another thing were going to talk a lot about here is the last month and the rise in Interest Rates. What was the source of that, could the fed have done that differently . Thats going to be instructive for mow the fed moves forward in its communications and guidance for the tape fer it gets around to it. I think the big rate debate is whether or not its the fed having a stock of assets thats taken off the market, is it the flows that it takes off every month. My favorite, what i think is the post parnt. Market expectations. How the Federal Reserve guides those. Were going to have two Bank President s on from here. Jim bully from st. Louis, john waynes from San Francisco. Well bring in those in the next couple days. I think thats going to be friday morning. And theres going to be a lot of talk, not inconsequential. We will not get that speech that sets the tone for policy over the next cupping months. Weve been your ears might have been burning. Andrew and i talked about you because of the septemberdecember discussion. And i didnt hear im told that last week you started thinking september was less likely. And i got that from andrew but im worried about it because i remember that other situation t sound bite and everything and you stormed out of here. So im not sure whether i can take his word. Did you say its off the table he didnt say off the table. Less than 50 50. Steve can speak. I want to hear it. Im not going to call you horse but right from the horses mouth. You can call me horse, im a big handy cammer as you know. The famous mark haines, we used to do that. I lowered my odds for september taper to 60 40 based on comments from Dennis Lockhart and jim, both said they did not believe they would have enough information in september to make that decision. 60 40 against. Not taper. Right. Ive also been corresponding on background with jim. He wonders when is the moment the market will get that clear guyence from the Federal Reserve. The calendar is such that september is when well get the guidance. More likely we would get it. He said we should press conferences every month. I agree with look heart, joe, on the following which i dont think the data is decisive enough in order for the fed to make that move. I want to layer in what lockhart said. When we start this we have to figure the market is going to price this to the end so we better be sure what were going to do here. Both of those guys, i thought the fete wanted to do this. They may still want to. I think they worked hard to get that flexibility. Give you want for the mft cement. This is not inside knowledge on my part. I read their speeches, they make sense to me. Even if they started with 5 or 10 or 15, people go to the end. So once it starts a its a big deal. Thats right. And you know, bull erd said, made an interesting comment, we ought to stop this business about trying to get the market to separate, tapering from tightening. Basically he said we lost that battle. Well have a chance on squawk box to ask him about that notion. But that was interesting what he said and it changed my thinking a bit. Steve, dont go anywhere. Well get more on this and want you to jump in. We are joined by bank head of Regulatory Affairs and former executive Vice President at the new york fed and nathan sheet, former director of the International Finance at the fed. Do you agree, both of you jump in on this issue of the 60 40, that september is not the month. I continue to think its going to happen in september. If the fed is nervous whether the data are Strong Enough i think they will try to off offset some of the markets by reducing the threshold for hiking on the unemployment right. I think that will allow backer to say that we shifted the mix of tools but were i tempting to maintain a stimulative stance. I have become totally confused by the messages out of the fete at this point. We had an argument what matters is the stock of purchases, not the flows. What matters is the guidance how long its going to be at zero. You look at the last four years would they have ramp up all of these. 2. 2 . Quarter by quarter. Though they ramped up different instruments, growth has not changed. How much is this having an impact on gdp. San francisco put out a piece that tried to estimate. It was de minimis. Then you are arguing the tamer immediately. So the implication that should lead you to the conclusion you should begin tapering except that they team to be impacted on the market and the impact this will have on markets. They dont taper in september, doesnt the market thak as a bad sign . I think this is a important point. The Federal Reserve pab hawking about since may. This has been enormous uncertainties and its time for them to get started. They have a variety of tools to offset it through their communication and i very much agree with your point if they dont boo its going to be a situation they are more optimistic about the economy. The strategy began in spring of 2009, accelerated in 2010. Weve gonen from exit to tapering. There has been on the table for several years. Whats happening is that instead of sort of bringing down these unconventional they have been ramped up. At some point they have to pull the plug. When they do that its going to have a min ef earthquake in the market. What do you have to say . Well, i want to make one point. The alternative to the fed not tapering and the impact on credibility is the other side of that is what if they have to go back and increase the amount of quantitative easing again because the economy is not in good enough shape. One of the things worried about the sequester on the economy. That leads to their uncertainty. The other thing is there has been some reports about the lack of effectiveness of quantitative easing. The San Francisco report that there will be other papers that will discuss that outcome. But when you see the market t Interest Rates rise as much as they did from tapering and the market sell off, doesnt that really tell what you the effect has been on the economy, that you have the higher stock market and lower Interest Rates. Okay, its not led to greater than 2 growth. You had the 1 drag from the federal government so maybe it has been more effective. These estimates are rough. Theres a big margin of error. No question about that. I think you look at the last four years, weve been in recovery for four years and we should have had a recovery that was much stronger than it has been t fed was forecasting 3 , 4 growth over the course of that period in their january forecast. We havent had that. So you know, for whatever reason, and you noi know, other people can judge what those are, the economy has not performed. The effectiveness of these have not work as well as expected so you have to look at what are the costs, what are the benefits. The benefits have not been as great. What are the costs. Maybe that might be a good thing to discuss in jackson hole, what have been the costs and what is the mix when you weigh the costs and benefits of this policy. Well leave it there. A good place to leave. Steve, we gave you talking points. Wonder who the top dog are you the top dog out there right now . Like who is without baerng and dragl, you . Coroda from japan. Which fed guy is going to be the one that everyones trying probably janet yellen will be the number one person. Well get back to studying the kind of Research Rather than some of maybe the politics, more about the papers. Youre studying fish. We know what youre studying. Well do that too. Thanks, steve. Coming up the recovery in housing, we get existing home sales later. First a read on real estate from trulias economist and from barry habib. In todays markets, a lot can happen in a second. 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[ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Welcome back to squawk box. Among the headlines a Goldman Sachs error caused erroneous option trades yesterday. Many may wind up being erased. It could cost the firm up to 100 million. In a statement saying the firm does not face material loss or risk from the issue and jpmorgan is said to be close to naming two new directors with finance and Risk Management expertise. The bank to have identified the candidates but the board has not voted on them. Get a read on the health of the Housing Market with us on set barry habib. Chief Market Strategist at Residential Finance and joining us from San Francisco, a chief economist, jed kolko. We had a backup. The backup a point . Is it starting to bite or people have decided that i better do it now and therefore they are deciding to before it goes up more. They have been strong on the purchase side. The latest survey shows that purchase applications up over 1 . They helped pretty firm. I think some of the housing numbers weve seen overstate the health of the Housing Market a couple of months back because people wanted to get in while the getting was good. Its norm tool see a lull. Me migrate transactions forward. Were seeing it come back strong. Try to explain the movement in housing stocks, do you . A stock market thing . Well look. They have been very, very strong for the past couple of years, actually. Is it a form normal pullback . I think so. Its a natural reaction. Up 30 to down or whatever . You know, when you see Interest Rates gets your attention. Interest rates moved up faster than they have done, in the last 52, 53 years so its going to shock the markets, pex r people try to anticipate it. Its out of the refinance side down 62 . So jed, this is a way markets work, right. Get over, it swings, everyone gets excited from that horrible situation five years ago and because it pulled back doesnt mean were near the end, right . Is this a pause . Thats right. Where we are right now, rates are rising, they are still very low compared to historical norms. Last decade around 6 . So at 4. 5 rates look very low. It means that buying still looks relatively affordable in most markets across the country. We reached a new phase of the housing recovery. Where we are right now, is because rates are rising, inventories actually expanding a bit, it means that prices arent rising as fast as they were a few months ago or a year ago. Were at the phase where inventory is expanding, rates are rising, and prices arent going to be rising out of control the way they had been throughout much of last year and this year. I dont think that inventories are expanding that quickly. It depends on the market youre in. I talk to so many people on the front lines say inventory is really tight. Theres a lot of pricing pressure to the up side. You look at alternatives, rents are tight, expensive, going up. People take a step back and say okay. Even in the most conservative estimates home prices should go up about 6 a year over the next three years. Thats compounded to a 20 return. I think that we get existing home sales where we see the median home price above 220 today. We get 220. 20 , 44,000 of lets say appreciation in the next three years. So your Mortgage Rate went up. That cost you 100 bucks a month more. Three years thats 3600. I take that trade any day. 3600 to get 44,000. You can see how aware the fed is about their actions in all of these matters and what it would do to i guess what everybody is worried is still sort of a fragile recovery. And some people think the fed watches the 10year too much and that changes their rhetoric on what they are going to do. What number would the fed have to worry about where they really would cause this to slow down to where you would notice it . I think when we ask consumers the rate that consumers are most focused on is about 6 , thats where more than half of consumers told us were at about 4. 6. So were talking about a 10year cant measure the 10year obviously but in general, rates have to go up another point and a half at least. Consumers tell us they would be discouraged buying around 6 . The thing is because prices fell so much after the bubble burst when we do the math looking at renting versus buying nationally, buying still looks cheaper than renting if you stay put for seven years, until rates get above 10 . Thats because rents continue to rise, prices are still far down from where they were last decade. It means that kor consumers doing out the math taking into account Mortgage Rates, rates could rise a lot more before renting starts to look cheaper than buying. If you could tell bernanke what to do what would you say start in september cutting back . I think at this point theres room for rates to continue to rise without derailing the housing recovery. Of course refinancing is taking the hit. I think your question for housing is not so many what happens to rates but the supply of credit. It remains tight. It started to loosen. The latest survey suggest its looser than it has been but its still very tight. People would rather have a 5 loan they can get than a 3. 5 they cant. The sfed going to taper. There is no press conference. December is too late. Look for a couple things. One, they may disproportionately taper. More treasuries. They are worried about the housing. Less refinances, less supply so even though they are going to buy less asset purchases it could be stimulative because there is less supply coming to market. The last, when the fed does this, they might throw the market a bone and say our target for hiking rates will be reduced. May make it at 5. 75. That is an offset. Someone said that. Thank you. We always got to run. Thanks. Coming up, weve got a 23yearold, sam barnett, who has started his own hedge fund, working on his ph. D. And working on another dream, climbing his way up the professional tennis rankings. I am today by luck. I put in the hours and built a strong reputation in the industry. I set goals and worked hard to meet them. Ive made my success happen. So when it comes to my investments, im supposed to just hand it over to a broker and back away . Thats not gonna happen. Avo when you work with a schwab financial consultant, youll get the guidance you need with the control you want. Talk to us today. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Welcome back to squawk box. Lets look at stocks in the news this morning. Toll brothers shares, the home builder matched quarterly procht. Revenue was short of consensus and order growth slowed. Also look at this. Office supplies retailer staples earning 16 Cents Per Share. Two cents below estimate, cutting the full year outlook because of declining sales. A little better fortunes for rival office depot, its stock higher after the company resolved a dispute. Three executives nominated will join the companys board. Star board wanted to nominate six new board members. Over to you, joe. See what i mean. You see toll brothers. See. This makes you wonder. You got to write it off to i dont know, fast traders or something. A check on the markets. Rick joins us from the cme in chicago. I think its lucky you dont watch, i wish you could watch. We have done the taper shuffle. When the rupee moves around based on whether someone blinks at the fed, maybe its not maybe we should be doing that. You know, listen, joe. I really miss seeing as much of squawk box as possible. I miss talking to you one on one so this is unique. But i dont know. I think id rather concentrate on what is being affected by what you were discussing earlier. And i do think Market Forces have reached a critical mass, where they pretty much charted out a course. Now, exactly how many highs and lows in this roller coaster course we have, obviously can be affected by things that go on in jackson hole and the fed. When you switch gears and look at the emerging markets, ive said for some time, some things i say work out well, some dont but the emerging markets has been an easy call. Weve spent some time talking to central bankers in mexico and of course we all read whats going on across the globe. When you have a fire hose of liquidity, even distant geraniums are affected. The periphery of the puddle shrinks when you pull the center plug. Soy think the emerging markets have their own issues but there is little doubt, like dollar volatility and commodity volatility. The ivory Tower Central bankers left huge finger prints in these areas. Rick, you talk about the distant geraniums in the emerging markets. In the times one of the ripple effects that the fact that cities like istanbul have been borrowing in dollars, a lot of these markets borrowing in dollars because of this cheap liquidity. And now they might become dubai or argentina, is that something that you fear . Absolutely. You know, pretty much every story on the planet that is indirectly involved by Central Banks becomes a funding issue. Thats what its about. Today it might be countries like india, current account deficits, theres a lot of various issues depending which currency they focused on for some of the newly created structures. It could become ap tesla story. A wonderful car company, a Little Car Company and there is a really big stock price and im sure will get affected by capital flows and tax policy and environmental policy so these things arent easy. But in the final analysis. A 28210year tells me one thing, they can control shortterm Interest Rates, but when it comes to the longer end of the market, at a time where we see china and japan net sellers in the Treasury International capital flows, you know, i think its going to be a very aggressive, ongoing participation in good high quality Interest Rates. If they dont switch to the alternate roll of being a safe harbor or the dollar doesnt switch its role while the issues are going on, you know what it tells me, you never watch the passive player, you watch the pro active player. Emerging markets were sailing down on their own you buy dollars, you buy treasuries, but when its the latter group thats pro active player in essence the ems, the emerging markets become spectators. Just listening to that, rick, think about how much the fed had to do with the housing bubble and we think about all of that liquidity that seemed misplaced and found its way oh, my god, joe, did you see the mayor of that California City trying to do eminent domain, i think we had him on, what a great interview. She goes you know its all the banks fault for bringing those Adjustable Rate Mortgages and balloons. Let me think. Adjustable rate mortgages ever in vogue again. Exactly right. How much bigger, maybe we needed the liquidity at the start of this thing to thats what the argument would be. But this seems more accommodation from the fed this time around and makes me wonder where it is and how this pans out if it was so bad last time. You know, the way i look at it we had a crisis in this country, and there definitely was a band aid put on it but that gash has long healed. We dont have a crisis, we have a condition, the condition is called the subsidy, in every form of government from sugar to milk to Interest Rates to stock market and believe me, anybody who has read a newspaper that covered politics the only thing tough tear remove fron a subsidy would probably be some of the young People Living in their parents homes these days. Exactly. Thats happening here a lot. Thanks, rick. I think well talk about emer emerging markets. The fed planning to tamer its asset purchase program. We dont know when the emerging markets are paying that price. Well talk to a specialist. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer scottrade proud to be ranked best overall client experience. Starts with freshlymade pasta, and 100 real cheddar cheese. But what makes Stouffers Mac n cheese best of all. That moment you enjoy it at home. Stouffers. Made with care for you or your family. Welcome back. The prospect fed tapering weighing on the emerging markets. Joining us walter morano. I had it explained to me, walter. You got a garden hose, even the spray thats hitting the geraniums next door, if you turn it down even a little it can affect. Is that how we should look at the feds actions on emerging markets . Is the fed tapering actually influencing emerging markets . Definitely except it wasnt just a hose, it was a fire hose because people didnt want to go into the core markets, people were concerned what was going on with the u. S. Financial sector, u. S. Housing, they were sold a lot of i guess opportunities in the emerging markets, they were young countries with high growth potentials so almost none of the money went into the core developed markets and a lot flowed into the emerging markets. Now you turn off that hose they dont know what they are going to do. Has it got more to do with things happening over there or here . I mean, does it have more to do with china or countries affected by china or does have the to do or a combination of poth . Its a combination of both. I think that it definitely has a lot to do with whats happening here. We provided a lot of liquidity, not just us but the europeans. A lot of our savings, our monetary easing went into the emerging world. Assets got very expensive, currencies became hideously overvalued. You went to an emerging market country and more expensive than new york. At the same time it has to do with things that are happening in the emerging markets world to slow down in china. The arrogance they started drinking their own cool aid. They thought they were more sophisticated, had better institutions than the core markets so they didnt feel like they had to push on with the reform agenda. As a result then they became overleveraged, households in the emerging market world are hideously overleveraged. We have have Consumer Credit ratios approaching what we saw in europe and the United States, especially in spain at the height of the housing bubble. Now they are going to go through the same cycle we went through five years ago. What do you mean . Is there going to be a financial crisis in the emernling markets . I believe thats going to be the case. But as this capital begins to flow back as the tide begins to flow back into the developed world the emerging markets will be a field of broken dreams, i think. That comes back and affects a lot of the stuff that we do as well, though, in terms of selling into the emerging markets so thats not good for anyone. Its not because i think that a lot of Corporate Board rooms really put a lot of pressure on some of their ceos to refocus Business Operations into the emerging world. There was a lot of pressure to go in the emerging world and they went into it agregressivel not understanding the culture, the institutions t differences, the new wangss t weakness in legal systems. So as a result they are going to be caught wrong footed as again the focus is going to return to the United States, and europe, i think that were starting to see the early green chutes in europe of a recovery. Thanks. Thats something to more to worry about. Whether you have emerging markets or here. Appreciate it. Quickly, kayla, i cant help but see insight going by. There it is again on the ticker up 5 bucks because of a pancreatic drug or pancreatic cancer that had positive survival data in a mid stage trial with chemotherapy. The most deadly form of cancer. You never catch it seems in time. Very few symptoms until its too late. Exactly. Little progress with it and stock is up a lot on that. As it often is with some of the pharmaceutical companies. Coming up on the show, we have a hedge fund triple threat. A Hedge Fund Manager and a professional tennis player. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. And choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Every day were working to and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. 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. Now get 200 free trades when you open an account. Welcome back. Lets get down to the new york stock exchange. Jim cramer is with us. When we have big names i like to talk to you about that. Then we got jackson hole and weve got other things. Is target, was it lousy . That was a crazy number. They dont tell us about too 1 cents. Not giving us enough yet. I got a listen. We know apparel has not been that great. We know that a lot of what they may have to say about target in terms of hard goods i dont know. Lowes did the number. This has been the most inconsistent quarter for retail. New perception who is is doing well and not doing well. Walmart, target, these used to blow it away. Its amazing. Staples, bad. Terrible. Everyone thought that Small Business, look, the usa today story, clearly saying its not coming back. If Small Business isnt coming back and we dont have robust housing what are they going to do in jackson hole say listen, weve got to start tapering. Where is it great . Business, the building index was better. I need to know where its great. I havent talked to a company. Maybe they think its great in jackson hole. Real quick, jim. Two things. Goldman sachs, fat finger, something with this trading, 100 million loss. Is it relevant . Should we care . We got to care. Night securities, night capital groom, because of flash crash. We got to Care Software runs amok. The machines are in control. We forget that. Because the market is so thin that goldman probably say these option prints, i mean, at a dollar. Where are the units . Where are the units . I guess they disappeared, too expensive. Eric holder, what do you make of that . This is the new thing, these guys that we know that the statute of limitations has been ticking. We never saw a task force from holder. Look, even the bush administration, they had a task force. I always think that justice is overmatched until they have a task force. He is saying all of this, saying that every bank can be arthur anderson. I dont think he means that. The president comes in, bashes him. These guys are bashing him. Look out for china. There are a lot of companies that put people on the payroll to get business. That was called how to do business but i guess thats no good. Do you short the banks . How do you prepare. I i thats a mistake. Why are the multiples so low . I think people feel that crimes havent been paid for, there will be reserves. Going over the jpmorgan reserves. They jumped over the 6 to almost 7 billion you think wait, maybe something new happened. The only thing new is the china story. This happened years ago but they got to get scouts. I think its popular to get scalps. People dont like the bankers. Better late than never. Maybe thats the way holder feels. They woke up down there. They blocked the us airways deal, we got a Justice Department. Theyre back. All right. And were i dont know whether were all the better now it. Thanks, jim. I ask how many guy, like 550 guys, none of those are getting subpoenas i dont think. The guys that left. No. Come on they are immune. They have protection. Its a racket. Thanks, jim. All the banks. Coming up more of todays top stories. Who topped the list of highest paid tv entertainers . You might be surprised. 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I never quit one job before another job. Did you see that speech . All the right wingers were playing the speech. Hes great. Yeah. Yeah. I know. You know that feeling . Not just a pretty boy. You know what i feel like, demi moore. I feel like hes young and i want him all of a sudden. Not really. Well let our viewers chew on that. So to speak. Coming up, were going to talk to sam barnett. Hedge fund manager, northern western, and, yet a professional tennis player. Were going to bat it around with him after this. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Starts with freshlymade pasta, and 100 real cheddar cheese. But what makes Stouffers Mac n cheese best of all. That moment you enjoy it at home. Stouffers. Made with care for you or your family. And this is my home team. This is my large lecture hall. This is my professor. And also my coach. This is my booster club. This is the guy whos graduating ready for a great career in technology. [ male announcer ] in 2012, 90 of Devry University grads actively seeking employment had careers in their field in 6 months. Join the 90 . Learn how at devry. Edu. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Most people considering running a hedge fund to be an impressive feat but how about running a fund study and being a globally ranked tennis player . Joining us now is george barnett. He funded the hedge fund in february, a sophomore at cal tech. Sam, thanks for being with us. We have a couple of minutes at the end of the show here. I want to know, which one do you consider your day job . Thanks so much for having me. Business comes first. Im spending a lot of time doing research for my hedge fund, which goes hand in hand with my academic research. But im really incredibly fortunate to have a great team working with me so that i can also pursue my athletic endeavors and continue playing tennis. Most experienced Hedge Fund Managers find it a challenge to raise the first 100 million even with a long track record. How do you do it, where did it come from and what are you investing from now . Originally my investors came from an professioner at cal tech. Since then its been something that more people are just contacted me. So we have a wait list for investors. When we have time for an offering, then we go to the weigwait list and get more people involved in the fund. Is it a cal tech type fund . Yes. Quantitative easing and making predictions. Its not a High Frequency fund. So were predicting things on more of a oneday to 90day scout. What are you triggers then . All kinds of different data and we look at macro indicators and all the way to twitter feeds and unusual data from the internet that were collecting just to predict what we think people are reacting to. I wonder about the tennis career. How often do you play, how often do you practice . Do you think theres any connection to your life as an investor . Sure. So i practice about two hours a day. Sometimes i have to practice late at night. Im very fortunate that im growing up im living near where i grew up so my childhood club lets me play at 11 00 p. M. At night if i need to. So i practice that around then. And theres a lot of parallels between tennis and business. And im practicing hard. Im disciplined with both things. But, you know, it really just t matters about taking things from practice and trying to turn them into real life applications. Do you at cal tech, do you aim for things knowing exactly how much the ball is going to fall as its moving forward like with or is that integral calculus . You invented both, i think, newton did. Do you see things like that as a geek . I dont get to take my pencils out to the court to calculate things. I cant imagine cal tech has much of a tennis team, do they, with all the nerds . One thethird of cal tech students are on varsity team. Weve got a lot of sam, thank you for this. Unfortunately weve got to jump because we have another show starting. Appreciate your time. Thank you. Thank you. Thanks. Its now time for squawk on the street. Good morning, everybody. Welcome to squawk on the street. Im brian with the man himself, jim cramer. We are live at the new york stock exchange. David faber is off this week. Carl quintanilla is on assignment. Lets look now at your futures on this wednesday. Listen, were not implied a big down drop, folks. Down slide is down about 20 points. S p and nasdaq down fractionally as well, though. Nasdaq looking a little stronger than the other two indexes as it has the rest of the