Transcripts For CNBC Squawk On The Street 20130724

Surprising on the upside. And the road map begins with the morning. We will break down the ones that you need to watch. The dell Shareholder Meeting adjourned again as michael dell raises the buyit offer with conditions. We will give you the details. People love the iphones and shares of apple up after reporting strong earnings last night. And not just the fcc but appears that criminal charges are coming for stove cohens s. A. C. Capital and what does that all mean . We are going to begin with cap pillar who the company says earned well below forecast ed estimates. They say they have been hurt by dealer machines inventory reductions and this comes a week after jim chanos told our alpha conference that he is shorting the stock. And we asked Delbert Doug Ober Hellmann about it this morning. There are 7 or 8 Million People going to 9, and raising standard livings around the world are going to require energy and certainly mining. It is not a Straight Line up, and we knew that. Super cycle or what, whatever you want to call it, but it is a cyclical business and we are used to it. A longterm view by jim. He stalk about the cycle coming back from 3, 5 or 10 years. He said we knew that and no. I was looking to 6 and 6. 50, and they come in better than i thought, and the reason i say that is that their enthusiasm has betrayed them. If they had taken the numbers down to where everybody else like united energies and ingerle sol rand and been part of the whole group that said, hey, things are troubled here, then we would be pleasantly surprised, but the fact is that these are the last remaining one and it is painful. They believe that the inventory at the end of the year is 3. 5 billion below even though the user demand has not changed so they see a rebound as the dealers stock up again. Yes, stock down 25 and i dont want the buy it here or there and it is not short because they have good operating cash flow, and if you believe that china is going to come back, which i am skeptical, but the pmi numbers of europe are arcane. And the 51. 1 number, and doug talked about how europe is not that good, but memo to doug, i mean, get with the program. Chanos was also critical of the acquisitions and particularly in china. And a number of things as well. So it is beyond the fundamentals in terms of the business. Yes, if you took the number 14 guy at ford and the 42 guy at boeing and put them into the top of caterpillar, you might see better results. Im the executioner, and im questioning the executioner. The execution is not that great. The numbers are not there. And the company that his t historically, from a macro standpoint, it used to be very conservative and the economic value was conservative and now you are accusing them of trying to whistle by the graveyard. Well, it is betraying them. If you look at al mulally who came out and said that europe is a black hole and i will fix it. He recognized first before gm that it was a black hole on the ford going up. That is the forward thinking that i want. Doug is going to catch up, but the fact is that these big Great American companies recognize the problems much faster than he did with the exception of maybe Norfolk Southern which did not deliver, and it has to do with the rosy outlook not in keeping with the role. If he had lowered expeck igs tas, he would have beat them just like everybody else is doing. And speaking of the Companies Executing well, boeing poised to open up at all time highs, and they raise their profit forecast, and as jim said, ford rising in the qe2 earnings. And strong pickup in demand for trucks. And pepsi early on the companys cfo responded to nelson peltz desire to acquire mondelez. We believe that pepsico as a portfolio is working so well, and the complexity of taking on an 80 billion acquisition and somehow trying the do all of the integration, frankly, it will distract the business from doing what we are doing right now which is to create a lot of value for the shareholders. Interestingly americas beverage volume is down 3. 5, but the snacks make up for it which is peltz argument, it is a food company. Well, if you bought when peltz announced the position which is before mondelez, you have made money, and it is important to point out that mondelez is going to go headtohead to fritolay, and so why the heck would you want to merge them . I dont know. When does an enterprise that is doing well and take on a not so well enterprise, and i like the fact that pepsico did not play the weather game. How about you making a Weather Channel joke today. He said im not playing the Weather Channel game. That is backhanded. Well, to be fair, i mean pepsis beverage volume is weak, but it is the food that did well. But to make fun of coke and the lame excuse is not fair, is it . To split up the two companies fritolay and the cola company, and you have a multiple on the soft drinks and a company with a decent multiple on the snacks, i dont know why you would . I dont think that you would. And when you have a guy like peltz who prides himself on working with the management and get in there and not be public simply because of the sense that he has so much power has to go public like he did, that mentions a lot of moxie we havent seen in a long time. A long time. And what about, i really nailed this one. And get the company to buy it at 2911. We havent seen that in a while, yahoo yes, and go to boeing for a second with mcnerney. And i have never seen this before, this kind of an increase. The cash flow, and the cash flow in the last year 1. 6 billion and this year, 3. 4 billion. Hello dreamliner and when did you start printing, and have you been to the s a m Assembly Line with phil lebeau. When they start to pump them out, it is like b17s in world war ii and who made the b17 . They raised the revenue guidance to 83 to 86 billion for the years, and the higher margins, and the strength here, jim, strangely on the government side, on the defense side. That is what Northrup Grumman said. The most jarring trade in a long time the fact that it is the government and the defense spending raising the fortunes and the bag backlog is my favorite number of the day, 410. I have a backlog around that. 20year backlog. Im working on it. And it is going be a 25year plan. That is going to be an alltime high for boeing. And the real story of raising the forecast for the year, europe was not a spoiler to a large degree, and phil points out that raising the Global Production by ford by almost 100,000 cars. Clearly, not the most person who bought a ford 350 super duty. This has to be noticed, because the lat tirn american latin American Trend is being pulled off. They are ahead of everybody else and i have Charitable Trust name, but ford could be in the late 80s renaissance. And not like the Renaissance Center in detroit. Right. And the cash flow here is going to be the dividend rise, and anybody remember when ford had 5 yield and not because the stock was low . And what about the europe turn . That would only be wind at their backs. Narrowing the expected loss at 1. 8. Taking the share and lowering it in europe. You know there are only 6 Million People in europe. Yes, i heard that. You are in jeopardy, because they dont buy a lot of new cars. Pickups, first half, 22 , and three times the industry. I saw the tweet, and you want to make money, we visited the f150 plant and you coin money on the trucks which by the way is the best selling truck in america. All right. Should we talk dow . Well, this morning, you may have seen it, are we at the end game . I dont know what to tell you at this point, the meeting has been adjourned for 6 00 p. M. Tonight and dell and silver lake have raised the bid for the company from 13. 65 by a dime. Up to 13. 75, but most importantly, please, people, focus on this if you care, they will not raise this bid to 13. 75 and it will go away at 6 00 p. M. Tonight unless the special committee of dells board of directors says to change the voting provisions so say it is a percentage of the shares voted as opposed to the outstanding meaning that the no votes will not be counted by those outstand i ing. So that is what counted. So you have to understand that it is until 6 00 p. M. Tonight unless the special Committee Votes to change that. And where was it . 13. 65. You are telling me that i have a dime, but at 6 01, i will lose the dime . If the special Committee Votes to change the provisions by 6 00 tonight. If they dont agree to that, and by the way, they were not aware of this and did not want to make it public, they wont do it from what i am hearing, for a dime, they wont change the voting agreement, but for 5. 10, yes. And even for 50 cents in dimes they might but not for one dime, no. They are not going to. That is a great thing. Our producer comes in with the props. He knows what he is doing. So on august 2nd, you are looking at 13. 65. Will that carry the day . Best and final is what they say. Best and final. Silver lake may be done, and in fact, im surprised they came to a dime. Will michael dell really be willing to watch the deal get voted down . We shall see. Again, i want to make it clear to people that this is not 13. 75, but it is 13. 75 with the special committee changing the voting provision, then it is done and it wins. They will win. If it becomes just of the sheer vote votes that you need a majority, they will win. But special committee is not going to do it for a dime. And what about a south korean election, and those who dont vote, it is a yes. And tonights at 6 00, because for dell and silver lake, and they say, we will keep it to 13. 65, even if we dont get the vote. And now this morning, scott wapner being told that it would be unconscionable if dell directors accept this new offer, and i ask the voters to switch their vote in protest. Well, i remember michael dell, my voting is 16 , and you take the 84 , and that is all of the votes available and 77 of those voted so they had a 23 nonvote and you have to get all of the people into the scolumn, and they have done a little bit, but they have a long ways to go. If they were in the sever system a la emc you would be 15. There is a lot of technology coming in. Oh, apple. Oh, yeah, apple. You cut the numbers and up. And to doug over cat, you cut the numbers up. And the margins are higher a little bit. But what should we take to it . A new product . They made the point of listen, we will develop new products when we say so and not before then. This is a quarter of the analysts and remember the halcion days when they loved apple and this is one of the consensus, where, hey, we are not bullish. We will dive down into apple after the break, and the question is the stock run over for the phonemakers . We will hear what jim has to say about it. Then we will take the pulse of the Housing Market. Century 21 and Coldwell Banker is up. And we have to get to panera and find out what happened with broadcom, and we will do when squawk on the street comes right back. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. So you can capture your receipts, ink for all business purchases. And manage them online with jot, the latest app from ink. So you can spend less time doing paperwork. And more time doing paperwork. Ink from chase. So you can. Apple shares are up sharply, and the tech giant beating the street with the result of more than 31 million iphones sold in the period of the forecast, and apples revenues for the quarter is below consensus, and 32 million is less than qe3 and less than we thought they would po post. Well, this is like muhammad ali, they floated like a b butterfly and stung like a bee. They had saturation and using the ammo in the fact that the 4. 0 and the 4. 0s did well. Also trying to nail down ultimately with china, and they sold a lot all over the world, but all of the analysts cared about was china, china, china, and the s4 and got too negative. Did the come poent prices come down . No, not for the gram. Well, the margins for the 4 and the 4s is Getting Better and better, arent they . Well, the margins are 36. 9 versus 42. 8 a year ago. And well, 36 and 37 is still in line. This notion of saturation which is something that they are holding this morning, but the fact is that micron may be the winner because they supply the dram. And what about the apple product, because was this is a company at the end of the day is an Innovation Company and what about new products . We will announce things when we are ready. When they are ready. That is what they said. When are they going to be ready . Well, when they announce it. Well, a debate now about whether or not you stick with the strategy of doing it on your own timetable and doing the best you can or going for the scale which is what android and google did. Well, that is a good point. And you know, again, on the quarter, you get the sense they have a sense that we have Something Big up our sleeve, and the analyst is saying that it is up our sleeve for so long. And they guide into higher margins, and the new products were depressed margins initially. Yes. So can we say for the guidance to not expect a new product this year . I didnt feel that you are going to get a product this year. And the same time, verizon is selling a lot, and that turned out to be the real tell. Verizon, if you listened to verizon, you can extrapolate that and you have apple at 20 point points. When a company is returning ten times and the capital and the margins going up and we dont know about the new products, do you buy it . This is about the bank when you have the absolute low and then the buyback stock, and you hate to sell it, and use the accelerated broker and pick it o off. This is more sophisticated, and what i see is that the arc of time, and that is another phrase that tim cook uses, the arc of time will go their way in china and that is how you get to the Gross Margins. And although, he was going to explain what happened to hong kong where the sales were down 20 , and he even say said that we are puzzled by that, and china down by four. Well, that is right. That is not what you want. This is a quarter where they didnt they only mentioned ecosystem once and i wanted to know how the 4 and the 4s is on the ecosystem, because that is where you get the hardware growth of 1 , and that is not what we want from a growth company. And then again, it is a growth multiple. Well, absolutely a multiple very similar to what we expect of a big company. Hewlett packard. Not that far behind it seven or eight times. So not bad. But it is growing. It is growing. And even if they do cut the price market from 500 to 540 this morning to keep the buy. 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Lockheed martin around here, and this is when people were completely freaking out about the sequester and what it would do, and lock hooed martin was not freaking out because they had seen it coming and took down the cost. You know who is stepping up in defense . Our allies, and they are starting to buy. They are . Wouldnt this be funny in all of the fepeople that we defende over the years are starting to buy equipment to arm themselves. That way we dont have to have 1. 6 million soldiers all over the place. We cant afford it anymore. And stocks from germany and japan, and we won that war. Okay. Okay. We closed the golf courses while we were at it. Close them up. We have so many winners and losers this morning that you have heard a lot of the earnings and a lot more. We have not talked about at t. And we will break it down for you after the break when the opening bell continues. Announcer sundays your last chance announcer to save big during sleep trains triple choice sale. 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And up six points is qualcomm. And look at that. Lets kick off the wednesday morning with the s p at the top of the the screen and the big board, and Grana Y Montero celebrating its ipo today, a big construction company, and over at the nasdaq, dentists and henry schein. I knew him growing up. You name dropper. It is funny, because you forget that there is a guy named henry schein. Like mr. Ford . No, did not know him. A different era. And things are filling in, broadcom is the biggest loser lowering the forecast for the biggest quarter and i have not touched on panera cut by three cents with the shortfall of some locations. They are talking about the blueprint not that good, but this is something that has best ed cha poelt lt la chipotle, panera, this is a var miery rar miss. And is this a tell if they can hold on to modest losses a la apple last week, and so what dow think about caterpillar . Well, they will do what other Industrial Companies have done, but they continue to be too rosie. As opposed to alan mulally, we have to be careful in china and latin america, and they did things carefully, and if you are careful, you are blowing it out now. And speaking of ford earlier, they are raising the forecast for the year. In china alone, first half sales are up 45 , and that is four times industry sales. Wow. You talk about being able to be spotting around the corners there, and executing. Ford is doing extremely well. Good looking chart there. There is no roof to the ford chart. Well, 18 in 2011, and i think that it will take out the high quickly. You do . Yes. And is this something that they have done internally or affect housing, Small Business, employment things like that in the u. S. . Well, that is a great question, because we hear about the reorganizations and restructuring and mulally made ford to have one, and they used to have a million brands and cut back on the different iterations of ford. That has worked for them. I think that it was an internal reorganization that truly did work. Dont forget they have always had great financials, and remember they changed the big debt deal before the decline, and i am looking for the ford paper to look like when i was Goldman Sachs and better than aaa, and Ford Motor Credit was the best to buy. And Goldman Sachs also taking ford public so many years ago. And we will keep an eye on other names. Yahoo david, getting into discussion of the lobe sale and calling it green mail, and empl employees are upset that their options and rsus will take a hit depending what happens to the stock today. Yes, and most of the time, 2911 which is the price at which they bought back the 40 million shares owned by serve point seemed to be a nice print. They did print that at some last week, but maybe theres an argument to be made there. The way it was orchestrated. But i kind of get it as well. Part of the buyback, and we will see. We will see how it goes, but it is worth noting that it probably should have noted it day one in addition to Everything Else that we did mention of course yes, we will see it around the space there. And suddenly, you know, there was a stream, but what is so wrong with taking a great trade . Nothing, but why couldnt he have sold it in the open market . Right. Or some well, i was not referring to that. And as a result of having directors, you are locked up. It is not the same. Thats why you have to in part negotiate it as they did with the buyback and the stepping down of the three directors but still maybe an argument to be made that it could have been done better. But some say, he is not a long term investor, and in this day and age, two years is a lifetime. And boeing is one to watch up 1 , but for the year, up 45 , boeing. 45 . Hey, listen, he delivered. I mean, it was not easy, and you had to stay focused, and you could not let the headlines get in your way, and dreamliner, and mcnerney is as good of a manager in the country and maybe the best there is. Those looking for hair on the quarter say, well, they might have benefited from the dreamliners held back from the prior quarter and delivered in the quarter, and does it bother you . Look at my head. That is how much they have. Mcnerney, i love you. I didnt get to i dreamed i was a knockout and i went shopping in my maiden form. Sometimes you go places that im not with you. Maiden form . Did peggy have the maiden form account . Well, that is a good question. I have to go back to look. Maybe draper didnt have it, and maybe they lost it in the end, because that work was shot ti. And we are going to talk m a in the show, arent we, carl . Yes, david. They are dells banker. Oh, wow. So, i doubt very much that we will get answers. Dell is down. Perhaps not as much as some may have anticipated if you are just joining us, appears to be a raise of a dime, but it is base on the special committee changing the way the vote goes so that you only have to have a majority of the shares voted which is easier to get to the per percentage line for the deal. But the dime, the special committee is not going there. We will see what happens. So august 2nd, if they dont miss the deadline to change the provision, what does dell do once the deal is voted down if it is voted down, do they em bar bark on a large buyback and substantially shrink the float to which they would float up mr. Dells position to come into a pr proxy fight with mr. Icahn and we will think of that game theory. I think that the stock is at the final. And that is what you have to wonder. There he is. He is brilliant, i have to tell you. And silver lake is wondering if they have a liability down the road for a year or two from now. All crazy things, but right now, he is at 12. 83 and he is not making money either. He is down 2. 50 or 3. 00 from the high of herbalife. Im not sure why. Well, a lot of the rumors that they have been covered and the trade is broken. I have not heard from mack. I thought he was in it for doeb. Well, maybe for a dime. Well, my favorite icahn quote from last week is that if in fact he loses and is a minority holder, i have to figure out how to get the hell out of the damn thing. Dell. Yes. I love that. Lets get to bob pisani who is at post 5. How is the span snik. Well, that is an interesting question, because there are two ipos and the first one is this big oil and Gas Exploration Company Going public today and 12. 5 million shares at 15 and waiting for it to open, and the once that carl is referencing over here is grano y montero, and this is the first latin american ipo of the year, and they are a Peruvian Company saying construction and think infrastructure and big real estate and not just peru, but throughout latin america, and they have 21 million shares, and no indication of how far away from the 13 they are. There are a few other latin american stocks with a couple of airlines floating around. As for the earnings, airlines are fantastic, and aerospace terrific. We got Great Results from delta, us airways and boeing and one trader said that they made 620 million just from the start and change fees on reservations. That makes sense to me. They are making money on incidentals and change fees here. As for caterpillar and the problem is in the mining area. The mining revenues down 33 which is onethird of all of their revenues. Con costrustruction is down 8 which is not that much, but it looks like they reduced the dealer machine inventories why the guidance is down dramatically, which is painful, but reducing the inventory is up for positive growth sales and not good short term, but people will recognize that fact and give them a break. As for the real estate business, did you see those numbers . The higher Mortgage Rates going on, and he said despite the rise in rates affordability is excellent and the demand for homes continuing to be strong in all of the markets and that is the ceo. Realty who is the Biggest Real Estate Company in the United States recorded the earnings and they were good, but the ceo is go ing to be on with us this morning at 11 30, and you want to find out how much affordability is and the impact of the higher Mortgage Rates will have in the talk this morning. Richard smith will be with us, ceo, 11 30 eastern time to an answers all of the questions on real estate. Back to you. Thank you, bob. Faber report, and lets talk about the at t and the earnings out after the bell yesterday, and the stock is getting hit, and why . Well, partly because of the margin. Only on june 6th that the Company Guided to margins that were more or less in line with the previous quarter, but however when we saw that the margins were currently reported quarter that being the Second Quarter of 2013, they recorded 32. 4 , and we may have that for you, and so there a little bit of concern there why the margin decline from where the guidance was only on june 6th if i look back at the stories from that time when the company was guiding towards ebitda margins. And also mobil fighting back. When you are fighting, you have to spend more marketing dollars. And other things on at t are good, and versus verizon not that much. But not bad. Wireless revenue, and there you can look at the subscriber growth that is giving people pause. And cap x seems to be going up across the board and they did not guide it, but they are spending it at at t and verizon having done that. And four competitive Wireless Companies now, and if that is true, maybe the government is right not allowing at t buying tmo, but not allowing another deal to occur. I believe that the tmo deal is coming on next week and we will get the sprint numbers, and also from nextel, and they will get the capital and the carrier spending has picked up. That is terrific news for cisco, but yeah, i see that this is like a monopoly and now it is a dog eat dog oligopoly, and apple could be a winner this. Yes, the beneficiary. Yes. They didnt say a lot on the call about europe, because a lot of the murmering on the at t side to be active in the acquisitions in europe. Didnt hear a lot of that on the call. Coming back to europe makes me think of verizon and vodafone and not much to tell you there at this point. The ipo may have opened this morning in terms of that continued dance if you will between them. Vodafone had a good quarter, but lost in the shuffle. All right. Lets look at the bonds and the dollar, and we go the Rick Santelli in cme in chicago. Good morning, jim. If you look at the yields this morning, you would think, wow, somebody is having some good Economic Data out there, and it is true. I will tell you 151 yesterday, excuse me, 251 yesterday, and 257 and up the half a dozen and you see the chart of 10s there. If you open up the chart to one month, we have talked about it the 246, and 247 yield held. First time on the left that that quasi head and shoulders with a 261 yield, and that is the next important level to Pay Attention to. Lets look at what is going on overseas. It is a story about the pmis in europe, and a lot of the celebrating going on and you can clearly see that bundes is up, and you can see that it is looking ahead of the 10year in terms of trying to pull in the good news in the year of yearend rates. If you look at the big market, it is confusing, the jjbs and look at the japan tenure going in the opposite direction and now 77 basis points and never crossed the 100 threshold and why is this important . Because if you want risk back and the kerry trade back and the rates to move down and you want the currency to move down. Next chart, please. Look at the dollar yen. Dollar is scoring on this one, and pretty aggressively and if we look at the last chart, this is the euro and the dollar. Yes, it seems the dollar index is spongy, and the pmi and the good news in europe and not so good in china and think about this from the Vantage Point of exports, because it is going to be the ongoing battlefield. Back to you. Thanks so much, Rick Santelli, chicago. Kelly evans is joining us at post nine and looking way ahead in terms of who may run the fed next year. When you look at how important the job is and that bernankes term is up at the end of the year, it would be a horse race of who would succeed him. And we have seen interesting reports of the business journals asking economists who is likely to succeed bernanke and who should, and janet yellen is the name coming up. And that was friday. Of course, yesterday from the washington post, he is hearing that people inside of the beltway it is Larry Summers. These two are not inkon sconsis and they highlight what is going to go into picking the next fed chair. Do you pick the guy who is more in the green span and bernanke ilk and wonkish or somebody who is more Political Savvy for the role. A couple of weeks back, cheryl said that they didnt know that bernanke would be a kind of guy they would pick, and now that summers name is being floated and seriously talked about it, it tells you what emphasis the white house is putting on this role. Somebody they feel comfortable with and know, and markets can respect and also a key for fed leadership. And summers is seen as a consensus builderer and yellen not so much. There are a couple of other moves happening with the fed board as well. We know that sarah dukes laskin is leaving for the board as well as dana raskin. Yellen is more attractive and she would cast her vote for yellen in a oped written by fr forbes yesterday. But still rumors. We saw on the record that summers visited 14 times in the past two years and janet yellen, once. Yes, this is huge implications for september, and the this is happening at the same time and this could happen as much as what we are hearing from bernanke. And coming up, a new chapter in the probe of Steven Cohens s. A. P. Capital. Others are said to be in the mix. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. 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But they said that the founder steven cohen would not be personally charged. Last week, jim spoke to the director of s. A. P. And although he would not address it correctly, he said that the fiveyear statute of limitations is up. And it is not a joking matter, but people who run for this hedge fund or bank or some other Financial Institution or a company that makes any product, you have the take it seriously, and the most important thing that you can think about doing at this moment is to think about how forthcoming you should be and to cooperate, because the history is that those who come forward and are voluntary with information, voluntary information do better than those who dont. One thing that we know, guys, when the feds do bring an indictment that firm never survives. Never does. E. F. Hutton. One thing that bothers me about the story is that preet said, you will not read over and over if i am going to charge somebody, but here we are again, and the paper is being presumptuo presumptuous. And yes, you could say it is worse than him being charged drktly, and drexel and Arthur Anderson and the firms dont survive that and keep in mind they borrow a tremendous amount of money from jpmorgan and Goldman Sachs and that is where the leverage is and if you run with of the banks do you want to extend the credit if the company is indicted . We will have much more on that. And jim is with 6 in 60 coming up next. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac ats for around 299 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. Fso youre worried about housef fires . Stop smoking. Manage your wires. Watch out for space heaters. Clean the chimney. Get one of these. Cool the romance. And of course, talk to farmers. Hi. We are farmers bum pa dum, bum bum bum bum 6 in 60 with jim. Blast from the past. Yes. And remember that, i am pulling for oleman, but i am not wanting to be in jcpenney. And fedex . This has nine lives like fedex. And six flags . Well, they have a good yield and the companies tend to come back from the terrible incidents. And upgrade of juniper . Yes, the carrier spending coming in better than expected and this stock is on a tear. Carrier spending is going to be a major story for the rest of the year. And Morgan Stanley says coach is a beat. I dont want to bet against them, because this company is smarter than it was. And you mentioned the rails. And i dont want to stop on Norfolk Southern, because it is up big from where it was, but csx had the right coal, and Northern Pacific is an outlier here. And what about tonight . Well, one of the big issues is are companies in the housing industry really doing well . The stock is down, and the Lumber Liquidators is coming up. So we have to see the housing coming right. And we will see you tonight. Home sales are coming up after the break. Dont go away. What . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Money needs an ally. I want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. Our Business Needs more cases. [ male announcer ] where do you want to take your business . I need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, Small Business solutions from at t have the security you need to get you there. Call us. We can show you how at t solutions can help you do what you do. Even better. People find out state farm does car loans as well as they do insurance, our bank is through. Good point. Grab an edge. Look theres two guys on the state farm borrow Better Banking sign. Nope for real theres two dudes on the state farm borrow Better Banking sign. [ reporter ] breaking news from the state farm borrow Better Banking sign. Were seeing two men that have climbed the borrow Better Banking sign gentlemen please get down from the state farm borrow Better Banking sign. Phil get the hose. Okay hes getting the hose. Alright, lets go. [ male announcer ] talk to a state farm agent about car loans that can save you hundreds. Thats borrowing better. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Welcome back to squawk on the street. We have hitting a new historic mark on home sales in june. 490,000, and that is the seasonally adjusted rate. We went from 476 downwardly revised to 459, and even though it was a little bit lower, that is the best rate since may of 08 and over five years. Definitely not a bad number, and coming on the day when we see the Mortgage Application continue to move a little bit lower due to the rising rates, and the rising rates we see again today. Kelly, back to you. Wow. Rick, almost tracking the half million number, and lets get more from tiei idiana olick joi frus washington. Where we were before higher, but looks like a new cycle high. Yes, this is a great number, and especially have to remember that this is the first number we are seeing that is going to show the spike of Mortgage Rates in june because it is based on the signed contracts in june and not the closings, so we were wondering what would happen to see the new spike of nearly a full percentage point in Mortgage Rates, but apparently not the problem for the homebuyer to see it up 3. 8 , and we have a tight supply of existing homes as well. I am waiting to hear the prices numbers from a year ago, but at this point, it is a great number for the builders Going Forward, because it shows that the Mortgage Rates did not have a big impact in june, but the question is Going Forward, because they did come off of the high in june, then the builders should be okay Going Forward, but they aare hampered by a increase. There is no prices out, but again, this is a great number. Diana, looking at the release from the website that the median price of a new home sold in june is 249,700. That is up from 2439. Yes, the builders are getting b better from the tight rising supply, but how much can they raise prices on koconstruction with the higher mortgage rate. But there are 2. 7 increases from a year ago. And yes, it is extraordinary, certainly, people understand the headlines. Diana olick in washington. Thank you for that. And in detroit, a showdown in the federal court is beginning a bankruptcy hearing over the bankruptcy hearing. A judge is deciding whether to dismiss lawsuits filed by pension boards and labor unions on the bankruptcy because of the violation of the constitution. Scott cohn is inside of the hearing room, and when we keep a tight look at the situation, carl. Yes, apples earnings are surging. And iphone sales saw a pop, but there was a decline for the second consecutive quarter of ssi. There is a target price of 600. And guys, good morning to both of you. Eric, let me start with you. You said that basically pretty good to neutral in terms of the actual results, but we are in a period where it is really new products time to shine, a san diego that going the happen . Well, if you look back at apples history, jim, it has been traditionally in the fall and the new year where apple starts to set the table with the new products and either coming out in the later in the year or the consumer heightened buying time. And they tell us there is always the back to school bump with apple deals and guidance. And so it is about a new catalyst. We havent seen a new fundamental category about the new products since the ipad and that was 2010. Yes. And brian, may not have settled some of the naysayers off of the ledge last night, but if there is a plan for september and october, they are keeping the cards close to the vest. Definitely. You think about apple being one of the most secretive companies out there, and rightfully so, because they dont want to let the public know what is coming down the pike. But in addition to the new products, the Gross Margins are a key part of it as well. Guiding for 36 to 37 growth margin s f margins for the September Quarter is a quarter at the end of the quarter where we expect the lowcost iphone to come into the marketplace, and many thought it would be a below growth margin, but we believe it is going to be above corporate margin margins. So i think that the guidance is indicative of the fact that apple is migrating down the cost serve and maintaining some attractive level of growth margin. And brian, a year ago they were 42. 8, and are we back to the levels or slower rate of decline of margins . Dont hold yourself on that one, carl. I dont think that we will ever see the low 40s again. Ultimately what was driving that is incremental 85 Gross Margins on the resale of flash and in addition to the high carrier subsidies on the iphone side. Both of which are moving against the company right now, and in addition, we have a lowend migration mix. The market is growing faster than at the high end. We estimate in the i phone 4 is in the low 40 is, and the 4s isn the 30s, and so we believe it is going to be around 35 for the next few quarters. And we look forward to what the product announcements are going to be, but in the environment after so much time has elapsed whether we are overplaying a prospect of what products may come to market, and underplay underplaying the strength of the iphone, because the strength of the sales in the United States are up 51 from a year ago and up 61 in china and the core of the business is the iphone and surely, it is doing well. Well, it certainly is. It is beating expectations, but one market that apple has not penetrated well, and they have not gotten that deal with the china unicome. They have done well with china, but not with china unicom and long doing the negotiation. Arik, it is not driven by a lower cost iphone . Well, the growth and the blend of the sap on iphones is coming down and it was 600 or thereabouts and come down partially, because the older model iphones are selling better than expected which is dragging down the average price of unit quite a bit. The iphone 4 is going for 3 in some cases and the iphone 4s and plenty of people are buying that from the reduced price. So they are take hit there. Brian, a big strategic debate about where they go. The journal today takes a crack at it. They take the mac and a superior machine in the day, but ended up with Little Market share and essentially just drowned by the advent of the pc and windows. Do you think that they should continue to make the best product they can and not go for the scale or do they have to play to the law of large numbers now . Well, if you are looking atple in the last couple of years, they have flourished in the high end and dominated the high end and maximized the profit pool and put it in the back pocket. Going for ward, if apple is going to reaccelerate and become once again a doubledigit grow on the top line and on the bottom line, they hit the mass market. And so this migration down with the low cost iphone and perhaps other products down the road as well, we will see a couple of hundred iwatch and things like that et cetera hitting the market, and you think about it, 600 million of cell base ios users out there, and it is a phenomenal ability to monetize it. They monetize at price points, and at a low cost to maintain the margins, and they real maximize the high end and now they have to migrate to the midand the low end if they want to continue the growth fund forward. We will learn more about that decision in the coming months. Thank you, arik and brian. The market is in negative territory for the indices. We go over the josh lipton. Looking at seagate, and stx is a hard morning for the driver manufacturer. They told us that the shipments, and they slumped 18 and the cash flow is disappointing. Seagate has surged harder this year, but down hard today. Kelly, back to you. Thank you, josh. Now to another big rumor of the morning and that is ford. The auto maker trading higher after beating Second Quarter estimates and the company is wrapping up a Conference Call, and phil lebeau is going to join was the highlights. Good morning, phil. Good morning, kelly. A couple of things stand out, and in the northeast region, blowout numbers of 2. 2 billion, and meeting the demand here in the u. S. And how ford is doing it. The company, globally in the Third Quarter is going to be raising production at least 100,000 vehicles and coming out to 195,000 vehicles which is important, because it drives revenue and earnings. And in north america the earning surge is built primarily on the stronger sales and talking especially about pickup trucks. Here is ceo alan mulally. We project that the market share will increase in 2012 in the u. S. And china and to be about equal to last year in europe. It is important to focus there on increasing market share in china. Questions on the Conference Call about china, and where it was zero earnings and posted best ever in asia because of the sales and the market share. And ceo mark fields says that the biggest challenge there is keeping up with the demand. We are watching very closely in june the oems have a practice to pay the midyear bonuses based on the wholesales so basically a potential of a pikeup in june, and we will see how july plays out, and we are facer toing that into the call. And when you look at ford, keep in mind they grew sales by 45 , 45 in the last seven months to indicate how hot they are running inside of china. There are the shares of ford and multiyear high, and bob shanks, the cfo will be talking to us first on csnbc shortly after noon. And these are unusual numbers by ford, but we will listen to the call to hear the analysts struggling at what to nitpick at. A couple of hours to the interview. We look forward to it. Thank you very much. And now caterpillar is falling 4 , and he told George Chanos at alpha that he is shortchanging the stock. Did he, and why . We will have that coming up. And also, the global cohead of the m a of citigroup is coming up to join us. 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. Wi drive a ford fusion. Who is healthier, you or your car . I would say my car. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah announcer through sunday at sleep train, save hundreds on beautyrest and posturepedic. Choose 300 in free gifts with tempurpedic. Even choose 48 months interestfree financing on the new tempurchoice. The triple choice sale ends sunday at sleep train. Another chapter in that ever evolving story of the leverage buyout and silver lake increased the share from 13. 75 up ten cents but the new offer is conditional of changing the voting requirements under the deal, and of course, if they were successful in getting the special committee to the board of directors to in fact agree to this, it would substantially increase the likelihood that the deal would be approved, because it would become the majority of the shares cash as opposed to the majorative oshares overall outstanding notwithstanding michael dells 16 hold iing. We will see the special committee of dell to release this letter publicly and to adjourn todays meeting that is supposed to take place at 6 00 p. M. Until august 2nd, now the special committee apparently has until 6 00 p. M. Today to decide whether or not it will change the voting requirements, but the likelihood at this point from what i am hearing is that they certainly want more time from that to consider at least whether to do this and it is far from clear that a 10 cent bump in is what is called the best and the final proposal from michael dell and silver lake will be enough to get the special committee to change the voting requirements that they fought very hard to put in place in the first place in order to try to protect shareholders. We shall see at this point, getting close the silver lake and dell and calling them resolute to see that they are not going higher than that, but it is unclear whether it is enough to carry the day if they dont get the change in those voting requirements as at this point it appears unlike ly the special committee would give into. Again, we will see that they may be able to push that deadline past 6 00 p. M. , and dell is like, okay, special committee, we didnt give you a lot of time to think about this, and maybe it is tomorrow or the next day, and these are important issues that they need to without a great deal of precedent. And how far can they push the shareholder vote . Well, further than august 2nd, they have to change the socalled record date by which shareholders are allowed the vote which is june 3rd, and so once it is past august 2nd, the record date changes and that creates a different dynamic. And so im not exactly clear how it is. And some argue that it is easier to get the deal done. B but there are other arguments to counter that, carl. But right now, we13. 75, but it could be 13. 6. If they stick to the deadline. And now talking about shares of caterpillar talking to him at alpha conference. Well, going through the series, they will be facing a series of super commodity headwinds that i dont think that the supporters really appreciate it. Meanwhile, the co of caterpillar responded to the comments this morning in person on cnbcs squawk box. We are in a cycle in mining and no question slowdown, but long term for me, mining is a great place to be. And i have said it before to you and others 7 billion people on the planet doing to 9 and rising standards of living around the world will require minerals and energy, and that is mining. It is not certainly a Straight Line up, and we knew that. Super cycle or what, we dont know what you want to call it, but it is definitely a business cyclical that we are used to. And now we are joined by levi leftgarden, and thank you for join g joining us. We have talked about the inventory reductions of an attempt to control the costs, but when you strip it out, what is the underlying state of the b business for the shareholders . Well, an ugly quarter no matter what you do, but it is the 21st century caterpillar instead of losing money, downgrading rapidly to control the inventory, and we are approaching the bottom for the stock particularly as the mining heads to stabilization, and it may be next week or next year, but the mining inventory reductions the company will end, and that is what is going to give you the 7. 50 dollar earnings rate this year, and if mining is headed toward a stabilization then 2014 is an p upup year for the earnings and for the stock and with nearly a 3 yield, you have to be careful shorting it. And now on the call that you had with the price target of 100, it is ambitious, and would you expect to see a substantial rally in the stock on the basis of where mining might go in a couple of years . Not really. What we need is mining to stabilize at the lower levels. It will take a couple of years for the mining to climb back, and the Power Systems and the construction site are the leverages and the key is at earnings dont to go down next year. And the 7. 50 stock is not a big multiple in the current market. So if they can deliver, the stock has upside here with minimal downside. And that downside is more than 10 , and the upside is 25 or more. And lets look at another view of this, eli, if we may, as we are joined by John Rhadigan from jpmorgan, and we know that the Conference Call is starting in 40 minutes time, and from what we know now, what are you saying to the shareholders . Well, we are telling the shareholders and i like what eli said that 6. 50 is a stop, and it should be trading at 20 times trop, and the evaluations are compelli compelling. One thing on top of that is that the investors might start to take a look at is that the cycle six months from now is going to see that exports out of china and europe are beginning to improve and dont forget that europe is chinas biggest export market and so we think that we have seen a bottom in the global macro data, and Going Forward we think that as this gets better sentiment on the stock, caterpillars stock is better, and so we are a buyer today. Eli wrote on twitter that you and ann have forgotten most about this company than most know, and that said, why is this quarter not well telegraphed . You understand the cull xhur from the Investor Relations and the cfos office, and this is a little bit of surprise that people rupset . Well, we knew the Mining Systems well, and it is the big drop in the inventory and the downturn of the inventory that was a drop in earnings, but again, this is a 21st century caterpillar and still cyclical and we wont get the quarters absolutely right, but the i78 pornt thing important thing is to get to it quickly, and dont let it continue in a history of terrible numbers. Thank you for the clear call. Ann and eli, caterpillar reports. Enjoy the Conference Call. And how glaxosmithkline bribery scandal could affect the company. We will find out what the ceo has to say about this when we come back. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. 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Well, they are in serious damage control mood. The ceo was speaking of the Second Quarter results and speaking to the investors said that the headquarters had no knowledge of the china scandal and that the chinese were deeply disappointed that 99. 9 of the staff operated in a appropriate way and you could see him trying to distance the company from the scandal. He wanted to make sure that people knew that china had the unique characteristics and that they were dealing with the situation in the best way they could and that if there werer any malpractice suits in the Chinese Market that it wouldnt be something that they would see in the emerging markets as well, and other emerging markets that they were in. One more point that he made is that he believed that china has reached an Inflection Point in the modernization of the health care system, and it is interesting a bout that is that we are seeing the people in the Health Care Industry on edge. They are nervous about what they are seeing for the first time for example today in the widening investigation, an american was detained, and we do not know the name of the american. But we do know that the person is not working at pfizer or glaxosmithkline or eli lilly and the companies are quick to make those statements. Guys . Wow. Okay. We will have to follow that story, eunice, and see if we can find out anymore about that individual. Thank you very much. In the meantime, crude oil is trading for a oneyear high at 106, and we will get the latest Oil Inventory numbers in three minutes. And former Goldman Sachs vp back in court and not only that, he will take the stand this afternoon. We will get more on that when squawk on the street comes back. Welcome back to squawk on the street. Im sharon epperson, and they are carrying the losses with crude oil going to 106 and we got the report from the Energy Department showing another decline in crude supplies down 2. 8 million, and this is the fourth week in a row that we have seen a decline in the crude supplies and a big reason for the runup in oil prices as s hn this inventory declines. And also, in fuels, gasoline supplies down 4. 8 Million Barrels and dislate inventories also down. So we are looking at our gasoline futures getting a little bit of a bump up here with the decline that we are seeing in the gasoline supplies and meantime in distillate fuels, we are looking at the diesel futures down slightly right now, but keep in mind that four weeks in a row, we are looking at a decline of about 30 Million Barrels of crude oil in one months team, and a big reason for triple digit oil prices. Back to you. That is incredible, and what a collapse in the inventory levels. Thank you, sharon epperson. We got a report from boeing, and their Conference Call started a few moments ago. Their Second Quarter profit beat expectations and reduced the outlook off of the highest levels today. And phil lebeau is listening in on the call, and he will bring us any headlines that he finds. And we will look at Fabrice Tourre is at the courthouse today ready to take the stand, and mary is at the courthouse. Yes, he will be taking the stand later today at 3 00 or 4 00 on the eighth day of the trial. Walking into the court today, the 34yearold told cnbc that he felt good charged in 2010 with purposely withholding information from the investors about the tight hold that John Paulsons firm had in designing and the 2000 bet on the Housing Market. This includes the former goldman worker with him at goldman who said they believed all along that paulsons firm was long or betting on the success of the Housing Market, and that the debt obligation, and the cbo advocates, and paulson and the subprime market was set behind it, and he made 1 billion on it, and the other investors lost 1 billion. The s. E. C. Argues that the go between should have told the long investors about paulsons position known that he made billions, but against the u. S. Housing market. The defense has been countering it by questioning the witnesss credibility and promising aud taudio tapes today for failing to detail his legal obligations the clients. While the jury was listening when the s. E. C. Had one of their witnesses turn hostile on the stand. They have a lot riding on it, because the s. E. C. Is needing to convince the jurists that he is des deceptive and the defense needs to say that tourre was just doing his job. And so he was selling as directed by the firm. Okay. Mary, thank you very much for that. Along with that w we are watching this story of federal prosecutors preparing criminal charges against saac capital. This is coming amid Insider Trading report. This is coming awe of the reports today of the wall street journal, and going back to what Preet Bharara says that sometimes the reports that you hear are not going to be what happens. And yes, in lots of newspapers today, so somebody is putting it out there. Amazingly enough, i think that this is unexpected at the sac in what i have gathered from speaking to people. Hard to imagine that through all of the time it might come as a surprise, but nonetheless, it does appear to be. And in many ways you can make the argument that this is as bad if not worse than if mr. Cohen were indicted himself. It will put in doubt the firms ability to operate as a commercial enterprise. We have never seen a company surviven the indictment whether or not you are proved guilty or not. And then the idea is well, it would be a home office and you will see him right, there and most of the money or roughly 9 billion of the sac is his, and therefore he will simply manage his own money, but you have to wonder about the employees and how many people would continue the work there and want to work there. And the fees to the banks as you mentioned in the last half hour. And yes, the banks that are providing leverage to sac as it does the business and remember, it is a hedge fund and you lever up the po igs s and one has to think if they will continue to provide the credit if they are indicted, because are we going to see it again, will it be frozen . What will happen . That is a clear blow to the business model, and so a lot of the questions here as we await what many are reporting is imminent firm indictment. That is right. It is interesting as well, because with the sense from again your reporting on this, that maybe they had put this behind them in either the spring of what happened last week, and that was it, and now, now this. Well, they have paid 6661 mi 661 million over the s. E. C. Over the wires trade that would perhaps put it behind them, and clearly not the case, and the s. E. C. Came back last week with a supervisory charge and now we have the likelihood it appears of criminal indictment. So, yeah, the firm and the lawyers, you know, can make the argument they have not played it right, have they . Well, the paper that was released yesterday of 40something screens and only one with email, and he has to shrink the window, and is that disproportionate. Yes. And good question. Plenty of people say it is a reach and why is it being done . Many people have not seen the evidence or the indictment, and we simply dont know. And over to josh lipton for the market flash. We are watching hanes wanting to buy maidenform, and a premium. And hanes saying that maidenform is a natural fit for the core business and both of them are rising this morning. Back to you. Thank you for that. Find out which hotels love to stay at and why. We will tell you the biggest problems that hotels are facing satisfying the guests. And this first half of the year has been the lowest m a deals, and we will find out what happens for the remainder of the year from mark shafir from citigroup. This is the pursuit of perfection. [ whirring ] [ dog barks ] i want to treat more dogs. Our Business Needs more cases. [ male announcer ] where do you want to take your business . I need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, Small Business solutions from at t have the security you need to get you there. Call us. We can show you how at t solutions can help you do what you do. Even better. Can help you do what you do. Even better. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Global m a volume is less and in fact since 2004 and will the trend continue through the second half to year . Joining me now is mark shafir cohead of global acquisitions at citi. And we book you ahead of times and we dont plan these things, because we love the have you on to talk about the larger global m a picturek but the viewers should know that you are the adviser to silver lake and to michael dell, the buyout group now offering 13. 75 a share to buy and take the company private. And so, lets start there if we might. Why the decision to go up 10 cents and make this 6 00 p. M. Deadline by which the special committee has to change the voting provisions to be much more favorable for michael dell and silver lake. Well, let me say that we put the best and the final on the table at 13. 75. Best and final . Yes. And we have been crucified six times in the negotiations, and a very strong shop, and nobody showed up. The bottom line is that this is a great price and compelling offer. As far as the voting provision goes, we have a situation where you have a very close race in a contentious situation like this, and you have the key sponsor who can vote his own shares and the company, and we are saying that if you are down 25 on the vote, it is a very rough standard and what we have to do is to let the special committee decide. Let mem make the decision and we will live with it ooeither way. We are comfortable where we are. All right. The special committee from what i am hearing is not likely to do it for a dime. Then what . Well, we take it one step at a time around here. We think that the offer is compelling, and we like those in the market to take advantage of the a compelling opportunity. And we hope it goes through. It is going to be fascinating to see if we have a proxy fight between michael dell or what the company hachooses to do with a buyback. And 6 00 p. M. Currently is the deadline at least, and the special and your client did leave themselves with an opportunity to say, well, maybe more time, and im hearing from my sources from the special committee they would like more time to figure it out. It is important, because they just got the letter. Well, we are looking at that and taking it under advisement and something to say at that point, but nothing here. And the best and the final. You said it here, but i have heard it so many times, and it ends up not being true. David, this is best and final. You heard frit mark sha yo heard frit ma heard it from mark shafir. And we are moving along. And where do you stand in the company reporting earnings that there is a belief to the viability of the auction and some debate on that. Are you going to tell is company . Well, as we said, we have a process under way which is a healthy process. We feel good about where we are, and i think that what you will be hearing from us shortly. Shortly meaning in the next week or so . Yes, beyond that, and you will be hearing from us shortly. And now that we have made some news which is the rarity of some of the news, we will talk about the broad environment, and you have not been positive on the m a for a long time, and you have been right this years and what does the second half look like. Well, the problem is that sort of being the purveyor of doom and gloom and turns out to be right. The first half was flat and the second half last year was stronger. So we are looking at in our mind something on the order of maybe the market is down 5 in global volu volume. But the problem is the last two quarters and the number of deals have actually decline and remember the mega deals that got everybody excited in the beginning of the year have also come down, so it looks like to us that it is a decelerating market and instead of accelerating. So decelerating m a market, and so historically and incredibly low numbers, and it would seem that for conal isdation bais consolidation, and no revenues from the banks, and come on, what is going on . Well, a lot of expectation from the buyer and the seller. There is concern for the big deals. A lot of the cases that you have the boards and the ipos and this is a track of confidence that we have talked about and macro uncertainty is growing in china, and economic slowing, and Geopolitical Uncertainty in places like turkey and egypt are not helping with the market. As a result, until we see a catalyst, it will keep happen i ing. What kind of catalyst is thisks÷ conservative nature thew normal . Well, i mean, we are living in the range in terms of the total value of the last three or four years, you wonder where the 06 and 07, was that because of the, bubble . And the real normalized markes s are looking like 2. 5 or 2. 7 or Something Like that, and it is difficult to say, because the conditions, we talk about it, great credit markets with a lot of liquidity, and a lot of reasons to feel like we should be doing better than we are. I feel there is going to be and up turn, but i cant tell you when. And if it werent for carl icahn, we wouldnt have this situation with dell. So that would seem an engine. Well, in a odd way, it is a bright spot if you are a practitioner, and maybe not so great if you are on the receiving end of one of the situations, but yeah, the way we see it, it is up in terms of the equities substantially, and people are making money doing this relatively to the other shortterm strategies, and other strategies, so we think it is going to continue and become part of the landscape. The interesting thing is the mutual funds will take a much more active stance. And the s. E. C. Commissioner came out a few weeks ago talking about relying on the Consultancy Services is not good. And we think that it is changing, and we will see that as well. We have seen it in the dell vote to this point. Let me end there with you on dell, and you are articulating the position of the client michael dell and silver lake. For those who say they are tanking the numbers and the pc business is undervalued and you should pay at least 14. They should go to talk to the people in the valley who understand the computer business and understand what the tech world is really like before making that judgment. Mark shafir cohead of the global of m a at citigroup. We always appreciate him coming on. Great interview, david. In a couple of hours president obama will deliver the first in a series of backtoback speeches over next 24 hours to sell the country on the theory of a thriving economy, but this is after a poll of only 42 approve of the president s performance. Senator roy blunt will be here to tell us about what he thinks of the president coming up. All business purchases. So you can capture your receipts, and manage them online with jot, the latest app from ink. So you can spend less time doing paperwork. And more time doing paperwork. Ink from chase. So you can. With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. We used to live with a bear. [growl] wed always have to go everywhere with it. Get in the front. We drive. It was so embarrasing that we just wanted to say, well, go away. Shoo bear. But we cant really tell bears what to do. Moooooommmmmm then one day, it was just gone. Mom [announcer] you are how you sleep. Tempurpedic. Welcome back to squawk on the street. Todays wednesday. Santelli exchange for wednesday, listen, big news today out of the eurozone, and its welcome news, okay . Were seeing some of their pmis move into much more solid expansionary territory. Lets take a close look. An aggregate, the aeurozone, m manufacturing, sched, service. If we break them out individually, germany, above 50 on both. Germany really isnt as much of the problem. Most stories i read of late say if we are going to end the recession that plagues much of europe, france is key. Now, even though both of these indicators, 49 manufacturing, you could see theyre still under 50 . Theres a pmi thats even more important and i didnt put it out there. Many question the accuracy but i question the accuracy of everything. Lets see if you can guess. 47. 7 . Well, that was the kind of advance chinese pmi. So lets try to lump all this together. I look up at rates today, 2. 57 on a tenyear, so were moving back in after holding the mid 2. 40s. I see a twoen in year noyear n. The twoyear is nailed because of fed policy and promises, scouts honor to 2015 but its still up three basis points. The long and short of it is all this is wonderful, but the only number that really matters, okay, it is this, 12. 2 . What is 12. 2 . Thats the Unemployment Rate in the eurozone in aggregate and on the last day of july, theyre going to have updated news. Its always been, always has been, and always will be about jobs. People need to buy things, businesses are making, and this is key. The president is giving a speech today. Im not getting involved in the intricacies but it should come as no shock to anybody because his leading bit of legislation thats his marquee, of course, is the health care, and just since january over 800,000 new parttimers in the u. S. And 100,000 fewer fulltimers. No matter what part of the globe youre on, its about creating jobs, and that really is the premise. Simon, back to you. Thank you very much. Amen to that, Rick Santelli. You saw it first in the Airline Industry now Customer Satisfaction with the Hotel Industry is surging to a sevenyear high. Basically because room prices have recovered. Brands scoring the highest satisfaction ranking in each of the eight industry segments surveyed by j. D. Power should be able to look forward to higher margins because more customers will repeat book without hotel owners paying commissions to third parties like Online Travel agencies to fill those rooms. But the big takeaway from this survey for hotel owners is that the survey clearly shows ensuring your customers have at least four interactions with your staff during their stays drives that satisfaction higher. So for owners actively considering now which many are investing in mobile technology to speed checkin, they really must ensure they redeploy any staff time thats freed up towards the customer according to j. D. Powers stuart greif. Those remaining human touch points become essential and there are still opportunities. So an engaging checkin experience with somebody greets you as you come in with a tablet as opposed to waiting at a long line at a checkin desk is the future. Its actually a science. We have our first statement from michael dell and silver lake regarding their increased offer by 10 cents a share to 13. 75 for the company they wish to take private. You heard from mark shafir, the adviser to both of them. Let me read to you from the statement. What is happening here really if i can foreshadow it is simply they are trying to apply pressure publicly on the Shareholder Base to agree to their demand that would change the voting provision in terms of the vote itself. Saying that their latest tally, roughly 27 of the unaffiliated shares, that means those not owned by michael dell, have not yet been voted. The presumption that these shares should be treated as if they had voted against the transaction is patently unfair. Remember, by virtue of the agreement they have with the special committee in the vote that was taking place last week, is currently still under way, if you will, because the meeting keeps getting adjourned, if you dont vote, its not counted as a yes. They need yes votes to be in the majority. What they want at dell and silver lake, is that it should be a majority of the votes cast. Sense they continue to put pressure on saying 13. 75, a full and fair price, and they believe that the decision to accept this offer should rest in the hands of the unaffiliated shareholders. Echoing what their adviser, mr. Shafir, just said on our air in which he also emphasized this is the final bid from dell and silver lake. They have a 6 00 p. M. Deadline. It sounded to me that that may get pushed, well see whether they give them more time. Are there legal implications to the best and final language . There are not. There are not. Its just meant as a bargaining tool, right . It is often and, therefore, that is why we have seen Companies Say best and final and then do Something Else whether its a dividend on the back end or what it might be that certainly make it not having been best and final though they could argue it. There were also no legal implications for the special committee to change their mind on this voting provision. Under the business judgment rule as best i have been able to determine, theyre in the clear to do that, so it simply seems to be a matter of price and what i have heard continually and reported to you is that the special committee does not feel a dime warrants a change, but they may want more time to think about it. Theres a Public Campaign under way from these two gentlemen to get them to think long and hard. Mark shafir was quite firm about it, best and final is what he said. Although anyone who has ever negotiated to buy a house knows where that will get you. You know who has been noticeably silent so far is carl. You got to imagine that may change before the day is through. I would bet you are right. Probably hear from him weather publicly or in letter, maybe hell come on and join us at some point. He wants to put pressure on the special committee not to give in, not to change that voting provision for, again, that ten cent pump in the price. Gee might tweet about it. All right. Meantime, the dow has recovered some of its losses. We were down 50plus points earlier in the session. People talking about the new home sales which was a nice beat, and reflecting as diana olick said, some of the rises in Mortgage Rates, Capital Economics out with a note saying thts the first major test of the Housing Market and it has emerged unscathed in their words. Good day for the banks as well. Am ex is up 1. 5 . Can i put one word in for europe. Just to emphasize it, the data is great in europe today. Europe could be bottoming. More in half an hour. Well talk about that. David, thanks again. If youre just joining us this morning, here is what you missed earlier on. Welcome to squawk on the street. Here is whats happened so far. Saw a huge inventory reduction as weve seen the last two or three. Were actually producing and selling to dealers far less than theyre selling to end users and their customer. That bodes well for the future but its certainly been a drag on earnings. Dell is now announcing that it has received a revised proposal from michael dell and from silver lake under which they would increase the price for acquiring the company. Theyre talking about 13. 75 a share in cash. My favorite number of the day, backlog 410 billion. If you can get a dreamliner in 2020, i will swap you. I think im probably in line now for 2025. I have a backlog around that. You do . 20year player. Im working on it. Theyre not going to do it. For a dime theyre not changing the voting agreement. For five bucks in dimes, yes. Even for 50 cents in dimes they might. Lets kick off this wednesday morning. I think they really kind of maximized the high end. Now they have to migrate to the mid and low end if they really want to continue the growth Going Forward. Increase the price six times in the negotiations. Nobody showed up at 13. 66 a share. The bottom line this is we think a great price, a compelling offer. Good wednesday morning. Weaver li were live at post 9 at the new york stock exchange. The dow has managed to come back. Currently down 24 points. The shares of caterpillar tumbling this morning. Second quarter profits coming in lower than expected. It cut its full years earning guidance blaming a slowing Global Economy and falling Commodity Prices for that. The companys ceo did say he expects improvements during the second half of the year, and then panera, another big loser today. The restaurant chains Second Quarter numbers and revenue missing expectations. The company cuts its full year forecast because of slow growth at many Company Owned low cas. Lolocations. Well tell you how long the iphone trend can continue. President obama set to give a major speech on the economy . Just a little over an hour from now. Well ask one republican senator what he wants to hear from the president later today. And the blowout quarter for new home sales coming in at their highest level in five years. The head of the biggest Real Estate Broker in the country tells us what to expect next. And they just arent into us anymore. Foreign buyers apparently cutting back on buying u. S. Real estate. Well tell you why. Thats all straight ahead. First though shares of apple on the rides after reporting Earnings Results better than expected. What do the technicals tell us about where apple goes next. Lets ask mark newton joining us at post 9. Welcome. Thank you. What are you divining from the charts . Weve made a little progress but the stock is very much still range bound over the last five months. Its tough to make too much of this. Over the last five months it hasnt really participated. The market is up 18 and the stock is range bound. It continues to trade range bound with highs near 445 to 450 tz whi 450 and lows near 3. It will need a little more progress. Whats a little more progress . I want to see a move over 445 and if you look at daily charts of the stock really since february, that defines the highs of the stock of this entire range. Getting over there would be a temporary positive. Next, i want to see a move over 460 which were the may highs. That would suggest the stock can really start to accelerate and get up towards 501, potentially up near 538. For now i think the stock is a really good risk reward given the decline its had and the start of stabilization but its still a little premature to say you reach in and buy on todays move. What if that doesnt happen and we cant get to the 445 and above level sfs. The stock moved up in may. It was right to sell into the move and buy pullbacks. If the market starts to turn down, which is a possibility given the recent divergence of momentum, the stock could be vulnerable. Initially 388 on the downside is important. I think a max low for apple should be right near 370. It would be a great area to take a look at buying the shares. Thats only a long way from where we are now. When you say its a relatively good buy. Does that say more about how its priced or how the rest of the market is priced . More so on the overall market. Weve seen gradual signs of momentum deterioration. Sentiment has gotten very lofty, really since the late june lows we havent seen the same amount of stocks hitting new highs. The nasdaq really peaked last week. Its not participating in this weeks new highs like the dow and s p are. Europe and emerging markets have been under pregnancy. The market really isnt moving all in unison right now. Technology has been under some substantial pressure. Materials which have been a big underperformer have started to bounce of late. We want to see more stocks move up and see the breadth of this market improved. The risk reward isnt there. Interesting point about the nasdaq. Thanks very much. Appreciate your time. My pleasure. Got to continue to watch shares of boeing. Company beat the street this morning with earnings and revenue much better than expected. Earnings calls going on right now and phil lebeau has all the details. Good morning, phil. Good morning. Questions on the Conference Call are primarily focused on two areas, one driving down costs on the 77 dreamliner as they increase production and the overall backlog when it comes to customers airlines. Theres a look at boeing beating the street by 9 cents. Revenue coming in 1. 5 billion better than the street expected. Why . W well, you have dreamliners being delivered. The faa grounding was lifted in april. 16 delivered in the Second Quarter. Boeing says 787 problems, and we have seen a number of them, are not slowing down demand. Here is the ceo talking about the latest on the investigation regarding that fire in London Heathrow Airport with a dreamliner last week. In anticipation of planned action by the faa and other regulators in response to the aaibs recommendations, we have provided customers instructions for the proper inspection and or temporary removal of the fixed elts. Those elts being the locator transmitter, the pingers, where the fire was located. Lets talk about commercial airplane production. What were talking about are the 777s and the 737. Thats the bread and butter airplane. The commercial airplane backlog stands at nearly 4,000 planes. You mentioned it earlier today, carl. 410 billion is the value on that. It is scheduled boeing is schedule 20d to deliver between5 and 645 planes this year. The ceo says we could increase our production rate beyond the target of 42 per month. We remain on track to increase 737 production to 42 per month in the Second Quarter of next year. Further, we are positioned to match production with additional demand as our customers require it. Read between the lines there as you take a look at shares of boeing over the last year. That is jim mcer in ni saying they could go beyond 42 a month. The call is still going on. Going to hop back on it. There are a lot of questions regarding 787 production costs, bringing them down, and then also ramping up production on the 737 and the other lines because thats really whats driving the stock right now. Guys, back to you. All right, phil. Thank you very much for that. Our phil lebeau watching boeing on a busy day. In a little over an hour, the president will deliver whats being billed as a major speech on the economy. Senator roy blunt is here to tell us what he wants to hear from the president and what he thinks hell hear in just a moment. [ 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 pection. [ 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. We used to live with a bear. [growl] wed always have to go everywhere with it. Get in the front. We drive. It was so embarrasing that we just wanted to say, well, go away. Shoo bear. But we cant really tell bears what to do. Moooooommmmmm then one day, it was just gone. Mom [announcer] you are how you sleep. Tempurpedic. Welcome back to squawk on the street. Im josh lipton. Keeping an eye on broad com here. The chipmaker down hard this morning swinging to a Second Quarter loss. Current quarter revenue forecasts missing what the street wanted to see. That stock hitting lows it has not seen since december 2011. Carl, back to you. Josh, thank you for that. Speaking of tech, google is hosting a breakfast today with its chrome and android head. The invite does not reveal a whole lot but people are speculating it could be regarding the new nexus or maybe an update on chrome, maybe a hint at a muchanticipated moto x. John frt n fortt is at the even. Good morning to both of you. Jon, walk me through the scene over there, and walk me through your own expectations. What are we going to hear . Well, carl, weve got a few folks lined up for the event now. A lot of the hometown heroes who i recognize. I dont expect any moto x. They sent out the invite. We expect to see that august 1st in new york. But the nexus 7, the latest version of that, some people say code named razor, we do expect higher resolution screen, 320 ppi, faster qualcomm chips inside. Its been a year since we saw the last version. Companies like to roll these things out at a decent cadence. Maybe some updates on the os software for tablets. Interesting here because we saw apples ipad numbers down a bit in its report earlier this week, and we also know that google is not making a lot of money on the hardware here. Its kind of like a strategy to get hardware out there to sell services. Kind of like a new traffic acquisition cost. So it will be interesting to see how they position this, carl. Lance, its hard to imagine them having even a big software conversation without at least mentioning the phone or some hardware. Whats your expectation. Yeah. I think google has to google and its Company Motorola have to do something on the hardware side. I dont think the battle so much has been with apple so much as its been samsung eating the android lunch. They have been the android story with so many lead products. They have a different sized phone for every need, and i think google and motorola will have to do some stuff. We just saw there were a few new drouds a few days ago. Its kind of confusing that google is having two meetings in the space of really just a few days, but we think nexus 4 today and a preview of android 4. 3. This is the android and chrome heads meeting. He hasnt done a lot of oneonone things in his new role. I expect he will focus mostly on the software side. Maybe let them handle this nexus 4 and probably nothing about the moto x because now i really think thats going to be an august 1st event. Jon, what about this the way that google is going about this, having the breakfast, then having the event. Is this just reflecting our attention shifting to the products theyre coming out with or is this different for google now as well . I think its a little different. Before they did the sort of thing at google io, their big developer conference. They held it a bit earlier this year. This is also refleck at this of a trend of tech in general where your big power players, apples, samsungs, googles, they know they can call peoples attention in their own events. They can pick their shots. They didnt perhaps have this ready in time for google io so theyre rolling it out now. Theyre really trying to keep, i dont know if you remember the old mcd slogan, keep the hot side hot and the cold side cold. They want to sent a message were still neutral for you and at the same time say were coming out with great devices. They dont want the google main executives to seem to be giving motorola too much attention, special attention. I wouldnt expect to hear too much about that today at all. Although just to put a period on it, lance, if you dont want to draw attention to it, why would you have eric Schmidt Holding what appears to be the phone in sun valley, right . Apparently hes been testing it for weeks. Hes not doing much to hide it. I think this is just a really tough position because i think that google feels the pressure with making something of motorola. Bringing it back to its previous heights. They have cut like 5,000 workers over the last quarter, and yet they still want to make motorola into a power player in the smartphone space and having eric schmidt walk around with that phone and show it off is one way of doing that. It builds the hype. And they do want hype around this phone. I just dont know if theyll do it today as opposed to a few days from now. Jon . I think eric schmidt, i think eric schmidt might have gone rogue a little bit there. Im not sure the motorola folks planned on him showing off that phone at that event but they dont exactly tell eric schmidt what to do. He put his blackberry aside for this phone. It was a big deal. Everybody got excited. Im sure he knew what was going to happen. Guys, well see what happens today. He knew. Anybody who is long google or apple today is paying attention. Thank you very much, lance and jon. We do want to mention, guys, we have heard from carl icahn on twitter regarding dell. All would be swell at dell if michael and the board bid farewell. Hes a poet and he didnt know it. This is not, by the way, the clue he said he would offer on twitter to his next investment idea but certainly reflects that theme. Keep an eye on it. Buyers have been pouring money into Luxury Real Estate lately but the tide may be turning. What does it mean for the u. S. Housing market . We take a look when we come back. Unlike history, math and english, Financial Literacy is not taught to young students. But from an early age, children internalize behaviors that affect financial Decision Making later in life. Pwc is helping spread that message. Im bob moritz, u. S. Chairman of pwc. Pwcs earn your future is a 5year, 160 million commitment to help students learn the financial skills they need as they grow. Pwcs earn your future empowering students and future leaders through financial responsibility. Honey, is he too into this car thing . [ mumbling ] definitely the quattro. Honey . Huh . A5. What . [ sighs ] did you Say Something . Did you Say Something . announcer at scottrade, our cexactly how they want. T with scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. Today the president is going to kick off a threespeech tour apriled at explaining his vision for the economy as his approval ratedings drop to the lowest level since the fall of 2011. According to a new wall street journal nbc news poll, overall disapproval of Congress Hits its highest level ever. Roy blunt joins us today. Good morniing to you. A lot of guessing about what the speech will be about. Some criticism saying it could be another pivot to jobs, something hes tried to do several times. I think thats exactly the thing to look for, not xa wha he says today but what hes saying tomorrow and a week from today. The president when hes talking about private sector jobs, if thats what he talks about, thats what he ought to be talking about and he ought to keep talking about it until we get some. Fulltime private sector jobs should be the number one domestic goal right now. I think it calculates somewhere in the area of a dozen times the president goes to jobs and then goes back to higher taxes, higher utility bills, Uncertain Health care, the kind of things that hold jobs back. Were a business channel. We talk about stocks all day. Does he need to reverence where the dow is, the fact that we are at record levels . Well, i think, you know, when you reference that, then you look at all kinds of analysis as to why that is and almost no analysis is based on the growing the economy growing like wed want it to. Its lots of money coming in and low Interest Rates and lots of other things. If i was the president , i would try to say all i could about good things happening in the economy and indicators of good things. More importantly, i would tell the administration, lets stick with this this time. That cant just be another pivot we immediately pivot back to things that hold jobs and Economic Opportunity back. Senator, staying with the economy, do you think the better choice to succeed ben bernanke is Larry Summers or janet yellin . I dont know. Im not going fob allowed to make that choice, probably not be advised on that choice, but its going to be important who does that job and how they do it and how eventually we wean the economy away from the false impact every month of 85 billion new dollars coming the fed just creates and that has all kinds of ramifications, and every time they suggest they might back away from it, that has ramifications, too. So who can figure out how to get to a better place than we are with the fed i think. Wert of those two candidates receive a yes vote as far as your concerned through the nomination process . Well, id like to hear what they have to say, but i know Larry Summers very well, and i know yellin less well. Lets see what they have to say and how they go through this process. Senator, well see what the president has to say in just a little bit. Thank you so much for your time. Good to be with you. Senator roy blunt of missouri. And its another delay for dell today as Shareholder Meeting pushed back after michael dell and silver lake upped their offer by 10 cents to 13. 75 a share. Jackie deangelis is live in round rock, texas, with more. Must be an interesting scene down there. It definitely is. Good morning to you, kelly. Dell and silver lake certainly raising the stakes here this morning. Were at the hampton inn down the road from dell headquarters where a lot of shareholders were staying. They were planning to attend the meeting later. Instead, they woke up to this news. Theyve checked out and gone home. Theyre planning to come back potentially for the next meeting next week. We talked to a couple people as they were leaving. They said a 10 cent increase from michael dell and silver lake with these special conditions is ridiculous. They said the special committee is in charge. They are supposed to be taking the best interests of the shareholders into account here and potentially changing this vote halfway through is not necessarily doing that. Still at the same time you have the dell proponents who are saying this is the special committee trying to negotiate. Theyre trying to get more out of michael dell, maybe even more than 13. 75. Now, tonight at 6 00 p. M. Eastern time, that is key because dells new offer is set to potentially expire based on whether the special Committee Changes those voting conditions. You have some people saying that theyll be watching that very closely at the same time saying the special committee could potentially extend that time line as well. Theres a lot of unknowns here right now. Meantime, that new meeting is set for august 2nd. Thats a friday, 10 00 a. M. Eastern time. You will have icahn and southeastern reps coming back here to make their case again. The individual shareholders, thats what theyre coming to hear, both sides of the story. Dell and silver lake said in a statement that they believe the 13. 75 per share is a fair price. You had other big shareholders coming out this morning. Saying this is beyond outrage us. We continue to oppose the dell proposal, but, again, the outstanding questions, what happens at 6 00 p. M. Eastern tonight and is this special Committee Really trying to work with both sides here, trying to get that number up and get shareholders more than 13. 75 so they get a deal passed next week, kelly . And, jackie, maybe the third time will be the charm. Thank you very much for that. Jackie again in silver lake, texas. As we speak, a major bankruptcy hearing is going on in detroit. We will go live on the ground to bring you the latest. Plus, there are just a few minutes left in europes trading day. Simon is pretty excited about some of the data coming out of there this morning. Well get you details on that and the close when we come back. , which would be fine if bob were a vampire. But hes not. Hes an architect with two kids and a mortgage. Luckily, he found someone who gave him a fresh perspective on his portfolio. And with some planning and effort, hopefully bob can retire at a more appropriate age. Its not rocket science. Its just common sense. From td ameritrade. Wi drive a ford fusion. Who is healthier, you or your car . I would say my car. Probably the car. Cause as you get older you start breaking down. I love my car. I want to take care of it. I have a bad wheel i must say. My car is running quite well. Keep your car healthy with the works. 29. 95 or less after 10 mailin rebate at your participating ford dealer. So you gotta take care of yourself . Yes you do. You gotta take care of your baby . Oh yeah lets brings in the close now, just about a minute to go, simon, and its been an interesting trading session. Oh, wow, it certainly is. Dat that coming out of europe is phenomenal. Hold tight, were lifting is how jpmorgan put it in a note today. They suggest that the data indicates that the euro area is finally emerging from recession. If you look at the stock market action, youll see it is a positive day in europe, and you will see that the periphery in particular has done well because the bond market is rallying and risk assets are in favor. Check out that green there. And then you see as you look around spain, portugal, italy, some of the banks have lifted that market more than the rest. Let me show you the data, let me show you exactly what im suggesting may be the bottom for the eurozone economy. It is the composite pmi, services and manufacturing put together, and if you have a reading above 50 as regular viewers will know, it indicates that youre actually gaining. Youre not in contraction. Contraction is below 50 . Above 50 is expansion. Finally after 18 months across the eurozone, the average has lifted above 50 and that indicates an expansion. Germany clearly is strong. Yes, as rick was indicating, france is weak, but with france weak it indicates that since the average is expansion, the rest of the periphery is also doing extremely well. Now, it may be a slightly false reading because the data earlier in the year was so poor and maybe this is a bit of a snap back revision to the mean as mark put it at monument, but lets take it for now. Certainly you have seen a selloff in super safe haven german bonds as you can see so the yield is higher there. Yes, i know there are rumors in the market. Lets see what happens. Meantime, the yields are still really quite low on italian and spanish debt and that is why the banks have held in. Meantime, on a lighter note, everybody has seen now the man or the boy that is third in line to the heir of the british monarc monarchy. Whats as the dust begins to setting is the degree to which marketeers have used social media. Johnson johnson, a baby in a bath with soup suds that have been shaped as a crown. Thank you. Or yos, an oreo and a milk filled baby bottle on a royal cushion. And coke, toasting to two royal companiles toasting with one bottle names wills and one named kate. Most people i dont think are toasting with cocacola. Certainly not in the uk where i come from. No. Thats a different spirit. Talking about going where the eyeballs are. Did you see the number of page views for theb bc. Record day. If theres one story britain will thrive on, its the birth of a royal baby. It was a good day. What else do you want to know about brit snn. Thanks very much, simon. A major bankruptcy hearing for the city of detroit going on right now. Our own scott cohn is live in detroit and joins us with more on that. Hi, carl. The city of detroit and the governors handpicked emergency manager kevyn orr very much want to get their plan off the ground so theyre pushing their plan in federal court. The unions see that as a direct assault on their Pension Plans which they say are protected by the state constitution, not to mention a direct assault on their very existence. Theyre fighting back hard. In the hearing this morning an attorney for the city, heather lennox, argued that all of these lawsuits that the unions and the Pension Funds have been filing in state court, all that litigation has got to stop and that the proper jurisdiction is here in the federal court, but meantime an attorney for the Public Safety Pension Funds which the city says are some 2 billion underfunded says that it should be as if this filing in federal court, the bankruptcy filing, never happened because it is prohibited by the state constitution. These arguments are continuing now. The city is going ahead with its rebuttal to the yub aunion and fund arguments. The judge has said he will have a ruling today on whether all those state lawsuits and lawsuits against state officials, including the governor, should be halted while the federal brubs goes through. Were live tweeting these proceedings from an overflow room. You can follow me scottcohncnbc. There have been a smattering of protesters trying to draw attention to what they see as a direct assault on their lives, their existence, the unions existence, and the retirement funds. People who are here say that they are out here because there is so much at stake. Im scared. Im scared. Im scared ill lose my retirement. Im squared that the city will get im scared for all of us. Again, we expect that there will be at least a preliminary ruling in this case whether the bankruptcy can go ahead in federal court sometime today. Follow us on twitter. Stay with cnbc, well keep you posted. Your stuff on twitter has been so good all day. Thank you so much, scott. Want to bring in mark ash, the ceo of transpro. Transpro managed the detroit bus system from 2011 to 2012. He joins us at post 9. Good to have you. Thanks. You have helped a lot of municipalities restructure. Who is right on this decision, the pensioners or the city . Its a really Pretty Simple issue, isnt it . The whole idea of a public pension is to prepare people for their golden years. Its not designed to be gold plated. What we have here are pensions that are simply unaffordable, particularly when there are street lights that are out in the city of detroit. Its simply not sustainable. Its simply not affordable and theres going to have to be changes. Is it the fact that the pensions are gold plated or the fact that these pensions exist at all i think their pension load is 90 relative to 35 . Even if they were bare bones, they would still have a problem. Which is why its really tough for people who planned their retirements on this, but the reality is when the retion of america has benefit rates at 35 , detroit retirees are at 90 . We cant continue that. Theres going to have to be charges and you will see that today. Weve heard from a lot of different sides regarding detroit. Some realtors on our air talking about how the inventory for Good Properties actually is pretty tight. How services in the core of downtown are pretty good. Do you think the view of detroit being a mess, having services be a mess, has been overstated . Its not. I spent many, many nights in detroit last year. We worked with the city of detroit. We saved 39 million in their transit system, improved Customer Satisfaction 44 . It demonstrates we can run public agencies with a private sector mindset, but detroit is in serious trouble. You get just outside of that core, you will see an entire city block with one or two houses on it. Theyve got to make big changes and they have to make them fast. Although fixing the Transportation System, would you argue that thats an easier problem than the citys fanses broadly speaking . In other words, one is sort of an operational issue or was there a pension issue with the Transportation System as well . We had two issues with the Transportation System. One was they were spending way too much money and the quality was horribly inferior. Youre getting the lowest Quality Hotel room for ritz carlton prices. We have to make changes. Its why youve seen the emergency manager take them into bankruptcy court. Theres a lot of talk about all this thing with alternative fuels, but theres not an alternative way to pay. Some day the guy at the pump wants his money. Thats where we are. Talk about the broken promises, too. Well see where this all leads news the court system. Thank you for coming in. Pretty good housing number this morning. New home sales coming in at their lhighest level in five years. Well check out what paulson had to say about one company he likes in the housing sector. Weve also bought a stake in realagy. They are the largest Real Estate Broker. The companys yoep is here to respond coming back. In todays markets, respond coming back. 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. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this cadillac srx for around 369 per month or purchase for 0 apr for 60 months. 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With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Coming up next on the half, lots of focus on small caps but it is time to go blue. Blue chips keep beating the street. Which ones should you buy . Plus, are apples worst days behind it . And oh, brother, its game on as two najarians square off over zynga. Michael dell and silver lake raising their buy out offer for dell and adjourning that Shareholder Meeting. David faber is speaking with dells banker in the last hour. Hes back at post 9. The day never ends. This saga never ends certainly. As weve told you, 13. 75 is the in you price at least for now from dow and silver lake. One question, is it best and final . Mark shafir is advertising that buyout group. He joined us earlier on squawk on the street and ths what he had to say about best and final. We put our best and final on the table at 13. 75. Thats it, best and final. Best and final. The facts are we increased the price six times in the negotiations. Nobody showed up at 13 . 66 a share. As part of their decision to go to 13. 75, the buy out group also put it to the special committee in writing saying we need you to change the voting standard by which votes are actually cast and counted, in that we want it to be simply a majority of those votes cast. That would, of course, make it much more likely it would get approved. From what im hearing it is highly unlikely the special committee will agree to change the voting standard. They have until 6 00 p. M. When i asked shafir about that deadline, he did at least seem to indicate that could get moved. My best guess is you do see that moved and you see 13. 75 straight. Its not clear to me why they included this provision or this deadline certainly. And we shall see whether, in fact, we get a vote even held on august 2nd. Weve seen it delayed twice so far, and it is certainly possible it could be delayed yet again. There you would get a different record date. What a battle. Exactly. We heard from icahn in the past few minutes although just a rhyme. Nothing substantial. Im sure theres more to come. There is. Thanks, david. David faber. New home sales hitting their highest level in five years. We talked to Hedge Fund Manager john paulson last week about how hes playing housing at the delivering alpha conference. Here is one of the ways he talked about. Weve also bought a stake in realogy, which is another way to play the home recovery. Realogy is the largest residential broker in the country. Richard smith, the ceo of realogy, joining us in morning in a cnbc exclusive along with bob pisani. Good to have you back. Good to be here. Back to profitability. Prices up 10 . Are we still in a sweet spot . Were in the early stages of the housing recovery. This is a three, four, maybe even a fiveyear correction process. Then well talk about stability when we get to that four or fiveyear time frame. 3. 5 Mortgage Rates we had just two months ago. We wont to 4. 5 , there was a little bit of a freakout. Can you talk about the impact of higher Mortgage Rates and higher prices on sales. Is it hurting the business right now that we have somewhat higher rates . Early indications are its not. Were a Firm Believer that affordability is the issue. Affordability right now is about 172. This is an index provided by the National Association of realtors. It takes into consideration all the variables, Mortgage Rates being one of the variables. Mortgage rates are incredibly low. The affordability level is very high. We dont see it in our business and we have no immediate forecast for any impact on our existing home sales. We think over time when we get to a 6 or 7 mortgage rate, well have another discussion but we have a long ways to go. Im curious who some of the buyers are. A lot of people are saying is this all hedge funds . Who are buying these homes or is there a lot of demand from firsttime buyers for example . Whats your experience . First time buyers are having a tough time getting a loan. Underwriting standards are difficult. They will improve with latebreaking news on dodd frank so were encouraged by that. First time buyers will become more relevant. What just happened with dodd frank . Dodd frank is indicating they may come up with a new definition of qualified Residential Mortgage which will be less onerous to lenders. Right now lenders are lending at the highest possible standard. Now thatq rm is defined in the next several months, the rules will not be reduced. Theyre going to be more practical. Weve been here before though. Is this really the way to go, to loosen the standards . The underwriting standards are incredibly difficult. Its not that theyre reasonable or unreasonable. Theyre entirely too restrictive because the lenders dont know the rules. And its still 20 down. Qrm is being contemplated that will eliminate the 20 down rule under certain circumstances and theyll also eliminate prospectively the 5 retention rule that currently requires the linder to hold 5 of the face value of the loan on the balance sheet. I think all that now is in play and it wasnt just two weeks ago. What about the inventory levels . Weve been hitting new lows in inventories. They seem to be improving a while. From what i can see, theyre selling as fast as you get inventory in at this point. Is it going to get any better . What needs to happen. Inventory levels are improving. Were selling it as quickly as we get it. Were 5. 2 months. We should get to 6 sometime next year. Were confident inventory levels will continue to improve. That said, theres incredibly Strong Demand for inventory. Finally, apollo has done incredibly well with the stock but they are shedding their stake and it sort of feeds that view that, yeah, it looks great but the big boys are exiting. Actually the opposite. Remember, apollo got into the stock in 2006. They closed the deal in 2007. This is a long hold time for private equity. They stayed with us during the good and the bad times and now exited on the good times but the good times are very, very much prospective. Look at the institutional buyers like john paulson. Theyre staying in the stock. Apollo got out for other reasons unrelated to the market, unrelated to the condition of the company. Before you go, prices still going up through the end of the year . A lot of people emailing me wanting to know where prices are going . Yes, sir, they are. Demand is outstripping supply, so pricing is reacting to that. You can listen to lennar, theres another 9 to 10 price increase between now and the end f of the year. Thank you very much. Its been a huge day for earnings. Ford caterpillar, boeing, and pepsi some of the Major Companies reporting before the bell. Our earnings squad will tell you what you need to know when we come back. Of the year. Announcer where can an investor be a name and not a number . Scottrade. 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. Welcome to the earnings squad. We dissect the earns story everyone is talking about and help you trade the stories you may have missed. Im melissa lee joined by Kayla Tausche and dr. Jon najarian. 66 beat eps targets, 10 have met estimates, 24 of reports have come in below forecasts. Were seeing the first of several airlines report. Shares of delta trading higher. The worlds Second Largest Airline posting a better q2 profit. Us airways also benefiting from lower fuel costs. Stronger than expected revenue. The company also reported higher passenger traffic that attributed to the companys beat. The defense sector, what a run it has had. Hitting new highs, the fifth record high in a row, getting a boost from General Dynamics big q2 beats. Kayla has been breaking down the results. Everyone is saying sequester, what sequester . Werent we supposed to see a lot of revenue falloff . Revenues were pretty much flat. Dont get too excited just because the bottom line beat because we did see big beats both at general dynamic and northrop grumman. The total funded backlog for both northrop and General Dynamics is down, roughly flat to down. Northrop grummans is down sharply, about 10 . Going forward i think maybe it didnt hit them as hard this past quarter. Going forward that could foreshadow some tough times for revenues. What a sector run this has had. 33 gain for the year in boeing even though its down right now. Boeing hit a new alltime high again today. You look at some of the battery problems and the good news coming out of northrop and a sevenyear backlog of airplanes doesnt hurt boeing and the fact sequester isnt really what it was made out to be, melissa, because all it is is back to 2012 spending which means they spend the same. Thats the flat revenue you were talking about, but theyve managed to lean it and mean it so its dropping more to the bottom line. Lets talk about vm ware. Big move in todays session, doc. Yeah. And its helping a bunch of other cloud plays as well. Silver linings, if you will, melissa, although i might say when it rains it pours because in a good way vmwirare, thats been really good for them. Their spinoff, their parent company, emc, thats benefiting. You can look at ffiv, ntap hit a new 52week high. Volumes in these stocks is extremely good, and this is one of the areas of tech where it really is benefiting from demand. Flip side to the tech story today, broad com. This is a massive selloff were seeing in the shares. Revenues came in light. The forecast for revenues in the Third Quarter missing expectations. Market cap loss of 2. 5 billion with this 14 decline and this is heavy volume, five times the average daily volume here. What you need to know is there are concerns its seeing weakness across product lines and is losing market share to the likes of qualcomm which reports after the bell. Thats it for earnings squad. If you want to join the conversation, tweet us. Back with more during street signs. 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Our Business Needs more cases. [ male announcer ] where do you want to take your business . I need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, Small Business solutions from at t have the security you need to get you there. Call us. We can show you how at t solutions can help you do what you do. Even better. A news alert out of detroit. The judge will issue a ruling in the bankruptcy hearing at 2 00 p. M. Eastern. Scott cohn will have the details for you live on street signs later today. Meantime, signs that the slowdown in china and brazil could be hurting penthouse sales in the u. S. Robert frank joins us with more on that. The overseas wealthy have poured billions of dollars into Luxury Real Estate in the u. S. But that spending may be slowing down. A report showing that sales to foreign buyers dropped 17 in the 12month period ending in march falling from 82 billion to 68 billion. Now, the high end fell the most. Sales of homes priced 1 million or more falling from 10 of all foreign sales to 6 . Thats the biggest drop of any price category. The main reason for the slowdown here is weaker economyinies overseas especially in latin america and china. This have been the big fear from brokers, that all this buying support could start to crumble. Miami would be among the hardest hit. It remains highly dependent on foreign buyers, especially from brazil. The apogee in miami beach, they are aim eed squarely at wealthy brazilia brazilians. In new york the building known as 432 park that will be the tallest condo tower in the city when it opens in 2014, we are betting big on china. Onethird of the contract so far are to chinese buyers. Now, the developer is sending a team to shanghai and beijing to sell even more units. Well see whether there is enough new chinese wealth to fill all 96 floors. Back to you, carl. Its interesting, robert. I have seen a couple notes looking at new York Real Estate prices and what they have done. The argument is they cant continue to go as quickly as they have because of smaller numbers of international buyers, fewer cash deals, all of that. Thats the one hand. Ornd, you just had Richard Smith on making the point that inventories are very tight, demand is so strong. So the question is has the local buyer market remained so strong that they can pick up the slack from these foreign buyers . Well see. We could see this foreign buying taper, but the market now could be Strong Enough and tight enough its okay without them. A different kind of taper to think about. Robert frank, thanks very much. Theyre not disconnected. The fact that the fed is tapering, that u. S. Financial conditions have tightened, people are pulling money out of emerging markets, all that means its not going to some people who are turning around and buying real estate. Its like a giant washing man. Again, sort of pushing that paulsonesque idea were in year one of a sevenyear recovery. A lot of people have real problems with that argument. If you go back and look at the 3. 9 month supply of new homes that was just reported this morning, the cycle low is 3. 5 months and that was in 2003. We know how long that cycle went on after hitting that low. We could have a couple years here . Yeah. Meantime, dow is hanging in there despite being dragged down by caterpillar. We have a lot more big earnings tonight. The facebooks of the world. Well see what happens this afternoon. Lets go back to headquarters. Scott wapner and the halftime. Guys, thanks very much. Welcome to the halftime show. Four hours until the close. We walk to the wall and see where we stand. Its somewhat of a down day. Dow is kind of hanging in there. Dow is down 17. S p negative, nasdaq the standout. Here is what were following. Blue chip bonanza. Small caps keep stealing the spotlight, but are americas Biggest Companies the best place for your money . Game on. Zynga has been red hot but with earnings looming, is it time to bet the farm on the stock in two brothers and one big debate is just ahead. First, our top story, apple rp