Transcripts For CNBC Closing Bell 20140806

This state wasnt just recently named the top state for business in america. So many huge businesses are down here, including Delta Air Lines. Ceo Richard Anderson joining us exclusively in just a moment. Also, georgia governor nathan diehl is going to join us. Well ask him how hes going to be tops on the business lid list next year. Fed president Dennis Lockhart will join us after the bell in a newsmaking interview. And the person rumored to be home depots next ceo, craig menear, also here exclusively and gives us a peek into some of the major changes theyre making to their distribution network, bill. Yeah, the economys doing okay in georgia there, and its contributing a great degree to whats going on on the east coast here, so weve got a lot to talk about in that regard. The european economy is struggling, though, and the european markets were down today. The german dax was down enough to make it into correction territory today. It has since bounced back a little bit, but those european markets have been taking a toll on our own. Let me show you, kelly, how our markets have been doing so far today. A bit of a bounce on the open this morning. Weve been drifting this afternoon. The dow right now is up 14 points. The nasdaq is up only 8 points at this hour, trading at 4,361. And the s p is up just a tiny fraction right now. But that does not begin to tell the whole story on whats been happening today, and lets talk about it in our closing bell exchange. Kimberly foss from Imperial Wealth Management is with us, Jack Bouroudjian from index financial partners, Abigail Doolittle from peak theories is with me here at the new york stock exchange, and of course, our own Rick Santelli is in chicago. And abigail, what about . I mean, the influence of the other markets around the world on our own market today. European markets struggling. Greece is in bear market territory, portugals in bear market territory, and germany, the Growth Engine of europe, is now in correction territory. You know, bill, i think thats a good tell on whats likely to happen here in the u. S. , and that is a formal correction. I think if we keep it simple, were siegrist aversion and repricing of risk. We have stocks selling off, junk bonds selling off. This past week we lost 100 million in m a deals. And something worth keeping in mind, newtons third law every action has an equal and opposite reaction. What goes up must come down. We have been living now in an action of extreme accommodations from the Central Banks, much of it needed to restore confidence, but the confidence has gone into complacency and then over confidence. So, now i think were seeing the reaction back down. The russell 2000 looks set to join the german dax into a formal correction, so i think investors want to probably get a little bit defensive here. Kelly . You know, that canceled m a point is interesting. According to s p capital iq, 227 billion in canceled m a this year. I wonder if thats an earnings boost to some of those, given the breakup fees. But lets talk about europe. Kimberly foss, italys back in recession. Web we talked about the impact of germany here and what its markets doing. The European Central bank tomorrow, what does it have to do . Can anything prevent the germany benchmark Interest Rate, the tenyear, from going below 1 , and what does that mean for markets here . Yeah, i think that that just gives more trepidation for the markets here. The markets are, you know, frothily, as we talked about earlier, and i think theyre looking for any kind of potential to pull back and maybe take some profits. Were only down about 4 overall. I think thats kind of a little bit, you know, just icing on the cake. With italy going back into recession with russia and the potential for ukraine, and then youve also got china with a pmi numbers coming down as well. I think were set to see more volatility, but thats also an ability for us to be able to dip and then put money into the markets, and were putting our clients monies to work as those dips come in, 4 , 5 each time. Jack bouroudjian, i was checking my notes here. There must be some mistake. This says here Jack Bouroudjian says we could have a 10 correction here. Let me qualify that. If you remember, about a month ago, i said the markets should pull back about 3 to 5 . This is that 3 to 5 pullback. Weve seen a series of these over the course of the last 40 months. Were not getting the full 10 correction, which is what all the Fund Managers who were underinvested absolutely need and this is why it keeps doing this, climbing that wall of worry with a lot of nonbelievers. But if the situation in ukraine starts to escalate, that will be the catalyst for a full 10 correction. And id worry about that. But thats a big if, bill, remember. I mean, there are i think what were seeing is the pain being felt by europe. The question is, if this starts to escalate, it will spill over here and it will be a 10 correction at that point. Rick santelli, let me just ask you about spillover effects, because you could argue on the one hand, of course, anything thats negative for growth in europe could be negative for growth in the u. S. On the other hand, if u. S. Interest rates are lower than they otherwise would be because people keep buying our debt, doesnt that necessarily bode well for the u. S. Economy in longer term . Well, in your latter, in a normal word, i would say yes, but in the world we live in, ive seen plenty of examples where low Interest Rates havent really accomplished a whole lot. I look at the u. S. Housing market. I look at the strangest debates. Wow, housings doing great at 3. 75 , but at 4. 25 , forget about it thats crazy. And it really underscores that theres a whole lot more to transactions, like credit issues and affordability versus just low Interest Rates. And on low Interest Rates, lets look at the three Central Banks tomorrow. We see that we averted a new low yield close for the year, unless we get back under 2. 44 , and it doesnt look like we will in 10s, but look at bunds. 1. 09 they need tomorrow. We often forget about gilds. They are the lowest yields in about a year. They need tomorrow as well and theyve been rocking backwards really fast on the notion that theyre going to be raising rates any time soon. And lets not forget the bank of japan, with its 10year at a whopping 51 basis points. See how well that low Interest Rates helped them out . And rick, i thought of you this morning thats a good point. When i saw the dax was down 10 from its june 20th high. You told us here on the program, it was either yesterday or the day before, youre watching that german stock market very carefully. So, whats it telling you right now . Well, ill tell you, if you look at the way it traded intraday, it could have closed much worse. It grabbed another handle back over 91, and that was late in the session. I continue to say that if we get a close under 9,000 in the dax, that that is going to be the canary in the coal mine. I absolutely agree with you on that, rick, strictly from a technical standpoint. If we see the dax go below 9,000, it would suggest that were going to see a true 20 correction here. In terms of what jack was talking about, i agree that we could maybe this is just a brief pullback, but i dont think it is going to be capped at 3 to 5 . And i think when we look at Interest Rates, we have to keep in mind that bond, its been telling us about a flight to safety all year, and i think that it suggests that this correction or pullback right now is going to turn into that correction. Wait, wait, wait, wait, wait. Fundamentally, this market is still sound. Topline Revenue Growth is still 5 year over year, Earnings Growth is still 10 year over year. Were talking about a sound market. Geopolitically, it is scared, and that is one of the reasons that were seeing it do what its doing. And if we get the geopolitical scare out of the way, watch out. You will see money coming out of this thing and running right back into the equity markets. Geopolitics believe me, i dont mean to dismiss the Human Element here. Its definitely something to consider, but geopolitics like weather now becomes the place that everybody wants to hide if equities arent as bullish, and i will contend that unless the Energy Markets move up, what were dealing with is that geopolitics will impact the markets, but its not going to put them anywhere they wouldnt have gone anyway, and my analogy stands. If youre at the top of the mountain and you push somebody off, thats different than if youre on the bottom of a mountain. One of the differences is now you have statesponsored capitalism. You have a lot of wealth concentrated in the hands of a few individuals. So, when we Start Talking sanctions on russia its always been that way, jack. Its just now political hot potato to talk about. This has been a phenomenon over the last 20 years as they have become the new rich, and what they want to do is maintain that wealth. Not buying it. Well, thats one of the reasons why we see jack, if you take all the wealthy peoples money and made everybody equal at zero, why do i think in ten years, the same people that are wealthy today will be wealthy then . Well, you know why, because thats the rule of the world. Come on, rick right so, what are you arguing . Wait, wait. Did microsoft have new millionaires created . Absolutely of course they did. When we freed up the capital in this country and we unleashed real capitalism, what it did you have the bootstrap mentality . Then we can have the hammock mentality, and thats never going to change. Thats human nature, just like good and evil. Youre never going to get rid of them. There are takers and theres the doers. Let me give kim the last word. You mentioned earlier as youre buying into these corrections, if you want to call it that, these selloffs, how do you know whether things have changed . What tells you that weve gone from a temporary event to something more lasting . Look, no one knows if were going from a temporary event to something more lasting, but the bottom line, wealth in this country is created by the free markets, and free markets and the money flows where it gets best rewarded. So, i think the best thing investors can do and what were coaching clients to do out there is, you know, keep an eye on your asset allocation. Make sure its commensurate with your ability to take risk and stay in the markets through the peaks and valleys, rick, and to be rewarded in the long run, because this is about longterm wealth, not shortterm speculation. End of story, you know, be able to buy on the debts and make sure your allocation is appropriate for your ability to gain wealth in the long term. All right. Got to go at this point, gang. Once again, another lively conversation. We thank you all for your insights in todays market action. Well see you later. Thanks, guys. Heading toward the close, about 50 minutes left in the trading session. The dow is about the middle of its trading range today with this gain of 16 points. The s ps up a fraction, and the nasdaq up five points, kelly. All right. Much more to come on this special edition of the closing bell. The ceo of Delta Air Lines and the person many say could be the next home depot ceo, both speak with us exclusively. Plus, well be joined by georgias governor, nathan deal will be with us, as well as atlanta fed president Dennis Lockhart. A lot to talk about with all these folks. The state of business, the consumer, the economic recovery, the markets. So, stick around on this special edition of the closing bell, coming up. E financial noise financial noise financial noise financial noise frotheres no reasonn average 17 we cant manufacture in shuthe United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. 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Weve been watching the european markets, which were down sharply this morning. Concerns about many of the european economies over there on the continent, but right now the dows up about 13 points with about 45 minutes to go in the trading day here. Kelly . Its been a good year for delta air. The stock soaring steadily, up about 70 since last year. So, for more on the success of the company and where the airline may be headed next, were joined now exclusively by Delta Air Lines ceo Richard Anderson, here in atlanta, your home. Why is this your home . Atlanta became deltas home in 1943. Youve been here a while. Well, i havent, but traffics a little worse. Traffics a little worse, but its a nice place to live. And it has a lot of good news and well get to that in a moment. Just a couple miles from where were sitting, theyre treating ebola patients. What impact is this latest scare having on your business . Well, it has minimal impact on the business. The priority for us is making sure that our operations in liberia are safe for our crew and our passengers. But youre going to continue to serve all of these markets . Were serving through august 31st, but we really take it on a daybyday basis. The great thing about being in atlanta, cdc is here, and we have a deep relationship with cdc and emory. And so, we operate under their guidance and advice, and were continuing to operate under their guidance and advice. How much do you know about where possible people who are infected with ebola are and whether they may or may not be trying to get on a flight and does that matter . Well, it matters a lot, and one of the responsibilities we have is to make sure we operate safely for our passengers and crews. We have screening mechanisms in place in the airport in liberia at terminal 2, and our flight crews and our pilots turn out at the car. So, the airplane comes from the car to liberia, sits on the ground and then turns around and goes back to the car. So, we have good procedures in place. The government of liberia is doing a good job screening people in advance of entering the airport. And do you have any other information about ebola at this point that you can share with us, relative to past outbreaks of the disease in the world . Well, the most Important Information source is the cdc website and the World Health Organization website. They essentially provide regular updates to businesses, airlines and people that travel there, and they do a really good job of it. And thats not the only part of the business right now where there is challenges, to put it mildly. Recently, russia, theres been some talk about closing air space, some of the European Airlines and carriers in particular could really be affected by this if they have to move their planes around existing routes. This is already happening in the air space over ukraine. How is this impacting deltas operations, and is there a logic to the fact that u. S. Airlines shares were bid up on the very day that some of the european rivals are selling off, thinking they could take more profit hits on this . I dont think theres much correlation between how the market treats those issues. The overflight issue in russia is just a question of whether theyre going to allow overflights or not, and it just has to do with how you route your airplanes. So, in our case, it involves routing the airplanes in a Different Air space, moving from the u. S. To asia. Bigger fuel bill . Youll burn a little more gas, and sometimes the gas is offset by overflight fees. So, it just depends. Its an economic decision from day to day, and if a country decides to either charge too much or restrict their air space, then we just reroute over other air space. And speaking of charges, we know that airfares have been rising steadily. Im surprised that even as they have, theyve been outpacing general inflation in the u. S. , and yet, it looks like, you know, its not deterring people from flying. Your planes are fuller. The number of passengers youre carrying is going up. How much further can airline prices rise, do you think . Well, its a very competitive market, so airfares are going to be determined by normal supply and demand and competitive factors in the market. If you look at true airfare, including fees over the last decade, adjusted for inflation, its still one of the great bargains for american consumers. Ive heard people say, though, that because of the price changes, 20 of the population couldnt afford to fly a decade ago today cant fly. Well when gasoline goes from 20 a barrel to 110 a barrel, that price, just like the price of your electricity or the fuel that goes in your car, the price has to go up to reflect the privat price of the commodity increase weve seen over the last decade. Do you still feel the u. S. Doesnt need an Exportimport Bank . I feel like we do need the Exportimport Bank. Our objection to the Export Import Bank is a very narrow objection. We support the eximport bank for small industry, we support it for caterpillar, we support it for all the other industries. We have one narrow issue, which is, when our government finances very wealthy, sovereignowned airlines that have access to private markets and they take jobs from people in the u. S. Thats our objection. How does that affect, say people here in atlanta, when that happens . It affects people here in atlanta when a stateowned, statesubsidized carrier like air india receives subsidized government financing from our u. S. Treasury and from our employees tax dollars and brings capacity into the market and undercuts all the fares in the market and drives us out of the market. And thats not the only issue in washington potentially affecting business here. Delta every now and then is raised as a possible candidate for a tax inversion, saying maybe theyll buy a overseas carrier and lower the Corporate Tax do you have an issue with Corporate Tax in this country . Corporate tax i mean, the u. S. Has got to become competitive broadly on taxation policy around the world, but airlines cannot invert. Because in order to be an airline in the United States, you have to be a u. S. Citizen or we cannot hold a certificate of public convenience in necessity. So, no, delta will not invert. The broader issue of tax policy in the United States, federal tax policy remember, were now in a global economy. And maybe it didnt matter 30 or 40 years ago, but now capital moves freely across borders around the world. The rule of laws strong. We have a world trade organization. When you take all those factors together, just like states, youre sitting in atlanta, and atlanta is incredibly competitive. Its probably one of the number one places for businesses to relocate in the u. S. And the reason why is atlantas a much more competitive place to place your business than a lot of other states. Its no different for the United States. When were trying to attract capital in this country, youve got to be attractive to attract capital. Thats why it sounds almost like if you could, you would pursue a tax inversion. Well, we have were in a very different situation because we play an essential role in the u. S. Defense department, you know. We are a understood. Civil reserve, and we take that responsibility seriously, so, no, were not interested in inversion at delta. But we do believe that in order for our business to continue to grow, the corporations and the companies and businesses we serve in the United States need to be in a competitive tax structure. So, when president obama says corporate ceos have to stop whining, that hes constantly hearing from them on these issues, theyre sending lobbyists to washington to push for one thing, even while theyre saying, no, we really are interested in social responsibility, whats your response . One, i dont lie. And two, i fly delta in coach. And number three, i dont have a house in the hamptons. Ive got one in galveston, texas, on stilts. Thats what i say. So, you dont think that this is a i think youve got to be mature about addressing the issues that make the United States competitive as a global economy. Thats what i think you need to do, and its not a matter of criticizing one party or the other, its a matter of addressing a real issue on the merits. And delta for the rest of this year facing some significant headwinds, whether geopolitically or just to circle back again to this circle of things weve been discussing. Have you seen any hits to traffic in the midst of all this . No. You know, overall, our business is quite strong, and we expect to set an alltime record at delta this year. Our pretax profits should exceed 4 billion this year in Free Cash Flow above 3 billion. So, were coming off an extremely strong Second Quarter. Our Third Quarter guidance has, you know, 15 to 17 operating income margins. So, were in really good shape in the business. Different parts of the world perform differently, you know. There can be some weakness in brazil, but theres strength in europe right now. Really . The u. S. Economys in europe . In our business, europe is doing really well, the u. S. Is doing well, mexico u. S. Is doing well. So, we have a broad, diverse network, and we have broad, Diverse Businesses in our portfolio. And that diversity provides for a strong operating performance. And one reason why georgias turned in a Strong Performance here in terms of how its doing for business. Richard anderson, ceo of Delta Air Lines, thank you so much for being with us. Youre kind to have me. Bill, back over to you. The headline of the interview, Richard Anderson flies coach on his own airline. Does he not get a price break up front of the bus there . What is that about . No price break, richard . All the people in the front of the bus are paying passengers. Im a non, so all i get is an exit row seat. Oh, a little extra foot room. Thats what i get. Great stuff. Thank you, mr. Anderson. Heading towards the close, 35 minutes here. The dow is up just 20 points, but a lot of the volatility came early on this morning. A selloff resulted in a response to some of the selling in europe this morning. We came back. Now were kind of drifting here as we head toward the close, kelly. And theres more ahead in our special edition of the closing bell. Atlanta fed president Dennis Lockharts joining us exclusively. Find out if he sees the fed raising Interest Rates sooner than expected on a strengthening economy. Up next, disturbing story. Hacking the world. This russian crime ring makes off with more than 1 billion internet names and passwords and an Online Security pro will explain how you can safeguard your information and if theres anything they can do to stop the bad guys. Well be back after this. Greenline do for you . Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. 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. We stathat the kid on thehought back of the bus might have a song that he has in his head but he just cant get out. With the technology of cloud, we change all that. I can sing something into my device, up to the cloud it goes, back down it comes, sounding better. We break down the walls of creation and we give music creation for the masses. Unlock the creativity in anyone. With the ibm cloud. The ibm cloud is the cloud for business. Such a disturbing story. Over 1 billion internet passwords hacked by a russian crime ring. The New York Times this morning calling it the largest known collection of stolen internet credentials. Yeah. Our eamon javers now has the lowdown from washington. Whats happening here, eamon . Reporter thats right, kelly. Actually, its 1. 2 billion credentials, and thats a matching set of usernames and passwords, things like that that can be used to identify you on the internet. The company is called hold security. Thats a Cyber Security firm that says it uncovered this cash. Take a look at some of the details of what they found here. They are dubbing this new russian cyber criminal gang cyber vor, and vor means thief in russian. And these thieves allegedly robbed 420,000 web and ftp sites, scouring the entire internet to come up with this information. Hold security says no evidence so far that theyre massively exploiting this, but it could be a treasure trove for other hackers on the internet and they say they are using is it to send a lot of spam to people, so that may be part of what youre seeing in your inbox. Guys, this is starting a discussion in the Cyber Community about whether or not its time to move past the idea of passwords for security on the internet and maybe move to a passwordfree internet, using other kinds of security technology, guys. A lot to chew over here. It raises a lot of important questions. Eamon javers in washington, thank you very much. Lets talk more about the implications of this big hack and how concerned all of us should be that our informations been compromised. Joining us, a man who should know, michael decesar is the president of mcafee. Thank you for joining us, mike. When i read this article, the anger this morning when i saw this. Yet another hacking, and this dwarfs all the others, it seems. Is there any such thing as actual security in this field, or is it merely an illusion . How does this keep happening . You know, i mean, the technology that we use today around passwords has been in place for many years. And i think what these technical sophistication that were seeing in some of these breaches point out is that there needs to be a new approach to how we secure our data online. Isnt that your job . But mike isnt that your job . It definitely is our job. There are many technologies out in the industry to attack exactly that. Well, this is what i find so interesting about this, though. It seems that the answer to, well, your password has been stolen is give us your biometric information, as if having that stolen wouldnt be far worse. Well, i think when you look at the machines that we depend on every day, whether its your smartphone or an ipad or the computers that you run in your office, they have technologies in them that can imprint your voice, that can scan your retina, that can validate your location with gps. And when these things are put together, they can give a very accurate footprint and ensure thats you thats what im saying, why would you want your location, your dna information, your retina, why would you want all that information out there if its so easily compromised . Well, passwords are stored in the system, right . So, when you go into a website and log on, you create an identity for yourself with your address and username and password. Those biometrics are not stored. Theyre validated each time you logon. So, theoretically, those are a stronger opportunity for us to secure the information that we rely on every day. Is there any foolproof security method, or is it possible thats the better question is it possible to create a foolproof security method . I think when we look at the economy these days and we see the amount of information that we rely on that is being put online, being put in the cloud, that information is put online. It certainly opens up the opportunity for the bad guys to be able to go steal it. What i will tell you is governments, corporations, theyre partnering up and there is a lot of very good work being done to do exactly that, secure the technology. But no guarantees . Itd be a difficult thing to guarantee, that is for sure. Yeah. So, beyond just changing your passwords, is there anything the average person could do to protect themselves from the bad guys here . You know what, i mean, be smart about it, you know. Monitor your credit card statements. Make sure that you know the activity, that you can validate whats on your credit card is something you spent. You know, use different passwords. I know it sounds very basic, but an unbelievable number of people use the same password for everything. Be smart about it when its your money. Put a more complicated password, dont repeat those things. Theres definitely things we can do to guard against this. Yeah. Everybody should be doing that, thats for sure. Michael, thank you very much for joining us. Appreciate it. I appreciate being on. Thanks. Michael decaesar of mcafee. Heading to the close, 30 minutes left in the trading session, the dow slowly heading back to the unchanged level. Its been down 50, up 60. Were up 7 points right now, kelly. And bill, this password thing, what i love is that as people then try to have more sophisticated passwords, ive seen them write it down on a sticky note or make a note on their iphone about it. Thats not very secure either how else are you going to remember it, right . Up next, georgia governor you cant, exactly. There needs to be another solution. Well see if the market can come up with one. Coming up, georgia governor nathan deal speaking with us exclusively. Well get his take on jobs, housing, the consumer, a heated governors race and a whole lot more. Georgia just topped cnbcs list for best states in business. And top executives still to come from u. P. S. And home depot, both headquartered there in atlanta. They will be stopping by. And wait until you hear their view on u. S. Consumers and whether or not their mojo will return to full force before winter does. Thats still to come on the closing bell. We do . I took the trash out. I know. And thank you so much for that. I think we should get a Medicare Supplement insurance plan. Right now . [ male announcer ] whether youre new to medicare or not, you may know it only covers about 80 of your part b medical expenses. Its up to you to pay the difference. So think about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they help cover some of what medicare doesnt pay and could really save you in outofpocket medical costs. Call now. With a Medicare Supplement plan, youll be able to stay with your doctor. Oh, you know, i love that guy. Mmhmm. [ male announcer ] these types of plans let you visit any doctor or hospital that accepts medicare patients. And there are no networks. You do your pushups today . Prepare to be amazed. [ male announcer ] dont wait. Call today to request your free decision guide and find the aarp Medicare Supplement plan to go the distance with you. Go long. Who is americas top state for business . Dekalb school of the arts choir, tell us, please. Georgia, georgia, the whole day through ah, music to governor deals ears, right . That was our scott cohn announcing georgia as the winner of cnbcs survey of americas top states for business for 2014. Yes, and now with us to talk about how his state got to that coveted number one spot is georgia governor nathan deal joining me here in atlanta. Welcome. Im here on your territory. Well, its nice to be with you. Its not the new york stock exchange, thats for sure. Lets just start out talking about some of the reasons why this is the top state for business, because its actually a more contentious one than people might realize. Its because atlanta and georgia, a very lowcost area. Part of that is because its a really cheap place for workers. In other words, you can find a lowcost workforce here. The workforce wouldnt mind if they were a little more expensive, though. Well, we are a righttowork state, and of course, that makes a big difference, but i think we have all of the ingredients that most people look for in terms of where to locate a business, where to grow a business. And we are very pleased by the way, and i want to thank you for the designation as being the number one state in the nation in which to do business. One of the things we did when i became governor in 2011 was to look at the scene we had before us, and we had been a state that had been growing very rapidly. This Great Recession hit us harder than in many other states. So, we had to decide, what are we going to do to bring this economy back . We decided that government cant create the jobs for people, but government can create the environment and the right policies so that the private sector can grow jobs. And we keep monitoring the new labor statistics, and we are rapidly approaching 300,000 new private sector jobs in less than the four years since i became governor, so we are very proud of that. Governor, it was all math. We just inputted all the data about your state and out you came at number one. The two areas where you lagged the most among the other 49 states were quality of life and education. What do you do about that . Well, lets start with education. We are working very hard. We have a great prek program. In fact, its been acknowledged as one of the best in the United States. We have a great Technical College system, and part of that is our quickstart program, whereby we train workers for businesses that come to our state. And we have a Great College and university system. I think one of only three states in the country that have two universities designated in the top twenty by u. S. News world report. We are working very hard in the k12, and we are making strides there. We are doing things like dual enrollment, to allow children to move on when theyre ready, take Technical College and University Courses while theyre still in high school. We are starting a new internship program, and many of our companies that are in our state have come from europe, and they are accustomed to having those kind of Young People Working in their businesses while theyre still going to school. You know, if everythings going so smoothly, why are you trailing your challenger in the polls right now . Are you confident youre going to be around to see the fruition of a lot of the changes that youve made . Absolutely. You know, we have polls all over everywhere. The ones weve seen most recently we are ahead. We intend to stay there, too. So, this reelection or your reelection, your challenger is a grandson of a former u. S. President , and actually inserted the issue of the israel palestine conflict to the center of the race. Youve drawn attention to this. Its not as if this is a media play. What do you think is really going on here with regard to the issue that former president jimmy carter has raised about the treatment of the palestinians and the extent to which that should be used in your Campaign Battle against his grandson . Well, first of all, let me make it clear, i do not agree with president carters position, and his most recent statements i certainly do not agree with. We just came back from an Economic Development trip to israel about a month ago. I had a great meeting with Prime Minister netanyahu, and we brought back an Israeli Company thats establishing a business here in the state of georgia. Weve actually doubled our purchase of israeli bonds as a way of showing support from the state of georgia for the israeli government. I believe that they are our most reliable ally in that part of the world, and i think we should treat them accordingly. Look, one quick question, governor. As it happens, ive got family there in atlanta area. I was there the last week in january when you had the ice storm for the ages. It snarled traffic. You and mayor reid both said that you would fix things, try and i mean, this sounds like me asking about a pothole to fix or something, but have you done anything different so that traffic, which at best is a problem in atlanta anyway, as you well know, but when you get little bit of ice or snow, it just fell apart that time. Any changes . Well, it was a bad day and we have made changes. In fact, Mother Nature gave us an opportunity about three or four weeks later to prove that the changes weve put in place actually worked. We had another major storm, and we had very little interruption, because that storm gave us the opportunity to warn people well in advance, and many of them stayed home, and that made the big difference. And just finally, can you give us any update on the patients who are being treated at one of the universities you mentioned, Emory University here, just a few miles away, for ebola . All i know is pretty whach i heard on the news, but i think it is an indication that our state is also one of the states that has premier Treatment Facilities for people with all sorts of difficulties. I am pleased that we have those kinds of resources in our state. Certainly, weve had the cdc, but the Emory University hospital where theyre being treated is one of the premier institutions in the entire country, of which we are very proud. And we are sitting here pretty much the at crossrods of all this activity. Governor nathan deal, on the back of the state being named top for business, thank you for joining us this afternoon. Thank you. Really appreciate it. Heading toward the close, 18 minutes left in the trading session here. The dow with a near 10point gain. The s p has actually slipped back into negative territory here. The nasdaq is up three points, kelly. And up next on this special atlanta edition of the closing bell, the head of u. P. S. Operations in the u. S. Weighing in on the economy and its businesses and consumers are picking up steam. Well also ask about this a. M. Sgon move, rolling out more sameday shipments across the east coast. Also later, atlanta fed president Dennis Lockhart speaks with us exclusively to talk Interest Rate policy and if geopolitics could derail our feds plans to raise rates next year. Thats still to come. Collection is here. Dillacr during the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Is caused by people looking for parking. In a city thats remarkable that so much energy is, is wasted. Streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. We wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then theres a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. The collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. Citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. So the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. Welcome back. 14 minutes left. The dow up just 16 points. It doesnt look like it, but there are some stocks on the move today, arent there, Morgan Brennan . Well, thanks, bill. Yes, theres a number of stocks. Lets take a look at newskin enterprises. This is coming after the direct seller of Skin Care Products reported a drop in Second Quarter profit. A drop of sales in china, its biggest market, fell 12 . Meanwhile, General Electric one of the best performers in the dow. Bernstein upgraded its rating from outperform to marketperform and raised the price target to 33 from 29, calling the company an underappreciated value stock. Walgreens hit hard after choosing not to rein corporate overseas after buying alliance boost that it doesnt already own, that for more than 15 bill johnss on. And intelligence la gaining ground after Pacific Press began coverage with an outperform rating, citing an underappreciated growth trajectory. Kelly, back to you. Morgan, thank you. U. P. S. Is responsible for delivering and picking up more than 15 million packages each day. So, lets get a pulse on the nations economy here with one of their guys at the top joining me here in atlanta is myron gray, u. P. S. President of u. S. Operations. Great to have you here. Thank you for having me. Were dying to know just how strong the u. S. Economy really is after a really bad First Quarter, but signs that the back half of the year could be started off on better ground. Bhar you seeing . How much momentum is there . Kelly, the National Retail Federation Just lowered its guidelines for the year, lowering them from 4. 1 to 3. 6 , but they expect rapid growth over the next five months. And after a sluggish First Quarter, we stand to pick up. Thats what im curious about is just across the trucks we see everywhere all the time, you guys are facing a number of different industries. Do you feel like the u. S. Economy is improving . Is your business growing . I think that consumer demand has picked up, particularly when the Retail Sector. The National Retail federation expects that well see ecommerce grow 14 until 2017, and we expect 150 million Online Purchases throughout those years. So, on the back of that, you know, we have amazon today saying theyre going to expand same day delivery across six more cities, include massive swaths of the east coast. What does that mean as more, amazon, others, perhaps, move towards sameday delivery . Whats that mean for u. P. S. . Amazon is a Great Customer of u. P. S. , so enjoy working with them, but lets talk about the trends. The trends we see in the retail segment specifically, Consumers Want flexibility, more twopersonfamily households exist today. So, they want to control the delivery, and thats why u. P. S. Implemented u. P. S. My choice that gives you, the end consumer, the control over when you get your deliveries, and well give you an email the day before the proposed delivery and up to a fourhour window for that delivery. Well even give you a twohour delivery window for a nominal fee. Wow, so youre already narrowing in on that delivery time that is important to me people. This sounds great until drones maybe replace your business. Does u. P. S. Get into the drone business here . Do you take any of this talk seriously . Were closely evaluating drone usage as well as other means of delivery. We dont see it happening in the near future, but there may perhaps be a place for it some time down the road. When we spoke with fedex, fred smith brought up 3d printing and looking at that as well as maybe a competitive threat down the road. Where do you see the biggest challenge is today . Well, if you remember, u. P. S. Introduced 3d printing to the Retail Sector through our u. P. S. Stores first. So, we do see that there is room for its growth, particularly with internet startup companies, athome momandpops. So, we do see a place for it. And confident you wont have a repeat of christmas 2013 . Yes. We started working on 2013 mishaps at the beginning of january. Were very confident. We have over 70 projects under way today, theyre all on plan, and we expect to have a smooth season. And another business where all this is happening, at least originating here in atlanta. Myron gray, president of u. P. S. Operations, u. P. S. Based here in the city. Thank you for joining us today. Thank you. Really appreciate it. Bill . Another reminder of how bad the winter was last year and the impact it had on the economy and on Companies Like u. P. S. Ten minutes to go. The dow up 15 points. The s p is back positive by a fraction right now, kelly. Coming up, atlanta fed president Dennis Lockhart speaks with us exclusively about Interest Rates and what could drive the fed to hike them sooner rather than later, if anything. You cannot afford to miss it. Well be right back. You do a lot of things great. But parallel parking isnt one of them. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. 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Plus, now you get up to a 100 prepaid card when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more about seven minutes left, the dow up 19 points. The volatility happened this morning, up 60 points, down 50 points, now a 20point gain, bob pisani. Feels like the markets waiting for something, and it probably is, tomorrow, ecb, right . It is, and thats going to be important, because frankly, i thought the news out of italy was terrible today. They had two quarters of negative gdp growth. Wait a minute, this isnt ukraine here. The second biggest, third biggest economy in europe is slipping back into a recession . I think thats news. Its been a little slippery there for a while, but recession talk . I havent heard that. This is the first day in a couple years ive really heard recession talk. And the german market, it was down at its low today 10 below its high of june 20th. Thats right. So, hit correction territory for a time today. That didnt help. Other markets were a lot worse. Portugals down 17 . Right. So, my point is, yes, were still trying to figure out whats happening in ukraine, were trying to figure out putins response to this whole thing, but meantime, there is another sideshow thats going on thats potentially more important, and thats these big economies, now starting to see some real concerns overall. All right. Well see what the European Central bank does tomorrow. Thank you, robert. See you later. Well have the closing countdown and then after the bell, more from atlanta. Atlantas fed president Dennis Lockhart, and also, craig menear will be talking to kelly exclusively. Hes the frontrunner to become home depots next ceo and hell be joining kelly coming up from atlanta. Youre watching cnbc, first in business worldwide. Siness, with. Weve created tax free zones throughout the state. 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The s p, were finishing the day i mean, seeing a trading pattern, but finishing the day right around 1,920, which many traders are looking at as something of a support level right now. Terry dolan, i mean, youve been skeptical of this market anyway, so i imagine youve been selling into some of these rallies lately. What are you doing now . You start to buy a little bit down here. You had a decent correction relative to where we were, and really a lot of the fundamentals and basics are still intact. What we did was go in from a really overbought situation to a more palatable valuation. Id like to see the market do more work at the lower end of the range before going back up, rather than create a v bottom, which would create more uncertainty Going Forward. Thats been weve seen, the market goes down, somebody starts buying and back it goes up again. Thats why i hope we see more work at the lower levels, get more valuation under our belts, because i think weve got a rough couple months coming up with political events, volatility. Decembers not the greatest historically and octobers you have an election coming up that could lead to volatility as well. Thats true. Yellens given us another thing to look at which makes it positive, switching her focus to Wage Inflation and that will change dramatically in terms of the per krechgts markets on how shell act Going Forward because theres plenty of room. Right now are there levels youre watching . Id like to see the market between here and lets say 16,000 and 16,500 for some time. Okay. And id like to see the s p 500 travel down around the 1,900 level, pick up more steam down there. Very good. Thanks, jerry. Appreciate your thoughts. Were going out with a minor gain. So, we have the rally on monday, big selloff yesterday. Today kind of an unchanged market. The European Central bank will be big to watch tomorrow morning. Right now its back to atlanta and the second hour of the closing bell with kelly evendz. Ill see you tomorrow. Thank you, bill. Welcome to the closing bell, live from atlanta today. Im kelly evans. And take a look first of all at how were finishing up the day on wall street, a day that saw the dow up and down as much as 60 points. But as we go out here, looks like its somewhere in the middle, up about 12. The nasdaq holding on to a slight gain at 4,355. The s p 500 fractionally lower. Well see if that holds as all of the trades settle out. 1,920 is the level there. Weve got a lot coming up on the program, so lets get right to it and begin here with our closing bell panel today. Cnbc contributor stephanie link is here. The host of televisions bar rescue, john tapper, a warm welcome, and our own sharon epperson. Also with us to wrap up todays action on the markets, Dennis Gartman of the gartman letter and fast money trader tim seymour. Welcome to everybody. Were waiting on results from 21st century fox out momentarily. Dennis gartman, before we get there, first your quick thoughts on this market. Well, first of all, welcome back to the south, kelly. Its good to have you back and somewhere south of the masondixon line again. What do i think about the market i had a great chicken sandwich. Its still a bull market, a quiet bull market. Its probably going to continue to be a bull market. And one is either aggressively long or quietly long, and i think quietly long is the right place to be. Ive owned industrial metals, basically aluminum for a while. Ive got it hedged against the broad market. Its been working. Im going to stay that way. Stephanie link . So, i think we have like a pushpull thing going on here in the market, right . We have these concerns about europe potentially going into a recession. We saw the italy numbers yesterday. We saw all the manufacturing numbers today as well. And we have, so, we have that, and then we also have the u. S. Thats actually seeing betterthanexpected economic growth. In fact, the trade numbers today suggest the Second Quarter probably gets revised to 4. 2 gdp, Third Quarter probably 3. 5 kind of a number, and eriks at the same time are coming in better than expected at about 11 . Revenues at about 4. 5 . So, youve got this big fear about europe and then youve got this really, this easing concern about whats happening in the u. S. , but are we growing too fast and what is the fed going to do . I think all of this continues in august, kelly. I think were going to have kind of a trading range type of a market. I think you want to use the dips if youre buying, but we actually have a lot of cash on hand to be doing that buying. We actually sold a lot of things into earnings and now were ready to buy some things. We bought a couple things today, like freeportmcmoran, like lear automotive. So, were working at special situations where Companies Reported good numbers but theres also pullback. Kelly, i think a lot of longerterm investors and we just talked to u. P. S. Go ahead, yep. I was going to say, some of the longerterm investors arent as sure about where the u. S. Is right now. If you look at the latest nbc wall street journal poll and you look at the fact that 76 of americans dont have the confidence that their children are going to be as well off as they are and about 71 think the u. S. Is going in the wrong direction, nearly twothirds believe were definitely on a decline. Theres a lot of angst out there. Theres a lot of concern about whats going to happen longer term, some of the money that i may have bet on on some of these mega deals happening, maybe theyre not going to happen. Whats going to happen in europe . What is that going to mean to me here . And then other things that geopolitical situations that always kind of royal the markets. Right. All of that i think is weighing on longterm investors minds. Great point. John tapper, you have a frontrow seat on so much of, whether its the consumer out there, kind of main street america. What do you think of those numbers sharon just referenced and how do you think folks are really doing out there . Well, you know, i think its somewhat of a mixed bag, but theres a fatigue out in the marketplace. People are tired. I think theyre tired of international events, theyre a little tired of political events, theyre a limb frustrated. And i think the marketplace is a bit disconnected right now. I dont think theyre as engaged as they typically would be. And as we enter the election season, im concerned that that complacency might grow. Yeah. And tim seymour, were waiting here on some results from 21st century fox. I mean, a breakup has kind of been the theme of the week, hasnt it . Yeah, a lot of fireworks, but i dont think you can look at these breakups as being indicative of a broader movement. In each case, you had regulatory concerns. Maybe with time warner and fox you have one ceo who really believes he truly can add value. Hes added tremendous value over the last couple years. It gets to a matter of price, and for fox, maybe this deal didnt make sense. The market, when theres a lot of volatility when there has been none looks for reasons. When the earnings season was as good as the Second Quarter was and stocks are down, the market looks for reasons. The fed is in play for the first time in two years. This brings volatility. That is what you need to be playing. And you need to trade this market, i would say, as said in a range, i think the s p contests the 1,880 levels. For the short term, people are looking at 1,914. Its held that, but europe will probably put more pressure when you look at growth over there. The factory numbers in germany, the most important economy in europe, were not good. Dennis gartman, how should people think about the European Central banks move tomorrow or lack thereof against the backdrop of a weaker european outlook . Well, i think with the data that came out today, the pressures going to be upon the ecb to actually make a statement and move to ease Monetary Policy. They have been very far behind the ball for a long period of time. Ive taken them to task for being that way. And after the data that came out on italy today, i think they have no choice. I think draghi has to move. I think he has to make sure that the rhetoric in his post meeting communique is easily understood, and i dont think he has a choice. I think this is very dollar positive hang on, guys. Hold that fought for one second. I think we have earnings. Green mountain coffee roasters, morgan. Thanks, kelly. Check out cherry green mountain. Its moving lower after posting betterthanexpected firstquarter earnings, but revenue a bit shy. It raised fullyear guidance, but its still below street views, so thats currently down 4 in the afterhours. Back to you. Tim, any thoughts on that one . I think, you know, people are really unsure where these guys are the aggressor or they see people coming into their turf. I think the valuation around 120 bucks is neutral. Not a stock that i would say theres a lot of value in if i look at it from a Value Investors perspective, but a lot going on with sodastream and starbucks. I think people are looking for guidance where they see competitive advantages, where they see competitors on their turf. Its not a name i think is moving the market here, though, to be clear. Its those companies that have been able to beat revenues and earnings and guide higher that have worked higher, and those stocks that have been able to do it, if in fact theyve sold off, those are the ones you want to be buying, but these guys sound like they missed on revenue. Ive got to hear about the margins, but i also want to know and understand whats happening with that guidance and are they being conservative or not. But if you miss, you get penalized in this market. And we should mention, as we begin to get results from twentyfirst century fox, our Julia Boorstin is standing by now with the numbers. Julia . Kelly, twentyfirst century fox with higher than expected earnings and revenue, earnings at 8. 42 billion, 17 up from the prior year and compared to expectations of 7. 987 billion. Earnings per share from continuing operations are 42 cents. Wall street had been looking for 38 cents. And the yearago quarter it was 31 cents. So, of course, these numbers come when Rupert Murdoch is very much in the spotlight on the heels of withdrawing his bid for time warner. The companys Conference Call is in less than a half hour. Well be listening for any additional commentary, but going through the operating results here, it looks like the real factor driving upside surprise in revenue was filmed entertame, 2. 8 billion revenue, much higher than expected. Growth in the other divisions as well. Kelly, we continue to dig through these numbers here. Julia, thank you. The stock has fallen substantially on the time warner news when they announced the deal. I think 30 31ish is where you want to be buying the stock. They have a great group of content and thats key here. Thats what were learning with all of the m as in this sector, content is king. Whether they get time warner or not, theyre going to make sure they have the right assets in place to grow revenues, ebitda and earnings Going Forward in the doubledigit range. Thats an important point for longterm investors that look at these deals and then when they dont happen think do i need to own these stocks . You need to look at what the content is in these media companies, and as the landscape continues to change, that is what is really going to drive whether or not you want to be in this particular name. And its not only just the content. Content can be very creative this year we have a corporate go ahead, john. Its not only content. Content can run in spurts, where we have great content this year, not as good next year. The distribution is key. And theres a lot of Distribution Channels today that theyre participating in that are starting to pay off that are not as traditional as in the past. And i hate to jump in again. We have some breaking news on bank of america now and a deal with the fed. Our Kayla Tausche with the details. Yeah, kelly, the bank had been working through discussions with federal authorities over potential settlement over faulty mortgagebacked securities stemming back to the financial crisis. Ever since we saw citigroups settlement a couple weeks ago and ive just spoken to sources who confirmed that the bank is nearing a deal with the department of justice and relevant authorities in various states that had been looking into this as well. This deal is said to be nearing that 7 billion price tag that the government had initially sought in these discussions. Bank of america had been going back to the drawing board, back and forth. Several numbers were put on the table. Dow jones reporting that this will come in somewhere between 16 billion and 17 billion, and also that the cash portion of this deal, which had been the Sticking Point in these discussions, the cash paid straight to the government versus in homeowner relief, that will be 9 billion, according to dow jones. This is what they are reporting. Now, of course, you remember when jpmorgan reached its settlement with the government, each when they reached it in principle, it was still several weeks before it was put to paper, and that number changed several times. But no doubt, kelly, this will be incredibly expensive for bank of america. More so than the bank originally expected. Right now you can see those shares are up marginally, but it is still a very positive development on the legal front to have these issues, kelly, behind it. And kayla, thank you. Dennis gartman, last word to you here. Does this resolve the issues, these outstanding issues for bank of america . Whats the longerterm shareholder read here . Probably not. Probably not. It has been a long and involved saga for bank of america. I think they wish that they had never heard of word countrywide in their life before, and i dont think that this is going to go away any time soon. Sadly, thats probably the truth. Yeah. Yeah, well have to leave it there for now, everybody. A lot of news just in that first block. Be sure to stick around and catch tim seymour on fast money at 5 00 p. M. With much more on all these news items we just hit. Has the president won against big business . Walgreen on the road to merge with alliance, but not via the controversial tax inversion route, which would have relocated it to a lowertax country. The stock being punished today, but ceo not wavering. Larry kudlow and the panel coming up on the story. First, though, whats next for the fed and when . Atlanta Federal Reserve president Dennis Lockhart is here exclusively next. You are watching cnbc, first in business worldwide. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Yyyup. With xfinity internet soyour family can use all their devices at once. Works anywhere in the house. Even in the garage. Max whats going on . Were doing a tech startup. Were streamlining an algorithm. Were going public [cheering] the fastest inhome wifi for your entire family. The x1 entertainment operating system. Only from xfinity. Welcome back. We are live in atlanta, georgia, today. Naturally, we wanted to catch up with the atlanta Federal Reserve president , Dennis Lockhart. Recently, he stated he believes Interest Rates wont rise until well into 2015, but some time has passed. So, for more on where he stands today, lets ask the man himself, Dennis Lockhart. Welcome. Hi, kelly. How are you . Its great to see you. And i wonder, given the evidence lately that the u. S. Economy may grow at a better than 4 rate in the Third Quarter, what you think that means for the next move in Interest Rates . Well, i think its a little early to conclude that the economys going to grow that fast in the Third Quarter. Secondquarter number validated, i think, the view that the First Quarter was an aberration, but there was a major inventory factor in the Second Quarter, and that inventory accumulation may reverse in the Third Quarter. So, i think its a little early to conclude that were going to see that strong growth in the Third Quarter. So, youre not a Voting Member this year. No, next year. Right, next year. Delta president Richard Fisher just said he thinks more of the fed is coming around to his view, which is a more hawkish one. I guess that means youre not one of them . I still maintain that some time around midyear next year onward, perhaps in the second half of the next year is likely to be the right time for considering a rate move. I am still looking for lets say an accumulation of validating data to tell us that were on the track that we need to be on to close in on our objective. So, i guess i am a little bit slower on the trigger than Richard Fisher. I can understand that if the stock market werent near alltime highs. A lot of the concerns from the fishers and others come from this idea of, look, we cant afford to be 100 sure that the momentum in the economy is there at a time when that could risk bubbles in asset markets. So, what about that . Youre never going to be 100 sure, but i think the key question is has enough evidence come in to have high confidence that we will not see a reversal of the trends that were seeing . And i would like to see more evidence. Are you talking specifically about wages . Im not im talking about first growth. Lets keep this in perspective. We had a very weak First Quarter. Im prepared to call it an aberration. Most people view it that way. We had a Second Quarter where final sales that excludes inventory came in at say 2. 3 . Thats not a 3 growth rate and sort of a core sense of the pace of the economy. 4 with the inventory is a very nice number, and of course, were very happy about that. Third quarter, its a little early to say. So, i am just simply saying and looking for more evidence that were on the track that we think were on and that thats going to produce the results, and i think its going to take a while to be sure of that. So, why arent you worried that the fed could be behind the curve . In other words, lets say youre right that we need six to nine months to know for sure, but it takes a long time for Monetary Policy to affect the economy. So, can we afford to wait that long . Well, i think you have to look at the risks that would accompany being behind the curve. The most important one or one that certainly is on everyones mind would be the risk of a breakout of inflation to the high side and having that be sustained and persistent and undesirable inflation. And i think that is simply low probability. Inflation expectations are very well anchored. The public i think is now very used to a pace of inflation around 2 , little lower recently. But over the long term, i think they have been convinced, the public has been convinced that inflation is under control. And so, i am not so worried that a quarter of delay relative to richards view, for example, is going to make a big difference. Are you worried that there is a longerterm damage being done to the economy and to the American People by the wealth gap, some would say that results from this, and notably, there is a lot of recent surveys about the extent to which the general population does not feel confident in the future, feels as though the disparities in the economy are widening and that theyre not participating but all the gains are flowing to the 1 . Let me first say that as a Monetary Policymaker, Monetary Policy can deal with the expansion of the pie but cant do much about the distribution of the pie. So, to the extent that i am concerned, im simply concerned as a citizen that the trends that we have seen now literally over decades have seen income more concentrated in the top 10 of income earners, and even within the 10 , income concentrated in the top 1 . To the extent that those trends continue and they could affect the economy by weakening the consumer element of a consumerbased economy, of course im concerned, but its not something as a policymaker that i can easily address. So, you dont think theres anything the fed can or should try to do about it . I dont think Income Distribution is a monetary poli poli policy, a Federal Reserve, lets say front of mind issue to treat. We cannot target Monetary Policy. Monetary policy really deals with the broad economy, and then markets and other forces sort out who gets what within that economy. Given your private sector background, i want to ask you as well about the issue of Corporate Tax inversions, because im sure you can understand the incentive thats there for a lot of these ceos and a lot of the shareholders pushing for them, while at the same time looking at perhaps the economic damage thats being done to this country. Is there damage being done here . Well, obviously, through the point of view of federal tax and some state tax revenues, those jurisdictions that would be affected by a loss of revenues would be affected, so clearly, thats the case. Having said that, from my private sector background, i think i understand that this is a collision of commercial logic with political logic. And from a commercial logic point of view, if im a shareholder of a company, i pay that ceo to try to avoid, not illegally evade, but avoid unnecessary expenses, including tax expenses. So, i really do think that this is where one mentality comes in to conflict with another. And last question here. It goes to where Interest Rates ultimately do go from here. Kind of almost everybodys world view encapsulated in 2 or 4 . When even at the end of this tightening, at the end of this cycle of raising Interest Rates the fed is about to embark on at some point, where do you think that rate is . What is that rate today . Well, the way that question is framed usually is what is the longterm neutral rate for the policy rate, which is the fed funds rate. And the debate right now is whether its 4 , as most of us have projected in the summary of Economic Projections that we submit every quarter, or whether its lower, lower by maybe only a quarter at 3. 75 . You know, i listen to this debate. I am enrolled in discussing it with my staff and so forth. But i dont have a firm conclusi conclusion. The implication of a lower neutral rate is that we have a kind of chronically slower economy. Im not quite prepared to buy into that view. I think the economy still has the potential to grow, like i say, around 3 for the coming quarters. And im not prepared to buy into the view that structurally the economy is just slower than it was in the past. And we will leave it on that hopeful note. Thank you. Dennis lockhart, president of the atlanta fed. Thank you so much for joining us this afternoon. Thank you, kelly. Appreciate it. Well send it back to Morgan Brennan now and a quick earnings alert. Thanks, kelly. Zoo lily, the online retailer with betterthanexpected results but its thirdquarter guidance was light, so that stock is trading about flat right now. Jack in the box is moving higher, posting betterthanexpected thirdquarter results. Samestore sales for jack in the box up 2. 4 . That was slightly better than anticipated, but its ka dova chain is the really standout in this report with sales rising 7 , nearly twice the forecast. So, that stock is currently trading up just about 5 . Kelly, back to you. In after hours. Morgan, thank you. The bully pulpit may still wield power. That may be how president obama and his administration feel about their campaign against tax inversions that walgreen has bannba abandoned its plan. Has the administration won this battle or the whole war . Larry kudlow weighs in next. And in about 40 minutes, well hear from the president who will hold a press conference. Cnbc will carry it live. Well be right back. Kid hey dad, who was that man . Dad hes our broker. He helps looks after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at Charles Schwab just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Welcome back. Walgreen company, the latest casualty in the tax inversion battle, news yesterday that theyre going ahead with the Alliance Boots acquisition but will not reincorporate abroad. The stock has been punished for that decision. This morning, ceo greg watson addressed the issue on a Conference Call. Take a listen. The company and board looked at the full range of issues, both the potential opportunities and benefits as well as the risks that might be associated with an inversion. Understand that these are highly complicated issues that come with a wide range of assumptions. I cant emphasize enough, this is a highly technical and complex area of the tax code that requires companies to abide with specific requirements, and there are many opinions out there. The ceo of walgreen there explaining their decision not to relocate overseas. So, are companies too spooked to leave the u. S. After the white houses campaign against tax inversions . With us now to discuss is our own larry kudlow. Larry, whats interesting here is that walgreens shares were originally down around 5 or 6 after market yesterday after this news on sky. Today, they were whacked 15 . Is that move justified . Well, i have no idea if its justified. You do have, kelly, as you know, a lot of activist shareholders of walgreen, hedgeies and so forth, who wanted them to move. But i think the ceo is right, its a very complicated issue. And bear in mind, theyre kind of estranged 8,200 stores in the u. S. The vast bulk of their profits in the u. S. So, i dont know, walgreens a stretch. You know what theyre going to do. They and many other companies are going to take more of their profits and cash and bring it overseas. Thats what theyre going to do to escape the tax on foreign profits, which this country has and no other country has. So, one way or the other, we are not competitive on our tax system the ceo from delta told you that. One way or another, these companies are going to avoid the double tax. I wanted to get some reaction from the panel here, too. Did you think that move today was justified for walgreen . Yes and no, because the stock had rallied so substantially because of the inversion. In fact, a lot of the companies that have talked about or been rumored about to be tax inversion candidates, like an eaton, for example, all of them rallied so strongly on this potential. So, now that it looks like its not likely and theyre pulling back, i actually think walgreens is a buy down here. This is a quality company, and down 15 . Clearly, they see enough synergies from this transaction to it being accretive to earnings. They have 1 billion synergies, 500 million in sg a savings expected. Earnings will go from Something Like 5 bucks this year to Something Like 5. 35 or 5. 65. Maybe thats not as good as if they had done the inversion, its still creative and positive and the company is doing great things for shareholders. Where do you stand on the issue . We can say activist shareholders or board members, but its not an exclusion of fishery responsibility. As long as tax codes exist, people will exercise their fiduciary responsibility to save dollars. No, i agree with that. This is a structural issue, not a political one. I didnt mean to infer otherwise. I completely agree with that. I was just looking for the shortterm stock market impact. Hedge funds may have sold today. No, youre 100 right. Look, this issue, one way or another, all right, will not be solved. Either the issue of parking cash overseas so theyre not bringing it home for investment in jobs or the issue of inversion so theyre not bringing it home for investment in jobs, this will not be solved until the administration or maybe a new Congress Changes the Corporate Tax rate. And we should be down around 20 . We should be competitive. Canadas 15 federally, britain is 20 . That is the solution. All this stuff, kelly, about inversions and so forth you know, these are symptoms the real disease is the fact that our Corporate Tax rate is too high and that we tax foreign earnings also. But larry, that could take a long time for this to play out inversions, outversions. Sharon, last word. So, where does that leave the average investor now trying to decide what to do when they hear inversion talk and see stocks rally as a result of talk its going to happen and then it doesnt happen . I think they need to go back and look at the earnings, look at the underlying value in this company. Is it something that with the synergies is one that is going to add value to the company and something to own based on those merits, not based on what the tax structure is, because again, for any change to occur, its going to take time. Well, look, i agree with you 100 . All right. Youve got to look at the fundamentals of sales and profits. And i think steph is right. Im not an expert, but i think walgreens doing pretty well and its an awfully well run company. So, i agree with that, sharon, 100 . But look, youve got estimates run up to 2 trillion in cash parked overseas to avoid paying the double tax on profits, okay . Thats a killer. I mean, i would like that money to come home. Id like that money to be invested in longterm structures, equipment, technology, warehouses. That money, you know, Business Investment is carefully correlated with job creation. That would raise wages. I want that money to come home, but you have this huge tax obstacle. Larry, we hope the tax moneys listening. Well leave it there. Thank you very much, larry kudlow on the tax inversion issue this afternoon. Shareholders are always on the hunt for value, as you can see. Up next, dominic chu takes a look at which companies are spending wisely to create the most shareholder value, and some of the things on that list may surprise you. Also, the hot list. Usually its the stories on fire today. Coming up on todays list, cnbc. Com readers are looking into the future with a top ten restaurant chains for 2020. Well explain. Cant wait to hear what john tapper has to say when we come back. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com the list of 50 companies suppose spending on research and development creates the best value for shareholders. There are surprising names on that list and dominic chu is revealing them. Weve gone through five different matchups all day. This is technology, specifically semiconductors, the chips, intel versus amd. Professor Ann Marie Knott who teaches in st. Louis ranks companies on r d spending. In this case, amd, believe it or not, ranks better than intel when it comes to return from r d spending. Here you can see intel spent 10 billion in r d last year or about 20 of revenues. Amd spent just 1. 2 billion or 23 of revenues. But heres the fun part, a 10 boost to intels research and development budget, professor knott thinks that will get them an additional 323 million worth of revenues, not bad, but take a look at amd, because if you boost their budget, they get an extra 105 million. Thats a pretty good return on your r d investment. Thats why amd ranks higher than interet l in many of these categories. They have challenges. Intel is dealing with secular pc declines. Maybe things are Getting Better for businesses. With amd, they have a lot of stake in video games, graphics chips and video game consoles, so all of the stories are different. But if you look at the stock returns, intel has been outperforming amd. You can see amd the white line, intel the yellow. So it may not translate all the time into stock gains. But all day, dupont dow, apple versus hd, Northrop Grumman versus lockheed and now intel and amd. For more, cnbc. Com. Professor knotts list is there in addition to great content everywhere else. Back to you, kelly. We love it here. Dom, thanks so much. Coming up, more from georgia, the top state for biusiness. I sat down with home depots retail president to talk about sameday delivery and the housing market. He may be the oddson favorite for the next ceo. And president obama set to deliver a News Conference in under 30 minutes time. Cnbc will be carrying his remarks live. Stay with us. [ woman ] if you have moderate to severe Rheumatoid Arthritis like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. 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Talk to your doctor and visit humira. Com. water dripping and dont juspipes clanging ncisco. Visit tripadvisor san francisco. soothing sound of a shower with millions of reviews, tripadvisor makes any destination better. This morning i had the opportunity while here in atlanta to check out one of home depots new direct fulfillment Distribution Centers. The facility is home to many of the larger and bulkier items like bathtubs or water heaters that customers can order online and have delivered straight to their doorstep. Someone involved in the development of this program is craig menear, president of u. S. Retail at home depot and widely rumored to be the next ceo when frank blake steps down. I sat down to talk to craig about home depots future and his efforts to make them big players in mobile shopping. Is it safe to say you guys are becoming sort of like the amazon for items that weigh 5 pounds or more . So, we are focused in this facility on not only parcel shipment but also being best in class at big and bulky. So, whether its a customer buying a bathtub, for example, and having that shipped to them or shipped to one of our stores for pickup, thats what this facility will give us the capability to do. Thats a difficult thing to do, isnt it, to move some of these big, heavy items around the country . Amazon today is rolling out sameday delivery in more u. S. Cities, but thats for a lot of small items toothbrushes, books, those kinds of things. Right. What is the challenge when were talking about getting a washing machine or a dishwasher to a customer within days or hours, even . So, it is all about making sure that you can do that costeffectively and efficiently for the customer in a time frame that they need. And so, thats really what this facility enables us to do is to leverage the entire supply Chain Network that weve built at the home depot and be able to do that in a very costeffective manner for the customer. So, now that youre getting into this space more aggressively, whats it going to take and what is your projection for growing online sales, mobile sales, all of this as part of the companys future . And does that mean youre going to kind of turn your stores, ultimately, into little Distribution Centers of their own and everything winds up being delivered directly to somebodys doorway . Well, that will ultimately be determined by the customer and how they choose to shop, but we do have 2,000plus conveniently located stores for our customers that gives us the ability to deliver quickly and efficiently to the consumer. So, in total, if you think about homedepot. Com, we have the ability to offer our customer over 700,000 items where a typical store will only stock about 35,000 items. Youve been in retail for a long time. How would you describe the changes that are taking place right now . I would say that the change thats happening in retail is probably more in the last three years than its been in the last 50, and well see that continue to evolve over the next several years to come. Towards what . What is this all evolving towards . So, kelly what it really is, its what many people call the third phase of retail, where the customer is now in control. And so, you have to be able to build out capabilities and react to be able to allow the customer to engage with you as a retailer how they want to versus traditionally how we all did it, which was through brick and mortar. Right. Now it seems like everyones doing it through their mobile phone, or at least online, though theres a lot of talk that youre being groomed to be the next ceo here at home depot. And when you think about the future of this company, a future perhaps with yourself at the helm, what does that future look like . So, the future i think is incredibly bright for the home depot. We look at the interconnected retail world as a Growth Opportunity for us. If you think about 2013, our company grew 5 billion in total, and about 900 million of that came through homedepot. Com and our interconnected retail opportunities. And i think as you look forward in the future, thats really an enormous opportunity for the home depot and its shareholders. Have you been involved in succession talks . You know, look, at this point, that is all up to the board and to frank. I have been given the opportunity to be the president of u. S. Retail, and thats an enormous opportunity and responsibility, and thats really what im focused on right now. If the home of the future is a smarthome, one with a bunch of interconnected devices that you control from your mobile phone, what does that mean for home depot and whether you need things like a geek squad kind of thing that best buy offers to service some of these or people to explain how this all works or further integration of the Technology Supply chain into whats traditionally been a home retailer . Its a great question. And the first thing that i would say is, its really important for us to be working upstream with our suppliers to make sure that we have development of product that will, in fact, enable the smart home and allow customers to be able to connect product within their home the way they want to do that. Whether or not that evolves into a need for a service will be determined down the road. Many of the products today that are smartenabled, if you will, are very, very intuitive products that many customers are finding it very easy to set up in their home themselves. Its simply clicking on an app and making the connection. Oh, sure, but it also does open new risks for your business, because i think of nest. A highprofile launch, one thats driven traffic to your stores, and yet, one that also had a recall lately. So, talk us through the risks there. Certainly there is risk in any recall situation where a product doesnt perform the way you would like it to, but overall, in general, thats relatively small percentage of any issue, if you will, that comes up with end product. Most of our manufacturers work very, very diligently to make sure theyre bringing great product to market. It happens occasionally and you just have to deal with it. But all the same, how do you make sure that if people are after some of these smart home devices that theyre coming to home depot for them and not going to not only your direct competitors, but ultimately, to the apple store in the mall for them . So, thats actually the same challenge that we have across any product, whether its smart or not. And again, that drives back to the Value Proposition that we offer overall for our customers, using the buying power and leverage of the home depot to make sure the customers get a great deal when theyre coming to home depot, and also the hard work that our merchants put in working on exclusive products with our suppliers to drive differentiation in the marketplace as well for the home depot. And finally, just to bring it back to where were sitting, i noticed walking in there are hundreds of trucks outside with hundreds of different names on them. This is all about product delivery. The delivery part remains extremely important. What are the Biggest Challenges there for you . So, again, last Mile Delivery is important, and its leveraging the network that were building out at home depot to be able to do that in a very efficient manner. Again, we have 2,000plus conveniently located stores through our customer base, so we are very convenient for our customers, and the supply chain capabilities that weve built out to date and the enhancements in a delivery module that were working on today will allow us to be very effective at delivering quickly to the customers in a costeffective manner. If im hometown colleague u. P. S. , should i look to your future plans as an opportunity or as a threat . I think u. P. S. Would look at it as an opportunity. Will home depot ever be delivering by drone . Probably most of our products are a little heavier. A lot of the big products that we carry, that drone might be called a helicopter. Well, maybe home depot would be delivering by helicopter. You just never know in this day in age. Craig menear, head of america in home depot. And big moves in getting products to your mobile device to your doorstep in effectively a matter of hours. Coming up next, from market red flags to the hot restaurants of the future, we have got it all in the hot list with cnbc. Com managing editor allen wastler. And tune in to closing bell tomorrow. Chief economist Paul Mcculley will be talking to me about the economy and what we heard from atlanta fed president Dennis Lockhart just minutes ago on this program. Well be right back. We never thought wed be farming wind out here. Its not just building jobs here, its helping our community. Siemens location here has just received a major order of wind turbines. It puts a huge smile on my face. Cause im like, this is what we do. the fact that iowa is leading the way in wind energy, im so proud, like, its just amazing. Your studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. The thought of your baby girl driving around all by herself was. You just werent ready. But she did pass. cause shes your baby girl. And now youre proud. A bundle of nerves proud. But proud. Get a discount when you add a newlylicensed teen to your Liberty Mutual insurance policy. Call to learn about our whole range of life event discounts. Newlywed discount. New College Graduate and retiree discounts. You could even get a discount when you add a car. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back. You are looking at a live shot of the state department where president obama is scheduled to give a News Conference at 5 00 p. M. Eastern. Cnbc will be taking it live when it starts. We will check on our web sites with none other than alan wasler, managing editor. You know death cross is a great head line word. We have a nice little ride up from jeff cox taking a look at research pointing out there was a death cross in tenf year bond yield, a few months ago, how that sort of indicates a lot of what is going on right now. Another good headline word trump, as in the donald, he is suing two casino, they have his name on it. He find them a little too shabby. People love the trumpster, finally they love food. They have this restaurant slider that has been kicking it. Check it out. Its looking at restaurant chains that will be big in 20 when the. I think people are going in there finding out their favorite place is going to make it in the future. They crunched a bunch of numbers. Our readers are eating it up so to speak. Thats my hot three. Alan, which restaurants, what surprised you most about that list . Actually, that mcdonalds still holds the top spot. What surprised me most is some of the restaurants that arent on the list, like applebee, apparently the whole sitdown experience, they dont think that will go too far in the future. Its interesting. Thats why, exactly alan, thank you. I want to get some Quick Reaction here from john tapper. Do these ring true to you, john, these 2020 projections . They do. There is good selection, whats interesting is two are steakhouses, texas long horn and the spend in the steakhouse is higher than in an ambees comparison, applebees issue isnt spend, its irrelevancy, when we look at steakhouse performance, its consistent. Panera bread is a product. Buffalo wild wings, promotional innovation. These brands are relevant because of what they do every day within their four balls. 25 milk shake flavors, thats what i learned. Thank you, john, for now. We have some comments from Rupert Murdock talking on the call after 21st century fox reported earnings. Well hit those when we come back. Welcome back. Rupert murdock on the 21st centuries call, julia boresen is listening in with the details. The earnings for the first time, to kick things off by directing outright his bit to buy time warner and then the decision yesterday to withdraw it. Heres what he said about why they decided to pull that offer. It appears time warninger Management Board to engage with us, to explore his compelling offer. Coupled with the reaction in our share prize that im the valued stock, resulting in a conclusion that this transaction was no longer attractive to fox shareholders. Murdock yielded that there is their resolute decision and the president and ceo chief kerry said to be clear, we are done, kelly, theyre clearly trying to address questions of whether or not they might jump into this and make another offer down the line. Theyre trying to build the business organically and not chasing time warner. Back over to you. Julia, thank you. Stephanie link, what do you think . Well, theyre staying disciplined. They have more stock back. I think about murdock showing up on the call. I think its great. I think its absolutely wonderful. Thats what people want to know whether or not they are making another bid or if he was bluffing or what he was doing. It sound like they were going about their business the way they should. They heard it from the horses mouth. Whats up . Well, you know, there is something to be said for presents the fact that he was on that call makes that a powerful statement, more compelling than his subordinates. So the horse has spoken. Resultan. Im saying thats what investors want to hear. They want to hear from the top of the company about what the direction is and why there has been a change that should instill more confidence from investors in this company. But, you know, again. Thank you, guys. Investors need to focus on whats behind the company and not really on the noise and around there. That does it for us this afternoon on close bell. Thanks, to my panel. We learned a lot. Well be back tomorrow and fast money with melissa lee begins right now. Fast money starts right now live from the nasdaq markets in new york citys times square, the tlaid traders are steve seymour, guy adami, mark head fake, stocks stabilizing after sharp declines yesterday sent them to the major indices to their lowest level