Transcripts For CNBC Squawk On The Street 20130904

Our intelligence when it came to combating terrorism. What i can say with confidence is that when it comes to our domestic operations, the concerns that people have back home in the United States of america, that we do not surveil the American People or people within the United States, that there are a lot of checks and balances in place designed to avoid a surveillance state. There have been times where the procedures, because these are human endeavors, have not worked the way they should, and we had to tighten them up. And i think there are legitimate questions that have been raised about the fact that as Technology Advances and capabilities grow, it may be that the laws that are currently in place are not sufficient to guard against the dangers of us being able to track so much. When it comes to intelligence gathering internationally, our focus is on counter terrorism, weapons of mass destruction, cyber security, Core National security interests of the United States. But what is true is is that the United States has enormous capabilities when it comes to intelligence. One way to think about it is in the same way that our military capabilities are significantly greater than many other countries, the same is true for intelligence capabilities. S so even though we may have the same goals, our means are significantly greater. And i can give assurances to the publics in europe and around the world that were not going around snooping at peoples emails or listening to their phone calls. What we are trying to do is to target very specifically areas of concern. Having said that, what ive said domestically and what ive said International Audiences is we have changes in technology, we have the growth of our capability capabilities. If our attitude is because we can do it we should go ahead and do it, then we may not be, you know, addressing some of the legitimate concerns and dangers that exist any time were talking about intelligence gathering and surveillance. So what ive asked my National Security team to do, as well as independent persons who are wellknown lawyers, civil libertarians, privacy experts to do is to review everything that were doing with the instructions to them that we have to balance the ends with the means. And just because we can do something doesnt mean we should do it. And there may be situations in which were gathering information just because we can but doesnt help us with our National Security, but does raise questions in terms of whether were tipping over into being too intrusive with respect to the you know, the interactions of other governments. And that is something that we are currently reviewing carefully. We are consulting with the eu in this process. We are consulting with other countries in this process. And finding out from them whether there are areas of specific concern and trying to align what we do in a way that, i think, alleviates some of the public concerns that people may have. But this is always going to be some theres going to be some balancing that takes place on these issues. To sum up some of the folks who have been most greatly offended publicly, we know privately engage in the same activities directed at us or use information that weve obtained to protect their people. And we recognize that, but i think all of us have to take a very thoughtful approach to this problem. And im the first one to acknowledge that given advances technology and the fact that so much of our information flow today is through the internet, through wireless, that the risks of abuse are greater than they had been in the past. Now, with respect to sweden, i havent had a chance to Wander Around stockholm as much as i would like, it is a gorgeous country. What i know about sweden i think offers us some good lessons. Number one, the work youve done on energy, i think is something that the United States can and will learn from because every country in the world right now has to recognize that if were going to continue to grow, improve our standard of living, while maintaining a sustainable planet, then were going to change our patterns of energy use. Sweden i think is well far ahead of many other countries. Sweden also has been able to have a robust market economy while recognizing that there are some investments in education or infrastructure or research that are important and theres no contradiction between making public investments and being a Firm Believer in free markets. And thats a debate and a discussion that we often have in the United States. I have to say that if i were here in europe, i would probably be considered right in the middle, maybe center left, maybe center right depending on the country. In the United States, sometimes the names im called are quite different. And i think a third observation and final observation i would make is though i know that im sure fredrik doesnt feel this as hes engaging in difficult debates here, i do get a sense that the politics in sweden right now involve both the ruling party and the opposition engaged in a respectful and rational debate thats based on fact s and issues, and i think that kind of recognition that people can have political differences but were all trying to achieve the same goals. Thats something that swedes should be proud of and should try to maintain. The first question from the American Press goes to Steve Holland of reuters. Thank you, mr. President. Thank you, sir. Have you made up your mind whether to take action against syria, whether or not you have a congressional resolution approved . Is a strike needed in order to preserve your credibility for when you set these sort of red lines . And were you able to enlist the support of the Prime Minister here for support in syria . Let me unpack the question. First of all, i didnt set a red line. The world set a red line. The world set a red line when governments representing 98 of the worlds population said, the use of chemical weapons are abhorrent and passed a treaty forbidding their use even when countries are engaged in war. Congress set a red line when it ratified that treaty. Congress set a red line when it indicated that in a piece of legislation titled syria accountability act that some of the horrendous things that are happening on the ground there need to be answered for. And so when i said in a press conference that my calculus about whats happening in syria would be altered by the use of chemical weapons, which the overwhelming consensus of humanity says is wrong, i wasnt saying i just kind of made up. I didnt pluck it out of thin air. Theres a reason for it. Thats point number one. Point number two. My credibility is not on the line. The International Communitys credibility is on the line. And america and congress credibility is on the line because we give lip service to the notion that these International Norms are important. And when those videos first broke and you saw images of over 400 children subjected to gas, everybody expressed outrage. How can this happen in this modern world . Well, it happened because a government chose to deploy these Deadly Weapons on civilian populations. And so the question is, how credible is the International Community when it says this is an International Norm that has to be observed . The question is, how credible is congress when it passes a treaty saying we have to forbid the use of chemical weapons . And i do think that we have to act because if we dont, we are effectively saying that even though we may condemn it and issue resolutions and so forth and so on, somebody who is not shamed by resolutions can continue to act with impunity. And those International Norms begin to erode and other d despites and authoritarian regimes can start looking and saying, thats something we can get away with. And that then calls into question other International Norms and laws of war and whether those are going to be enforced. So as i told the Prime Minister, i am very respectful of the u. N. Investigators who went in at great danger to try to gather evidence about what happened. We want more information, not less. But when i said that i have high confidence that chemical weapons were used and that the assad government, through their chain of command, ordered their use, that was based on both public sourcing, intercepts, evidence that we feel very confident about, including samples that had beenest t estested showing from individuals who were there. And im very mindful of the fact that around the world and here in europe in particular there are still memories of iraq and weapons of mass destruction accusations and people being concerned about how accurate this information is. Keep in mind im somebody who opposed the war in iraq and not interested in repeating mistakes of us basing decisions on faulty intelligence. But having done a thorough evaluation of the information that is currently available, i can say with high confidence, chemical weapons were used. And by the way, iran doesnt deny it. Even syria doesnt actually deny they were used, and that is what the u. N. Investigators are supposed to be determining. And frankly, nobody is really disputing the chemical weapons were used. The only remaining dispute is who used them, which is outside the parameters of the u. N. Investigation. So the u. N. Investigation will not be able to answer that preliminarily. Theyre not supposed to. But what we know is is that the opposition doesnt have the capability to deliver weapons on this scale. These weapons are in assads possession. We have intercepts indicating people in the chain of command, both before and after the attacks, with knowledge of these attacks. We can show that the rockets that delivered these chemical weapons went from areas controlled by assad into these areas where the opposition was lodged. And that accumulation of evidence gives us high confidence that assad carried this out. And so the question is, after weve gone through all this, are we going to try to find a reason not to act . And if thats the case, then i think the World Community should admit it, because you can always find a reason not to act. Its a complicated, decision. And an initial response will not solve the underlying tragedy of the civil war in syria, as fredrik mentioned, that will be solved through empventually a transition. But we can send a very clear, strong message against the prohibition or in favor of the prohibition against using chemical weapons. We can change assads calculus about using them again. We can degrade his capabilities so that he does not use them again. And so what im talking about is an action that is limited in time and in scope. Targeted at the specific task of degrading his capabilities and deterring the use of those weapons again and, in the meantime, we will continue to engage the entire International Community in trying to find a solution to the underlying problems, which brings me to the last question. And that is what happens if congress doesnt approve it. I believe that congress will approve it. I believe congress will approve it because i think america recognizes that, as difficult as it is to take any military action, even win as limited as im talking about, even one without boots on the ground, thats a sober decision. But i think america also recognizes that if the International Community fails to maintain certain norms, standards, laws, governing how country interact and how people are treated, that over time, this world becomes less safe, it becomes more dangerous not only for those people who are subjected to these horrible crimes but to all of humanity. And weve seen that happen again and again in our history. And the people of europe are certainly familiar with what happens when the International Community finds excuses not to act. And i would not have taken this before Congress Just as a symbolic gesture. I think its very important that congress say that we mean what we say. And i think we will be stronger as a country in our response if the president and congress does it together. As commander in chief, i always preserve the right and the responsibility to act on behalf of americas National Security. I do not believe that i was required to take this to congress, but i did not take this to Congress Just because its an empty exercise. I think its important to have congress support on it. And the next swedish question goes to that is the president in stockholm with the Prime Minister of sweden, fredrik reinfeldt. He said that we have to act and also defending his use of the socalled red line, saying i didnt use the red line, the world set a red line. Obviously, guys, welcome to squawk on the street, by the way. Im carl quintanilla. One reason, jim, we lost 100 points on the intraday high yesterday. The pingpong continues. Well, i think that no one wants to take action before this that i know. And then Everyone Wants to take action after, as if theres this event. It will be a discrete event and then you go buy them. I think thats a little simplistic but thats what im hearing over and over again. It is possible that is what is, in fact, will take place. He did not answer the question specifically about what he will do if Congress Says we dont endorse bombing. We dont know. Reserves the right as he has been saying for a few days now. Oil and gold historically traded up instantly. Oil comes down. Gold has come down. Maybe gold this time is different. I had a chart last night, i tend not to be chart sorry ended but gold is tending to climb, seasonal. Theres a big strike going on in the south and south africa. So just keep in mind those are the ones to watch. Gold and oil. Those have been the international worry plays. Oil went down very big after libya. Went down very big after iraq. So keep that in mind. Yeah. By the way, were expecting some kind of proposed resolution out of the senate today which would put together some objectives. Likely a 60day deadline, maybe a 30day extension. Kerry and hagel back on the hill again today. The polls continue to show 6 out of 10 americans oppose any action of any kind. Something to watch, obviously. Along with a lot of news. Shares of Dollar General rising in the premarket. Discount retailer reported earnings of 77 cents a share. Revenues exceeding consensus. Samestore sales up 51 helped up demand for tobacco product which they recently added. C consumables at large up. This is the place where the walmart people seem to have gone. There is a trade down in part because, by the way, food stamps. Remember, food stamps have gone up for 2 per year every year since 2008. 46 million people. Food stamps taken by Dollar General because they moved in consumables. Ive got to tell you that is maybe the missing piece of the puzzle about what is going on in this country, whether it be dollar tree, Family Dollar, dollar gen. People are going to these places that just moving to california, one fifth of the country. Theres also a consolidation question around the sector that i continue to hear. Not so much about Dollar General being acquired but perhaps would it consider and maybe well hear something at 10 00, you never know because theres enough investors have asked the question, would it consider acquiring the name most often heard there is Family Dollar. The board of which is up. Is there a willingness on the part of the founding family to sell that company. Would walmart be interested. This is all chatter. Yeah. In walmart . You just mentioned how theyve been would walmart be interested in buying one of the Dollar Stores. That would be breakthrough. Walmart does have sams club. This area is very much in flux because the expansions are radical for these Dollar Stores. People do like them. They added all of these great brands but they also added private label brands. These are cash machines. Walmart, that would be just that would be blow away if they did that. I got to tell you. Who knows. It is, again. I showed you this once gafr. But the chatter continues. Dollar generals call could easily say theres nothing going on whatsoever. Nelson doesnt stop. He gets his man. You can attest to that. They did buy back more stock in the quarter. 200 million versus 20 million. A little more confident in the coming quarter. Still see samestore sales up. People plummeted, Dollar Stores were all going down. You know whats funny, this is a consumable and somewhat hard goods play. Francescas, an apparel play down again. The only apparel play thats working is g3, which is sports apparel. That should help a couple other Companies Involved including pvh. Only one here on the quarter was inventory shrinkage, also known as theft, is on the rise. Also keeping our eye on apple. A couple of big things today. Invite to the event on september 10th has gone out. Its going to be in cooper tin no. 1 00 p. M. Eastern time. A separate invite to an event in beijing. All of the rumor mill is in chatter. The people who had price targets that were cut, cut, cut, now have to raise, raise, raise. Wells fargo going in there and saying, look, there are some real possible earnings growth. Six bucks more because of the flexibility with the carriers. Meanwhile, we still dont get any news. Flexibility with the carriers . Listen, i read. I mean, i thought they were somewhat flexible but nokia is a great latin play, latin america play because there they dont have the distribution. You actually go buy the phone. Everybody else around the world goes with this model. The model of youve got to get a little bit of a subsidy and if apple plays a little ball, maybe they can take back some of what samsung has gained. A little bit or in some cases a huge subsidy. Interesting when you asked him yesterday though what about reversing it to try to get nokia, microsoft out there, well pay you. He was very funny when he said, sure, ill take that call. Microsoft downgraded from Morgan Stanley. Its almost universal. Hatred of this deal. Hatred. Hatred. I know. Day two. Well see what the stock does on microsoft. It has been notable. Not well received. No. Notable. Obviously, so many terms that had a sale on nokia and theyre all backpedalling. Yeah, we like nokia now. Well, thats really helpful. The new erickson that some calling it. New erickson, i like that. When we come back, exclusive with Bruce Berkowitz. You will want to hear his take on fannie and freddie. Havent talked on tv in a couple of years. Futures are negative as we will take stock of mortgage apps, auto sales. Opening bell when we come back. [ male announcer ] at his current pace, bob will retire when hes 153, 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. Youre watching cnbc squawk on the street, the opening bell set to ring in a minutes time. Youve already heard from the president this morning in stockholm on his way to the g20, argues once again that the United States, congress, International Community need to holds assad accountable for his alleged actions in syria to degrade his ability to carry out more types of attacks to deter further use around the world. The cloak of geo politics is going to be over the market once again today. Right. Look, i think that theres also, you have the jewish year tomorrow and the employment number friday. Series of events where trading will be thin. And the last guy who is worried blows the futures down and you see a nice gap. Youve got to be aware of that. People are trying to gain this at home understand that its very, very thin. As anybody who watched yesterdays action knows, we were up 125. Closed up only 23 on the dow. Theres the opening bell. Down here at the big boy emerging Global Advisers celebrating the third anniversary of the emerging markets consumer etf and at the nas, celebrating the 15th anniversary, akamai. And 13st anniversary of google as the Public Company but as an enterprise, yes. Between sergei and larry. Dow is up three out of four sessions. Auto sales, phil lebeau has ford. Strong numbers of ford reporting august sales growth of 12. 2 . That is better than what the street was expecting. Increase of 9. 4 . When you break it down, trucks versus cars, we continue to see strength, particularly on the truck side for ford. Increase of 18. 4 to compare to an increase of 17. 5 on the car side. Fer isries up 22. 2 . Last month the the most important piece of information from ford today, it is raising Fourth Quarter production by 7 to 785,000 vehicles. If im not mistaken, guys, that is the highest quarterly production under alan mulally. Back to you. I think you left a lot of us speechless here at the desk, phil. Thank you for that. Ive been worried that rates going up there eventual impact the deals that the Auto Companies can do. Clearly not. For gm. Got this very good engine for natural gas, f150, very excited. Going to have to build a lot more than they thought. This is an amazing renaissance. Sort of explains the isms that we got yesterday on manufacturing. Yes. Some of the new orders, jim, back in the 60s in terms of index points. I think that we also have to be aware for people who think why isnt the stock up 2 or 3 , this has a big european operation. The auto sales the last few days in europe havent been that great. But i do believe ford is breaking out of the pact, doing a lot of the right things. You do. I think these trucks make a for chur and they developed this one car philosophy where theyve got this top hat as they have the same car everywhere. No longer making all these different iterations so they make more money per car. Pretty nice move for ford. Almost 2 there. The biggest gainer is sienna. A lot of discussion about it being a favor among the big carriers. Just talking about verizon, is doing okay. Here we go. Weve got soft bank putting money main. The sprint bond deal. Tmobile is making a lot of noises. 100 people in verizon. Ciena has the hot products. I go back to cisco, i go back over that quarter and i to believe that John Chambers was more down beaten than he needed to be because of layoffs. The numbers are pretty good. Ciena is very good. You made that point that day with the layoffs. Gross margin, 38 to 42. Stock was at a twoyear high before the recent selloff. Feels like the old days when you just sold the carriers, spend and spend and spend. They do. They have to. At t was playing catchup. Its not about that but its about continuing to expand the capacity of the networks as people were you know what were doing out in. Watching full length videos all the time on your phone. Takes a lot of bandwidth. I know that les moonves in the interview previous on squawk was talking about Binge Viewing and people were streaming everywhere, the young people dont have tvs. Akamai, ciena. Another play can i give you a little linkedin, not to equate it with all of those names, different sector, but the stock is down a billion dollars shareoff. I believe that will be snapped up so fast. They did not sell a lot of shares when they went public that day back in 2011 right here on the New York Stock Exchange. But, you know, incredible performance from that company and its stock price, as you might expect, as well has reflected that. Now using the this opportunity to raise more money to continue to continue spending a lot more money when it went public in my of 11. Became public in may of 2011, 45. Immediately went to 94. People thought it was an over exuberance period. Dropped down and then off to the races ever since. Amazing. Incredibly powerful business model. Many people will tell you its the way that they are so embedded in Corporate America in terms of the Different Things that they conceivably can do beyond just the simple idea of trying to get a group of people and candidates together to find a job and fill a job. Increase in earnings. I didnt say revenues, i said earnings. During the dotcom period when it was eyeballs, how about profits . Amazing. Incredible. Incredible. Jcpenney getting a little action here. Up 3 . Glen view now the latest name to be added to the list of hedge funds that apparently think this thing is going places, jim, either the short or longer term. It was a big secondary, that i recall, and it was just the revenge secondary along with the revenge honestly, this piece of business was a big discount, jcpenney. A lot of guys picked it off. Ackman. Its interesting to note that between glenview and sorros and perry and heyman, youre talking about over 30 of the stock held by four funds. Smart guys. Interesting. All of whom are pretty smart but they make their mistakes, too. Right. There was there were still some stock apparently that got sold. People thought it was sold but by ackman. In other words, after the city print. That may have contributed to some of the weakness you saw because he owned 17 and then yeah. So everything is all cleaned up. Well see. These guys dont know i can promise you they know nothing more than probably a lot less frankly than you do about retail and what it takes to turn around a retailer. No offense, guys. The first thing you do in a turn around is you raise that money, which is what alan mulally did at ford and what mike goldman did. The reason i thought mike goldman got a raw deal at ackman is thats what you start with, a huge amount of cash. Make sure you can get through the holiday season. And then get the housewares. Ron johnson left him a big hole in the store ws with house weaw. Remember when you broke that story about no new equity, 17. Yes. 2 58 p. M. You came out with that story . Yes, i do. The stock went up dramatically. Thats where stock is going back. You think . Yes. Thats why its not complicated. Its not as if they have some special thoughts here about what can happen at jcpenney. Theyre thinking the same way you are. It can bounce back. Is it a fable retailer . Fallen on hard times but a lot of hard times were generated by ron johnson deciding it could be williamssonoma what restoration hardware. Customers back or are they gone for snefr. You will get some of them back. Do aggressive couponing. Bed, b bath and beyond was able get some people back. Macys clearly, the numbers werent so strong. I now believe some of that was jcpenney making a bounceback. And decent retail and they will get someone else who is good. There was a lot of talk it would be Christine Day from lulu lemon. I dont think that happens. Maybe this guy at foot locker who did not say no on the Conference Call. He is a fabulous retailer, foot locker has done quite well. Apple at 500, jim. Thats going to be an interesting tug of war today. Needs to get to 5 32 to get positive for the year. Is that true . Yes. Maybe carl icahn could have a brunch. Remember how it went up when he said he was going to have dinner with tim cooke. That dinner hasnt happened yet. It will be very interesting to hear what carl tweets after the dinner takes place. Im not sure when theyre scheduled. Yeah. That was the tweet heard around the world. It was, wasnt it . Yeah. Power of twitter. Yes. The man who knows something about that. People are chatting about the iphone 5c, dubbed for cheap. The phone that would have the same processor for less money and then iphone 5s. The 4s is one of the bestselling products in the companys history. First item that ever had siri. I dont know if you still use siri. No. I gave up. We had a falling out. She didnt understand me. I didnt understand her. Its not the first time. You should try her again. She keeps Getting Better. I heard you. I get it. She keeps Getting Better p you got to try her again. Really . Yes, baby, i ought to do it. Another go around with everybody. My kids were experimenting. I never tried it. Impre impressive. This seems like so ironic, this seems like its get microsoft deal. Theyve been playing microsoft just walked into a marketing buzz saw its a buzz saw, apple. Got it. I think ive got it. Im just going to be quiet now. What we do have is Mary Thompson on the floor watching whats moving. Good morning. We have a mixed picture on the New York Stock Exchange. Dow is up 25 points a little bit ahead of its worst level for the session. Nasdaq showing a slight gain of just over a point and the s p is as well. Basically syria concerns expected to overshadow the markets just as they have the overseas markets in overnight trading. There were comments from russian president Vladimir Putin saying he might support military strikes against syria if there was unequivocal evidence presented to the United Nations that it did indeed use chemical weapons. That kept the Global Markets overall although you did see a gain in japan. Traders are waiting for the results of the beige book that will give them insights into the feds thinking of the economy and insights as to whether or not the fed will begin tapering this month. Something that concerns of which i should say have kept pressure on the s p 500 over the past month. Take a look at the commodities. This is interesting. Despite the concerns about syria today we are seeing a pullback in gold which had a very strong twomonth run in silver. Strong performer during the month of august. Traders say that it appears the commodities are taking a brea e breather here. Weakness in crude oil despite the syrian. Syria not a big producer but located in an area that puts it within reach of key pipelines as well as the suez canal. Copper is strong because of the good manufacturing data both here in the u. S. And over seas in the past couple of days giving back some of the gains in early trade. Youve spoken about some of the stocks that are in the news. Lets look at some of the dow stocks today. Microsoft was cut to equal weight from overweight over at Morgan Stanley. It continues to decline in the wake of yesterdays announcem t announcement. 7. 2 billion for nokias handset business. Verizon weaker once again today. Boeing in keeping with some of the strength weve seen in the defense stocks. Slightly higher today. Intel also higher. The sia saying that july Semiconductor Sales were up. Which in turn is supporting the nasdaq and jpmorgan slightly higher as well. Ciena, strong numbers. Dollar general trading at a historic high. Navistar weaker. Saying its going to be cutting 500 salary workers as it tries to right size its business to the current industry demand. Lastly, h r block coming in with weaker than expected results although revenue is higher. Company was impacted by some higher expenses. The dow now moving a little bit higher. Still down ten points. Nasdaq holding on to a fourpoint game. Jim, back to you. Fabulous rundown. Transport is doing well today. Interesting. Worried about oil but others dont seem to be. Lets head to the bond pit. Jim, i know that the world, of course, is paying close attention in syria. Many are paying very close attention to everything autos. As phil lebeau shows us how well ford is doing of late. Interest rates, pretty much looking at everything through glasses that just see better activity. Its going to be for the marketplace to decide is it better activity genuine and sustainable. Look at a chart going back to july 1st of 2011 because the fiveyear yesterday served pushed back bon a new high yield close. Tens and 30s are not quite there yet. As you look at twoday chart of tens you can see that were hovering popping through the 290 area. But if you open the chart up to july, what you can see is currently we have a 285. The record going back to july in a tenyear close is 289 from the third week in august. For a 30, 392. Currently at 377. You can see some curve gyration, especially between tens and 30s. Lets look overseas. Twoday boon. Knocking at the door into the 190s. Whats very interesting, open this chart up to march of last year. That was the last time we were at 2 . So we continue to see a comp back on the boon to march of last year. Foreign exchange, well, the dollar index over a couple of days has firmed up. But if you really want to look at this bottom and remember, now, as of yesterdays close, best level on the dollar index since july 19th. This is a longrunning, curving bottom. I wouldnt look for a whole lot of breakout activity but many technicians got suckered into going short. Theyve now pretty much neutralized. Many think the next move is actually a test of the 83 handle. Carl, back to you. Spoken by someone who knows his charts. Thank you, rick. Rick santelli. When we come back, rare and exclusive with Bruce Berkowitz, star fund manager talks about his ideas and betting on fannie and br and freddie. Tesla is up almost 400 this year. Well meet an investor who got in on tirp ipo. T ipo. He ipo. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back to squawk on the street. Im jackie deangeles reporting from the nymex. Were watching the commodities complex pull back even though it appears they might approve a military strike on syria. Traders are taking a wait and see approach as washington works this out. Wti is as well under 108 a barrel and brent prices under 115. Gold is pairing back the gains. Trading under 1400 an ounce. Metal traders are focusing on fridays jobs number and wondering what impact that will have on the potential for a fed taper. Guys, back to you. Thank you for thanchtsz tt. Phil lebeau has toyota now, phil . Carl, these are big numbers from toyota. Increase of 22. 8 . Much better than what the street was expecting. Again, toyota, up for the month of august, 22. 8 . When you guys look at this along with ford and chrysler, were going to get gm in 13 minutes, were looking at much better than expected Sales Numbers for the month of august. And i think there might be a chance that were going to pierce that 16 million sales rate for the month. Guys, back to you. That would be a big deal trying to get there on that annual number. Its back. You did say earlier, jim, i remember you said three pillars to the economy, housing, autos, consumer. What was it . Yeah, but one. Consumer. Weve got to be very careful with this housing because we saw some decent numbers still refi is down a lot. You need to we see housing come back. You need to see it stabilize. Mortgage rates dropped last week. They go to three and we lose housing which is what i really fear. I think we are. You end up with a situation that is simply not great, not bad. And you have to hope that the industrials pick up the slack because europe is so good and china, the numbers are good. I know people are skeptical. The numbers are good. Europe is so good. Its just hilarious to hear that coming out of your mouth. Europe is so good. The eurozone retail sales were a miss but China Services pmi best since march. Yes. And the uk had terrific numbers this morning. Go back to 06. P g may be working on a cheaper version of tide detergent. Looking for a low price brand called tide simple to compete with rival low price detergents. The company did test tide basic three years ago but concerned users were having a difficult time differentiating between the two versions. Guys, ceo is on the wires right now saying, in fact, they will launch a lower priced version. Looks like this year. Also saying cfo muller saying dollar currently a 7 to 8 headwind versus a 6 headwind in mid july. Pepsi talking about a that. People are willing to look through the dollar situation. General mills had some issues yesterday that talking about margins. This group is really in the grips of rates. And if you see rates stabilize, it will come right back up. What about the lack of innovation of p g which you deprived of some time. They spent a lot of money. They need hair and grooming. Thats where i feel like beauty has been the problem. Beauty has been the problem. Not they did have a very good tide offering. This is mcdonalds a lot of people said mcdonalds previous ceo did not fix hair and grooming. When you go through the quarter, thats where the weakness has been. Heres whats coming up next on squawk on the street. The stock market can be quite a circus. And we have the ring master, jim cramer and his six stocks in 60 seconds taking center stage when squawk on the street returns. Ready to run your lines . Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. Lets get 6 in 60 with jim. Merrill is selling a whole. This is is a stock that is so heated. You keep getting the guys and its moving higher. Halliburton . They did this, retired a lot of stock. This is off to the races there. You mentioned fran earlier this morning. This is apparel. It just shows you the contrast. People saying, listen, they do take a look at coors versus francesca. This is the lower end in teenage to 35. We do have a price target move on facebook. This is another one where people have a trust name. Theyre using mid quarter checks using a 50 price target. Citi on dks. Dont give up the ships. Analyst meeting. Nike has been strong lately. Micron is doing huge. Incredible. High mix factory, fire in china. Micron benefiting because its gigantic in flash and drams. This stock has been incredible. Huge fund. One of the best so far. Whats on mad tonight . Ive got moshe, deeply in the heart of video and transmission on your mobile. Thats been the hot area. I finished my football draft tonight, second day with some players. Im relating players to stocks. And, by the way, i drafted lashaun shady mccoy first last night in the mad money pool. Everybody plays. Everybody on this show plays. Everybody on mad money plays. Thats how we are. People just said, listen, im just too horrible at this. Thats who i usually like. See you tonight, jim. 6 00 and 11 00. Stick around for a rare and exclusive interview with Bruce Berkowitz of Fairholme Capital. And absolute vodka. Malibu rum. Talk spirits and the consume were the ceo. Vo two years of grad school. 20 years with the company. Thousands of presentations. And one hard earned partnership. It took a lot of work to get this far. So now im supposed to take a back seat when it comes to my investments . Theres zero chance of that happening. Avo when you work with a schwab financial consultant, youll get the guidance you need with the control you want. Talk to us today. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. 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. Welcome back to squawk on the street. Our road map begins with the rocky start to the month with the possibility of military action in syria weighing on investors minds. Apple planning a big event in china. Sparking rumors of a possible deal with china mobile. The china now the secret to apples success . Fairholmes capital is here in the post nine. Well get his take on the big banks and freddie and fannie. General motor Sales Numbers are out. Phil lebeau joins us with gms Vice President of sales. Simon, better than expected numbers of General Motors. Increase of 14. 7 . Increase of 11 expected. Lets bring in kirk mcneil, vp of u. S. Sales in detroit. Were seeing stronger than expected numbers across the board. Whats giving this extra push within the last month for you and the other automakers . Well, we continue to see the industry grow, slow, steady growth. Positive economic factors we think outweigh any of the small speed bumps along the way. You know, we feel very good about this continuing to grow through the back half of the year. Kurt, youve got 60 days supply inventory. Will you raise production for the Fourth Quarter . Weve already seen a production increase called by ford today. Will you be doing the same thing for the Fourth Quarter . We, you know, saw the industry continuing to improve throughout the year, phil. So from a prukz poduction stand i think were on plan. Having said that, were looking at it month to month and make tweaks along the way but theyre small tweaks. We feel good about where we are. Youve got the chevy volt having the best sales month ever. How much is that because you cut the price out there by 5,000. How much did that juice the market, so to speak, and bring people into showrooms . It had its best month ever, phil. And like you said, up roughly 18 for the month. Still up 11 calendar year to date. As we continue to see, you know, have experience with the technology, were finding great new ways to take cost out of the vehicle, passing some of that along to the consumer, which is always a good thing. And its still bringing great new consumers into the General Motors showroom. 75 of those people are new to General Motors. Real quick, kurt, do we hit 16 million for a sales pace for the month, first time that i think we have to go back well over five years until we have seen 16 million. Do we do that this month . I think youre definitely going to see us come in well over 16 million, phil. Absolutely. Kurt mcneil, vp of u. S. Sales for General Motors joining us from the companys headquarters in detroit. Kurt saying its going to be well over 16 million and, again, we have not seen that in at least five or six years. But weve seen the Monthly Sales pace at that rate. Phil, thank you so much for that. Phil lebeau covering all the auto sales this morning. Shares of Dollar General are up this morning. Reporting Second Quarter results that beat estimates. Companys Conference Call is now under way. Lets bring in joe feldman, managing director, Senior Research analyst with telsey advisory group. Pretty good quarter here. A lot of it happening around consumables and a lot of discussion about their addition of tobacco products. How much of that tobacco, accounts for the quarter is this just the consumer coming back . I think the consumer has been able to spend a bill llittle bi. Its not just tobacco. I think that consumables in general have been strong. But company did well with seasonal. They did well with apparel as well. So i think theres a trend a little bit better than what we saw in the first quarter. Seemed like that lower income consumer is starting to spend a little bit more again. Yeah. Traffic was up. Transactions were up. Samestore sales weve mentioned up 51. Really the only thing people have had concerns about, mild concerns, you might add, is inventory, per store inventory, up 11 . Is that going to come back to bite them the rest of the year . Well, thats something that we want to explore with them as we listen to their Conference Call and speak with them later today because it does it does strike a little bit of a concern. Now, the question is how much of it is apparel versus consumables or maybe tobacco. The con flexiplekz of the inven will matter. I think they do a good job of managing and they will work through a lot of this but it is something to look at. Obviously people are beginning to figure out, joe, that this may be the sweet spot for the consumer as we get into back to school, the holidays. When you compare it to a dollar tree or a Family Dollar or even a walmart, where does dg fit in terms of on the spectrum of favorites . Well, you know, we like Dollar General a lot. I think that probably among the best position at the moment. Theyve got the broad assortment, broad pricing, value prices. Theyre able to take some market share i think from supermarkets and drugstores. And they compete very effectively within the market share for the lowincome consumer. I think that these guys are pretty well positioned. Joe, what happens though as more people identify the opportunity in the space . We heard from big lots which said its going to move aggress ively into consumables now. Whats that going to do for margins and the competition across for the consumer generally . I think theres tremendous competition. Walmart is really the one thats going to drive a lot of that. More so than even big lots. I think with Dollar General having around over 10,000 stores they have a big read on a company like the big lots in order to maintain that customer consumables. Its really walmart where you do see the pressure . I think there are some trips happening that are going to Dollar General. Again, more comes from supermarket than walmart, per se. Im eager to say maybe walmart is going to pink k up a little. Joe, finally, some of the Media Coverage is picking up on this issue of shoplifting or theft, inventory shrinkage, as they call it. Is is that par for the course is that Something Different going on here this quarter . It is to be expected given the rollout of tobacco. I think the top process was that there would be a little increase in shrink because of tobacco products. Obviously cigarettes are expensive items and somehow they can walk out the store a little more than some other products. So i think it has more to do with that. But it sounds like its probably in line with what we would expect and certainly what the company had talked about. Interesting. I guess it is a little bit easier to stash a carton of tobacco or a package of cigarettes in your pocket than it is something else. Joe, thanks so much. Thank you. Joe feldman talking Dollar General. Youre obviously not a smoker. Theyre usually behind the counteder. You have to ask for them. You got me there. Take my word for it. I do find this all interesting. To the extent that would spur people walking out of the store. Is it employ eors . They are so expensive. Lets send it over now to dominic chu with the headquarters. Kelly, shares of computer networking and Telecom Equipment makers are surging higher after the company roereporting profitd sales and forecast a Fourth Quarter sales number thats above estimates as well. Ceo gary smith says ciena is improving market share and pushing into new products. Kelly, back over to you. 10 moved, dominic. Thanks. Coming up next, as the president says the world has set a red line against the use of chemical weapons, well find out what voters really think of the situation. And also still to come on squawk, an interview with Bruce Berkowitz. You wont want to miss it. Is something we all share. But who can help you find your own path . Who can build you a plan, not just a pie chart . Who can help keep your investments on course, whatever lies ahead . That someone is a Morgan Stanley financial advisor. And were ready to work for you. Female narrator sleep train challenged its manufacturers sleep train challenged its manufacturers to offer even lower prices. But the mattress price wars ends sunday. Now its posturepedic versus beautyrest with big savings of up to 400 off. Serta icomfort and tempurpedic go headtohead with three years interestfree financing, plus free sameday delivery, setup, and removal of your old set. When brands compete, you save. Mattress price wars ends sunday at sleep train. Your ticket to a better nights sleep credit markets have rebottomed. The question is whether the looming taper talk will we derail the momentum. Lets ask bonnie baja with double line. She manages more than a billion dollars of double lines fund. And michael, chief u. S. Economist with jpmorgan. Good morning to you both. Did i just say jp morning jpmorgan, that is. Bonnie, first to you. We see what looks to be a strong start to september with regard to issuance at least in the credit markets. Why is it this is still showing some strength even though the tenyear benchmark Interest Rate has almost doubled since the spring . Well, thats precisely one of the reasons why. Benchmark treasuries are up. Spreads are still pretty much where they were. You can now actually get a higher yield and high yield than you could, say, six months ago. Credit investors, thats a good thing. We welcome a backup. At the same time, we want to go back to jeffs call on what would happen with that benchmark rate because he was saying we think 2 1 2 is roughly fair value. Weve backed up to the 3 range. Has that done damage to either the economy or, again, to the longerterm prospects here for people to pile into the credit space . You know, it really hasnt. I guess if theres been one thing that surprised us at double line its been the voracity of this liquidity cycle. Certainly fundamentally nothings changed. The taper talk is still there. Syria may even derail that. And when you look at the longterm low cost aspects of the u. S. Like 2 percentish at this point, having a tenyear that goes much above 3 , the math doesnt work. Its not sustainable. Were still looking at 2 1 2 as a reasonable value but it may take us a while to get back there. Mike, if what were starting to see is perhaps evidence of the fed talk about bernanke beginning going back toot spring and reaction in the markets since is slowing the economy more than its slowing the Financial Markets . So this is so far limited impact on the economy. Obviously housing has shown signs of softening a little bit in the recent months. Residential investment is contributing. We think its modulating the pace of the housing recovery but we think the taper talk has had some impact. I think the recovery is still on track and we still expect above trend growth for the second half of the year. Im really disappointed with what youre seeing about the future. There will be people who believe in cycles who will say isnt this just an ideal time in equities to edge into equities as we go into this problem in the full because 2014 is going to be brighter and at some point the growth cycle around the world will turn, will create jobs. Ceos will spend. Everyone will make money. It will be another bull market run. Right. You dont think the you dont think thats in this economy . Well, not in the immediate future. Look, when you talk about cycles, there are several cycles. Theres a seasonal cycle. I mean, this time of year is usually when surprises happen and when rosy earnings estimates go out the window if thats the case. What i guess were more concerned about is more of a secular trend thats really not a cyclical bounceback from the recession that we you dont think jobs are coming back to this country . I would like to say i think theyre coming back. They will eventually but its just not going to happen overnight. Look, there are so many jobs that have gone away already that arent coming back in our industry in particular. You go to the supermarket. Nobody needs to check you out. You do it yours. You dont even need a person to fly a plane anymore. Whats interesting about that, mike, is that its precisely the decline in the Unemployment Rate that is the reason that markets here are expecting the fed might act more quickly. There are some out there with a view that we could be at that 6 1 2 level within 18 months. So how do you guys think the outlook is going to evolve . Does turn employment rate keep falling and should the fed responds to that if it doesnt reflect any broader strength of the labor market . Right, i think thats the flip side of, you know, i agree with what bonnie was saying about slow trend growth in the u. S. But what that also means is that it doesnt take as much to realize growth to get the Unemployment Rate down. We could easily see turn employment rate hit that 6 1 2 threshold by tend of next year. I think people will start to turn attention to what happens to fed policy after we reach 6 1 2 threshold. Thats going to be an interesting question in september meetings, where theyre going to start to publish their 2016 forecast and youre going have to think a little more clearly about, you know, how the Unemployment Rate is going to involve after the end of next year. Does it make a difference, mike, whether its a summers feld or yellin fed in response that to that. Some is probably more hawkish than yellin. Some of more dovish than the hawks in the community. Given some of the things that summers said, i think hes perhaps a little more open that maybe the economy is structurally slower and youre going to have to normalize policy because of that sooner than expected. Janet yellin has been resistant to the idea that theres been any structure. Still thinks the Unemployment Rate is low. I do think theres a difference there between the two which will make summers a little more potentially a little more hawkish than yellen. You talk about the summers put. What is that . Summers put, some of us at double line noticed when the housing baktd up in the past it accelerates when the talk of summers being the next fed chair goes up. You know, look, hes a brilliant individual. We can all concede that, hes not a central banker. Theres always a fair factor. Janet yellen has been there since 1994. Hes a wild card. And a democrat. Bonnie and michael, interesting discussion this morning as we keep an eye on these rates. Thank you very much. Thank you. Apple is certainly on the comeback trail over the last few months. Rumors that a partnership with china mobile could be announced. Finally, the big prize on wednesday. Is it a sign to buy . Well find out next. Later, find out what Fairholme Capital Bruce Berkowitz will find when he joins us here for a post nine rare and exclusive interview. Thats only on squawk on the street. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. 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The u. S. Trading shares of irish Discount Airline ryan air are getting hammered in trading so far after the company said that profits in the current fiscal year could come in less than priority forecast. Ryan air cited competitive prices for budget conscious competitors. Ryan air shares, you want to watch those as we head towards the midday session. And the rest of the European Airlines are down. Dominic chu there with ryan air. Meanwhile, we have two events with apple next week. On tuesday, an event in california. Now a second event has been organized the day after in beijing. Thats led to speculation that the company is about on wednesday to finally announce a deal with china mobile. Remember, china mobile has 740 million mobile subscribers. Joining us now brian white, global head of Technology Hardware and software and Cantor Fitzgeral fitzgerald. This has been a prize long in the coming. Do you think its finally here . This is a Historic Events because apple does not hold events in china, number one. And number two, they never have a launch in china thats so close to, say, u. S. Or european launch. So i think its historical from a couple of perspectives. The reason that i think they would accelerate this. Last year the iphone 5 came out in the u. S. , in china, in december. The reason you might want to have a event at the same time here is because of the five cs, lower priced iphone. Whether this is a deal with china mobile or its just working with your other two carriers, its big. Lets explain. Were going to get t the iphone 5s, the upgrade. Correct. That will come in on the tuesday, on the west coast. When this iphone 5c, colorful for china and cheaper and potentially with a qualcomm chip that will allow it to work on staterun china mobiles own kind of quirky platform that its desperate to push around the world. Its important politically to be able to link into their system. China mobile system is a china standard. Unlike the 4g standard in china thats global, it only works 3d only works in china on that network. What they really need to do is come out with a chip that will work across the networks and obviously if theyre going to work with china mobile today thats what theyre going to have to do. Youre known for your previous target of 1111. I think youre initiating at 777. Correct. Why a little more cautious this time . Were not more cautious. We used a market multiple on next years earnings. Really weve always done that. I think if you look over the past year, you know, stock prices come down. Earnings have come down. Actually using the same multiple. Tremendous upside. The theme here is this is a company last year with a very tough year, fiscal 13. Fiscal 14 is a year of invasion. New products are coming out. Its obvious thats more than 50 higher than we are now. Correct. Still a huge call from where we are at the moment. Is the market ready to rerate a until. I tell you what, i think with profits accelerating and a product cycle not just a 5s but a 5c will address 15 of the smartphone apple that it cant and i wash, all of these are new innovations. Thats what investors want to sglee do you think that tim cook will be focused on berlin this afternoon when samsung reveils the new watch . Very interested in wearable devices. Talked about the risk being the focus. Obviously been a lot of media warts about iwatch. Am has never hosted a party that they perfect. Awaiting further news from apple. Meantime, the president saying in the last hour that we h did not draw the red line against syria, the world did. John harwood in oklahoma with more on how the world views a military strike. Carl, this district just outside of wooklahoma city reflects the pressures, especially on republican congressman, as they are asked to authorities action by the president of the United States against syria. Now, the this is a district that voted 21 for mitt romney over barack obama. Promilitary district. Major air force base here. But because there have been so many deployments over the last ten years as weve been to war, in iraq and afghanistan, theres also tremendous reluctance and tom cole heard it, the representative here, heard it at full volume in a town meeting last night. The American People are leery of all of this kind of stuff thats been going on for the last 14 years. When he does decide to do this and russia says they will respond with nukes. China said they will respond. Syria has a treaty with iran. This could possibly get very ugly very quickly. I always want to ask, where did he get this, you know, out of a cracker jack box or what. Its not in the constitution. Just because the president made a statement that he should not have made should not bind congress to go ahead and approve it. Thats right. Interestingly, carl, tom cole got a lot of pushback on other issues as well. Conservatives wanting him to support a Government Shutdown over defunding obamacare, talk of socialism and impeachment. He pushed back among those things. He wants a budget deal. He did not push back on syria. He said hes going to be a very, very hard sell for the administration. So important, john, to talk about how this is playing in the middle of the country. Thanks so you. John harwood in midwest city, oklahoma. When we come back, rare and exclusive interview, bruce birk bur live here at post nine. Are you looking to spruce up your wardrobe this fall . You cant go wrong with new shirts, especially the cnbc tshirts signed by the entire squawk on the street gang. You ant them, just guess fridays nonfarm number. Tweet squawk street and dont forget the nailthenumber. You have to be 16. Sorry, kid. For all the official rules and details go to sots cnbc. Com. 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Shares the Electronics Retailer up 220 so far this year. Lets go over to david. Thanks very much, carl. You know, this week marks the fifth an verse writ of the placing of fannie mae and freddie mac into conservatorship by the u. S. Government. Today the gses are making billions and seeing deliver more money to the u. S. Treasury than received in aid. The question now, what happens to the mortgage giants. My next guest has taken a large position and preferred shares of both fannie and freddie to the belief they should be rufrd to the investor. Bruce berkowitz is joining me now. Nice to see you. Nice to see you. Lets talk fannie and freddie. Here you are decided to buy the preferred shares of the two gses even though under some plans in congress, it could be worthless. Why . I have a somewhat different viewpoint if preferred is a contract to pay a dividend. Thats what were entitled to. And the companies together make about 40 billion a year. Earnings power. They can more than afford to give a big win to the government, taxpayers, and to make everybody whole in the ownership structure. I like the preferred because the market does proceed both fannie and freddie to be near death and that makes no sense to me. And you can buy the preferred at such discounts you get unbelievable promised yields. So i expect those prefers to pay the dividends again. Dividends from profits. And then go back to par, essentially, if they if that were to occur. Most of them should go to par. And make an enormous amount of money as well as other hedge funds that own the preferred shares. 200,000 tax paying shareholders want me to do. I know, but, but, nobody else in government is talking about that being a possibility. Even the likes of senator corker, for example, or any of the plans that weve seen at this point for reforming the gses, figging out what were going to go, include returning these preferreds or turning back on the dividend. Heres what i think. Weve done it with aig, bank of america, invested in goldman sachs, Morgan Stanley, cit after the 2008 real Residential Real Estate debacle. So we, you know, fair home, we buy companies, essential, critical, systematically Important Companies that look like theyre down and out. Absolutely essential to the economy. And theyre going to stay. Its no different with fannie and freddie. We own the craft. The government made an investment 2008, brilliant investment. Excellent. The government is unbelievable hedge fund. They do extremely well. T. A. R. P. Has done well. You cant argue with what happened in 2008. You can with 2012 when they made this decision to not pay the dividend but swept all the profits to the u. S. Treasury. Third amendment. Suing on that. Thats whats going on right now. I dont understand the 2012 amendment, the sweep amendment. The 2012 amendment is based as if we were still in 2008. I really dont understand it. And the lawsuits about protecting our property. For all i know there could be a typo in the third amendment. I really dont understand this the common sense of it makes no sense to me that you can just snap your fingers and take everything. That has not played out. The lawsuits for fair home capital, we stand alone, is just, you know, were property owners. This is america. So whats going to happen here, bruce . I guess the common sense construct in my mind. The housing, the Residential Mortgage market is incredibly important in this country. 30 of familys net worth. 20 something percent of gdp that creates employment. You have to have it. Fannie and freddie, very valuable franchises. 12,000 plus talented employees of both of these firms. Theyre actually essential to the running of our mortgage market. Now, because fannie and freddie have a Public Mission funded by private capital from fairholme and others, they have a very unique place. For example, in the last five or six years the company has lost about 500 billion. But thats their mission. When everybody else runs in time of crisis, fannie and freddie stand up and keep the Mortgage Markets running even if its unprofitable to do so. 90 of the mortgage market. They are the mortgage market. Until private capital starts the only private capital right now is fannie and freddie. They are the private Capital Market. They have been. Theres always been a debate about them. So theres no middle class housing. Theres no American Dream. Theres no cornerstone of the American Dream and housing. Theres no 30year mixed mortgage without fannie and freddie and no alternative. Fannie and freddie, they are the system. You are relying on the u. S. Government, particularly the congress, perhaps, to act rationall rationally, some would say. That is a big bet. Common sense was not prevail in washington, d. C. Very often these days. A lot of investors here counting on you, counting on something that doesnt happen. Right now when i look at the bloomberg machine i do not and the ownership list, i do not see the u. S. Government. They have the right to make 79. 9 in war rans. They could make an enormous amount of money. And they should make, for the taxpayers should make a very nice return on their investment. And then private capital, which put taxpayers before themselves. Making sure that taxpayers pay in full with a profit before taking a penny. So as long as were doing the right thing, doing what is right for homeowners, its right for taxpayers. Fannie and freddie have accomplished their mission. They did it. Mission impossible, accomplished. So now its time for them to be resuscitated, rehabilitated. Let the equity build up in the companies and prepare for the next rainy day. This is the nature capitalism. We take ood ideas to a large extremes. Correct the logical extremes, go back to where we were and thats what makes it such a great country. I want to talk about some of the other holdings you have in your 8 million fairholmes fund. Aig, youve been a huge holder of this lo not long after the crisis, not long after the government came in. Its been a big win for you. You suffered some tough years. Why do you still own this thing after having had the appreciation youve had . Why is it 50 of your fund . Its done well, the position. But besides that, you know, investing is all about, you know, comparing. What you giver sus what you get. When you look at todays stock price with aig, its still selling significantly below aly question dags value. At some point the stock market price at aig will meet the book value of aib which i take as a proxy of the liquidation value. What is the book value . 57 a share. Higher depending upon tangible or not. If it gets to that point, are you a seller at any point . I start to think about selling. Dont you have to when its 50 of your fund . You know, Benjamin Graham once ran into this issue with geico. When it got to be too much he distributed the shares to shareholders because it was just ridiculous to sell itnd still too cheap. At an appropriate time well make a decision. If we have to well distribute shares to our Fund Shareholders but its still trading for less than liquidation. I expect some very good returns from aig. We bought it at half of liquidation value. It will double in a bunch of years and theres such superb franchises the company deserves to sell for more than a liquidation value. Listen, you hold on. You and i have not talked on air in a couple of years but were talking about many of the same stocks other than fannie and freddie. Same concept. Which leads me to sears which you still own. Seems very little has happened that would endear the company to shareholders. Why do you own almost a billion dollars of this stocksti still . I may be in the minority but i think lambert has done a great job. If i was in his shoes i would make the same decision looking back. They havent had the same store comp sales in years. What really matters is in sales is what matters is on profits. My question to you on sears is this, how can you have sears selling where it is. Sears has more Square Footage than simon propertieses, the largest mall reet in tit in the country. Thats the rub. We have something extremely valuable if its an if its anywhere close to being an apples to apples comparison then something is very wrong. One is very expensive and one is very cheap or its somewhere in the middle. And its a big talking 10x range. Thats the rub. Nothing is free in this world. And you dont know when. But youre still hanging in there for when that day is because you still believe that they will realize some of that value. I still have my mini Berkshire Hathaway model working on sears and i havent been able to disprove that theory yet. You will hold it in you disprove it . Absolutely. I like what hes done. Hes taken a lot of cash out of the companies. Hes used it to buy back stock. Granted it too high a price but a mistake a lot of us have made over the last few years. And they still generate cash. Sten still 5 billion in inventory. Real estate is amazing. Spend our lives understanding the real estate structures, the ownership structure, the leasing structure. Yo i just got back from puerto rico looking at sears and k marts in puerto rico. Hot spots. I want to talk to you about the fund itself. Youre open now for new inves r investors. Yes. 50 in aig. You were fund manager of the decade. Youve had great performance over a long period of time. But youve had some years, man, that are butte tall. What were you down we had a brutal 2011. And but if anybody, you know, i write these letters so people can go back ten years, five years, to see what i said. What should i think if i invest with you, i have to believe in the long term, your ability over the long term. Theres no free lunch. To make a lot of money it cant be easy. And by not easy in valuebased business is, you look wrong until youre right. And in 2011, our companies were doing unbelievably well. But the market disagreed. Everybody in the marketplace thought we were going to have a double dip recession, didnt believe the earnings that were being published. Youre still an owner of bank of america. When bank of america looks like wells fargo a few years from now its going to be an unbelievable profit. They have done a great job b. You know, your fund holders, some of them dont buy and sell you at the right time. Its a little schizophrenic. People out there saying the best thing you should have done for shareholders is stays closed for good. Recent article. Investors could do is ignore the funds opening. I think that gentleman said the same thing at the bottom of 2011, too. But the point is everyone talks about diversified portfolios. Im a manager. Thats what i do. Im a focused investors. Thats what i say in my prospect us the. Its what ive done from day one. I kept my promises and stay focused within the scope of the 40 act. And i am one of many investments for manyst most people. So i dont understand this argument about diversification upon diversification upon diversificatio diversification. Its just going to lead to an average performance. I want to give people above average performance and the price youre going to say for above average performance is short volatilitvolatility. When people think im wrong im going to look really wrong. If they eventually agree with me were going to get a nice pop. Thats what i do with my familys money and what i do every day is put myself in the shoes of the shareholder and i stick to it without consequence of what people may say or what the optics may look like. Thats my job. Thats why get paid for. Thats what im going to keep doing. Its always interesting to follow fairholme fund. Look forward to having you back. Well have more to discuss on fannie and freddie over time. Important story for everybody. Bruce berkowitz, kelly, over to you. Now we know where to find you guy on a friday night. Now, here comes the smart watch, at least the samsung version. Trying to beat apple to the punch. Set to be unveiled in a couple of hours. Find out what you should watch for when squawk on the street comes right back. train horn vo wherever our trains go, the economy comes to life. Norfolk southern. One line, infinite possibilities. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Samsung expected to launch its new smartwatch in a couple of hours. The event is being live streamed to new yorks times square where we see our own seema this morning. Seema, hi. Hi, carl. If we do get a smartwatch from samsung as expected, it would be the first smartwatch from a top mobile manufacturer. Gardner estimates five in 10 million may ship this year if samsung and others get it right. They said they had leaked photos of samsungs smartwatch. They say it will have a large screen, four megapixel camera, wifi and access to Realtime Health data. The smartwatch will be the most important new product category in Consumer Electronics since the ipad. The biggest names in tech have taken notice. Sony, microsoft, apple, google all rumored to be developing some type of smartwatch. Recent survey conducted by Forester Research found out when consumers were asked where they would want to wear a device, 29 said clipped to clothing. 29 said opted for wrist. 12 said glass pep the big question on the street is if todays Product Announcement will heighten samsungs lead in the Consumer Tech space, specifically against apple, apple is pecked to unveil its own sort of smartwatch in the coming months. So however, if smartwatch from samsung today would give samsung the first mover advantage. Simon, back to you. So, seema, are they going to be images from berlin where the launches where you are in times square . Absolutely. We are expecting the device to be unveiled just behind me in the next couple of hours. Hoping to get you a look at a device when that comes out. 1 00 eastern. Cant wait to see what it is. Still ahead on the program, tesla seemingly unstoppable as a stock this year. Rising about 400 . So inevitably the question, has it gone too far too fast . Well talk about [ male announcer] surprise youre having triplets. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. [ male announcer ] some things are designed to draw crowds. Others are designed to leave them behind. The allnew 2014 lexus is. Its your move. Dow is now up 66 points. Lets check in with Rick Santelli. Hi, carl. Theres a new conversation going on these days and i find it fascinating and i think it epitomizes maybe apples to oranges is not quite right, maybe apples to watermelons would be better. That, of course, is Interest Rates and how theyll affect different businesses and different sectors of the economy. Many are worried about housing, but many are not worried about autos. As a matter of fact, theres been many conversations in the last couple of days where i have been witness to the idea that, hey, rates going up certainly isnt hurting autos. Think of phil four on the floor lebeau talking about the historic annualized numbers, the pace of auto sales. But i caution, the Interest Rates of autos is in a different world than the Interest Rates we most observe. Think baked in the cake. Just to give you an idea, from my fico. Com, here is what we learn. I could look at various loans that will exaggerate this but on a 36month loan with these scores, here is the Interest Rate. 10. 8 , 15. 4 , 590 to 589, close to 17 . Now, consider a number of time issues, okay . What weve learned is recently new auto loans average 65 months. Thats a historic high. 18 of these loans are between 73 and 84 months, and, yes, there are advertisements out there for 97month loans. Will y but lets take this a step farther, if you have no credit, and i have a guest that is going to talk about the credit invisibles. Do you know how many are out there . 50 million credit invisibles. Now, if you have no Credit History, we made some calls to dealerships. They didnt want us to use their names, maybe theyre a bit embarrassed, but they said with no Credit History, youre looking at 16 to potentially 23. 9 . So when a tenyear goes from a 1. 38 historic low to its current level, to think whats going on in auto loans is the way other Industries Like house something going to move, i dont think so. Take it a step farther, maybe the Housing Market would be better off if there wasnt so much credit allocation. Think subprime auto loans. Kelly, back to you. Its a hugely important topic. We know youll have a little more on this coming up next hour. Thank you very much. Googles latest weapon in the war against apple mighting chocolate. Well explain why when we come back. 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Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. The next version of googles android operating system has been called kit kat and google is not just breaking off a piece of that name licensing agreement, its in a full partnership with nestle. Nestle is creating a slew of Cross Marketing initiatives from a revamped kit kat website to a video that appears to poke fun at google rival apples senior Vice President of design, sir johnny ive. Take a listen. Every corner, every edge, every finger of every bar has been carefully considered and crafted to create a beautifully immersive and multisensory experience. And it really does taste as good as it looks. Because when we set out to create confectionary perfectionary by designing the perfect chocolate bar, we nailed it the first time. That is the chief breaks officer of kit kat, chris catalin, making fun of the videos johnny iv e does. Sort of a shot across the bow. Google remember with the Scroogled Campaign has been the target of aggressive ads and now its turning the table and taking the same approach with apple. Its worth noting that there are somewhere in the region of 800 million android phones. What the latent power of putting an advert on each of those . But how to you put the advertisement on there . Something that would pop up when you look at the phone. That would be annoying, highly annoying. I would break it like a kit kat bar. Google has backed off of the 900 level. Keep an eye on that stock anyway. By the way, if youre just joining thus morning, here is what you missed earlier on. Welcome to squawk on the street. Here is whats happened so far. As mobile continues to develop, there are new opportunities for us to be able to reach those fans, and thats what fans demand. We can all sit around and say we want to keep the world the way it is, its not staying the way it is. It is going to change because technology is out there, and we as the nfl have to be at the forefront of that. At the end of the day there are no heroes during this thing, and im sure the public resents both sides. However, it was important we take a stand. This is about the stand about content and the future of content and how content is sold and how it goes to our consumers. Gold and oil, those have been the international worry plays. Oil went down very big after libya. Went down very big after iraq. So keep that in mind. Were expecting some kind of proposed resolution out of the senate today. Theres the opening bell. Whats giving this extra push within the last month for you and the other automakers . We continue to see the industry grow, slow, steady growth. The positive economic factors we think outweigh the small little speed burchs along the way. We buy companies, essential, critical, systemically Important Companies, that look like theyre down and out, but their franchises are still intact. Theyre still essential to the economy. Good morning. Were live at post 9 at the New York Stock Exchange with a check on the markets. Dow hanging on to some gains of almost 70 points. A couple things going on, a sense that perhaps a strike in syria is not necessarily imminent. Oil is off almost 1 as mccain says he has some reservations about this Senate Resolution. S p is up about 9. As soon as dak nasdaq is up 26. Dollar general posted better than expected earnings boosted by stronger sales of cigarettes. Dollar general put its full year profit forecast in june and is standing by the numbers. Bill ackman is out, glenview is in. Jcpenney seeing a nice gain after glenviews Larry Robbins disclosed a stake in the retailer. Kyle bass has a 5. 2 stake. Disclosed that yesterday. Another big day on capitol hill. In just an hour secretary of state jon kerry and defense secretary chuck hagel will testify about military action in syria. Well talk to members on both sides of the aisle. Plus, is apple tv coming soon . A new report says we could see a new apple tv as soon as next week. Well take a closer look and tell you what you can expect. Also, time to get smart. In just a couple hours from now, samsung will unveil its brand new smart watch. The question is why wait until then when we can give you an inside look at the new smart watch in just a couple minutes. But well start with apple, of course. While many are expecting the release of iphones in different colors next week, rumors are swirling a new apple tv set box could be in the pipeline. Our next guest says this could come as soon as next month. Gene joins us from minneapolis. Good to see you. Do you feel like youre going out a bit on a limb here . No, because, you know, when you get this shipment data coming into the u. S. And some of these ports in l. A. , for example, thats not much of a limb. The bigger question is whether apple will update the apple tv. The last big upgrade is march of 2012. The bigger part were going out on a limb on is saying this is part of a big ger strategy including an apple tv. You think this is essentially in the very near term. What do you envision if they redo this hockey puck. What could the set top box look like . There could be a little more power which would allow them to have a bigger operating system. When they come out with a new version ofo os, the apple tv operating system is a version of your io s. Thats part of it. Bigger processing and ultimately this could be were not saying this definitively, but it could be room for an app store for apple tv. Dont know if its going to be this month but ultimately theyre laying the ground work to allow gamers to develop apps for apple tv. Lets talk about some of the projections. How many of these they could potentially sell, where they would price it, what it would do to revenue, what it would do to margins . Its pretty small. This is a small part of a Bigger Picture which is the actual television, but just to put it into perspective, they sold about 13 million of these hockey pucks life to date which is about 1 of their revenue at 100 a pop. And so this probably isnt going to change any of the street estimates out there. What i think this is going to do is get investors continuing to debate this question, whether its an apple tv or an apple television. And, gene, just to that point, fortune writer earlier responding to the tim cook comments talking and being pressed about the question of whether theyd come out with the apple tv set saying while you had said you heard him perhaps referencing it, what he heard instead were two journalists pressing very hard for details about a product that cook made it quite clear he was not going to talk about that may not be coming down the pipe. Why are you so confident still theyre going to go the set top route . Its more than what tim cook or steve jobs has said. I think theres been some things that they have said that have been very powerful about what theyre going to do around tv, but its about what were hearing from some of the major suppliers in asia. We talk to these people routinely. The question is the timing. The question is not whether apple is doing it. So, for example, well talk to a large component supplier that will do panels, and theyll say theyre testing this with apple. Its things like that that we hear that give us confidence that this is ultimately coming. Gene, lets talk about next week. Do you believe the beijing event has anything to do with china mobile and in terms of how you play the stock, we know generally when a new product comes out, there is a bit of an aftermath where the stock does not outperform. Do you get in front of tuesday or not . Well, youre right, the stock typically trade off after the events. I think its generally known based on that invite that youre talking about that china mobile will be part of this. I think thats been highly anticipated, but thats a huge, huge market. I mean, were talking 740 million subs. At t and verizon combined are about 210 million. Granted, theyre more valuable subs, but in terms of order of magnitude. I wouldnt be surprised, to answer your question, if the stock trades off after the event. I think that that tends to be a buy on the rumor, sell on the news. Things like china mobile and a more mid priced iphone are laying the groundwork for apple to have a Better International and global opportunity. I think thats something thats going to be positive for the stock as the estimates start to move higher in the next few months. Yeah. Were going to Start Talking a lot more about how much share they could take in china if next week goes as some expect. Always good to have you. Thanks for coming on. Thank you. Gene munster joining us from minneapolis. Lets send it over to dominic chu. Dow is up 88. Here is a positive for a stock. Discount brokers E Trade Financial on the move to the upside. They said they received Regulatory Approval to Access Capital from its Bank Subsidiary for use elsewhere in the company. The move is being viewed as a sign of strength for the company. The cfo said the companys announcement reflects significant progress in the capital plan trade to reduce risk and strengthen its overall financial position. Shares certainly to the upside, kelly. Thanks seven for that. We take a look at tesla shares. What a ride theyve been on, up almost 400 so far this year. Hitting another alltime high during trade yesterday. But could something be lurking in the stocks blind spots . We will explore that straight ahead. First, Rick Santelli following up on the look at credit and how renting may help save the u. S. Economy. Ill tell what you, young people, young people, are you listening . Because youre getting a raw deal everywhere i look these days, and here is one of your raw deals. You cant afford houses, so you rent, and if you have wonderful credit renting and you pay on time, it probably doesnt even improve or go into your credit score. That has to change. I have a guest who says it can make a difference, that you can build your credit by paying your bills and your utilities and renting. You want to hear this. Ten minutes from right now make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you start using active trader pro today. Shares of tesla have now risen almost 400 in year alone. The question is whether that rise in price is justified. Our own phil lebeau spoke to elon musk just a couple weeks ago. Musk had this to say about the companys valuation. Market obviously goes through these periods of exuberance and depression, and in our case our stock has a lot of volatility because it depends so much on what people believe our future execution will be. Our stock price is obviously far too high based on historical financials or even on current financials. So the value is very much based on what the future will be like. So as that confidence waxes and wanes, well see big swings in the value of the company. You could almost describe it as confidence in the man himself. Joining us now, collin rush be analyst at Northland Capital Management and drew cups. Welcome. Collin, first to you, im just curious, this is one debate people are having. Do you cover tesla as a car company or do you cover it as a tech company and how does that change the valuation . I think you have to cover it as both. First an enabling technology company. As we look at this company, they have really developed a battery pack and a drive train system thats parallel to none. They have a cost advantage on a fundamental basis. They have ip advantage that folks are going to take years to catch up with and we think theyre going to enable transition of the transportation market to utilize underutilized assets in the utility industry. We have had some chartists in to look at the chart and say where is a decent entry point. A lot of them say it doesnt make sense to buy it here but they cant rule out a leg higher. How do we get our arms around that . Great stocks are tough to buy. Theres no two ways about that. I have been witnessing that for 20 years. So you really need to make an assessment and pick your spot and go. Collin alluded to the fact that this is the biggest industry on the planet. This is a company that is set to take share whether thats small, medium, or large is a big deal. Its a big multiplier. The stock, i think theres a case to be made for higher as well as lower in the short term. Where did you guys get involved with the shares . Did you expect them to go to this level . And what was the justification . Do you look at this on a classic price earnings ratio or what are your metrics to justify exposure here . What our firm specializes in is where the world is going and disruptive technologies, and tesla fit that bill. We were involved on the ipo. We were buying shares in the 20s and 30s and higher than that as well. We dont know where the stock is going, and we didnt expect it to go to 170 in three years. But. Company but the company is on a really interesting path where they havent missed a beat. The thing were focused on now is the pace of advancement. They are running faster than anyone else so how are the others going to close the gap . Some skeptics worry about the frequency of their data, to what degree the dealers will cause a stink around the country that want to bring it into their network. Will it result in a pullback in the near term . Theres always a potential for a near term blip on a stock like this and weve seen that a couple times where it takes a 15 or 20 dive. Were seeing tesla really manage the process extremely well in terms of handling the legal issues, being able to brand and work around all of the sales issues as well as any of the production issues. Your price target is still 230 . Correct. All right. What are we going to hit that next month . You know, it was a 12month price target. I still have ten months until that price target. All right. Collin and drew, well keep an eye on the shares. Pleasure. You always hear buying a home is a huge part of the American Dream. What if we told you renting instead of buying could go further in saving the u. S. Economy . Well explain that after a break. Are you looking to spruce up your wardrobe this fall . Well, you cant go wrong with some new shirts, especially the cnbc tshirts signed by the entire squawk on the street gang. You want them . All tough do is guess fridays nonfarm jobs number. Tweet your guess to squawk street and dont forget nailthenumber. You have to be at least 18 years of age to enter. Sorry, kid. For all the official rules and details, go to stocks. Cnbc. Com. You have until 8 29 a. M. Eastern friday morning. Good luck. Farmers presents fifteen seconds of smart. So you want to drive more safely . Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. We are farmers bum pa dum, bum bum bum bum unh hey lets go [ male announcer ] you can choose to blend in. Yeah yeah yeah or you can choose to blend out. Oh, yeaheah the allnew 2014 lexus is. S your move. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. Welcome back. As we look at that triple digit swing from the lows today and the dow is up 82 points. David faber sat down with bruce berg wi berkowitz in the last hour. Of course, berkowitz known for taking large positions and holding them for quite some time. Often they are controversial positions in his 8 billion fair home fund. For example owning aig not long after the bailouts. It represents a 50 position at fair home. The latest move hes made so the without controversy as well is into the preferred shares of fannie mae and freddie mac. The gses are making an awful lot of money and returning all that to the treasury given the sweep of the profits. Berkowitz is betting they are be returned to the private sector and the dividends cut offer on that preferred will be turned back on. Greatly enhancing the security. I asked him why he believes that will be the case. Here is what he had to say. The only private capital right now is fannie and freddie and they are the private Capital Market and they have been. Fannie since the 1930s. Theres always been a debate about them. So theres no middle class housing, no American Dream, no cornerstone of the American Dream in housing. Theres no 30year fixed mortgage without fannie and freddie, and theres no alternative. Fannie and freddie, they are the system. Of course, that does not mean that in congress and or the treasury when various plans are surfaced as they are being at this point to reorganize or restructure the gses that that preferred will be made money good. Berkowitz is engage 23d in a lawsuit to assert his rights. Perry capital is suing the u. S. Treasury as well. Ted olson taking the lead there. Well see where it ends up. As for berkowitz and the fund, it has been the fund of the decade in some ways returning as much as 11 annually over a long period of time, but it has had its ups and its downs as a result of taking large positions in the likes of an aig which lost a great deal of its value back in 2011 and sent the fund down as much as 30 only to rebound with a Strong Performance in 2012. As i said earlier, berkowitz still owns about 4 billion worth of aig stock. I asked him why. Investing is all about, you know, comparing what you give versus what you get. When you look at todays stock price of aig, its selling significantly below a liquidation value. At some point the stock market price at ai g will meet the book value of aig. Bank of america looks just like wells fargo a few years from now. Its going to be an unbelievable profit. That is another name that he has held for years. You know, its funny, i interviewed him a couple years ago on cnbc and many of the stocks are the same ones. If you hung in there in the fund, in fact, you would have done quite well, but it is not without its ups and downs given his willingness to take enormous positions in terms of the allocation of his fund in these companies that are out of favor to say the least at types. Exactly. They were at the time, but if you look at how the market is doing over the last couple years sitting in a lot of these names would have worked for you. And it has for him in 2012 and 2013. Hes open again for new money. Its a tough ride with him even though it may end up over here. All i know is kmart is a good place to go on friday night. Well have to check that out. In puerto rico. In puerto rico. Lets get to Rick Santelli in chicago with a look at how building credit can benefit the overall economy. And specifically young people. Young people, young people, young people. This is jeff goldie. Hes with an outfit called william paid. Com. Im like whats william paid . Whats short for william . Bill. Paying your bills. It ought to help get you a nice credit scores. Credit scores are associated with debt. Is that right . How can you change that so people have a better chance to build credit. The problem is you have 50 million kids under the age of 30 that are renting, right . And so unless a debt, credit card, auto loan, student loan, or a mortgage, which as we know are not easy to get these days, theres no other way to build a Credit History and show off good track record. You call them credit invisibles. How do they do it . Report your rent services through a company like us. Theres Something Congress is trying to work on. As a voting bloc, young people, pay attention. Theres the Credit Access inclusion act, an amendment to the fair credit reporting act. It was intro dutiduced by representative ellison of minnesota. Trying to get utilities to report payments. They should show youre making these payments every month on time. Quality payment history. Every month. Its not being counted. What happens is you dont know you have bad credit until you run into that instance where you apply for it, where you really need it. You need that auto loan because you cant finance it to get to work. Which we just talked about. Some of the rates are very high. Exactly. And so now you have this whole sector that goes into the subprime and theyre getting paid im a young person, paying 1,500 a month rent. Its not helping me build a Credit History or payment history for future purchases like a house. Right. What do they do . Concrete things to do to get this going. Number one, come to william paid. Com. And theres probably others. And there are others. If your landlord reports, which is typically the largest 50 property managers, they may report. If youre renting an apartment from a single proprietor. A guy may have 10 or 12 units. Exactly. Theyre not buying the software. How much does this cost . If they go through us and want to use a single checking account, they can do it for free. We never charge to report and there are others in the game as well. There are a few others. I want you to come back in a couple weeks. Were going to pick this up. Hes also very smart on Student Loans and some of the ways we can help young people pay those off, maybe with less costs. So at the end, young people, you want to build a payment history, Credit History is associated with debt. Maybe we need to rethink the whole thing. Back to you. Rick, i love it. Personal experience speaks to this one as well, to the need for services to be reflected into that score. Thank you very much, sir. An important discussion thats happening. Also happening in less than an hour from now, secretary of state john kerry and defense secretary chuck hagel will be back on capitol hill testifying on military action in syria. Coming up, well talk to a congressman who will be in that hearing to find out what hed like to hear from the white house. Plus, bells are about to sound across europe and there are just a couple minutes left to go in the trading session there. Well get you all the detames you need on the close with tie mon hobbs when we come back. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The cadillac ats 2013 north american car of the year. Lease this cadillac ats for around 299 per month with premium Care Maintenance included. I put in the hourswhere i am today by luck. And built a strong reputation in the industry. I set goals and worked hard to meet them. Ive made my success happen. So when it comes to my investments, im supposed to just hand it over to a broker and back away . Thats not gonna happen. Avo when you work with a schwab financial consultant, youll get the guidance you need with the control you want. Talk to us today. The european markets are closing now. And simon hobbs joins us with a look at whats happened across europe. A lot of focus on where to put money to work these days. The big puck toicture in eur this sharp rebound from negative territory to positive territory. The big standout is italy, still very much in negative territory. The big question is sylvilvio berlusconi going to trigger the fall of the rickety coalition government. The press was full of stuff about the fact hes pessimistic they will try to kick him out out of the senate. A lot of these italian blue chips, media set is his broadcasting empire, a lot of those blue chips are down, and you have an underperformance on the sovereign date. T big corporate story today, ryanair reporting a warning on its profits as a result of soft demand. This is europes answer to southwest. A lot of other airlines undercutting it on the economy side of things. And, of course, politically as we speak in europe, theres a redefinition of the argument over syria. You saw the president earlier in the program in stoll stockholm where he said the red lines are not of his making but are of the International Communitys making. In paris the french government has instituted a debate about whether france will support the United States. There wont be a vote and hollande has said they will defer to congress on any timing of any action. Guys, back to you. Something well be watching all day. Thank you for that. Lets bring in Mary Thompson and see whats moving on the big board. Two hours into trading, the dow is up 85 points. Close to all time highs. As the case in france, the markets are certainly watching what happens in the u. S. With concerns to syria as well given that some members of congress appear to be less supportive of the action. Thats helped to move stocks higher in todays trade. Lets take a look at some of the sector that is are leading the rally today. Certainly tech is getting a boost. Semiconductors in particular are strong. Were also seeing strength in financials and Consumer Discretionary stocks today. Speaking of tech, the nasdaq showing strength up 29 points. Weakness is apparent in the utilities area. Thats not a surprise given the gains we are seeing in the yield on the tenyear bond. The two of them tend to act inversely. Gains on the ten year tend to put pressure on some of the utilities. Thats what were seeing in todays session. Some of the companies, the utilities are among the weaker performers within the s p 500 which is up 11 points right now as we speak. As i mentioned, semiconductors are strong today, in particular micron and sandisk getting a boston from the news one of its rivals in china has seen a fire that shut down one of the plants. The Semiconductor Industry Association Industry saying sales were up 5 in july. Life insurers are looking strong. Upgrades from barclays on a couple big names, metlife and prudential. A rising rate environment they say will be good for these companies over the long run. Once again, the dow is up 84 points. Thank you very much for that. In less than 30 minutes the House Foreign Affairs committee will hold a hearing on the obama administrations response to syria. We have two congressmen joining us who have different opinions. Brad sherman who supports military action and republican congressman scott dejar lay. Congressman sherman, you are going to be in this hearing in a few moments. It sounds like you support some action, but its going to come down to the wording of these resolutions, isnt it . Absolutely. The resolution the president sent us on the 31st of august was dead when read. The president is talking about a limited action for a limited purpose and the text his lawyer sent over would have authorized troops on the ground for years if the president had chosen at some future time to do that. What weve got to authorize, if anything at all, is something thats limited and does not involve boots on the ground. Congressman deshar lay, were all trying to make sense of this now, especially now that john mccain is seemingly against the Senate Resolution as we expect it to be worded. Where are you coming down and how does the leaderships view change your own view . It doesnt change my own view at all. I think that it was clear that we did not need to get involved in this civil war in syria and i dont think theres been any seminal moment that occurred on august 21st or really any time over the last year that would warrant this call for action at this point in time. Congressman, the action on august 21st was, of course, the use of chemical weapons. That was the red line the president laid out. I guess the problem is you have to respond to that. The u. S. Has to respond. Now, you cannot like that he did that in the first place, but do you not admit we sort of put ourselves in a corner or in a box here . Well, it brings up an interesting point because this is not the first time chemical weapons have been used. In fact, theyve been used multiple times over the past years and been used in the past by saddam hussein. At one point we had a coalition behind a strike if this occurred, and now that coalition has dissolved, specifically france and britain. If this was such a clear cut decision and something we needed to do, why are we having to build support within our own congress to act when these other people have peeled off. Although secretary kerry yesterday did say the pert since august 2 1st, Something Like 50 medications have come forward condemning the use of chemical weapons or indicating their support for action that, again, it seems as though its up to the u. S. To kind of do something about here. So for you does it come down to the use of chemical weapons . Is this about president obama . Through what lens then are you viewing what should or shouldnt be done in syria . If it was about chemical weapons, action should have been taken sometime over the past 12 months. What im not understanding is that theyre making this push now. You say nations are coming together to support this. Were not seeing this. It looks like were looking for a unilateral strike by this president , and now today hes saying it wasnt his red line, its the worlds red line, but theres a lot of confusion and a lot of lack of leadership and a lot of folks back home that are very leery about getting involved with any kind of conflict in syria right now. Congressman sherman, the president this morning said he still reserves the right to act on his own if congress does not support him in this move. What would be the consequences of that . If the white house moved ahead even with a no vote in the house or senate . I think that would be very surprising coming to the house and asking for a vote and then ignoring it would be obviously much worse than not having come to us to begin with. At the same time i should point out that when the president drew that red line, no one criticized him for doing it at the time. The fact is we have a National Security interest in deterring the widespread use of chemical weapons. This is the first instance when its clear that they were used on a large scale and that that was, in fact, authorized by the highest levels of the syrian government. There were a few other instances where you could have said maybe it was a rogue colonel, maybe it was the opposition, maybe it was so small we dont know exactly the source. This, and i invite scott to be here, to be to the classified briefings, its very clear. This is the top levels of the syrian government. Not only using poison gas this time, but if they get away with it, theyll be doing it again and again and again and dictators for decades to come will do the same thing. That certainly is the concern, congressman. Im sure youve given some thought to what the iranian response will be if, in fact, the u. S. And the rest of the International Community do nothing. What do you think happens to their Nuclear Development from here on out if that happens . Well, first of all, i appreciate the invite and, of course, i was in washington on sunday and did peruse the classified documents and attended the classified briefings and thats what i base a lot of my opinions on was that you say this is the first wide scale use of chemical weapons and we know that it was the assad regime that was responsible. Im sure you looked at the same information i did, and i dont think the details that came out in the briefing necessarily match clearly with the classified briefings that i read. First of all, you have to define large scale. Is one death from a chemical weapon enough to act or is it 1,400 . How much was convention weapons death, how much was gas . I dont think theres any question that gas was used, but the thing is were talking about a limited response or a limited military action, but you cant get the other side to necessarily agree with that. We know russia is opposed to this and has been supporting assad. We know that the likelihood that this is going to escalate is very high. We know that israel is in danger of retaliation as are targets possibly in the u. S. From terrorism. So its not like we just decide were going to make a limited military strike, hope to deter or reduce his ability to make these type of attacks in the future, and then just wash our hands of it and this is over. Its very unlikely thats going to happen. But i will say the big threat we have to look for is the Iranian Nuclear threat, and maybe thats the end game of all this. We are involved simply by being virtue by virtue of being the worlds only super power. Yes, theres peril if we act, but theres greater peril if we dont. It is those earlier instances where very small scale and there was considerable conjecture as to whether they were authorized at the top level. Now theres no limit. And looking a decade or two from now, will dictators learn the lesson that assad was able to use chemical weapons at well against his own people, kill tens of thousands of civilians in future instances and the world did nothing. The United States is in a position with a very low risk of casualties, very low risk of involvement because our mission is so limited. Our mission is not to change the governance of syria. Our mission is simply to demonstrate to future dictators that the use of chemical weapons is not militarily advantageous. As long as assad loses substantial assets of any sort as a result of his use of chemical weapons, that lesson will be taught and well be done with this. To say that we turn our back on it, therefore, were not involved, ignores our role in the world. Congressmen, well see what happens in the committee hearing. Thanks very much for both of your time. Appreciate it very much. Thank you. Thank you. Ja let lets get to phil lebeau. Im on the gm Conference Call going over the august sales number. The company is adamant telling reporters, a, august sales for the industry, the pace will be greater than 16 million vehicles. Thats the pace, not the actual sales number. But more importantly when asked about whether or not this is a onemonth aberration where you just had something come up and sales spiked, they said, no, thats not the case. 16 million is here to stay. Thats the words of the gm executive, so what youre hearing is increasingly Auto Executives saying we are on a 16 million sales pace from here on out. Back to you. That is thats important distinction, phil. Thank you for that. Our phil lebeau watching auto sales all day long. The smart watch era apparently has arrived. Samsung will unveil its wearable device. Why wait until then . Well give you a sneak peek when we come right back. In todays markets, a lot can happen in a second. 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Coming up on the half, two weeks and counting until the biggest fed meeting in recent memory. Despite the taper talk, one top strategist is making a bigtime bullish call. Morgan stanleys adam parker makes his case next. Plus, apples last frontier. Could a deal with china mobile finally be in the works . What does it mean for the stocks in. Dollar general delivers a solid beat. Why is one of our traders bearish on that name. Top of the hour in about 15 minutes. Thank you very much. Now its almost time in a little over an hour from now samsung will unveil its first smart watch. The galaxy gear. Google and apple expected to release their smart watches in the future. Cot smart watch now replace the smartphone . Lets ask Kerry Mccracken and christina far, a Technology Writer from venture beat who got a first look at samsungs smart watch last weekend. Good morning to you both. Hey there. Good morning. Christina, so what can you tell us . What did you see . Well, i got a call on friday, and i rushed down to Silicon Valley and a source told me they had a prototype for me to play with, and this prototype turned out to be one of Samsungs Galaxy gear smart watches which was sent to a few select developers to build kind of apps for the new watch. And so i actually got a chance to play with it, to try it on for about an hour. My first the first thing i notice is i actually couldnt get it on my wrist because it was a little too clunky. As you can see, i have pretty small wrists. So i thought maybe it was quite masculine. That was my sort of first takeaway. Then i noticed some very interesting features. Camera in the wrist and speakers in the clasp. And i saw a lot of this sort of functionalities and features you would expect out of a smartphone but on your wrist. Interesting. From that review, obviously as truncated as it was, is this the smart watch that will break out, that will create some sort of zeitgeist . That will be beyond a fitness tool for those who like to work out . I think everybody thinks theres a lot of potential in this category and there have been a bunch of products already. Sony is just releasing its Second Generation one, but none of them has been the device where tens of millions of consumers look at it and say ahha, i understand why i want this, and theyre still design challenges such as the fact its hard to put a color touch screen on something that small and to have a battery thats big enough that it can run for more than a few hours at a time and its not clear samsung has licked all of those. There will be a bunch of device that is dont nail it before there is the one that does nail it. Well, and, harry, thats been precisely the argument for apple here is that they may not necessarily be the first mover, although with the tablet to some extent they were, but certainly not in the case of the original ipod. That there are advantages they come in and make it something elegant and, you know, that you actually want to own and wear. Do you think that that happens again here . Well, we dont know a whole lot about what apple might be up to other than they seem to have hired a bunch of the people you would want to hire to do a device like this. But youre right. People sometimes think apple is early in categories. Its actually very late and its very good at swooping in and doing the definitive device after other companies have sort of made mistakes along the way. Christina, you talk about how its quite masculine. Obviously a little bit clunky. I think people can sort of understand that. These early designs are going to be like that, but do you think its the kind of thing was it the kind of thing that prodded you to use an app more often . The point of these things is ostensibly going to be to check your phone more often, to logon to facebook more often down the road. Thats the question is do you want your wristwatch to be an alternative to your smart phone . Will you leave the house and just have your smart watch and leave your phone behind . If you want to have all of those features that you might expect out of a phone on your wrist, then its going to have to be pretty clunky. But if were building a device that kind of accessorizes the mobile experience that you would use alongside your smartphone, then it can be a little bit more sleek and streamlined. Right, and thats been the question. So it sounds like this is trying to be the allinin p hallino. Thank you. You might not know the company but you know the brands. Absolute hluakahlua. We will ask the ceo if people are still spending on booze when we come right back. [ male announcer ] lets say you pay your guy around 2 to manage your money. Thats not much, you think. Except its 2 every year. Go to etrade and find out how much our advice and guidance costs. Spoiler alert its low. Its guidance on your terms, not ours. Etrade. Less for us. More for you. [ male announcer ] the allnew 2014 lexus is. This is your move. So you want to drive more safely . Of smart. Lexus is. Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. We are farmers bum pa dum, bum bum bum bum french wine and Spirits Company is boosting its annual profit despite a difficult year in europe. The company also benefitting from the expansion of its champagne business. Joining us first on cnbc is pierre, the ceo. He joins us out here on broad street. Welcome, its great to have you. It sounds like whats moving in terms of product is the premium stuff. Am i right . Its absolutely correct. Premiumization has been our strategy for more than a decade now, and the success of jensen, gl glenlivet is an example. How is the champagne strategy changing . Well, if you look, we have some that are enjoying extraordinary success. Who is buying this stuff . Well, in fact, people who enjoy life and enjoy Premium Products and its a high quality product and thats very much the people we are targeting. Is it americans . Is it the chinese . So much focus has been on to what extent china and asia are driving demand for spirits but it sounds like theres still a cadre of buyers in the u. S. Its very interesting you mention both countries, u. S. And china. In fact, the largest markets happen to be the u. S. And china. We keep looking at what appears to be a recovery in europe. Stock markets there are outpacing our gains since june. Some of these retail sales have been pretty good. The pmis in the uk, you got to go back five or six years. Are you feeling that on this front or is it less noticeable because you never really had the downturn that say a manufacturer did . Well, in fact, i would be more cautious about that. There are clear signs that europe is getting out of recession. Is it going into strong growth . Its probably premature to say that. Im very confident regarding the u. S. Market. We grew by 8 last year and we expect to do well, something similar this year as well. Whats the next product for you guys . Well, that leads me to innovation which is as important is premiumization for us. As an example, we try to focus on the revival of the whiskey, particularly the american whiskey. For instance we have this paddy in the flavored version with a new packaging. Interesting. Quite attractive. And for the craft products. This pike creek. When you drink a single malt, do you do it neat or rocks . With one ice cube. One ice cube. All right. That sounds good. Ill take it anyway. Pierre, thank you for coming in. Good to have you. The ceo of pinot ricard. Were just a couple days away from the august employment report. That also means its time for nail the number. You know how it works. Well tell you what this months prize will be when we come back. Ill take it anyway. Prize will be when we come back. And hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The cadillac ats 2013 north american car of the year. 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We have been pretty level but we had a strong is m report, a long first day of the month. The question then becomes whats the bar . Some traders saying it could be as low as 150,000 because of that stronger ism number to support the market from here. Well see if that Employment Index leads to another number. Dow is up 109 points. Pretty good action out of financials today. Were above 1650 which some technicians are watching on the s p, having apple up doesnt hurt. Second day in a row its outperforming the market and looking at that syria action and the extent to which thats prompting a risk on risk off trade. Some believe with mccain not liking that Senate Resolution, maybe this process will take longer than some people thought. Oil is coming in by 1. When phil lebeau talks about 16 million being sustainable for the rest of the years, thats a big deal. One release after another saying august is going to be a go good month. Lets get back inside to scott wapner and the halftime. Carl, thanks so much. Welcome to the halftime show. Lets go to the wall and find out where we stand on the street at this hour. Take a look at the green arrows across the board. Highs of the day for the dow, up 114. S p and nasdaq good as well. Red apples. Is an invithere a deal with chi mobile . Dollar general beats. First, our top story, two weeks and counting