Icahn's Dell Surprise: Street Smart (07/10)

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July 10 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

That and people taking advantage of rules that actually take money from people who only really are accredited investors.

Bob rice, thank you, as always, for joining us.

, if you have an idea for bob's next buzzword, go ahead and tweak it to him.

That does do it for "money moves ." if you missed one of the shows, you can check it out on our website.

This also our amazing ipad app.

"street smart" starts now.

? carl icon's surprised gamble.

The billionaire investor offers his latest move for del.

Plus, bernanke speaks and investors listen.

He makes remarks after the bell.

We get full coverage.

Yum's bet on china.

The kfc king gets more than half of its revenue from the asian superpower.

From bloomberg world headquarters in new york, this is "street smart" with trish regan and adam johnson.

Stocks getting a boost after the fed schools.

Welcome to the most important hour of the session, just 60 minutes before the closing bell.

The dow jumping higher with fed headlines.

Let me get right to the big picture, the three charts you need to see right now to know exactly what is happening.

Take a look at the dow reaction, up, down, all-around, quite frankly.

People are trying to interpret what actually was said at the fed.

Look at the 10-year.

Is it good?

Is it bad?

We were up, down come a wind up again, the yield right now 2.68. finally, something unrelated, but incredibly important, a look at what is happening with oil.

Right now, $105.93. we drew down our inventories more than expected.

That is a big deal.

Julie hyman, what do you have that we need to know now.

We certainly have individual movers.

Let's start with family dollar.

After the discount chain came out with earnings that beat estimates, at the same time, they actually brought down the forecast for the year.

That is not enough to dampen enthusiasm for the stock.

It is still up nearly 9%. different story for best buy.

In may and june, comparable sales trends slowed, particularly when it comes to legacy items like personal computers and televisions.

Even a little bit of slowing in mobile and tablets as well.

Finally, pandora also following -- also falling.

Richard greenfield said that pandora, particularly in cars, is going to be facing more competition from apple and itunes radio as people listen to the radio more on their devices and less on pandora.

We are seeing their shares down 8%. the top story takes us back to the center of the del buyout saba.

In a daze, shareholders will be -- dell buyout saga.

In eight days, shareholders will be voting on whether to take a deal.

Carl icahn is still in the middle of the drama.

He said they could remove more after an appraisal, but an appraisal puts the company in hands of a judge.

Here to walk us through what the appraisal process means is our panel of experts.

Let's start with christina.

Walk us through what is going on.

This issue of appraisal rights only comes into effect if shareholders do in deed vote in favor of the deal.

Once that happens, unhappy shareholders, including carl icahn, could go to court and asked the court to deem that valuation fair.

One judge.

Exactly.

What happens if the judge says you know what?

We think it is worth more.

We agree with carl.

That suddenly changes the price that silver lake and michael dell would be paying.

The shareholders that sought appraisal rights would get increased fruition.

If you're actually putting the money fourth, if you are silver lake, and does it make you nervous because you might not ultimately know what the end deal price is?

Absolutely.

Not only that, the 60 days you alluded to are the time and they're going to have a free option, effectively, to negotiate with dell and maybe get a higher price.

Dell is going to be out with bankers syndicating the deal and they are not going to want to have an appraisal liability like this hanging over their heads.

As far as the overlay is concerned, it does not have an out on this -- as silver lake is concerned, it does not have an out on this deal.

Their equity is committed and they cannot walk away.

That is interesting.

A lot of deals will have an out.

Silver lake does not have that, that would make, i would think, them a little bit nervous.

By the same token, carl icahn also taking a big gamble because he would be relying on one judge as well?

Yes.

He still believes and still wants the shareholders to vote down the deal and approved his $14 tender offer.

If that does not happen, he is all about risk-reward calls.

If it does not happen, it will put him in a position where he will have 60 days to evaluate whether he is going to go forward with appraisal rights, try to negotiate with the company, and at the end of 60 days, if he decides to go through with appraisal rights, then yes, it will be in the hands of -- not necessarily throwing in the towel, but the potential downside.

A fed court did just review appraisal rights on a smaller hedge fund in a smaller deal and the judge did award a higher price to that deal.

That decision came out just last week.

We have a professor joining us from boston.

Brian, i imagine this also opens the floodgates for this discovery process as well, does it not?

Not really.

When the question of appraisal and the before a judge, the only question the judge is going to consider is what the value of dell is in the days before the deal.

What is the process of the company before the transaction occurred?

It is only a question of valuation.

It is not a question of whether they were treated fairly in the process and the fiduciary claims.

It is only about how much shareholders seeking appraisal should get as a fair value.

How do they determine that in the court?

That will be a question for the experts, really.

Dell will be bringing their experts in who will say, the business is going down the tubes.

We're lucky we got $13.65. carl icahn will bring in experts to say the future is rosy and we deserve more.

This will take years.

This will not take 60 days.

When carl icahn threatened years of litigation, this would be it.

If, in fact, we're talking about years as you say, let's say that michael dell and his team decide, you know what?

We don't want to deal with that.

We're willing to pay more.

If they were to up their offer -- they said they would not, but if they were, would that be a way to effectively quiet carl icahn?

It could be.

If you want to be in the group that could get appraisal, and i am sure carl icon is already there, you have to do a few things.

You have to make a written demand to the board of directors before the vote.

You have to vote no, and then you have to hold on to your shares, you can not sell them.

You're in for the long haul.

This is not something to be taken lightly.

Usually, only stockholders with significant interests or stakes are going to stick around.

Do you think he fundamentally believes the company is worth more, the fact that he is going through all of these motions?

Not yet because he has not taken any of these actions yet.

He will vote no, and then he will hang around for 60 days.

At that point, i am sure his lawyers will make a determination as to whether they think hanging around will be worth the payoff, or whether they should move on to something else.

I don't think we need the appraisal issue to know that carl really does believe the company is worth more than 1365 per share -- $13.65 per share.

Yes, you do have to hold onto your shares and you do not have consideration, a lot of these guys, you can borrow money against it.

One other point that i want to mention.

He is right that the experts are going to be arguing.

-- arguing that you are lucky to even get $13.65. dell is not going to be making that argument the week after the merger.

They're going to be out there saying this company is great, this company is so valuable.

It will be hard to do that and then in an appraisal say it is not worth anything.

But it will take another year, another 80 months.

That is way down the line.

Carl icahn actually brought another case to the delaware courts and they talked it out.

That is something we will hear from the other side, and basically trying to get out there that message.

The dow was on completely different merits.

That had to do with the fairness of the profits.

As the professor just mentioned, this is about fair value, not about whether the process itself was there.

If carell really wants to up the game, what he will do it -- if carl icahn really wants to up the game, he will make an offer for the entire company, which will put the process to bed.

One of the reasons the firm recommended voting against the deal was because it was not an apple to apple deal.

There is still uncertainty over the subsidies that carl icahn has under his proposal.

Who knows?

If he can get the financing together, maybe he comes back with a bigger offer for the whole company.

The other alternative is the silver lake and michael dell say we are going to offer additional cushion and up our bid?

Yes, but they are unlikely to do that today or tomorrow.

They are going to see what votes are coming in.

They're going to see who is asking for appraisal rights.

As we get closer to the meeting, we will have a better idea of where they are.

We will be watching for it.

Thank you to the whole panel.

We will have much more on the dell dual tomorrow with the man himself, carl icahn, joining him to explain his latest move tomorrow at 4:00 p.m. eastern, right at the close of trading here on "street smart" first on bloomberg.

Coming up, adam is naming names in today's insight in action.

10 stocks for under $10, time for a little insight in action.

Let me show you exactly what we are talking about.

They have screened through the russell 3000 to come up with the most attractive stocks based on earnings growth, evaluation and the charts rising.

They are in an up trend.

This is why you care, and it is symbol.

Since they started doing it -- an it is simple.

They are up 49.8% since they started doing it, obverses the s&p 500, which is up 30%. some of these names you may not have heard of.

See what i mean?

You've probably never heard of these.

They are smaller caps in a lot of cases.

Wendy's, there is one we know.

Don't worry, i will post all of those stickers on my twitter.

Sometimes cheaper is better.

Gregg's who better to talk equities than the biggest bull on wall street?

He has been in finance more than 25 years and he sees 1764 the s&p 500 this year, higher than any other wall street strategists that we survey.

Tony meyer, i guess you are not scared of tapering.

I still think i am conservative.

Really.

It is not like i am looking for 20% upside to get to 1760. we reached 1700. it is kind of aid defensive call.

I would like to focus on next year's 1955, which i think is also a conservative.

1760, despite all of these concerns about the fed having to pull back and not throw as much buying into the action, talking about going down $65 billion a month from $85 billion.

That will not affect the market?

I have made so many mistakes over the 25 years you mentioned, that we came up with five points that correlate with the direction of earnings.

Hang on, i have to stop you right there.

The direction of earnings is flat.

Flat now, but on a year-to- year basis, it is up.

Even with all of the head winds we have had over the course of the last four years, earnings have done pretty well.

I did not say history correlates to the top line growth rate.

A correlates to the direction of earnings.

The direction of earnings is driven by economic activity.

That is driven by the stable mass of the yield curve.

We have to talk about that.

But that could change.

The tapering talk -- meanwhile, of the fed did nothing so far.

The tapering talk -- by the way, you have not heard the q&a session yet.

It is coming up at 4:00. the long end is deep on the yield curve.

If you are a bank president or ceo, you are still buying short and borrowing long, or you are using that extra spread and the steepness of the curve to land.

Capering makes many more, not less available -- tapering makes money more, not less available.

Some other guests have said that it may perversely cause people to borrow more because they know the rates are not going to be low in definitely.

That is a great point.

That is a really interesting point.

Because if money is getting more expensive, maybe you will go out and borrow now and put that money to work.

Let's throw something in there.

It is ok if people cannot far barrault because they cannot afford to.

It is o'clock -- barrault because they cannot afford to.

It is a crazy notion that you should only bar with you can.

This has extended the economic -- borrow if you can.

This has extended the economic cycle, not shortened it.

The recession is further, not closer to us.

That means your earnings growth is going to last longer.

We are in the middle of this valuation.

You think the fed gamble and swell.

You think the economy is going to -- ends well.

You think the economy is going to improve.

The idea that it will end badly has killed some investors over the years.

And it will end badly because you cannot kick debt with more debt, which is what we are doing.

This is an expense category.

I went from a five-year adjustable-rate mortgage at 3.25%, i just got a 2.5% 10- year fixed-rate loan.

It is and interest expense story.

You cannot fix debt with debt.

Tony, i'm glad we have you here today.

In conversation.

The billionaire who represents everything these protesters hate is making big money of the upcoming world cup inand summer olympics.

The brazilian government's massive spending for both the summer olympics and the world cup sparked protests across the country last week.

One of the concerns is that money that should have gone to education and went to oas.

What is oas?

One of the bidders in the olympics whose success made a the president a billionaire.

What can you tell us about this billionaire?

He is extremely private, extremely low profile.

He does not draw attention to his wealth.

He rose to prominence as an entrepreneur, owner of a construction firm in the northeast of brazil during a time when the governor of the state was his father-in-law.

And rose to be the head of congress.

Along the way, he pushed a lot of business to his company.

So, he continued to prosper, even after his father-in-law died in 2007, and his company is building two out of the 12 stadiums for the world cup next year.

Two out of 12. as they say here in the u.s., you never go out of business doing business with the government.

Let's talk about his personal life.

What can you tell us about the man?

There is not a lot to say about his personal life because there is not a lot that is known.

He really tries to avoid the spotlight as much as possible.

We know that he is still married to the daughter of this politician.

We know he has a daughter not involved in the company and his two sons were vice presidents of the company that he is screaming to succeed him one day.

We know he lives in sao paulo -- he is grooming to succeed him one day.

We know he lives in sao paulo.

Beyond that, not a lot.

People are frustrated in brazil because there is not a lot of building -- because there is a lot of building going on, but it is not building of the infrastructure that they need and the money is not going to the education they need.

Have been these protests affect companies -- how can these protests affect companies like his?

It is a great point.

When brazil won than the rights to be -- when brazil won the rights to the world cup, it was pitched as a chance to transform their infrastructure.

All of those plans were shelved but the stadium when ahead.

What could happen with the protests?

We are already seeing the officials in some cities have reversed their hikes.

They have committed to investing $50 billion in new transportation projects.

We're going to leave it there.

They are taking it a bit more seriously.

Yum!

Brands earnings are minutes away, and it has been a difficult year for the china operation.

First, they had the flu scandal, and then an avian flu scare, and here's the thing -- yum!

Brands generates more than 50% of its revenue in china.

Are the company 's fundamentals strong enough to trump these bad headlines?

Julie, they've had a lot of hurdles.

They had.

If you look at this quarter, china will continue to be the focus.

One of the reasons the stock has been up this year is because the declines in china have been moderating to some degree.

The company did say that comparable sales in china no in may word down 15%, which sounds terrible, but it's smaller than the 29% drop it saw in april.

The company has been focusing on improving its business.

It's been running a lot of ads to try to improve its business, and it does have that first insurance advantage there.

It was one of the first fast food companies from outside china to inter china.

-- it does have that first entrenched advantage there.

We might see a slowing of the drop.

Let's not forget china is dealing with its own struggles in terms of its economy.

Let's talk about this -- april, down 29%. may, down 15%. not as bad as it was, but can they keep up momentum?

Can they keep up their stock price with numbers that look like that?

In april, 87 cases of avian flu, m&a, only a handful, and none in june.

The media focus on avian flu has died down dramatically.

You should start to see the numbers start to improve, probably not positive, but maybe mid or high single-digit negative.

I think any sort of directional improvement in same-store sales is a good anger at this point.

How much of this do you think is already baked in the?

Everybody knows china is dealing with a slowdown.

Everyone knows about avian flu and all these things are out there.

Our investors counting this when they tried to value the stock right now?

I think it is already factored in.

This is the third time to push up above this here in the last year and half.

We have been channeling between 74 and 64. the target is 84. i'm looking for a significant breakout, not just from earnings, but in the big picture, the worst has been factored in, we can move forward.

The options way i like is looking at i want to buy some out of the money calls for august.

They are relatively cheap.

I want to buy a pair of those.

For each pair that i buy, i sell a july call to help a war it.

I'm taking advantage of a breakout and looking for this stock to make a push above 74. i would also say one of the things you might be looking for from management today is for them to emphasize that half of their sales are in china but half of their sales are not in china.

Jeffries said at a consumer conference is held that that was something management was talking up, that it has seen strengthen taco bell here in the u.s. we might hear more of that type of commentary.

They have competition in the u.s. we just did a big special inside chipotle yesterday, and a lot of people are opting for that more expensive, considered healthier food.

How are brands like taco bell doing with competition in the u.s.? china is going to be the number 1, 2, and three thing everyone is looking at tonight.

Then they will look at the u.s. the u.s. is doing better.

Good year last year, doing better with new products coming out at talk about.

They are doing well, and they have also removed some of their dollars from local advertising, national advertising this year at talk about, and that is helping them.

We have seen that help restaurants in the past.

You want to buy these large cap restaurant companies when they are down on their luck.

To pull a last number was beaten up.

Nobody wanted to touch it.

-- chipotle last summer was beaten up.

Nobody wanted to touch it.

Look at it now.

The other thing as profit margins are increasing.

Commodity prices have come down.

Chicken is just corn and another bag.

Two dollars cheaper than it was just last year, so that is a big factor that will help them in the long run.

And yet, estimates are for down 19%? this all has to do with china, as peter was talking about this.

All of this is sort of moved -- moot if people are not seeing the prophet.

The company saying they are not really expecting a rebound in china until next year.

They have tried to manage what people are looking for in that way.

We will see how it looks when those numbers cross.

Thanks so much.

Media and tech titans are in sun valley, idaho.

We will take you there after the break.

Plus, one of the ultimate men's magazines goes up or sale.

Will the women of "maxim" attract big media buyers?

? some breaking news -- boston bomb suspect the dzhokhar tsarnaev has just pleaded not guilty in court.

He has just done that in boston.

We want to make sure everyone knows that very latest piece of that peculiar puzzle.

Media moguls, meanwhile, are taking over sun valley, idaho.

Our senior west coast correspondent jon erlichman joins us live from sun valley with all the latest on the sports wars.

I would imagine this is a big topic of conversation in sun valley.

It's a great one.

Think about the fact that a lot of these companies are friendly, but at the same time, they are vicious competitors.

We know fox's gearing up for the big launch of its own sports channel to rival espn -- fox is gearing up.

They are hoping they can have a channel that could at some point maybe command the same kind of premium fees that espn has, but espn is going to continue to push out their own special programming.

They might have a few tricks up their sleeve or september and august -- or september and august as well.

They are also pushing espn on new technology platforms.

They recently unveiled the espn watch app for apple tv.

A lot of people talking about how one of the point people for apple is here at sun valley.

He played a key role in bringing that espn cap -- app.

Our main point of contact -- our main point of contact is eddie, and there's a pretty good working relationship with espn.

They have consistently worked with us.

When you see those big licensing deals , a lot of times, 5, 10 years down the road, they have to be thinking about how people will be consuming that sports content down the road.

They always have these new technologies and new apps in mind.

Were there some pro athletes on hand?

Sometimes there are.

Lebron james has been here in past years.

What you definitely see are a lot of sports owners.

We talked to the owner of the chicago bulls earlier.

He was looking for john skipper of espn because they had a meeting scheduled.

Did you also see a lot of the sports commissioners.

David stern of the nba and roger goodell of the nfl.

All those commissioners were speaking earlier today.

One of the panels this morning on the topic of sports.

You hear all the time in media these days, all the content creators saying content is king.

It's great to be in the content business and its even greater if you have live sporting events because that the stuff people still have to tune into as opposed to watching something later on -- whatever, netflix, hulu, something like that.

Good stuff.

"maxim's" sexy photo spreads appeal to its male audience, but will the magazine appeal to media buyers?

That is next on "street smart." ? ok, the magazine is a self- described ultimate guys guide, but at the end of the day, it may not be worth a whole lot, even though it is one of the largest men's magazines in circulation.

It is selling itself at 1/10 of what the owners paid just six years ago.

Gosh, just 1/10 of what it went for?

Incredible.

Really challenging conventional wisdom that you can sell ads against half naked women any day of the week, right?

We see that in the numbers.

We have seen ads sales drop annually and quarter over quarter.

In fact, if you look at the quarter over quarter numbers, ad sales for the magazine are down 45%, and basically, the problem is that it really has suffered from the lack of investment.

It was a private equity company.

Private equity guys bought it at the top of the market in 2007 and gave up on it two years later, defaulted on its debt.

The company ended up in the hands of its creditors.

It has -- it is just that advertising went south because the economy went so far south?

That's exactly it.

The magazine has not been able to capitalize on the fact that advertising revenue has come back because you had this disruption.

It's part of the digital atmosphere.

You can read these articles and see those pictures and probably more online.

Why the need for a magazine like "maxim" nowadays?

They still have a very attractive audience that advertisers look for.

Forget the audience, let's just talk about the content of the magazine.

Looking at that spread.

So they have that key demo, so that could be valuable.

Bids have come in for about $20 million, right after the most likely bidder we have been hearing is american media, which owns a suite of personal fitness magazines and has a partnership with "playboy," so we were thinking they would be a front runner, but they apparently have passed on the deal.

Do they have content online?

They do, but their website looks more like a blog posting.

You can see that it has not evolved into a true digital product.

Like you said in the intro, it is still the most widely -- $20 million?

When they lose money, they continue to default.

If you are a wall street guy that cannot get girls to talk to you, this is a nice way to get easy access to scantily clad women, no?

So the creditors lose about 100 million dollars, and you are talking about a sale price of $20 million, so creditors have obviously lost their shirts on the deal -- no pun intended.

Totally going south.

We could clearly have fun with this one.

This definitely comes at a challenging time for the magazine industry.

To your point, barry diller said he made a mistake in buying the magazine business.

Time warner spun off its magazine business, so very, very big challenges here.

Definitely.

Lex absolutely.

Our closer is the biggest bull on wall street -- absolutely.

Our closer is the biggest bull on wall street.

We will explain in today' cap.

? time for "chart attack," where we show you a chart that will make you smarter.

All right, tony, mr.

Bull.

A sickly, we are -- basically, we are in the early stages of value expansion.

The white line is the valuation expansion that took lace from 1984 to 1987, and the yellow line is from december of 1994 through august of 1997. i use those and points just as those were the first months or corrections in both of those times, so we are halfway through, which suggests if it continues to do to protect as it is, you would expect something like 2200 on the s&p at some point between next may and next october.

I appreciate the way you have gone back and looked at other big rallies to try to give it some context, but the fact is the current rally actually started back in 2009. if we were to make the start date for the blue line -- in other words, where the market currently is -- wouldn't we already be at the upper corner of that chart?

A market did not bottom in july of 1984. it did in 1982. i'm taking it from the valuation low, not the price low.

That is the key.

You are still in a tough economic environment.

Nobody is going to pay more for those earnings.

The key to this chart, though, is that we are following history . for this entire cycle, people like me keep coming on tv to try to prove it is different to try to sound smart.

The complicated stuff is not working.

This is a human nature game.

You buy what you need for returns.

For example, if this were about strong fundamentals, how did the highest risk adequate -- category go to a fixed income level?

It's because that is where the best returns were.

Understood.

Let's just show viewers one more time where this chart is.

Again, this is on valuation, and you can see we are still only in the middle based on valuation terms relative to some of the other big rallies we have seen.

Thanks for sharing that with us.

From tribune, then off to yum, we have 10 stocks, the top ones you need to know about.

Plus, next hour, you will be hearing from president obama's economic adviser, plus two congressmen on the future of immigration reform.

It's all next.

If you missed everything that happened during today's session, do not worry -- we will get you caught up on the only stocks you need to know about today.

Apple down a fraction after a judge ruled the company played a central role with wife publishers to fix electronic book prices.

Apple now faces a separate trial to determine sentencing.

All scripts sees more than $2 million in bookings.

Lex walter energy is up about .5%. earlier, it was higher than 5% after it was pushed up to market perform, citing financial performance for the upgrade.

Analysts have been saying the company has been making progress.

Seven is t-mobile.

The wireless carrier has added contract carriers for the first time in two years.

You can catch t-mobile's ceo on "bloomberg west" tonight at 6 p.m. eastern.

Citigroup believes that hp's services business could strengthen.

Five is tribune, up about three percent.

The media company planning to spend off its newspaper publishing business, which includes the "l.a. times," "the chicago tribune," and the "baltimore sun." this move will allow tribune to focus on its more profitable television business.

The stock is on the pink sheet.

Prbaa is where you would find that today.

That's about as far from the new york stock exchange as you could possibly get.

It speaks to how difficult it has been to make money in the print is this.

That is exactly one of the reasons why murdoch just split news corp.

Into publishing versus tv.

It's a tough as this.

We were just talking about "maxim," being sold for $20 million, one/10 the price it went for.

For his family dollar -- for his family dollar, -- number four is family dollar, which said it expects its customer base to remain under pressure, which is a good thing for a discount company like family dollar.

Cheap values.

People trying to save money.

All right, let's talk about best buy.

Shares falling 5% after reports that same-store sales appear to be slowing.

Also, fundamentals remain challenging at best buy, which is effectively the same difference.

Number two is yum!

Brands, who shares are down fractionally.

Analysts are looking for $.54 a share on revenues of two point $5 million.

Although the all-important number here will be that same- store sales number for china.

Analysts looking for a drop of 12.2%, which would be a smaller decline than we saw last quarter, the prior quarter.

Keep it here for full coverage and instant analysis of those results.

I will be bringing them to you when they come out.

All right, we are getting to our number one stock of the day, and it is dell, down less than one percent -- less than 1% . shareholders seeking a higher price for their shares in court as the deadline for dell investors decide on which offer they like.

Be sure to catch my interview with carl icahn tomorrow right here on "street smart" at 4:00 p.m. 24 hours from now.

We will see you then.

Looks like dell stock managed to eke out a bit of a gain there.

S&p just barely up, pretty much a frat line.

Dow trading down about seven points.

Again, pretty much on the flat line.

Let's start with julie.

As we were saying, everybody looking to the fed for some direction today, and they did not find it.

No more insight offered in those fed minutes for investors to chew on.

They were essentially saying they want to see more improvement in the labor market, but then, of course, you have some members on the committee saying they like the improvements they have seen in the economy thus far.

Not really anything new here.

What investors are still hoping for, seemingly, is some sort of insight coming out of those ben bernanke comments which will be imminent in the next hour or so.

In terms of the groups and how they performed in today's session, financials were consistent underperformers today.

That was one of the big lagging groups, a lot of confusion when it comes to the rates, taking its toll on financials.

People still looking for safety or what they perceive to be safety.

Health care the best performing group followed by utilities, and that is a trend, really, particularly, that we have been can -- that we have been seeing consistently.

How about treasuries?

We saw some of that volatility right after those fed minutes came out, but in the end, we saw treasuries drop in price for the first time in three days.

That means the drop in price translates to a rise in yields.

If you look at the 10-year u.s. government note, we did see yields briefly go down, right around 2:00 p.m., when those fed minutes came out, but you can see throughout the course of the session, yields have been rising . again, an interesting dynamic.

In those meeting minutes, we did get at least a reinforcement, if you will.

No new news, but we did see several members say that they could see fed purchases or the tapering effect, if you will, happening sometime in the near future if the economic conditions warrant.

Again, some traders say that leads people to believe that the treasury -- at least the treasury market -- could again start to move higher in terms of yield.

Remember, we also had a bond auction today overall.

Yields came i and -- yields came in just a little bit under analyst estimates.

Below average demand over the last 10 sales, and indirect bidders of foreign central banks included in that group took home a little bit more than average overall, but if you talk about what happened with the treasury market overall, tomorrow, we do get some catalysts.

Jobless claims tomorrow at 8:30 a.m. eastern time, and we also do get a little bit in terms of a catalyst overall or the 30- year note, 30-year-long bond because we have a bond auction tomorrow as well.

Those are the catalysts for tomorrow.

All right, good stuff.

For more, we want to go straight to our street fighters.

Looks like the fed wants to see more signs of job improvement before they really, really begin tapering.

Is this good news for the market?

That's nothing changed.

That has been the story from the beginning.

Certain criteria have to be met, and we have not met those.

Everybody anticipating something will happen before the rules get kicked in.

That was just wishful thinking, but i love the way the markets reacted over the last few sessions.

This is the fifth straight session up on the s&p. we've had a nice comeback.

We look like we are within striking distance of those former highs.

I love that you call this another day of gains for the s&p. we barely eke out again -- it is a gain if it is green, like my jacket.

I would add to what he said that i think the fed is going to want to wait to see what impact the higher interest rates on the long end of the curve.

I do not believe that the fed is going to be tapering anytime this year.

With core inflation dropping like it has and with the unemployment rate staying where it is -- that's a key point, by the way.

Today we got weekly mortgage applications down again, fourth week in a row, and down nine out of 10 weeks.

That's exactly what you're talking about.

As rates rise, people are not borrowing as much.

They are borrowing as much, but it is a different mix.

Mortgage activity should stabilize because it is not exactly expensive to take out a mortgage, but again, i think the fed is going to want to see what all of this means to economic activity.

They gave us the parameters.

The guy told us.

It's interesting what the market reads into it on any given day.

We will here in just a few moments from the fed chairman.

Do you think this could be market moving?

It will be academic.

He will talk about the last few years, some questions and answers.

The question-and-answer.

That's what we will be watching very carefully.

You can probably expect some academic commentary , but could that have the potential to move things tomorrow?

I think it is.

The s&p futures here in chicago, if you have known anything as a traitor, they might indicate 10 down and have a strong reversal.

I think ben bernanke speaking right now more or less laying out maybe not september, coming in december, but that tapering will start before the end of the year.

It's just a matter of september, december.

I think questions will be pointed toward that.

You will see strengthen the dollar.

I want to question you on that.

The man sitting to my right, quite the ball, does not think we will get tapering this year.

Make a case why you think we will get tapering this year.

I think we will get tapering this year very simply -- we have never had a more transparent treasury.

They came out and pretty much announced it.

Your guest is really leaning towards the fact that we are -- you know, bad mortgages.

You know, as far as the economy goes, we are really focusing on that jobs seven percent number.

I do not think we will hit that.

I think we will have a rough third quarter, but we need to get out of this by the middle of next year.

They have outlined that several times over the last couple of months.

Maybe not september, but a lot of us in chicago think it will be in december.

I do not see how you can, when the fed chairman has been on tv and in front of the senate he said at 7 -- at 7% he will start to taper.

He loses credibility if they change before that.

They have started to lose credibility, i would argue.

Are we hearing a little too much from them?

Your argument is dead on.

Hang on a bit.

We are at the point where we get almost too much information and we did too deep into this.

He has done what he said he would do.

We may not agree with it, but he has done what he said he would do.

Why look for that to change?

You are trying to look for a reversal, and i'm not looking for that to happen.

Look at the yield right now.

We are right near the midpoint at 2.8% for the 10-year.

We just bounced off an extreme low level.

We are not very high.

We had a horrible auction here in chicago -- you know that -- and we are still up at those numbers.

I really believe that 7% is some unicorn, and imaginary number.

The revised -- refis and mortgage applications are slowing down.

Where are we going to get those jobs except from housing?

We have seen that job growth in the private sector, but unless we have a huge housing recovery, where are we going to get down to 7%? i think you are switching your story.

Sounds like you are making the case for no tapering, which is what tony is saying.

No, i'm saying that that 7% -- we are going to start tapering before we get to that 7% level.

I think that is just the market you have seen in the last four or five trading sessions -- i think that 7%, we will taper no matter if we get above or below that, that is going to come this year.

Thanks so much.

It is a critical moment for immigration reform in congress.

House republicans are meeting right now behind closed doors to discuss our next move on the issue.

Peter cook has the latest from the hill.

Any sense where house republicans are going on this right now?

The scene down in the basement of the capitol building -- hot, cramped room.

House republicans all jammed in there.

No cameras, no press allowed in there.

It is a critical moment, as you said.

Immigration reform could die in this room right now, or it could live to live another day.

Right now, we do not have a sense if there is any consensus in that room.

One member described it for me as a free-for-all with every member getting a chance to weigh in on what house republicans should do with immigration reform now that the senate has passed their bipartisan bill.

One thing clear -- leadership has no plans at this point to bring up the senate legislation.

Instead, they plan to bring up their own bill or pieces of immigration reform to the floor.

One member is going to be presenting right now.

Even at this time, the homeland security chairman -- you might recall, he put together the border security bill that the house would consider on the floor.

We spoke to him going in i think the reader what -- we spoke to him going in.

I think the leader wants to judge the temperature of the members.

My job is to try to persuade them that my bill will achieve their goals in a very short time so that they are in a more comfortable place for that.

Mccaul going in, saying that a really big obstacle being the pathway to citizenship included in the senate said -- included in the senate will -- the senate bill, so he does not see a lot of house members supporting that.

This meeting to go to 5:00, 6:00, maybe 7:00. then at some point, we will get a sense from the house republicans, specifically john boehner on that.

That is the close, everyone, but we will get your first trade for tomorrow.

Here's a look at what is next.

Moments away from ben bernanke.

The market listens for any tapering clues from the fed chief.

A central bank veteran helps us break down the remarks.

Plus, immigration reform in the crosshairs.

We talk about the profits being that -- the process to revamp u.s. policy.

And today's "weird wall street here co stay tuned for your first trade tomorrow, coming up when we continue.

? the federal reserve was established to provide a means by which periodic panics which shake the american republic and do it enormous injury shall be stopped.

You are listening to federal reserve chairman ben bernanke.

He has started to speak at the national bureau of economic research conference in boston.

He is speaking about the central bank's 100th anniversary.

When the q&a begins, we will go to that live, so stay tuned.

It's happening shortly.

In the meantime, earlier today, the central bank released the minutes from its june meeting, showing that many fed members want further job improvement before putting the brakes on qe.

As we await the question-and- answer portion of the conference, we want to talk tapering with our guests.

Good to have you here.

Does it sound to you as though they need to get more certainty on the jobs front before we see any real tapering?

They have a forecast which if it comes true, they will be in a position to taper by september.

The most important thing is their characterization of inflation.

They market down there forecast of inflation in 2013 of .5%, but they had it rebounding right away back to goal.

What did they have in the minutes to explain that forecast?

Nothing.

That tells you the fact that inflation fell was inconvenient for them.

If it is inconvenient, what is it inconvenient to?

They will not be able to scale back their program anytime like they would like to -- if they admit they are not getting inflation like they would want.

Their characterization of inflation determines the width of the window before they can start tapering.

They decided to characterize it as benignly as possible, so they have therefore narrowed the window.

It is pretty scary if you think about what is happening with inflation with all the money they have been printing.

It's only 1.1%. and going lower.

I'm sorry to interrupt, but i think it is a very important point.

Basically, in terms of jobs, they said that given all the fiscal consolidation, you have got to be impressed with the underlying momentum in the economy.

They looked at housing and said it is probably resilient to attack up and rates because of her just money.

It is construction, not refi.

They said this was an opportunity to do something that was probably lessening the effect of qe.

To do that, they have to have sustained employment growth.

They have a forecast in which that happens, and they also have to ignore the inconvenient inflation.

If people are not employed, then they will not really have as much demand, and therefore, you will not see as much inflation.

That is part of the reason why we should not be surprised at inflation is low.

The dollar is appreciating.

Commodity prices going down.

You would think the pressure on inflation is pointed downward.

When you start off at a low base, where inflation currently is, you would think the risk would point to the downside, but the fomc forecast to go up.

Do you think they have it wrong?

They could be wrong and they are sincere, or they are insincere.

In either case, later in the year, they will turn around and say, "we are shocked.

Inflation has fallen." it is even further below their goal.

That gives them an opportunity to push back if market participants come to expect tightening too soon.

Thank you so much.

President obama pushing for immigration reform that both sides can agree on.

His economic advisor will be giving us the view from the white house next.

? republican lawmakers are meeting right now to try to put together immigration legislation that both parties can agree on.

President obama wants reform by the end of the year, saying that enacting the senate measure would increase gdp by three point three percent.

I asked gene sperling, director of the president's national economic council, why immigration reform is the key to growth.

Listen to what he said.

I think it does a lot of things.

One, it brings in a younger population that is working, adding to our economy.

As you just noted, the congressional budget office found that this commonsense immigration reform, the senate ale, would actually increase gdp by 3.3% over 10 years and by 5.5% over 20 years.

It also found that with additional workers, with ensuring that undocumented workers could come out of the shadows and pay their payroll taxes, it would actually bring down the deficit i 800 $50 billion over the next 20 years and add two years of life to the social security trust fund -- ring down the deficit by $ 850 billion.

It's a win for growth, deficit reduction, social security.

Look at the people who agree on that.

While we might disagree on specifics, this is an area where people like grover snort -- grover norquist, who you would often be asking me to respond to -- where we agree.

We agree on the economic benefits.

Sounds like it is an economic issue more than a political one, but you have house republicans, some of whom are not as much in favor of this, working right now on their own build.

What do you think the deal breakers would be for president obama?

I think it is pretty clear that there needs to be a halfway to -- a pathway to citizenship, and it has to be a comprehensive immigration agreement, as has been passed in the united states senate.

Again, i know there will be a lot of machinations in the house and a lot of legislative speculation, but remember how overwhelming bipartisan is a is.

President bush speaking on a, the ceo community and organized labor agreeing on this.

It sounds like you are very optimistic that common ground can be found.

What about border security?

If those provisions are strengthened, is that something the president would sign off on?

Let's remember what happened -- in order to get the agreement that was able to marshal 68 votes in the united eights senate, there was a very strong border security bill that evil like senator bob corker -- border security bill that people like bob corker were able to support.

It was shown to have a stronger effect in reducing illegal immigration on the border.

As you know, the president did agree to that.

Did sign onto that.

That is now part of the bipartisan bill that passed united states senate with nearly 70 votes.

We talk about how it is important for the economy.

You make the point, of course,, for the initial bump for gdp, but a lot of people still feel as though illegal immigrants, which could become legal -- immigrants could be taking the jobs of americans who have been here for years.

What do you say to that argument?

What i would say to them is you have 11 million americans who are here and are not documented.

The fact that they cannot come out of the shadows means they can be taken advantage of.

They can be paid lower wages, lower benefits.

That is what hurts american workers, that they have to compete with people who can be paid lower wages because they are not legal and cannot come out of the shadows to pay their fair share of taxes.

What i would say is that by allowing -- giving those undocumented workers a pathway to citizenship, you will have 3 million more of them paying payroll taxes, lowering our deficit, and that will have a positive wage impact on the people they would be competing with.

The second thing i would say -- and i know you hear this often from some ceo's in our most famous high-tech companies -- is that having more high skilled immigrants come in encourages them to locate more production in the united states.

Being able to have more access to some of the very best computer scientists in the world, the very best engineers in the world, rather than displacing american workers attracts more of our companies to locate production here, creating tens of thousands of jobs for native american workers who are here today.

In other words, you have to grow the whole pie.

If something does not pass this year, is there a chance that immigration reform can in fact get done no matter what by the end of the president's second term, or is this the last, best shot right now?

I never like to speculate on negative scenarios.

I think that, again -- i think right now you are seeing a lot of political machinations.

I think that happens on any very significant piece of legislation, but i still come back to the fact that this is not a democrat/republican issue.

This has overwhelming bipartisan support, overwhelming ceo and labor support.

Both our current democratic president and our previous republican presidents support some form of comprehensive, commonsense immigration reform, so i'm still going to bet on success.

That's the white house view.

? ok, as we told you earlier, house republicans are in a closed-door meeting to discuss their stance on immigration reform.

Many have said the future of the party depends on its ability to recruit the latino vote, but house republicans may be pushing back.

We have congressmen from both sides of the aisle and both sides of the debate joining us now.

Democratic congressman luis gutierrez is one of the authors of the house's immigration bill, and republican congressman thomas cole, whose own constituents are skeptical of mostly opposed to immigration reform.

I want to start first with you, congressman cole.

You were in this closed-door meeting today.

What do the majority of house republicans say right now about the immigration bill?

Let me make a quick correction -- what i said was they are mostly opposed to the senate bill, not to immigration reform.

I think there is a broad, high partisan since in the country that the immigration system is broken and needs to be fixed, but it has to be fixed in the right way.

We think the senate bill did something in the right direction, but we do not think it is the appropriate vehicle.

We had a good discussion with the speaker, who made it very apparent that no bill is coming to the floor without a majority of the majority or out of conference without a majority of the majority, but we wanted to take the time to get it right and get good reports about the progress on individual bills, so quite a bit of discussion, and now into open mic where individuals are asking questions, asking clarifications, or generating ideas.

Generating ideas.

What are some of the biggest ideas?

What are some of the biggest sticking points with the bill?

They simply do not trust the federal government on this issue . we were told we would have legalization and then enforcement.

Since we have legalization but not enforcement, people are skeptical of that formula.

Second, this administration and the senate bill, in particular, has far too much executive latitude.

Quite honestly, people do not trust the administration.

It just suspended parts of its own signature legislation, went to libya without congressional consent, so the idea that you will trust them to determine whether or not the border is secure i think is a nonstarter.

Again, people want to make sure that security components are in place and that we have smart policies that allow immigration -- illegal immigration is a wonderful thing for this country and always has been, but they want to make sure that we have more of an emphasis on people that are bringing skills into the country and coming in and filling positions that we need, frankly, up and down the economic spectrum.

We just want to make sure we get it right.

This is a once in a generation opportunity.

We do not want to mess it up.

We heard earlier from gene sperling who made the point that he thought everyone could come together on this.

We are hearing something different, of course, from representative cole.

What is your take?

The republican party is going to have to make a decision.

Is it going to be a party of provinces and states and regions and localities, or is it going to be a national party?

The fact is the demographics indicate that 50,000 latinos turned 18 every month.

Texas hundred thousand a year -- that is 600,000 a year.

Interestingly enough, george bush got about 40% of the latino vote in 2004. that went down to under 20% in the last election.

It sounds like they need it.

It is a political reality.

I'm thinking it is a political reality to their quandary in terms of how they're going to lead.

I believe there are republican men and women who want to settle the immigration debate tom and want to settle the debate by having good, comprehensive immigration reform policy, and i am one that has been working with judge carter and congressman thompson, and we will continue to work with republicans -- i will continue to work with republicans and extend my hand to the other side of the aisle, but what the chairman has done in the information he has relayed -- unlike mccaul, who does have a bipartisan bill, but the chairman has a straight republican bill.

Let me tell you what is wrong with that -- we have to decide if we want to settle the issue or we want to have a more partisan point of view.

We have a partisan point of view.

You cannot pass copperheads of immigration reform.

I want to secure the border.

I want a e-there are five program.

I want to give the high-tech industry and agricultural industry the workers they need.

We need to do that and a bipartisan way.

Representative cole, how important is immigration reform to the party?

I think it is very important, but with all respect to my friend, i worked in a bipartisan fashion on the fiscal cliff, on sandy relief, on dallas, so i do not need a lecture on being bipartisan.

Frankly, we have this administration that our side does not trust, giving its -- given its willingness to waiver the law, and we've had promises made that have not been kept.

I think we can achieve a bipartisan bill, but it will not be the senate bill, it will not be jammed, and it will not happen -- why not?

Because the majority in the senate -- [indiscernible] i can understand that you are not happy with the white house, but you have a representative on the other side of the aisle who has put something forth.

How does representative gutierrez's proposal strike you?

Can you work with that?

Actually, i think it probably -- i have not seen it.

They have not released the bill they talked about, but i have a lot of confidence in the members on both sides of the aisle, and i agree.

I think highly of luis.

I think very highly of my friends judge carter and sam johnson.

Those are really great members of congress, so i'm really interested in seeing what they are proposing, but so far, they have not been released.

I look forward to it being a positive contribution.

I want to tell my friend -- look, forgive me, i apologize if i came across as lecturing you on bipartisanship.

I would be the last one to ever -- i mean, i'm a pretty partisan kind of guy, so i would be the last one ever to lecture anybody on this.

I mean i do not have a lot of credibility in the past, but on this issue, i think we have worked in a -- look, i have worked with john mccain.

I worked with paul ryan in 2005. it sounds like everybody wants to be as bipartisan as they can.

House speaker john boehner spoke yesterday about immigration.

I would like to get your reaction, representative gutierrez.

Just listen to this for a moment.

I will.

We all believe that if we are going to go forward on immigration reform, the first except as you have to have a serious -- you have to have serious border security because without serious border security, you're going to end up with the same thing we saw in the 1986 act.

In the spirit of all this bipartisanship, would you prioritize border security right now as the first step in the immigration bill?

When i introduced the first bill in 2005 with mccain and kennedy and we introduced it in the house, with then paul ryan -- he was not the budget committee chairman, but he

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

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