Barnes & Noble CEO Exit: Street Smart (07/09)

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July 9 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

Come, but they will not pay attention once they do.

Now they are here and people are scrambling to put together their marketing strategies and positioning documents, going out and buying media, which is an interesting thing, and a lot of them are going to this registering process so that they can take in hand on them to a number of accredited investors and then turn around and advertise to those investors.

Thank you, bob rice.

Tamara is a big day.

Thank you so much for joining us.

We going to turn you over to which trish regan -- bloomberg.com "street smart" with trish regan and adam johnson.

What happens when the man who is supposed to bring barnes & noble to glory unexpectedly leaves.

Blackberry's plan c. do they have anything left or will it leave shareholders unimpressed?

Inside chipotle.

The company known for breaking all of the fast food rules.

From bloomberg world headquarters this is "street smart" which trish regan and adam johnson.

The most in power hour of the session.

We have 60 minutes to go.

The s&p rallying here for the fourth day on earnings optimism.

The action kicked off yesterday with alcoa.

You have stocks hitting a one- month high.

A lot to feel optimistic about.

Quite a lot to feel optimistic about.

Not the least of which is we created 21,000 more job openings then expecting.

Time for the big feature.

We are going to give you three charts you need to see what is happening.

There you have it.

The dow jones up 77 points.

We were up 2.2% so far this month.

Take a look at oil.

It cost me $94 to fill up my tank over the weekend.

That was painful.

I want to show you the euro.

The euro trading right now at a three-month low.

Maybe we convince management to do the show from europe.

I am all for that.

Keeping an eye on things.

Let's start to homebuilders.

We had some data out from poor logic that creates the housing market saying the foreclosure industry is falling 29 % in may versus a year earlier.

We're also seeing declines declines in other measures.

That leaves hope -- folks to believe the housing market is doing better and better.

We are seeing that reflected in the housing stocks today.

Look at fedex today.

Yesterday we got a hold of no acumen's letter to -- bill ackman's z he was raising in a large-cap u.s. stock and the next 10 days.

Apparently there is speculation that the company is fed ex.

Intuitive surgical, the worst performer by far in the s&p 500 today.

It is the maker of surgical war -- . it is seeing a decline in the decline.

Hospitals do not want to spend the money on these expensive robot guys.

Barnes and noble ceo has resigned.

He was the man planning to leave the bookstore.

This proved to be too much.

This now looks pretty uncertain.

It is the latest example of retail gone wrong in this digital era.

In the wake of the departure, we are bringing together ceos that have found they were -- a way forward.

They still rely heavily on brick and mortar stores.

This sells most of the merchandise online.

It is great to have all of you here.

It is such a competitive environment.

There is a threat from e- commerce.

How do you succeed in one that has so much competition?

I do not think of it as being under threat.

When you have a brick and mortar retail organization it has been for years to get the right project to the right place at the right time with an organization that is part of the retail.

It becomes get all of your project all of the time to all of the places.

All of the places mean all of the various mobile forms of shopping they are using this as warehouses which is what walmart is starting to do.

That is part of it.

The bigger part is that if you have a retail organization retail stores would train salespeople we do not hire hourly people to go work.

They know the project.

They know the proprietary knowledge.

In my view, it is digitizing the sales force.

It allows the productivity of the four walls to go to another level.

For example.

No longer are we necessarily found by the mistakes we made with our planning and allocation tools.

All of our stores have ipads.

They are trained to sell inventory.

It is like you are merging online and brick-and-mortar.

That is absolutely right.

Do you even need the brick-and- mortar?

We're focused on delivering fine menswear.

We originally thought we would not need the off-line piece.

We were wrong.

We were growing really quickly.

At some point we realize it is not a great experience it cannot try on project.

31 by 32 slim leg is not going to make sense in a brick-and- mortar only environment but you cannot try it on as some part we invented this idea of a shop.

It is a 1500 square foot retail sure story get a one-on-one experience and we filled the project from our website.

You do not buy it there.

This is the misnomer.

You absolutely buy it there.

The way you get it is it comes to you the nice day.

Buffer someone like me who likes the instant gratification ,, i want to walk out with it.

What happens to that person?

We heard so much about this.

They said there's no way it will work.

It was driven by constraints.

We felt what we are starting to get known for our blazers and shirts.

We heard more.

We were doing a million of revenue in our lobby.

We said this is a huge innovation.

They do not care so much in the e-commerce area about whether they walk out with that or if they get it the next day.

Let's back up and looks at what happens to barnes & noble.

Is anything you can take away?

What are the mistakes they made that you would not want to see more than anything it is about putting down your bricks, putting down your mortar.

I think that they look to break into rick mortar will have an -- an easier time than brick- and-mortar that try to create an integrated -- integrated experience.

Companies like ours run a retail organization.

The productivity of the basis of your store, it might be the wrong measurements will.

We are at a point where we are convincing our associates sell any inventory in if it does not come through here you're going to get credit for the sale.

But when you buy inventory you where it out in the store -- you wear it out in the store and you become company people.

They become assessed with moving those goods through those doors.

Sell what you have in stock.

This is not a $20 book.

What both of you are selling lends itself to the modern commerce.

They are selling commodity projects with a low-margin.

It was inevitable that it was going that way and less they can make the transition.

This weekend we were out east by the summer property.

As half of new york does.

I happen to stop into a bookstore.

They had this gorgeous set of books.

They are this day.

They are a hundred dollars each.

He said they could not keep them in stock.

If you are going to be a brick and mortar retailer eat cannot sell a $19 bestseller.

You have to sell something with some margin and is was his duty -- and exclusivity.

You see it.

You touch it.

It is different than the actual book.

It is particular style.

They are making the in person experience about this.

Could barnes & noble have done that?

Asked the issue is if it is a digital product, you do not need to touch it to know if you want to read it.

It is hard to be in barnes & noble.

There are some legacy elements that you would say some apply to our business.

Historically clothing retailers would launch a concept and get bigger and bigger retail.

We believe you take a lucky gene store which is small, we believe that because of the e-commerce environment, we believe we can actually deliver a full franchise opportunity in that smaller states by even doing the things that these guys have entered -- starting with.

Real estate is expensive.

It is too much inventory.

The overhead was too high.

The stores are similar to your guide stores.

This is coming in my inbox.

Have you you seen what kate spade is doing?

It is fun.

We turn to the ebay guys and say let us the the lab rats . we want to apply in a commercially sensible way their most important upstream technology.

We want to do it in a way that involves the channels.

But it delivers a customer experience that is right.

Your point about the bonobo guide store, there are some people that want to touch him by.

More and more people do not.

That is due to the service.

Let me do the work.

Let me have that be delivered by the ups man.

Would you rather have more people order off your website?

Absolutely i would.

I believe if consumers were more oriented that way our customer satisfaction and service levels would go through the roof.

We would be in business always with what and where she wants it.

He said she.

What about me?

Ica nice pair of peach colored pants and your future.

Thanks so much.

-- i see a nice pair of peach colored pants in your future.

Thank you so much.

Do not go anywhere.

Some power plays right after this.

? do you think rising grades are bad for utilities?

Time for a little ill aside in action.

The average maturity of the debt for utilities is 13 and a half years.

In other words, they have recognized we are not going to have lower rates for ever.

Used that because he can match of debt with the money coming in.

It is real simple.

Utilities ease more debt than just about anyone else.

Utilities now have a much bigger cushion than the rest of the markets.

Not surprisingly the analysts have started to recognize what the cfo has recognized.

They have discretion.

For every utility that have seen the earning estimates go down, 1.9 have seen them go up.

Utilities is the number one.

Analyst more than any of the other side others material in staples.

You are getting more lowering of estimates.

Utilities on top -- on top.

They like the more than any other sect tour.

They're bumping this by a higher ratio.

Look at what has happened to this.

. it is always a pleasure to have you here.

Why are estimates always a good thing?

Expectations are a good inc.. what in the happening is the street is always behind the curve.

Estimates come down as we get closer to actual earnings season.

It is not well how it does.

It is how it does relative to everybody else.

Wax lower the expectation.

Make it easier to jump over them when we have really high expect haitians.

They usually leads to disappointment.

Do you think it is fair?

It is not terribly cheap.

I cannot say we are at march 09 levels.

But we are not at march 2000 levels.

But earnings continue to grow it is a positive.

It is down one percent.

I am happy with the estimates being low.

The one fly in the ointment i am concerned about is the concerns for the s&p 500 which is about half of the total earnings.

They have been on a downtrend as they are dealing with this.

Asia is pretty slow.

We still have not seen the turnaround from the rest of china.

It sounds like you are making the case for selling to american consumers.

It is not the worst thing in the world to be overweight u.s. equities.

If you want to see cheap, europe is cheap.

That does not mean it will not get cheaper.

There is a new sheriff in town.

The london interbank rate is restoring credibility.

The market share.

Can they get that the mojo?

We have three dates coming up.

? this is "street smart" streaming live on your television.

$300 trillion in securities.

It will have someone new in charge.

Today's global out look, don shu brakes on what this means for global markets.

Let's talk about the big banks between them and barclays.

If you look at the investor confidence aspect the reason why this lobbying group is responsible for the libor rates, what they are looking to do is get competent act to this.

Home mortgages in all kind of things are tied to interest rates.

This is a huge deal.

It goes out of the hands of the bridgers banker association.

What surprised me most is that libor was just that.

There was no computerized mechanism with which to do this.

Is this going to change?

The aggregate numbers get put together.

They get rid of the topmost ones and bottom ones.

What is libor.

Is it going to be more formalize?

It depends on how the process will work.

This is not a body that has typically done this thing before.

They are an exchange.

They operate your second-biggest driven to which has them trading high to libor.

There are a lot of questions about whether this would be any different.

What would make you talk libor now?

If there was some automated one.

If there was some random way of doing this for the trailing five or 10 day average so it cannot be manipulated, i think people can rely on it.

Live from new york it is libor.

The whole circumstance sounds kind of odd.

In need to get renamed.

That is a good point.

How can we set a level on something by literally calling up 30 people and saying -- what price do you have?

It is absurd to read blackberry's lead to shareholders.

What investors continue to wait patiently?

I do not know.

That is next.

? shares of chipotle have more than tripled in the past five years.

It gives them a market cap of $12 billion.

Carol massar spent time with some of the executives in the mexican food chain.

Let's take a look.

Chipotle is known for serving fast quality mexican food.

But making a tv show?

We are shooting a web series we created called farms in danger.

It is about a likable but misguided group of people whose job it is to spend the most industrialized agricultural and a positive way so it looks good for consumers.

It is part of the untraditional marketing play.

We do not do the same advertising everybody else does.

They are arguing about the men -- the menu item, but we do not do that so we have other ways to tell our story.

And start contracts to its competitors, chipotle's main menu has hardly changed since it opened 20 years ago.

There are so many flavors that i do not think it is about a new menu item.

We signed a lease and opened a rare -- an airport restaurant.

Part of the stipulation is that we be open during breakfast.

We have a new frittata that we diced up the same size as our chicken or steak that was part of the breakfast burrito or bowl.

It is delicious.

Will you keep it?

We will see how it goes.

It is always a possibility.

One new item that is on the menu is this.

They began serving tofu in its california store.

A test run for a national rollout.

There are lots a begin -- vegan or vegetarian that are asking for this sort of thing.

When one be enough to bring in new customers?

It is sticking to a strategy.

The most important marketing we do is that it will always be what you experience.

You love what you eat.

How many of those doritos?

I want guacamole and salsa inches at this point.

It is all good.

They have been expanding this model.

They have been opening a southeast asian around the same module.

They're going to open about six more at the end of 2014. it all has to do with the food with integrity message.

It is a philosophy.

They care about where the food comes from.

It is made right in front of you.

It is interesting.

You get to literally create exactly the mail you want to eat.

It was created about two decades ago.

He is one of the co-ceo's of the company.

He created this fast casual way of eating.

You have your pen nara and others.

-- panera and others.

It is more expensive.

It's a nicer environment.

You sit down.

Quite how do they get the name?

What probably be flavor for mexican food.

The asian one is called chophouse.

Here is the thing.

It trades about 36 time earnings.

It is a great project.

It is pricey.

You're paying for the growth.

You go anywhere in manhattan were there is a chipotle during lunchtime the lines spilled onto the street and down the block.

You would think they were giving it away.

It is an eight dollar brito as opposed opposed to a seven dollar sandwich.

What about the rest of the country?

They are doing well.

There are several well-known short-sellers out there and there are concerns that there is a lot of competition out there.

David einhorn says they are competition with something a taco bell.

No.

let's be honest.

Taco bell is traditional, greasy fast food.

Every stoner and college knows exactly what taco bell is.

Chipotle is a very different business model.

They are aiming for a different audience.

The food is very different.

To be fair to taco bell i haven't been there in 15 years.

I cannot tell you if it is any different.

I can tell you.

It is still as good as it was.

It is not shipped poli -- chipotle.

We had a different model.

Very different.

Thank you so much.

Blackberry's shareholders , will investors wait patiently?

It is a supermarket sweep.

The biggest grocery chain in the u.s. is going shopping.

We will have all the details on this deal.

? first, bloomberg.

Blackberries a message to shareholders, have patience please.

The ceo is asking investors to patiently wait for the turnaround after its ed devices fell flat.

It has been out for five months and was considered the company saving grace and so the numbers came in well below estimates.

Stocks sold off big time in the past two weeks.

He is saying do not count us out.

Sales will pick up.

The question is, will they really?

What did we hear?

We heard the guns and roses song, all we need is just a little patience.

That is the message he is trying to get across.

The whole idea that blackberry 10 was supposed to be that operating system which would get blackberry out of its funk.

That was made very clear during last year's annual shareholder meeting.

The sales picture is certainly picking up.

They are still selling a lot more.

The real issue is that they are selling that many more phones, why is the market share not catching up?

It has been stagnant.

The only control three percent of the markets.

The real issue is this model is the first.

They have this new model.

They had everything going for them.

He had corporations across the globe that were buying them for their workers.

That was a built-in markets.

Organically, we have seen thing start to change.

They say can you give me software for my iphone.

What went so terribly wrong?

We are only five months into the launch of the blackberry 10. give us more time.

There is a five years wait to ever who caught the next.

That would have been an incredible asset base.

They had 80 million subscribers.

They have the corporate market lock up before they begin to lose the corporate market.

A few managers are allowing employees to use the iphone and the androids.

Do you think they can turn it around?

I do believe there'll always be a niche demand of the most corporate user likes the consumer market as well.

The problem is but very historically has had earnings reported by the service revenue that laster was $4 billion.

That is going away.

That was 100% . it has 100% that they made last year.

If blackberry is a niche supplier of this, could they make good hardware and business with low volume.

You can get sold.

Who might be potential sitters be?

Maybe you go private.

What can they do?

There are positives.

Everyone talks about how it could be an acquisition target.

Maybe a computer maker that wants to get more.

They still have that server network.

They have a load of huge load of patents that have some value to them.

They also have a subscriber base.

It is smaller than they used to boot -- used to be but it becomes whether or not they can moderate -- modify that.

There are 100% committed to look into partnerships.

They want to find the value first.

Let's get to what the stock looks like.

Let's get this from a technical respective.

This was a wall street darling coming into the new year.

There was the vague break out in the fall.

This thing actually tripled off of the lows.

Went from six dollars of to $18. a consolidated very nicely.

About half of those were consolidating and what a beautiful triangle.

Unfortunately, what happen is that it broke down to the downside.

If you take the measured move, let's get this.

You are not aj.

You think they can buy it and nine dollars?

If you get close to this a $.5 breakout level in the measured move down to nine dollars, in that area you could potentially set up for a buy but all this is going to be is trade.

Of bergen -- broken stop.

You can only traded.

We're going to have to leave it there.

Thanks.

Kroger go shopping.

The largest grocery chain in america is scooped up.

We will you about it next.

? the largest grocery stain in the united states, kroger, is buying a chain for $2.5 billion.

Cristina alesci joins us.

She has been all over since we first got word of this.

What is this?

At first blush you would think the largest retail out there is getting bigger.

That is true.

It is adding about 200 stores to the 2400 it already had.

What it is about is growth.

It is not just about the typical consolidation play.

Kroger definitely compete in that middle market.

There is the consumer that is growing in of itself.

We are pretty average of a retailer.

We need to up our game.

We need to earn a lot.

It is providing that value add that customers are looking for.

Might we see more deals like this?

The question is is it size or whole foods?

Maybe they're using that to offset lower margins in the business.

That is exactly right.

We could see more deals.

If this actually works out, if they let them keep its culture, you have other family-owned grocery stores that may feel digital selling to a big guy.

Thank you.

A tuned.

Bill gross has a chart he doesn't want to see.

We will show it to coming up.

? investors are putting bond -- bond funds at a record rate.

Bill gross is not want anyone to see.

Evil are leaving them.

That big red bar you see at the far right of the chart, essentially it counts for that huge surge in yields that we saw that took the 10-year up to 2.75. this comes after six years of giant inflows and pretty significant outflows from equities.

In area, this is the start of the great rotation out of equities as the economy begins to normalize.

Here is the thing.

I can understand why people are selling bonds.

We have seen the 10 year shoot from 160 almost love to 279. -- to almost 279. why isn't not going going into equities right away?

Some of it is obviously going into equities because here we are pretty close to five year highs.

Within a few percent of the all- time highs.

It is also a little bit of a process.

There is general nervousness both in mainstream that is looking at equities and the institutions themselves.

They are little cautious.

You can only sit with that much cash for so long.

Eventually it gets out some way.

We saw this unbelievable bond flow.

Let's pull this in.

It is practically off the chart.

There is this massive move.

Do you think this was the puke?

You look at how much money has floated into arms.

This is $60 billion.

In terms of the bond market, that is pocket change.

This is the flow following let's call it re-hundred months of inflows.

This was an unusual spike.

I think you will see outflows but much more gradual and moderates.

Fasten your seatbelts.

All right.

We would get the top 10 stocks you need to know about today.

In the next hour, inc.

For nothing uncle sam.

Angry investors suing any and freddie over the bailouts.

That is next.

? . ? all right, if you missed everything that happened today in the session, we will get too caught up right now.

Four minutes to go with the only stocks you need to know about.

No.

10, blackberry.

Up 1% as they hold their annual shareholder meeting.

Asking investors for patients following the quarterly loss last month.

There are some questions about whether they can turn themselves around.

In the middle of the conference they said that they were 100% open to all possibilities.

Sounds a bit desperate.

A little bit.

Out telekom down a fraction today, second quarter earnings beating the estimates by a mere penny.

Despite this one penny, their primary metals business by sales reported a loss of $32 million.

Not good.

Got another decliner for you guys, no.

8. pandora media, the internet radio company reported listener data for june and went down.

Rising year-over-year, but listening hours were down by 100 million compared to the sequential basis.

#7, satellite radio providers boosting forecasts this year, predicting a total of 1.5 million people will sign up for their services.

This quarter sirius surpassed their quarter mark.

In terms of making money, pandora and others are having a hard time showing revenue growth, which is the key.

Music business changing so fast.

Hewlett-packard, up after an analyst bought with a high price target.

Hp will strengthen cash flow with cost savings benefits and product mix is, it is a show me story.

We will see.

Fedex is high on the list today, no.

3, 4%. there is speculation that this may be the investment target pork hedge fund manager bill ackerman, who said he is seeking to raise money to buy the stock of a large u.s. company.

He did not name the company, but that does not stop people from trying to guess.

I should mention that att is also up for the same reason, other folks are speculating it could be his target.

To try to follow what you might think be an investment?

Take a wild guess.

[laughter] well, he has not had the best track record.

Early in the 2000 pause he had a great track record.

Since 2008, 2009, much more mixed.

It is not that it is clearly bad or good, but it is mixed.

I do think the market likes the idea of an activist, because it means something to happen.

Carl icahn has had huge luck with playing the role of activist.

The verdict on dell, still to be determined.

No.

4, tesla, the electronic carmaker will be added to the nasdaq 100 index.

Shares of tesla have more than triple based on the popularity of its new model.

Ibm, downgraded to neutral from buy over at goldman sachs with growing pressure on their growth markets in emerging regions and near-term challenges.

Kroger, of almost 3% after they announce that they were expanding with the purchase of harris teeter.

[opening bell -- closing bell] you can hear the bell, bringing us to the number one of the day, barnes and noble, trading up 5% at the close, breaking up after ceo william lynch resigned.

There is a manager spinning off units to the president -- there is a manager with a history of spinning off units.

Four days of gains, the nasdaq closing higher as well, ending the day up better than 80 points.

We have stocks, commodities, and bonds covered by our market reporters.

Let's kick off their.

We have this for a rally and it seems that the wind is at the back of the stocks to some extent.

Fief of link this to optimism over earnings except for the fact that the first big company coming out with earnings was down today, as we mentioned.

The best performing group today, gold is rising today, with industrial and energy financials helping to lead the gains.

It seems to be a momentum story, people are looking at a losses of the past month, judging them over and done.

We should point out that a big focus for investors will be the next segment tomorrow with more commentary coming from ben bernanke.

Fed handicapping has gone into the background, but it is expected to come back to the fore with those events.

The treasury market, let's go to dominic chu.

The three-year note auction today, the first of three this week, statistics, the yield was just below 72 basis points, more than double the reference point of the rate that we got on may 28. 3.35, $3.35 for every $1 bonds for sale.

Indirect bidders took 36%, the group including the all- important central banks.

Take a look at how the action those on the rest of the week, tomorrow there is a big action on 10-year notes.

Thursday rounded out with $13 billion worth.

Remember, if you take a look at the way it is trading in hands and 30's, the 10-year yield is seen as largely unchanged -- unchanged.

There is a slight change to the upside with a long bond yield.

Like julie said, the treasury catalyst could come from the fed minutes, who is going to release their minutes tomorrow afternoon at 2:00 p.m. eastern time, could be the catalyst in treasuries moving one way or the other.

For more on the commodities market, let's go to su keenan.

Agricultural commodities, corn rose more than 4% with a spotlight on oil, closing above $103, raising a new question -- how high does oil go?

Wheat and soybean futures rallying to their highest price in more than one week.

Dry, warm weather, raising the risk of damage to crops.

If the usda reduces their supply estimate, corn is at its biggest since late april.

Oil rose above 4%, i should say, in the extended trading.

Gains during the regular session limited by violence in egypt, continuing to be a driver with hedge funds increasing for the first -- third time, i should say, in four weeks.

Thank you, sue.

Back to the rest of the gang.

Let's go straight to our roundup.

At a chicago and barry holtz, still with us.

Looks like people are not so worried about the fed anymore.

What does this suggest to you about our earnings season is going to look?

And looks like alcoa was down, rallying up to $8.10. i actually purchased some family dollar, yum brands, coming up with a good story about global growth, china, later in the week on friday we will get a taste from the financials, wells fargo, jpmorgan.

The market is up for four days in a row, do you think that bodes well for this quarter?

I do not think so.

Year-over-year growth is not good.

Financials are supposed to grow the most.

Good numbers will likely be in the financial sector.

Overall i think it will be more stock specific.

I would sell my long positions.

I have been long all year long.

We like this idea of seeing all these estimates coming down, it makes it less challenging to be the numbers, effectively.

We have lowered the bar and made it easy to jump over.

The worst is when you have really high expectations for earnings in the fall short, especially when you have some form of bellwether that messes up.

I like seeing fedex rally not because i care what people are buying it, other than it is a bellwether the says that the overall economy -- but the reason it is falling is speculation that bill hackman might be making this is a big bet, right?

Getting an activist in there, markets think something might happen that is good for the stock.

Or is it based on something else?

We do not know.

It is hard to judge where these rumors come from.

Maybe he already purchased his position or he will turn around and say no.

Look, this is not a little company that you can take a chunk of.

This is a giant bellwether company.

To your point, ups was up today, call it 2.7%. clearly there is some sort of momentum aside from fedex with a crazy rumor attached to it.

The most interesting bank that we were discussing earlier was tesla getting added to the nasdaq 100. this is a relatively young company.

You have seen a shift with, at the same time, tesla added and barnes and noble looking at the management shift.

The stepping down -- ceo stepping down with the challenges in the environment.

The other one was rim, doing better today, but the ca 0 saying that they needed patience through these challenges.

-- ceo saying that they needed patience to these challenges.

It seems to be a real challenge for some companies in this environment, adapting to a new way.

I will say this, individually i think that beating estimates is getting easier because we are lowering the bar, somewhat, because it is a better guidance scenario, but things with an aggregate are getting too easy for making new highs and for those reasons we are really watching the fed on the comment yield curve for three, five, and 10. the fed is getting what they want right now in regards to the slope of the curve but i do not think we are getting the news or confirmation economically to justify this.

Are we rising on papers?

We could be.

But commodities on a whole are rising and the dollar is the talk of the day for myself.

Clubbing the euro at sterling, the strength of the dollar is continuing on a three week rampage.

The dollar is an almost three and have your eyes.

I have been hearing for five years the kiwi is going to destroy the dollar and we continue to see the greenback as the only clean shirt in the hamper.

As you look at companies the right now, it seems as though the u.s. based companies are the better choices for investors.

As you put it out, over half the sales in the s&p 500 come from outside the u.s.. if you want to play the world, you could do it with the u.s., too.

Right, if you are not going to buy a broad index like the s&p 500, you have to be selective.

For the ceo of raymond to say that investors need to be patient -- rim to say that investors need to be patient?

The iphone has been out for five years -- five years -- and they are just now getting around to a touchscreen found.

For that to take five years explains why that chart looks like a warm bath.

It brings up a broader, overall point.

This is the time when you have to continue to innovate because technology is moving so quickly.

Barnes and noble, the lack of innovation and what it meant to the company.

It is pretty much have the companies we mentioned today.

Rim, barnes and noble, go down the list of all of these business models.

That position has to adapt as well.

Look at jacobi as opposed to talk about.

They're both essentially selling mexican style food.

One of them is growing gangbusters, the other one not so much.

It really is a focus of -- what does the customer what?

Have we delivered?

What barnes and noble has done, selling commodity products, has painted themselves into a corner.

Chabot lee, as did lucky brands and the people from earlier.

It is all about innovation and staying within the curve, the market will report -- reward you for it.

Our closers, sticking with us.

That is your clothes, but we have your trades for tomorrow.

Next, on "street smart." housing rumble, shareholders facing off.

We to speak to one of the lead attorneys on the case.

Life in the fast lane, we show you the $100,000 super car that no one has heard of.

Plus, bank of america's social media fail and a real slow grower.

Copper stay tuned for your first trade, tomorrow, "street smart coming up street closed but continues.

-- coming up when "street smart" continues.

? ? shareholders at fannie mae and freddie mac are up in arms after the change the terms of their bailout last year.

Forcing fannie and freddie to pay their profits back to the government about cutting shareholders out of a hefty dividend.

We are joined right now by the lead counsel that is suing, thank you for being here.

Take us back to 2008. the government stepped in with money to backstop mortgages.

Do these companies really need that?

Does the system as a whole need that money?

Clearly there was some intervention necessary.

While we know now, we did not know in 2008 is that it was not $189 billion that was needed.

It is pretty much indisputable at this point that they were over-reserved.

There is a lot of capital that can be freed up.

Your main complaint here?

That they have gone back to change the rules now?

Our complaint is that treasury and the fsa bj need to follow the law -- fhfa needs to follow the law, working as a conservator, conserving and protecting the assets.

Of what the treasury is decided to do in august of 2012 is initiate the winding down of fannie and freddie, which is not conservatives.

What you are really worried about, if i really reading this correctly, the government effectively taking profits out to get reimbursed -- good for taxpayers, but you're saying that that violates the terms of conservatorship, correct?

It does not for the treasury to be repaid.

What does violate the terms of conservatorship is to do so in a way that initiates the wind down of these companies.

Everyone wants these companies to repay the treasury, and they will by the end of next year.

That is beyond dispute.

$189 billion will be repaid with interest, but the question is, what happens after?

It is still the basis of the litigation that you want to see the companies kept intact and eventually spun back out to the original shareholders?

What is it that you guys are demanding in the litigation?

We want the treasury and fhfa to follow the law, to act as a conservator, not initiating the wind down of these companies.

Obviously, congress, members of congress, are considering different ways and we think that one option the needs to be on the table is a reformed version, not simply a wind down.

One-out wind them down?

The main complaint against the gse's is that they are now officially propping up the housing system overall.

The idea of a backstop that is really not guaranteed, it is just a quasi-guarantee, providing the market but a false sense of security.

Do we need that security, in your opinion?

Clearly it has worked well over the years, but this is an issue for congress to decide, which is really the point of this lawsuit.

Congress did not delegate to treasury or the fhfa the unilateral authority to wind down these companies.

But they are not unilaterally winding down.

That has not yet been decided.

No one is winding down fannie or freddie, the government is taking the profits out, presumably to get repaid, and we would hope that they would once they get repaid, but that has not been decided.

I just do not think that is correct.

But treasury said when they announced their profit sweep amendment in august of 2012 was that this was to initiate the wind down of these companies.

That was the stated purpose of the amendment.

To effectively wind down the debt incurred by taxpayers.

They did not conclude that they would automatically wind down the entities.

That is not correct.

That is what the treasury said in august of 2012, which is that this was intended to wind down the entities and make sure that they could never come back into private hands, which is directly contrary to what congress specified in 2008. meanwhile, stock is trading at $1.62, meaning people are still betting on the future of these entities as they exist.

Clearly they do exist.

They are generating billions of dollars of profit each and every quarter.

Just last quarter, at the end of june, the treasury gained a dividend of $66 billion.

Because of this profit sweep amendment, the obama administration amended its 2014 budget to say that over the next 10 years the treasury will recruit some $240 billion, $50 billion more than treasury was ever provided in the first place.

What will ultimately make you happy?

If you were able to be successful in that the government was not winding these down, could they be fully self sustaining, 100% on their own, do you think?

Well, first, what i have said before and i will say it again, of what this lawsuit is all about is getting treasury and fhfa to follow the law set out in 2008. what happens after that is up to congress, but clearly what could happen and one option that should be available to congress is a reform of fannie and againfreddie, tied the regulated, forced to compete with private capital in the marketplace, taking taxpayers out of position, which seems to be what everyone agrees on in terms of needing to happen as we think about policy going forward.

If that were to happen, would the government spin out fannie and freddie to separate, private shareholders?

The government is now 80% holders of fannie and freddie, is that right?

They are.

In fact one little reported fact is that if there ever was a spin out, treasury holds warrants on 79.9% of the common stock.

If there ever was a spin out, treasury would get 80% of the upside.

This is a very good deal for the government.

Ok, very interesting.

Thank you for all of that, matt.

Coming up later in the hour, more on this issue with senator corker, someone who would like to see fannie and freddie one did it down.

Certainly an interesting part to to the conversation.

Coming up, the analyst who took down intel yesterday.

Why is doubt about the future of the chipmaker?

? -- ? barry, you may keep point about the theme here today, the evolution of companies involved were not.

They have got to do it.

Intel is a great example of a company that is mobile the loud smart phones and tablets to go to qualcomm and not them.

Not too long ago they were passing like ships in the night.

Has that always been the way of the world?

Or more lately?

There have been changes in technology.

Look, everything is accelerating and the second derivatives are accelerating.

People are so frustrated with apple because they are like -- where is the next big thing?

That is right.

Doing these things directly takes time.

It should not take five years, the reason that blackberry got eclipse, they sat on their hands for too long saying that they owned the enterprise space.

There is no company in america that owns anything over their trademark and logo.

Look at what is going on with ford, gm, and tesla.

You can be at the top of the world and like that.

Blackberry was on top.

Apple was on top and then samsung started innovating.

Clive barnes and noble, then came amazon.

Barnes and noble was in a long, slow decline, even when they belatedly jumped into that tablet world, which some people, they like the note, but they could not compete with the ipad.

The kindle.

The market at amazon, the amount of energy and subsidy that they put into the kindle, they had a business and investor base that allowed them to do that.

What happens to barnes and noble?

They get sold for all of their real estate.

It is a blockbuster story.

We might go into that local bookstore.

Like you want and $800 book on the history of the automobile or an 800 and dollar book -- coffee table books?

Quite literally coffee tables.

The book is a commodity nowadays.

It is.

I love bookstores but they are going the way of the dodo.

They are not where people are gathering to meet and greet.

Starbucks?

It means something for the publishing industry as well.

The publishing industry is now at risk of being replaced by soft publishing, an advantage that amazon and apple have.

Look, originally the itunes store, which is now the entire books, movies, music, apps, etc., a fantastic business model that both apple and amazon have and that other companies cannot compete with.

J.c. penney is having a hard time competing with that.

You have to be released specialized and have fat margins.

It was interesting speaking earlier to the retail see those who were trying to incorporate both into their business model.

They can do things the j.c. penney cannot.

Great to have you here today, mary.

We would keep you longer, but we know that you have things to do.

Ben bernanke, hard at work, all undone because of one vote?

I will see you on the other side of this break.

? ? welcome back to "street smart." our top headline, starting with more markets closing positive today at more -- on wall street.

75 points, over the past four days we have gained 2.5%, practically back to where we were before chairman ben bernanke first started that.

The s&p 500, trash, take a look.

Very similar pattern.

Up another 10 points and we are back to the pre taper talk.

Finally, you can see the nasdaq up 6/10 of 1%. ? ben bernanke may have more working against him than just the economy.

The federal deposit insurance corp.

Just voted to raise capital standards for the biggest u.s. banks up to 5% and 6%, forcing lenders to hold more funds as a buffer against lawsuits at a level that is double the industry standard.

The fdic believes this will protect the system from another landslide, others say that it will slam the bank some lending and throw the recovery of.

Let's hear from both sides.

Joining us now, dennis, in support of capital, and ernie, a former federal reserve bank of new york vice president, against the fdic plan.

Walk us through how is it that these capital requirements will make banks less willing to lend?

Let's face the that over time, you will have to reduce the dividend.

You are only limited in what you can do.

Right now this is not an issue.

If you need money for the affair, dowels or is are there but as the economy get better and banks to stop using the cash that they have, these will start to bite at some point.

At that case if banks want to continue to lend -- this is what mr.

Bernanke once.

He wants to encourage this.

Is this a slowdown of the process?

What might not -- now right now, but it could.

This will start to bite if the economy starts to roar.

More capital.

More in reserve, less the issue can lend out.

Why do you think the banks need this right now?

This is willie about eight largest banks in the united states, quickly significant, if any one of them fails it could bring down the financial system and cause an economic debacle, which happened five years ago, remember.

The key reason why that happened is because the too big to fail banks on wall street did not have enough capital and equity to cover their losses.

What happened is the united states taxpayers had to bail them out, affectively providing the capital after the fact.

Taxpayers should not be funding wall street.

Do you not think that in some way, shape, or form, that the markets should have some discipline here?

No investor wants to go through 2008 again.

Five years ago was actually very recent.

I would question whether they would be jumping back into bank stocks if they felt there was a jeopardy of another 2008. if you are a shareholder at one of these largest banks in the country, in the world, actually, you would be delighted to have very little capital, it means he will never fail because he will always be bailed out by the u.s. taxpayer.

If one of those big banks was just a regular country in the united states, when it went bankrupt, they would fail.

Only the biggest banks fall into the comforting arms of the taxpayer.

You are overstating the issue.

Once you get in to the larger banks we have higher risk capital requirements, leverage requirements, coming down the road the subordinated, long-term subordinated debt requirements that would take requirements as a resolution procedures so that they do not fail end of the common equity get wiped out.

We also have proposed prudential supervision requirements for banks.

There is a lot on the table.

Let's talk about profitable with that kind of regime.

How much cash flow is enough?

There is very little doubt that they will be massively profitable, as they have been in the run-up to the crisis and in the years since.

The issue here is -- what is the appropriate level of regulation and capital equity for the banks to have enough on hand to absorb their own losses?

We know for a fact that the losses in 2008 exceeded 6%. the capital required will not hurt lending or credit availability.

What hurt lending and credit availability in the last five years and today was the economic wreckage caused by the crisis.

I do not know about that.

It is just common sense, right?

If you are required to keep more money in the safe, there is less to lend.

But that is not but is really happening here.

It is about how banks finance what they do.

Money is not locked away in a safe.

They are locking it in a safe.

What do you mean?

What is happening with the kiwi policy is the bank sells security to the fed, which gives the bank's cash, the positing id and making a huge piggy bank.

At some point when the economy gets going, then we will see an issue.

Are locking it in a safe.

But it is irrelevant.

Interesting, but irrelevant.

One more thing that you forgot to mention was the stress test, which came out of the -- one of the better things timothy but -- and the dagger did.

Worst-case scenario, banks will have 5% common equity.

How much is enough?

Another point, how much is enough?

10% bemis 6%? ultimately, how much is enough and can you ever have enough?

The last crisis cost the american people 12 to -- well dollar trillion.

These regulations are designed to put in place and the protection so that we will have a safer banking system that bill not collapse or require bailouts.

Capital requirements are one component of that.

Talking about fed policy with capital requirements is mixing apples and oranges.

These requirements are having the banks fund entities with more equity rather than debt.

Right now they find themselves at a level of 97% debt to equity.

That is crazy.

No one on main street in this country could go to a bank and borrow $1 million with 97% borrowed money.

Wait a minute, wait a minute.

How many of our largest banks, full time supervisors -- these are not just business is raising capital, these are institutions that are heavily regulated.

First of all, you know better than that.

Jpmorgan chase has between 2005200 80,000 employees in this world and there are about 75 regulators in new york office.

Those other countries have regulators.

Look at what did they did for the u.s. taxpayer last time.

I blame the crisis on everyone.

As hillary said, it takes a nation.

Let's blame everybody.

Let's be clear about something.

There are 7400 banks in this country.

We are talking about capital charges for eight of them.

Let's keep it in perspective when you say banks.

I did not say banks, i am talking about the largest banks in this country, which proposed a unique threat to our financial system and economy.

We almost had a second great depression.

These rules are designed to put in place a system where the banks are safer and we do not face of this thread again.

Unfortunately, we are out of time, but we should have you both back for round two.

Debates continue, coming up, senator corker enters his plea to liquidate fannie and freddie, coming up next.

We will be right back.

? ? minutes ago we heard from a shareholder attorney who is suing the government over there bailout of fannie and freddie.

Listen to what he told us.

The need to follow block that was set out in 2008, which says that fhfa has to act as a conservative, protecting the assets of fannie and freddie.

What they decided to do is initiate the wind down of fannie and freddie, which is not a conservatorship.

Our next guest is not suing, he just wants to shut them down.

Bob corker is pushing a bill through congress to dismantle the housing giant.

Welcome back to "street smart," senator corker.

Walk us through what you would like to see happen.

Mark warner, myself, and along with the number of other senators we have a bill that we hope will make it through committee, winding them down over five years, creating an explicit government guarantees for housing finance, but in front of that explicit guarantee it puts in place a 10% capital requirement that is real equity in advance of a government guarantee.

We have nothing to do with this suit that is taking place.

I would not -- would love to talk about that, but we want to see happen is moving away from the small of where things are going great, of private shareholders doing well, but when things turn down the federal government has to bail them out.

We think this is a much more responsible way of dealing with this.

I never again want to see than -- a situation where an entity has an implicit guarantee.

Look, in a perfect world -- i wrote a bill like that two years ago that had zero guarantee and i thought it was the best bill ever.

But i was the only co-sponsor of that.

I would like to move to a more responsible place.

I realize that we have to work but people on both sides of the aisle to make that happen.

I think we wound up with a good starting point.

Any bill can be improved, but many people were a part of this effort and they have done a good job getting this to a good starting pays -- place.

Hopefully will put an end to the situation where private shareholders and gained when times are good but the public loses when times are bad.

90% of the housing market is backed up by fannie or freddie.

This wind down, how would it actually works?

How do you basically get everyone off of that when it is so much a part of the system?

I think it will work very well to begin building up in this new entity called the federal mortgage insurance corporation.

You begin building up.

Fsaha today is leading a bread trail towards this trend.

Let's face it, fannie and freddie today would be receiving zero guarantees if you did not have the u.s. eagle stamp out what they are doing.

This whole notion that they have value without the government behind them is completely bogus.

Are you not in some way -- forgive me, but are you not in some way replacing fannie and freddie with this corporation commission?

Trading one guarantee for another?

Well, there is a huge difference.

What guarantee is one that private shareholders have gained from, the other is an explicit and a price is paid for that.

You're explicitly also have 10% capital in advance of that entity with actual cash to put in front of the program.

Let's just -- you know, let's kill all in here.

You want to get government out of the housing market?

Why create an entity that provides any kind of backing for housing?

Just step aside.

If i was bizarre here and i could wave a magic wand -- [laughter] you would see that happening, but i realize that is not read the country is.

I want to make progress on the issue.

I will say that our bill puts in place a mechanism for congress to move totally off of this situation.

We moved in that direction.

Think about this 10% capital piece on $5 challian in mortgages, which is where fannie and freddie are today.

$500 billion in private capital at risk under this scenario.

Even if the government does not have the ability to price risk appropriately, there is adequate capital.

During the last crisis if fannie and freddie had had 5% capital, there would have been no taxpayer losses.

Look, i am about moving ahead.

If i could wave a magic wand and create a totally privatized system, i would do it, but that is not something we can pass in congress today.

I am a pragmatist and want to move ahead.

Speaking of, house gop will be deciding and immigration tomorrow.

Any advice for your fellow senators on that?

Let's look, i spoke to some folks there today who will be influential in this debate.

The senate seemed happy to be involved and hopefully it made a difference.

We will be looking at security where improvements can be made.

Look, they will take up their bill and hopefully there will be a conference, and i do think we still have a pathway toward a comprehensive immigration reform.

I think it is the right thing for the nation, economically.

Candidly, it is what this great nation needs to do at this time.

I still -- i still think we can cause this to happen.

Thank you so much.

Coming up next, the analyst that took down intel yesterday.

What about the future of this chipmaker?

? ? time for the next big trade, bringing you the boldest calls on wall street and the people behind them.

This one tanked.

A downgrade on intel, declining the stock, writing down the nasdaq gains.

Talking about the ax in the name not being in the market.

The decision was all about mobile, going to mobile not being as good as you might think.

Explain to viewers this shift from pc to mobile not being as good as you might think.

It comes down to dollars.

A lot of times investors thinking about intel wanted thing about percentage points, but it comes down to dollars.

When you take a look at the cannibalization that has been going on, tablets have been doing it for two years.

There has been no growth in notebooks.

When you run the numbers and take a look at their profit dollars per tablet, what kind of system you get for a notebook?

Think about it this way, in the next four months to six months, are you going to buy a laptop or a tablet?

Are you going to buy five tablets?

You have to sell five times as many mobile devices to make up for one pc.

That is incredible to me.

It really is a structural issue.

It really is.

As we get to the back half of the year, the reason that investors, the core of investors up there this week, we are getting to the point where intel is willing to launch its first target for the tablet market.

It has really been apple and samsung's market.

As we get to the fourth quarter, this is really the first time we are going to see intel pushing hard.

You will get some.

The good news is that they are participating in the cannibalization but the bad news is that it is still occurring.

Profit dollars are that much less than a notebook.

This is only part of it.

The other part of it is the server, the cloud.

What is interesting is that every tablet that is connected has to do the number crunching, twitter, things like that.

The server is going to go through a similar transition over the next few years

This text has been automatically generated. It may not be 100% accurate.

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