10:00 eastern time. they are expecting it to show slight improvement. the new york stock exchange says it revolved the computer problems which prompted it to ebbs tend the last thursday's trading session for extra 15 minutes. emc increased offer to $33.50 a share from $30. the domain is the object of a bidding contest between emc and netapp. that's cnbc.com news now. i'm courtney reagan. live from the financial capital of the world in the heart of lower manhattan. this is "squawk on the street." it's a monday morning. it's a sunny, glorious day in july. that's why mark is lucky to have the day off to enjoy it and do tomato harvesting. scott wapner is here. stocks are hung over from the holiday weekend. starting off with anything but a bang. we're going to open lower. people are concerned about the status of the "economic

rebound." >> i'm scott wapner in more mark haines. oil extended the previous weeks loss losses. >> let's look at the futures. it's lower across the board. a lot of concern. as we've been saying, scott, one of us said to me this morning it's more like there's moss, not green shoots. going from green shoots to moss is a downgrade. maybe that's what we're seeing in the market. the dollar, interesting story. china making reassuring comments about the dollar. ahead of the g-8 meeting in italy this week. beijing has made all sorts of noises about maybe getting another currency instead of the dollar to be the global reserve currency. they are now saying, however, they foresee the dollar to be the main currency 40 well extended too chur. china's vice foreign minister told reporters it is not the position of the government that tus dollar is still the most important may currency of the day. >> that is the formal position.

>> until tomorrow. >> until they say, oh, what about the ruble? >> i think they've enjoyed te e tweaking us over the dollar in the last couple of weeks. let's find out how this morning's news is playing out. we have it all covered. reporters standing by. we begin with rebecca jarvis here at the big board. >> thanks. commodity, stocks like you mentioned, under pressure. oil prices is lower as well as gold. they are down about mid single digit before the bell opens things up here. of course, the dollar in focus. the dollar is stronger this morning at a two-week high. you were told about the comments coming out of china. the idea of a global reserve currency is off the table 40 g-8. the u.s. dollar is basically safe, according to china for now. russia's president medvedev also coming out on the matter saying essentially that at some point in time it's going to be an issue, but that right now, there are no alternatives that are

available on the table. also in focus, top question on traders' minds, the rest of the year, earning season, kicks off on wednesday withal coya coming out with their earnings. and rio tinto is selling for $1.2 billion. we know general motors getting the nod from bankruptcy judge approved to move forward with their plan. let's get over to brian shactman for more on the tech trade. >> rebecca, thank you. we are looking at a negative open. the story is the love triangle between data do nan netapp and emc, upping the offer to $33.50. trading above that right now. interesting they think it has room to run. netapp says it has full regulatory approval to go forward with the deal. keep an eye on those two names. a lot of stuff out of baron's. amazon and amcon, they are

talking about jcom and middle beast. keep on eye on that. petsmart, $21.50. it could get to $28 in the next 12 months. want to.out positive stem cell data published. up 4.8%. apple, want to talk about nuance in business week saying positive on this company because of the relationship to the iphone. sirius xm said it had 1 million downloads of the app for the iphone. positive for that company as well. the bears might be back in command at the nymex. >> investors are not hungry for risk today, whether it's oil or metal or across the border, we have oil now, below $64 a barrel. and we also have copper off sharply, down a two-week low after surging 60%. gold down $9. the dollar strength and the seeking of the safe haven, a big reason why we're seeing commodities drop across the board. technically speaking, the oil

story is very interesting. down about $10 from last week's high. a high that was the highest for the year. a lot of that mooibl migight ha with pbm oil brokers and that trade that occurred overnight on june 30th, taking prices above $30 a barrel. they covered that short position. and then let the world know that it was a fake trade. we saw a lot ofselling ensue and that could have had a negative impact on the oil rally we've seen over the last couple of weeks if erin, back to you. >> thank you, sharon. let's look at the market overse overseas. in asia, the story is in india. the bombay sin s, 5.8% drop. scott's been talking about the country coming out with the budget which involved a whole lot of deficit spending, which is yet another country competing for precious financing dollar naps is a big drop there. china -- up 1.2%, bucking the

trend. guy johnson with more on what's happening in europe this moing. what's the story there? >> blue, erin. to be more precise, we're feeling red. most of the european markets are trading lower, pretty much across the whole of the european continent. we've got a negative story. let me just quickly show you what's happening with the stoxx 600. this is a 30-day chart. we've been down consecutively for the last six weeks. they are trading seven-week lowe's. stoxx 600 down today 7%. the oil majors over here, bp is trading down 2.4%. and ubs ain in the headlines denyinthat it's selling its paine webber brokerage business over on your side of the pond which it bout back in 2000. the stock is down by 2%. mr. wapner, back over to you. >> that's guy john in the uk. mean time, president obama is in russia meeting with his

count ter part medvedev to discuss missile defense to expanding business ties between our countriecountries. nbc news savannah guthrie has more. >> reporter: good morning. the president is here to famously set the reset button on u.s./russian relations. they'll make some progress. we do expect them to announce the framework for a new start treaty. the old start treaty to reduce nuclear arms expires in december and they want to come up with a new framework. we're not going to get a treaty out of today but should get further on the path. a real bonus contention though has to do with missile defense. there's a bush administration plan to build missile defense in poland and the czech republic. the obama administration is studying it. so far they're a bit cool on the idea but they ant abandoned it entirely. it is something russia is very much concerned about. if russia had its way, it would make this new start treaty conditional on the u.s.

abandoning the missile defense plans that the u.s. is not going to do that. there's a lot to talk about and a lot to fight about. back to you. >> thank you so much, savannah. we appreciate it. we will be talking to you a lot today. let's bring in john harwood in washington monitoring this i h or rick visit. john, what's your take? >> erin, i think this is the beginning of a feeling out process between the president and the russian leaders. both medvedev and vladimir putin. what the obama administration hopes is they can make some progress there as a means toward get progress on the more important priority which is trying to get russia to go ealog with more severe sanctions on iran. ♪ >> i'm sorry about that, john. i thought we were waiting for a sound bite to come. i was trying to be polite there.

in terms of the business side of this. one thing we were discussing this morning that i thought was fascinating is that given how important russia is in terms of ownership of u.s. treasuries, number three, we only do trade with russia equivalent to the trade with poland, which just goes to show you the sort of, shall we say, chilly atmosphere in business between the two countries. >> a move by the russians a few months ago, they announced they were dropping their bid to become a member of the world trade organization, even though the obstacles to that seem to have fallen away. what some people are saying is that russia was trying to say to the rest of the world, we don't need to trade with you. it's going to be interesting to see whether those business ties get warmed up by this visit as well. >> certainly is. we are all awaiting just to see if there is any sort of side commentary perhaps that comes out of mr. putin or mr. medvedev, right? >> exactly. >> whether it's power sharing or not. john harwood, thanks very much. john will be with us through the

day. heard on k street, john his on deck. we need to consider if the economy does not recover as consensus expects in the second half. then your best market moves now to profit in the second half and beyond. we've got your cnbc edge. and a small-cap hot hand tells us how his high quality growth strategy is paying off in he's volatile markets. five-star fund is up more than 20% this year.

"squawk on the street," live from the financial capital of the world. our next guest says even though it appears the economy has stabilized that is a very different thing than actually getting better. and it could still take another turn for the worse. so, he's come up with four scenarios that investors should consider if the u.s. does not recover in the second half of this year. john hilsenrath is with the "wall street journal." good to have you with us. >> the reason for pulling this up is aed what pretty dismal job numbers last week. they weren't as bad as earlier in the year but worse than the market expected. >> by 100. >> and this was on a holiday weekend. we're coming back today and people are still digesting those numbers. i think they've got -- we've spent the last three months pricing in stabilization

recovery. i think we have to start thinking about what happens if we don't get it. >> let's make that premise we're not going to get it. things maybe get worse in the second half. let's go through scenario number one. >> the fed, right? the fed has primed the market to expect that it's going to be pulling back from some of these asset purchase programs that they've done. buying shares, rebonds, buying mortgage-backed securities. the recovery doesn't materialize, those programs might be back on the table. they might have to extend them or expand the size of some of them. and investors are going to have to start price that? >> bring the rates down. >> yes. you've seen this getting priced in a little bit right now because long yields came down late last week. >> not to mention not only bring rates down, it could bring the fed chairman down. it's going put more pressure on bernanke. >> it's going to put more pressure on bernanke as the white house starts to focus on this renomination. they put that decision off because his term ends in january 2010. so they haven't had to think

about it until like just right now they've got to start getting themselves in the position to think about it. the economy deteriorates, that puts him in a tougher position. in part because he's got to get confirmed by an increasingly belligerent congress and they have to factor that in. could end up if the economy doesn't improve, we could end up with a more devilish fed chairman. >> everyone is now reading quite a bit into every statement made out of the white house. >> joe biden said this week -- >> right. the thing is the republican had no argument when they wanted to do it back in january and february because republicans policies hadn't gotten us anywhere. now if they come back to do another stimulus -- the republicans are already making this argument. they're going to say where did your first $780 billion get us. the unemployment rate would be around 7% or 8%, we're already 10%. >> we've only spent 10% of that

787 though. political argument. you've got to spend what you've done before you get more. >> that's going to be part of the brawl. we were talking before we came on about japan. the japanese did a lot of stimulus plan, a lot of fiscal spending. it got them nowhere. >> how many did they do, nine or ten stimulus different packages? >> they ran a very large budget deficit, worse than ours, in fact. it didn't produce much of a recovery. there's a real fight on the fiscal front if we don't get this. the final thing on the commodities front, starting to see oil prices come down. >> is the commodities run over? >> it looks like it's at least going to pause until we get more data that demonstrates that we're really getting a recovery here. one of the points that came out, i think, in thursday's jobs data is that there's still disinflationary pressure, downward pressure. wages are under a lot of pressure. it's becoming harder, i think, to make this inflation argument can every one of these jobs

report. that could hold off the commodity rally. >> you can see the dollar continue to strengthen, too, the coverry may not happen immediately. that could happen erode what's going on in commodities as well. >> this is what we start pricing in in the next few months. >> jon hilsenrath, good to see you, even though you didn't bring doughnuts. you're lucky mark isn't here to complain. >> i'll complain. i'm kind of hungry. >> he's been up since 4:00 a.m. first trading day of the week, following the long weekend. as jon said, still digesting the jobs numbers. we're live with the brains behind a five-star small cap growth fund that's up more than 20% this year. "squawk on the street" on cnbc, first in business worldwide. today the's a way to save more for rirement,

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let's just show you where futures are. we have been emphasizing focus now on the second half of the year. and as where that second half of recovery is going to come to fruition or not. that's going to have futures lower across the board. market overseas was in china. let's get down to you, scott, on the floor. >> thank you. with art cash in, director of floor operations at ubs. you saw the futures, looking kind of ugly. on thursday, down day after the jobs numbers. what are you looking for today? >> i think it's one of those day where's the market is going to be a hypokond dree achondriac. if we get down through 877 in the s&p, people will be talking about a head and shoulders.

that will not be too happy. we 23450ed need to get through t couple of days. >> important, none the less, because we have earnings. >> earnings are going to be a critical thing. not so much the earnings alone, scott. it will be, can we finally get clarity in the outlook. look five months ahead and say something. >> it looks as though expectations have ratcheted up a bit as pertains to earnings. the data over the last month or six weeks or so, better than expected. if you don't meet those expectations, what's going to happen? >> great debate. they low balled them initially when they thought the we'lls were coming off the locomotive and the green shoots showed up. they ratcheted them back up. that's why i'm thinking we're going to look more closely at the outlook than the actual earnings and see what happens? >> ism, services sector is 80% to 90% of the economy. i would think that would be important it. >> should be. however, traditionally they tend to look at the manufacturing baz being slightly more accurate and having a better weight.

we'll wait and see if they shifted to service, particularly in for thursday's shocking numbers. >> what are your thoughts about the president over in russia? is that going to impact trading over here at all? >> not so much. it could impact it later in the week when the g-8 gets together and puts the dollar on the table do they start to debate the reserve currency. >> thanks so much for joining us. erin, back up to you. let's get the buzz from beyond this trading floor. always good to see you, john. what's your focus this week? >> good morning, erin. i think we've got a week in limbo here as we await earnings that really start and earn this next week. i think from the standpoint that the follow up of fr what art said, there's a lot of technicians looking at this market, too. the s&p does tend to be a bit of a head and shoulders if we were to penetrate that. one thing i would draw your attention back to when the market felt a bottom off this 20 2002/2003 year, the last bear market we personsed, we had a

15% krekds from the top that supposedly the end of the bear market back down to reach half of the lows. on that basis, the 15% correction off 950 gets you to about 810 on the s&ps. >> how quickly would you expect that to happen? >> well, the last time it happened i think it took a few months. and the tendency especially right now in the summertime is less participation, so to speak, the markets can move a little easier and low volume. we've seen a lot of that as i've said to you in the past, we've experienced the move up to 950 in the s&ps and low volume and much less participation in the last few weeks. >> we've got alcoa on wednesday after the close. first big company to report earnings kickoff. earning season officially. what do you read into alcoa? it's a company that we all know frankly either hits or massively it's hard to reach much into it. is it going to be more important given the focus on earning season this time around? >> i think it will be initially. but i think as we get deeper

into earnings season, you might see either a bifurcation or a separation as to industries that have better operating leverage or have taken themselves down to a level where they can really manage their business properly. i point to the semiconductors that have tremendous operating leverage on the balance sheets that surprise people to the upside. to your point, alcoa is important. you've got to look at specific industries as you go through this. >> thank you very much, john. appreciate it. >> you're very welcome. we've got the final count down to the opening bell coming up on the there side of this break and more to watch and make sure that we rat least forth right with you. futures have closed. electronic trading session. they did close at the bottom of that. >> they did. >> we'll see what the day holds.

fa, straight-forward pricing. that's what tameritrade stands for. why pavesting fees you shouldn't ve to? or account fees that aren't clear?like inac? or maintenance fee it's not right. you know it. d the thing is, the other investme firms know it. and that's ju not fair or straight-forward but they do it anyway. td ameritrad independence is t spirit that drives america's most successful investor you are watching cnbc's "squawk on the street." we are live from the new york stock exchange.

we are just about two minutes away from the opening bell. getting ready here. and also at the nasdaq. also of things could happen this week. certainly the start is going to be an interesting one because it shows that the general mood out there, people start to get in the psychological mindset of the second half. okay, we've been hearing ability green shoots for months. now prove it. proving it is hard. >> the jobs data was week going into the end of the first half. that's what we're dealing with now, you've got more reports this week. earning which are going to be nothing less than critical. right? you want to hear what the companies are thinking and what their visibility is going forward. the expectations, as i was speaking with art about, have been ratcheted down because of the green shoots that have been mentioned for weeks. >> interesting you are saying that. in the past six weeks the earnings projections for this year and next year have all been going up. even with that, analysts are looking for earnings this quarter on an operating basis to be down 36 -- >> 34. >> right. but since mid may, earnings have been going up. so the bar has been going up.

even though the bar is still probably pretty darn low, it has been moving up. >> if they don't meet those expectations, only wonder what's going to happen to the stock market this week. >> how much longer can xaes companies get away with saying, look, we just don't know in terms of demand. there's this giant question mark because everybody is waiting. that was fine for the first quarter. it was fine obviously at the end of the year when they made that comment. now people need to hear signs of stabilizatililization or else. john said over the next six weeks, could go down 16%. it's possible to give some of that back. >> the conference call commentary is negative, that could happen. we're watching the situation in russia today. the bell is going to get ready to ring in a second. obama is over there and we'll talk about that. >> and one final headline as we come into the bell, saudi arabia coming out and saying they're going to invest $1.2 billion in real estate in the u.s. and the united kingdom. they say that's a better opportunity than investing in banks. interesting. a bet on real estate. >> a lot of real estate on sale

over here in the united states. >> real estate is usually local but i guess not in that case. tra transatlantic holding and over at the nasdaq, worldofmoney.org. they focus on literacy for underprif leunde underprivileged children. >> commoditiecommodities, like under significant pressure. with the underlying commodities under pressure you have a combo, two-fold story weighing on things. first of all, the dollar at two-week highs. on top of that it is the economy question. have we over-shot our optimism? we will get some answers going forward with the earnings story. that kicks off with alcoa on wednesday. the big question isn't just looking backwards at earnings but it is what is the outlook, what are these companies going to tell us about the second half of this year? what do they anticipate? we will see whether or not they

can validate some of that green shoot optimism that we've seen earlier this year. the other thing we are watching are the levels. right now 893 on the s&p 500 is an important level. that was the june 22nd level, and if we close below there, we are basically back where things were in may. also the dow is important. it's at its lowest level since memorial day. a couple of stories. stocks, rio tinto kelling to for $1.2 billion. general motors getting a nod from bankruptcy judge. they could move forward with asset sale. maybe things will be completed by thursday of this week. let's go over to brian shactman. >> thank you. we are looking at a negative open. down about 12 points. really the story of the day is data domain. emc coming out and upping the offer to $33.50. competing with netapp to get control of that company. it's staying at $34.18 right now. maybe the street thinks it's going to go higher.

netapp do say they have full regulatory approval to go through with the deal. positive move, basically there's a report of big order from handset makers out of asia. and also want to point out that broad point reiterates it as a buy. ford writes the future so much that they think the price target is 49 to $50 down the road. upgrades and down grades, i'll get through a few. polycom, nicholas upgrades it to a buy. deutsche bank upgrades to a buy. symantec there as well. it's up 2 1/2%. and t. rowe price has a new price target of $45. i'll talk about this is a little more in the next half hour. all the spillover positive from the iphone. sirius, xm radio, millions of down loads on the application for the iphone.

>> thank you. markets are opening lower this morning, as we told you they would. down 68 points. as everyone tries to reset for the second half, and decide if the price in scenario of recovery will come to frou i guess so or not, we want to get ideas. president and cio with broad leaf partners. phil is with us, also. john, let's start with you. when we talk about pulling back a little bit, are we talk about repricing and maybe pricing in more weakness from the second half than currently the market expects. what sort of a drop in your view would that imply? i mean, are we going back to the march bottom? >> no, i don't think we'll see the march bottom at all. as a matter of fact, you had the lehman brothers c,o on this morning. when you think back to september period, the s&p got up to about 1200. and it's at 900 today. so it got as low as 600 or about

halfway in between. i still think the bias end of the year remains to the upside. i think you could have a 10 to 15% correction but i think the overall trend will remain positive. >> and i wanted to ask you on a few sectors. i'm sure scott had a couple of specifics he wanted to focus in on as well. mine is health care. you have a trade there. is it based on you're saying health care reform will not move for sfwhard. >> ward? >> we're tending to focus on the cyclical areas of the market. what i've noticed lately is that health care started to perform better. perhaps that could be the defensive trade coming back. but i think with the health care, i noticed that the stocks started to do a little bit better when people perceived that maybe obama administration is not going to get all they want. the same thing happened in '94 with the clinton administration and health care went much more private in terms of the approach. and the same thing could happen

here. >> bill, doug doesn't think we're going back to the march lows. what are your thoughts on that? >> i don't think we're going to go anywhere near the march lowe's. i thi i think they're in place. markets after a dramatic event has a tendency to spike up. usually after the first chapter, 10%, 12%, 13% is not out of the ordinary. i think after the crash of that we did not see another 3,000 points coming from 1600. >> this is a pretty critical week, right? i mean, everybody is talking about how it's light on data but we get earnings. >> every week is critical in this business. come on. you know, you have a lot of bad news out there and a lot of good news out there. corporate america has been clouded by the 9.5% unemployment. that's bad news but it also shows the influence on how quick companies can adjust payrolls, balance sheets. i think that bodes well for a return of profitability and

recovery in the second half. >> doug, let me ask you about another sector you like that being technology. i'm sure you to doesfocused on decent balance sheets. >> that helped bolster it but it's got two things. one, you want to be focussed on cyclical elements in the economy. tech has cyclicality to it. it will do better as the economy recovers. it's innovative, talking about iphone or the new stuff coming out out of google. it's our biggest weighting in the portfolio right now. >> where do you stand on fixed income, particularly if we have a little bit of weakness independent second half, maybe not massive, but some. you do see the government programs extended as jon hilsenrath spoke to. some might say even with the increase in delinquencies, junk bonds are the best place in the world to be. where do you both stand on bonds. phil? >> i hate treasury anything. i think it's a way over bought. the opportunities are low and the risk is high.

you can make an argument maybe for some corporates but i think there are so many more attractive strategies and marketplaces to be than fixed anything. >> what about you? >> i would agree with that. i would avoid treasuries. next place i would go if you need fixed income exposure would be the corporate. it's not great. you can get a cisco systems corporate at 5%. again, nothing great but better than treasuries. some might argue cisco is maybe in better shape than the u.s. government. >> hey, they have cash, last i checked. >> yeah, exactly. a lot of excess. goldman sachs had bonds at 7%. i think they have shown themselves to be a survivor. but i think you're still going to get your biggest return out of equity. >> bill, you hate treasuries so where are you allocates? >> right now 55% equity. we use a long-short strategy. we have 8% in managed futures, 8% in currencies. and i think, you know, having a

tactical blend of all the major markets is the way you're going to survive what will probably be a fair amount of volatility for the next two or three or four years. >> doug, your allocations are what? >> well, it really depends on what the objective of the client is. right now definitely would be biased more towards equities and just having the cash that you o$ might need to survive the next six months.=f >> you buying on any dips? >> yes, i would be a buyer on a dip. as you mentioned earlier, this 890 is a crucial territory. and i think what's ahead of us now are earnings. it will be interesting to see whether or not those earnings will continue to justify less bad as a thing that will move the market forward or something even better than that. >> thanks very much to both. doug maccay. still to come here on "squawk on the street" on monday, the debt collection business has been on a roll. we've talked a bit about it. we're going to talk to the ceo of a company with double dingit revenue growth and stock that has doubled since the famous and

ever larger haines bottom. >> you said that, not me. but next, oil slide back down to a five-week low. what could it be signaling about the second half? you're watching "squawk on the street" here on cnbc, first in business worldwide.

market averages are lower. we did open down just nearly 70 points lower for the dow. now only down 28. holding within that range. nasdaq and s&p are lower. the big story though as of now is not on the stock side of things. it is on the commodity side. oil down rather dramatically. sharon, our check is, what, down almost $3? >> absolutely. we're about $64 a barrel in london and here in new york. and concerns about the economy

and fundamentals seem to be factors in. oil prices and commodity prices right now, we have saudi arabia even lowering its official selling price for crude to the u.s. in august $5.50 below what nymex crude prices are elling is out. we have kuwait's oil minister changing the tune from opec ministers. saying he thinks $80 a barrel -- sorry, $60 a barrel is more like what they're going to need for budgetary reasons. he hopes that oil stays above the $60 mark. they seem to be ignoring what's happening in nigeria. after all, nigeria is still producing above quota and there is plenty of oc capacity out there. yes, we have seen the rise in the dollar as well helping to put pressure on prices. when you look at what is happening along the curve and the fact that the spread between the front month and january's 2010 continues to weaken, that highlights the fact that there

probably is a lot of money trying to bid for storage here. and that is often bearish for prices. when you talk about where the volatility has been over the last couple of weeks, you have to look at where the money is coming from as well. bank of america, merrill lynch, did a very interesting study, showing $125 billion is now invested in commodity indices. that's up from $80 billion four months ago. so a lot of money being put to work here. >> absolutely. sharon, hang with us for a second. for more on oil slide and what it could be telling us. let's bring in senior vp at mf global. also cnbc contributor. john, sharon was talking about the dollar. that's whathis move in oil was all abou wasn't ? it wasn't a fundamental play, was t? >> no. the fundamentals haveeen compelling in terms of their being bearish. inventories terrific. bit has been about giving every benefit of the doubt up until

now to the economic recovery. these green shoots that everybody is talking about, we're priced in here dramatically. we seem to be getting that back on the back of what is my key indicator, the employment data. >> safe haven play, that means oil is going to continue to go down, right? >> the argument is there for it to go down from here on this basis, yes. right now the safe haven is on. everybody seems to be selling everything this morning, except --nd buying dollars as a place to hide out throughout this period. >> keep in mind, scott, we're still right around this 80 mark on the dollar index which we keep talking about as a key technical level. some out there say that actually oil prices should be higher considering the overall weakness we have seen in the dollar over the last couple of weeks. and the correlation may not be as strong as it once was. i really think the fund flow is what we're needing to pay attention to. yes, hopefully now the market issing looking at more of the fundamental factors. it seems the flows have really

kind of overshadowed everything over the past couple of months. >> the question is to both of you, but, sharon, i am curious as to your view. we're hearing it again, they want to look into whether speculators are responsible and perhaps increase regulation. is that something that you are getting the feeling could really gain steam or will it go away as it usually does once prices go down a bit? >> i think a lot of the traders here, more regulation, they think this market, of course, the nim mymex is regulated quit well already. there is concern about trying to do more regulation. keep in mind, yes, when prices come down considerably, that talk seems to go away. the volatility that we've seen recently not like the spike that we saw last summer, but still quite a bit of volatility is really heightening that conversation. and it will be interesting to see how what washington hears from that. >> john, what about the other

big story we talked so much about over the past few months. that is, well, it didn't seem to be logical but the difference that ww between natural gas and crude. what is the tde from re? >> i still not a belver necessarily that you sell crude anbunatural gas at this point. natural s unde$3.50 i think rtainly compelli. but it's really a sil commodity. even with the growth that we see in liquefied natural gas transports around the world, we have to look at our own backyard to determine that pricing. look, industrial utilization at 65%, horrible number. the employment data, horrible numbers. there's just no commercial demand for natural gas. and without any kind of strong weathe with no heat really emerging jt t, we're just overelm we'd this stf. so that relationship can stay this ey foray for a long time. almost as long as red can stay on the roulette table space. >> keep in mind the dollar correlation and it really is a domestic commodity here that we're talking about.

and when we talk about storage of natural gas, there's so much out there and there's even concern of where are they going to put it at. john, i know you're saying some levels that we haven't seen, record levels of storage right now. >> all right, guys. thanks. >> thank you. >> talk to you soon. next, stocks on the move. alcoa out of that key earnings report coming out on wednesday. plus, five-star smat small cap growth fund up more than 20% the brains behind the fund shares the secret to his success. it's "squawk on the street" here on cnbc. and we are first in business worldwide.0-345- "i'm rethinking everytng... tdd#: 1-800-345-2550 including who i ust to look after my money." tdd#: 1-800-345-2550 tdd#: 1-800-345-25 "the dust might be sing... d#: 1-800-345-2550 at's great, but i'm not." tdd#1-800-5-2550 d#: 1-800-345-2550 "i gue i'm just done with doinnothing, you know?" tdd#: 1-80342550 td: 1-800-345-2550 "oh, i'm not thinking aboumovingy money. tdd#: 800-345-2550 i am moving it

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all right. history would suggest down a day after fourth of july week. lo and behold, at the top of the loser board for the dow this morning is going to be aa alcoa. everybody is looking at alcoa for that after the close report. we see rbc, royal bank op cf canada, cutting the loss

estimate. the stock shed over 12% since a week ago today. talk about lacking energy. we talked about the price in oil, but all 40 stocks, every single one, nothing works in energy today. far and away the worse sector in the s&p 500, down 2%. there's just a couple of decliners to look at. nordstrom off the sell list. that goldman sachs, market pushes it higher here today. the stock is actually had a good run year to date. up about 45%. but now is unchanged rally since june 1st. lastly, you've got to look at kodak, ek, that little stock is now a small cap in the russell 2,000. best performer in the s&p 500 today with a 15% short interest. erin, back to you. >> thank you, mr. nesto. the small cap growth fund has been on a roll. look at a year to date, up more than 20%. price target of five-star rating and analyst pick in the small cap growth catory. keep in mind, compare it which is up, what, 1, 1 1/2.

shows you the magnitude. join us to tell us how he's ininteresting right now is jeff cardin, portfolio manager of the small cap fund. he's been manager of the fund since 1986 tfrks kr 861986. he has been there all along. jeff, appreciate you taking the team. yun thing you said you focused on is 3/4 of the companies in your fund have no debt on their balance sheet. usually, maybe it's just a little bit of insanity that took over the whole country. people think you have to have debt in order to finance your growth. these companies are also growing, right? >> that's right. the thing that's interesting about the investing in small caps is you can buy companies that are way better than the s&p 500 companies in terms of quality. you can buy a portfolio full of junk. of course, our long-run strategies to buy companies that don't have debt. so you know, like you said, 75% of our companies don't have debt. i think in an economy that's going to be growing, you know, a

lot slower than we're used to in the past, i think having companies that can sell finance and don't have to, you know, access capital is a real plus in this market, i think. >> so who can sell finance? when you say self finance, can these companies literally do all that out of their own cash flow or reliant on short-term financial markets like cp in any way? >> no, not really. free cash flow generators. there's a lot of companies out there that are really well run with passionate managements. they have free cash flow. if you have, for example, it's a simple math question. if you have a 15% return on equity and you're growing your top line at 15%, you don't have to change your capital structure. and so in a market like this where banks are not lending money as readily as they were, i think that's a real advantage. that goes a long way in expla explaining why we're doing so well this year. >> jeff, when i think debt free i think tech, right? sitting on a lot of cash. >> tech companies have really good balance sheets.

we like tech. we're a small cap growth manager. of course, there's growth in technology. i think, you know, there's another theme with tech that's really interesting. as the economy, as we, you know, enter this tough growth economic environment, you know, having companies that provide solutions to other businesses, to their customers, you know, applying technology can really save cost and create returns on investments for their customers. i think technology really has, you know, maybe a long-run play here. >> what's the breakdown of your other asset allocation then? >> well, you know, as a growth manager there are just certain parts of the economy that we're attracted to, which is where the growth is. so technology's one of them. we have an eclectic portfolio, one that doesn't fit into analysis, like automotive that sells auto parts. of course, with auto sales down so much, the aging of the u.s. auto industry is exploding.

people have to take care of their cars. there are a lot of sectors that are business services p companies that add true value to our economy that we invest in. that's a theme that i don't think has gotten a lot of play in the last ten years. we've gone from bubble to bubble to bubble. you know, we're investing in real companies that add jobs and really add value to the economy. >> jeff, thanks so much for being with us. jeff cardon has been managing the fund since its inception in 1986. >> that's what you call a track record. >> a lot of times they say the person has only been there a year, but he's been there through. the hot hands series continue in the next hour of "squawk on the street." stock strategy with the head of two five-star funds, including a small cap fund that's up over 2% this year. that's coming up at 10:05 earn. but next, the next economic data point. it's a monday and we've got one. ism services. biggest sector of our economy. we're going go inside the action and numbers. "squawk on the street" second

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for supply and manlment is out with the nonmanufacturing index for june. general motors may be able to close the sale of the assets to new gm by thursday of bankruptcy court judge's decision to allow the sale is not appealed. stocks are adding to thursday's loss. the major averages are well off the lowest levels of the session. that's cnbc.com news now. i'm courtney reagan. >>ve from the financial capital of the world, this is "squawk on the street." second fun-filled hour of "squawk on the street" on this monday morning. i have some services coming in at 47, point better than expected. any number shy of 50 still indicates contraction. i'm here on the floor with rebecca jarvis. you say traders are saying ism not as important. >> exactly. the traders are looking at the jobs report. we got that number on thursday. didn't look as good as many were hoping. what they want to see is

sustained improvement. look at the actual levels of the market. s&p 500 is an important one because we're basically right on the verge of crossing below 893. if we sustain that, we will be below the june 22nd level. that will be back where things were in may. what traders want to see and analysts want to see is a sustained improvement of the employment data. employment leads to purchasing and leads to stronger economy across the board. in some cases it could lead to a bit under housing which is the one thing everyone is still waiting for. >> speaking of housing, obviously financials in focus. there is a dichotomy there today that you are looking at. >> interesting difficult cot . some of the smaller names, regions, co. america, they are all stronger across the board. it's just an interesting

dichotomy between the two. what people are focusing on, you have oil, you have gold. that has two things to do. you have also the stronger dollar but you also have the question of the economy going forward and a lot of people will be looking for indications later this week out of alcoa, the earnings news. not only the backwards looking information, erin. as you've been discussing this morning, the forward looking information. what is the outlook going forward? >> rebecca, appreciate it. brian shactman is over on the nasdaq. brian, a couple of questions i wanted to ask you. when we talk about whether the economy's recovering, you sometimes do realize yields are still going on. they think nobody is doing business because everybody is nervous. not true. in your world, you are seeing quite a bit. one chess match in particular, the emc deal today. >> yeah, it's fascinating. obviously as you talked about a little bit ago, tech companies, a lot of cash, not a lot of debt.

emc ups the bid to data domain. it's trading at $33.14. they say maybe that offer is not enough. i want to point out a couple of quick things. emc offers all cash. netapp's offer is cash and stock at $30. in terms of cultures, the operation data domain, they have more of a closer corporate culture. they seem to faye vor netapp. you can't argue all cash and operation. >> now, the iphone. by the way, did you see that story today, brian, about how to talk for extended periods on the phone? it won't catch fire but it literally will turn red because it's so hot? >> the iphone? >> yeah. and then i saw a story by powering it by booze. i guess that's a separate story. >> yeah. >> you've got iphone angles of your own, though. >> i was told just never to keep the phone like between your legs when you're in the car or something. listen, there's so many businesses related to the iphone

and i know sirius/xm trades at only 46 cents. i want to point out they announced today they had a 1 million downloads of the siri sirius/xm ap. they do so much business in cars. you talked about rebound in the auto sector might be good for them. if they can get so many downloads on the iphone, maybe this is something that makes this a more relevant business moving forward and can see a lot of growth. keep an eye on that. if they can get business from the iphone, it could be a whole new business where they thought they maybe only had a one line model. >> brian shactman, thank you. and now let's head up to mr. wapner who is up in the nasdaq. >> let's get you caught up on the markets because that ism report was out. the market improved although it's not showing it right now. really started to move back towards the flat line as that ism report came in better than expected, 46 was the expectation.

the june number. this is non-manufacturing. services sector which is 80% to 90% of the economy came in at 47. better than expected. the market started to move back towards the flat line. as investors digest that number, you'll see we still are under a bit of pressure here. the dow is down 25. nasdaq down about two-thirds of 1%. that's a loss of 12 points. and the s&p 500 down about 3 2/3 points. let's head to sharon epperson in the oil pits with the latest moves on crude. sharon? >> scott, we're still near a five-week low but not down $3 as we were overnight. only down $2 right now. that ism data having some of an impact here at least on oil prices being off of their lows of the session. we are looking at economi concerns though really taking hold today. and when you look at what has happened to gasoline, that's a good case in point. gasoline has been probably the best performing cocommodity this year. up 65%.

over the holiday weekend, aaa estimating fuel use was down 3% versus a year ago. we are seeing demand continue to fall. natural gas, another extremely weak part of the commodities complex. now a lot of folks talking about china at the $3 level. a week ago, at the $4 level. we are hearing from jpmorgan that televangeli that the el nino affect and the hurricane season. that could be negative in terms of getting natural gas prices from hurricane season. when you look at the metals and the sell-off there, some are saying that it's just fatigue. after all, copper up 65% so far is year. it's at a two-week low right now. when you look at the strength in the dollar, the stability of the dollar right now, that may have something to do with it. scott, back to you. >> thanks. hot hand series continues now with a portfolio manager of two five-star funds. one of which is up over 25% this year. joining us to share his secret

to suck set is chow chin portfolio manager of the key sff small cap fund. good to see you this morning. what's the basic philosophy here? >> well, our funds are managed with a quantitative strategy or a set of quantitative strategies. and that kind of sets us apart from other funds in that all of our strategies are objective and can be tested on historical data thoroughly. so this year you are seeing our research and paying dividends. but really i think rather than focus on the recent performance it's a long-term performance that we're looking for. and over the long-term, both funds are v. out performed the market by a large%. >> we're not just talking about portfolio managers here, either. i see you're being managed by phd software developer. not only using historical patterns but algorithms thrown into one, right? >> that's right. basically we start with data and we have so have some idea.

after having that idea, we have to test them and a lot of testing has sophisticated statistics so that's why we need highly educated people and smart people to help us do that. >> how much stocks are we talking about here? >> we hold a very diversified portfolio. small cap, 300 stocks or so, more than 3 00 now, with each one less than 1% of the fund. and in the market mutual fund we have, i think, over 1,000 positions. >> the universe is pretty similar to the russell 2,000, correct? >> that's right. the small cap funds, goal is to track the russell but beat it. it has beat the russell by 7% net of fees annualized. >> let's talk about your specific holdings. do you want to go through some of those, some of the health care holdings, coventry? >> coventry health care, malena health care. i list them as examples to illustrate our strategy.

basically these companies have strong fundamentals, strong cash flow, operating earnings. but when you look at all of them, all five of them together, they only make up about 3% of our fund. so if you went out and bought all of these, you know, that's not to say this is our may squlor bet. but it's just illustration of the factors that we use. >> right. your major bets are in what stocks? what are the top five holdings right now? >> i can't tell you our top holdings. but these are -- i hold about .5% of the portfolio in each of these stocks and our largest hollings are about that much, maybe 0.7%. so because we invest really in strategies rather than in stocks, we don't have large bets in any individual stock or individual sectors. in fact if you look at our sector makeup, we're pretty much sector neutral. so we look very similar to the russell index, only that we will

have different weights for the stocks that are in our portfolio and these weights reflect our bets on strategies like fundamental strategies or pricing strategies that only have an effect when you aggregate over hundreds of positions. >> the small cap stock has had a pretty good run, right? some of that has been pulled back a little bit. >> that's right. >> is there more to go here? >> that's right. it's a very volatile segment of the universe. i think that we're down 20% this year. maybe up another 20% this year so the small cap universe is flat while we out perform by about 20% or so. so the fund doesn't try to time the market. so what we try to do with the fund is to give you exposure to the u.s. small cap market which, in general, goes up. but also give you an added bonus of these strategies where you can have out performers over the

long run. >> chao chin, thank you very much. >> thank you. hot hand series continues throughout the day. coming up on "the call", a five-star fund manager with his best tech picks. up next, why this might be the new golden age for hollywood. wow. and there's a way to profit from it? that's a change. we all know there's been issues there lately. >> pretty good weekend at the box office. why it pays to collect. we'll talk to the ceo of one collection agency which has seen his stock double since the haines bottom. and the reset button on u.s./russia relations. could it lay the foundation for better investment opportunities?

major markets are higher. moving down 70 and then down 28. now down 45. right within that range of tepid trepidation. >>here was a momenthere right after ism where we were like down five, six, and then it didn't take a minute at the most for things to reverse back the other way. >> exactly. exactly. >> okay. if you weren't at the beach or watching the fireworks this weekend, perhaps you did all three, maybe you hit the movie theater. our next guest says despite the tough economic times, this might be the new golden age for hollywood. that's right. he's bullish on several movie

theater stocks. joining us with his picks, eric wald, media and entertainment analyst. and also with us, our own julia borstein who covers media and entertent. guys, good to have you here. this weekend was good, right? we had a tie with "transformers" and "ice age." that h to bode well forhe industry as a whole. >> it does. the dury has done well this year. box office growth is up 11 1/2% year to date if better in the second quarter than the first. what we're seeing is families are still being tight with enter stainment dollars. you can still take a family of wour out to the movies with concessions, with tickets for about $40 nationwide. it's still become a very relative good investment or entertainment spend for the family. >> julia, you talked to the executives of these movie companies, these entertainment companies. they must feel pretty decent right now considering the numbers are pretty good. >> they do. and, scott, while the movie studios are struggling with issues like decline of dvd

sales, the movie theater companies are benefiting from the fact they're not just ticket sales, they benefit from concessions. right now we're seeing that while americans aren't going out to eat dinner as much, they are going to movie theaters and continuing to spend money on concessions. so now the movie theater chains are not only selling a family of four tickets but basically selling them dinner as well. starting to see more different types of concessions, more expensive concessions. that's much, much higher margins than the actual tickets themselves. >> and so how d you trade this, eric? >> well, the two topics we have inhe space. th first on is imax corporation, topic in 2009 and still is. they're not in the traditional sense of a theater operator. everyone knows them for the imax screens but they license them out to the studios and the theater operators and getting a piece of the box office from the studios and xib bittexhibitor.

they can pick it for a very high leverage for these top producing movies doing well. the second one is regal entertainment group. screen in the u.s.st separator obviously as the box office does well and families go out to novemb movies well. we did an analysis that shows the box office was heavily more skewed toward "g" and pg"-rated movies thalast year, which is more friendly tha "r" rated movies. it does boost profitability. >> and, julia, what about the whole -- one of the interesting things we learned through "transformers," not that we haven't seen it before but it was so stark in that situation. international box offices in so many ways, perhaps more important than the domestic one. does that show what kind of movies will come to the big screen? >> absolutely. they are basing their decisions

that are going to go international. you won't see a movie like baseball because that doesn't play well internationally. you're going to see big movies, sequels, franchises, recognizable brands. any time they can put out a film that has a bit-in audience, that's going to be good for them and the theater chain. more people are going to come out. another factor we should keep in mind is the roll out of digital screens. we've been waiting for more financing from wall street to help bring more digital projectors to all of these theater chains. once companies like regal have more 3-d theaters, that allows them to charge more for tickets which will help their bottom line. >> not to mention, those chains capitaze on the newest rage, 3-d. think how well "ice age" did this weekend. >> that's true. the 3-d movies that will come out this year, "monsters versus aliens," "ice age 3," they have the 3-d ticket sales, consumers

are going to spend theironey gointo the movies. they're willing to pay a couple extra dollars premium to make sure it's the best experience they can k. get. >> eric, julia, thanks so much. >> thank you. >> "ice age" see that one? >> you got little ones. >> i do. i think they might be scared of 3-d. i don't know. he loved the other ones, though. up next, the stocks on the move inshrewding time warner cable and sprint nextel. and the surplus of debt means big business for some collection agencies. look at shares of portfolio recovery which have doubled since the haines bottom. >> a lot of references to the haines bottom today. >> yes, there are a lot of references because it still holds, which is why we say it gets more powerful every day. we will be right back with the ceo. you'rehe colon lady! diarrhea, constipation, gas, bating.hat's me! can i tell you what aifference phillips' colon alth has made? 'she probiotics. the go bacteria. that gets your colon ck in lance.

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welcome back to "squawk on the street." i'm matt nesto.

have you seen beamus today? doing the deal and moving higher. that's nice. management is definitely patting themselves on the back on this one. it's going to raise their revenues for their packaging by the addition of, what, 23 plants all over the world? going to raise revenues by 1 $1/2 billion. doing $4 billion, give or take. time warner cable is hot. cable play is in with the tellcom stocks being one of the most attractive defensive growth stocks. i know it doesn't make sense. 4% higher on the news. also in the telecom kaspace, sprint/nextel with an upgrade at argis research. that's it from old nesto. back to you. >> thank you. seems logical during the height of a recession collecting delinquent debt from consumers would probably be tough to get it, but there would be a whole lot of people asking you to do it for them.

collection company portfolio recovery associates has been benefiting from the surge in demand for debt collection. double digit revenue, growth, and the stock has more than doubled since the haines bottom. there it is again. it's not called the march low, scott. >> i'm sorry. i'm sorry. >> the haines derriere. >> how could i forget? >> how could you forget? >> i completely forgot. >> joining us now, steve fred distribution son, given the financial prey pre sures a lot of people are under, make even with a debt collection agency in the picture, they're still not able to pay things back. so putting that together, how do you get to the double-digit revenue growth? >> well, you're absolutely right, in tough times like this, actually what we do is supposed to work for third parties we

require this data to be deep discount and liquidate it in our own call centers. in tough economic times we see debt for sale, prices tend to come down. although, the liquidity of that paper, the ability for consumers to repay it, is impaired. so we have to work harder at finding good, so 4rlid repaymen plans. >> you have two areas that are growing in particular. one is state governments. i know they want to get people who are late on their taxes. the other collateral for large automobile lenders. what's happening in that market? >> outside of our core debt buying business we have a couple of fee for service businesses which you just mentioned. on the collateral location business, we're working with the large automobile finance units. and when they can't get to an automobile that is delinquent

and needs to be repossessed, we work with third-party repossession ats to actually take the car back. >> you're still placing calls to people, right, asking them to faye t pay the money they owe? >> that's right. we're on the phones each and every day trying to talk to customers, number one. and number two, work out what is a viable repayment plan. >> how are you doing it better than others? are you just more aggressive? >> yong being more aggressive is really the way to get good results. what you need to do is be a good listener. you need to establish what the problem is on the consumer's end, what a realistic repayment blan i plan is, what the means is they have to repay you. that require an extended repayment plan, settling a debt, compromising. in all cases requires really listening to that consumer and trying to figure out how to work it. >> quick question for you on

pricing a lot of this debt. how are you getting it by most accounts who cover your company, you are getting it right. is there a magic formula for you? >> well, we do an awful lot of statistically analysis as we price our portfolios. we've been in business since 1996. we have a deep pool of portfolios. and we think we've got a good team that underwrites this stuff very well. >> steve, thanks. ceo of portfolio recovery associates. up next, as we await president obama's news conference in moscow, a look at what you need to know about investing in russia.

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market averages, lower. right now right about where we were at the open. slightly better but we're right back to that range for a brief moment. services came in slightly better than expected. at one point at the lowest level since, gosh, at least back before all this started in september '08. let's look at the internals. decliners. this is much worse than the actual headline number would appear to be. you certainly have decliners right now, 686. we'll show you the same. nasdaq, you can see the margin there slightly better but not much. >> 3-1 almost. >> 3-1 for both. >> president obama and his russian counterpart medvedev set to hold a joint news conference 20 minutes from now. there's a live picture in moscow where this news conference is going to take place.

chief washington correspondent john harwood in washington monitoring this today. john, what can we expect to hear? >> scott, we've already heard from the two presidents early this morning at the kremlin as they went into a private meeting. the principle topic they're going to be discussing right now is arms control, trying to make some progress on that issue to pave the way toward larger progress on more important issues like russian cooperation on the u.s. attempt to stop iran from developing nuclear weapons. but you and erin were talking before the break about investing in russia. critical to investing in russia is stability in the relationship. that's what this reset button is about, getting out of the cold war mode and back to a more respectful dialogue. and part of it is the rule of law. one thing president obama said before he left is that he wanted president medvedev to follow through on his pledge to enforce the rule of law. there are a lot of questions about the jailing of mikhail,

one of the russia's richest businessman, a rival of vat myr vladimir putin's. the united states is trying to put this relationship on a more solid footing. >> john, i want to issue a quick follow-up. when we were over in russia at the end of last year, everyone kept bridging up this whole issue of the missile shield. the united states wants to put that in place saying it's to protect against aggression. russia said, no, that's a thinly-veiled excuse, it's about us. what's amazing to me is that a lot of americans haven't heard about the missile shield and everyone in russia has and it's important to them. i want to get your gut feeling about whether obama will concede anything on that front. we all know the technology may not work. but he has appeared to say he wouldn't back down there. but is that something that's really important in russia, in terms of moving the relationship forward? >> it's certainly much more

important in russia than it is, i believe, to the obama administration, erin. i think the question is, what sort of signal does russia require on that? we already know that president obama has reduced funding for missile defense. it is plainly not a priority for his administration as it was for president bush. but he also doesn't want to appear weak and appear to be giving too much and start at the outset and say, we'll give this up. so i think the question is whether there's something back channel, something more subtle that's communicated that allows the russians to think they're getting a little bit of their priority that is a little softening of the united states' position without having president obama be required to come out and say we're dropping it. because i don't think the obama administration intends to do that. >> john, on the business front, we've already heard of deals coming out of this, right? pepsi, boeing and deere. a number that erin and i have been talking about this morning is that russia's trade with the u.s. worth just $36 billion in

'08 was the same amount with poland. you can look at that in two ways. one, it presents the opportunity that exists but the challenges that lie within as well, right? >> absolutely there are challenges. of course, with russia, you always have a mix of emotions. economic motivations, great power motivations, or the motivations of what once was a great power. we saw russia recently renounce its ambition to be part of the world trade organization. what signal does that send? what was that all about? was that saying to the west, we don't need you, we can stand on our own, we're going to indulge in a new round of protectionism? we're going to have to see what comes out of this meeting. >> we are, again, a few moments away from the joint statements by president obama and medvedev. in the meantime, one of the items likely on the meeting's agenda is improving investment and bilateral trade. scott was just talking about the shockingly small numbers in relationship of the two countries in terms of financial value. joining us now to talk about exactly how to in o. to deal

with investing in russia, michael, head of a merging market economics and strategy for jpmorgan and research director and chief economist with frontier strategy group. they have executives from multi-natural companies like coke who run the market in regions. let's talk r start with you on the back of what scott just said. it's pretty amazing the bilateral trade between the two countries is really only equivalent of that between the united states and poland. it's amazing when you land in moscow as an american how few american brands there are relative to other places around the world. is this something that you think will change in any significant way as a result of relations between medvedev and obama? >> well, certainly i think there's a lot of room to grow. as scott mentioned earlier, the u.s. and russia are not tied very closely with economic trade links. certainly countries such as germany and turkey, italy,

china, ukraine tends to make up the bulk of import and export there's into and out of russia. i think there's a lot of room for u.s. companies to expand trade bilaterally with russia but i think there's a lot of way to go to bring this relationship back from a low point. i think president obama has a lot of work to do to start that dialogue process really begin that, resetting of that button for longer term increasing trade ties. >> michael, what is the biggest concern or real concern for mrk right now, american investors as it pertains to russia. they've they're saying they're just overly reliant on commodities. there are some significant issues in that country, in terms of stability and life expectancy and in terms of sky high alcohol rate. there are all sorts of issues here. which is the most important? >> erin if you don't mind, i'll mention three. first of all, uncertainty that macro economic policy. if you take out oil revenue we're looking at 14% fiscal deficit this year and about 12%

next year. without even adding in the oil revenue we're talking about 7% deficit this year and about 5% next year. so second, there's just uncertainty about whether your collateral could ever be obtained if a borrower were ever to default. there's uncertainty about rule of law. and there's virtually no precedence in the legal system. so clients are concerned about these issues. yes, there are many problems in every country including russia, alcoholism, male death early, all those things. but uncertainty about macro and a legal system in general. >> or americans rank only tenth on the list of direct investors into russia. where are the opportunity it is you're going to invest there? >> it could be that if oil prices remain in the $70 to $90 range in the next few years and prime minister putin has made all sorts of promises t on the social spending. it could be the russians will open up investment in the commodity sphere.

that's one area. the second is high tech. russia still has excellent education, math, sciences. those are the two. commodities, especially. oil and natural gas if russians open it up again. and high tech. >> michael, the attitude among russians, hasn't been that open to begin with with american companies and investors getting in that game, either, has it? >> absolutely. russians are terribly skeptical about the united states. they think the united states has treated russia poorly for the last 17 years. there's to doubt about that. but again, if you have a period when oil and natural gas price rest main in this range, a bit of "american idol" abo above what we have today. you have prime minister putin saying next year we're looking at state pensions rising 40% and if public sector wages go up, say, 30%, then they have to have some engine of growth. access to the international financial markets has been cut off almost completely. >> when big u.s. companies tell you they want to go into russia

what sorts of compromises do you tell them they'll have to make? >> well, it's really a matter of setting the right expectations from the beginning. i don't think that most u.s. companies really want to make any compromises in terms of the ethical standards that they're used to and the regulations they have to deal with. i think it's just a matter of making sure they understand the environment and understand the uncertainties involved. western companies are looking for stability and predictability in the rule of law and judicial markets. even if the field is not always level they want to understand the parameters of the game and they can adjust to that. when you have a variable policy, the change from quarter to quarter, it makes long-term investing very difficult. so our advice is really to focus on longer-term fundamentals, really get the right types of partners on the ground in russia and to really engage the level -- every level of government, make sure you have the right course of action play and you have to think about russia on longer term. >> i hear you there. but it sounds like what you're

saying, i'm not trying to say you're saying people are doing anything illegal, but you're not saying a that. it's better to have a partner on the ground to deal with dealing with government as opposed to doing it yourself. >> in many cases, it is. we find that many companies have had success working with distributors and agents in russia, having partnerships there that can help them taupe right doors. it's difficult to go direct in russia. it's a very large geographically diverse country. and having somebody there on the ground that can bring some expertise and make the introductions tends to get you there a lot faster than doing it by yourself. >> thank you so much. we appreciate both of you taking the time. coming up, we're going to take you live to moscow for president obama's joint news conference with dmitri medvedev. this only captures the opulence there. it's pretty stgreat. we are first in business

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for details abou guaranteed income for fe. realtime, i'll give you some realtime. it's not necessarily good news if you have long kb homes, if you're short, you're loving it. stock down for a fourth day in a row here today and sharply president not only sharply but twice as bad as the broader homebuilders index, down 3% today. we are seeing weakness across the board in a lot of sectors and groups here today. kb home certainly getting hit harder than the pack. also worth a peak is the solar smackdown. barclays says this is going to be a long-term out performer. dip your tail in the water cautiously on these stocks but they rein in the estimates as

you can see, nenenergy conversi down 8% prks first solar down 4%. ying lee green down about 10% itself. watch out for the solar stocks here today. bernstein is out with a note talking at the pc upgrade cycle. you know we heard an earlier guest talking about o'reilly, automotive and the aging auto fleet. same thing happens in pcs and the smart guys look at these things and say that dell and hewlett-packard could be beneficiary if people start to upgrade those computers. erin, back to you. >> thank you, matt nesto. let's get a check of what's making news outside the world of business. monica is with us as we get ready for the joint prs conference. we havnews on the nuclear arms reduion. >> that's rit. i know you're seeing tha crossing the wires. president obama is in moscow today for the first u.s./russia summit in seven years. we have been meeting with the president. medvedev discussing it and the

fight in afghanistan and we do have two bits of news to bring you here. russia and u.s. aim to cut deployed nuclear warheads to 1500 to 1675 units on each side. so a framework deal there. also, russia agreeing to let the u.s. fly troops and weapons across its territory to afghanistan. so we'll keep you posted on all of that. meanwhile, in los angeles, they are bracing for massive crowds for michael jackson's memorial service. as many as 1 million people could flood the streets of the staples center. meantime, officials are concerned with the city covering the cost of the event during a fiscal crisis. investigators in tennessee are calling the death of former nfl quarterback steve mcnair a homicide. the two were found shot to death in a nashville condo saturday authories have stopped short caing th shootings a

rd/suicide. >>robert mcnamara died in his sleep in his home inwashington. he was considered a controversial figure as the chie architect of america's involvement in the vietnam war. he was 93. erin, back to you. >> thank you very much, monica. and next, we're going to have the mood of the market as we await president obama's press conference from russia with dmitri medvedev. >> and trish regan with what only you can expect on "the call." >> you guys just mentioned the press conference. this happening with russian president medvedev. we're going to talk about that. we're going have it live for you as soon as it happens. and then we're going to discuss all the investing opportunities that may be out there in russia. do you want to get into that country right now? we will debate. plus, we're going to continue our hot hands theme throughout the day. we're going to talk live with a five-star fund manager, up 26% this year. find out just exactly what he's doing right and how you can replicate it. we all that and the market news

right here from the stock change. first, "squawk on the stre" back right aer this break.

okay. that is a live look right there at the room inside the kremlin where president obama and medvedev will hold their joint news conference momentarily. we will take you there as soon as it begins. there have been already significant developments, the backdrop, arms control. but there are a numb of business objectives. >> there are. and a lot of people were looking at the key level, 2000, whether we were going to go below that number and they did solidly so. we'll see if they sign that by december 5th. as of now in the u.s. markets holding right within the range. 61 lower for the dow, s&p trading lower. minneapolis, phil dow is with us, director of equity strategy with rbc, good to have both of you with us. >> thank you, now. >> you've been waiting to

announce that. we'll let him fill everyone in on that. what are you looking at today? >> a little bit of obama being in russia and you folks later in the week on the g-8 meeting in rome. we'll start earnings coming up. but markets are just about risk and maybe derisking if you will. commodities a little softer today, particularly oil sector. dollar getting a little bit stronger. and sections like computer, consumer staples doing a little bit better too. that's where we're at right now. >> if you wanted to come in and clean your portfolio. let's say you weren't smart enough to sell before the crash last year. so then you sat and you're up a little bit. do you move anything around? and if so, what? >> well, i think this is a great time, erin, good morning, to clean up portfolios get out of companies where they're not quality, there's no visibility, and focus on those where there is visibility. and i think there's an attractive part of the market, high quality blue-chip companies that really underperformed the market at large. particularly those that can grow

the dividends. so i'm looking at those kind of opportunities right now, erin. >> do you feel as though earnings expectations have been ratcheted up a bit because some of the data of late has been better than expected, not including the employment number of last week, of course so there's a new expectation we have to reach, the bar has been raised. >> a little bit, scott, but again, the problem is where else do you go with your money right now? you know, it's a situation where you've got to take some risk if you're a pm, and you're going to have to find some of that risk in equities. so you're really going to have to jump in and hope you can keep up with the benchmarks. the bar is low now, comparatively to the way it's been in the past. but still, it may not be attainable even at these levels. >> bill, is the run in commodities over? or is there more to go? >> your guess is as good as mine. there is a profoundly strong case for demand down the road. my guess is you see commodity prices moving awful far awful fast.

my guess is that the most underowned asset right now, if you look at individuals, institutions, pension funds, endowment is quality common stocks. that's the opportunity in my opinion. >> all right. and when you say quality and big names, phil, can you give some examples of where you literally would -- >> an example would be, there's an etf called vig, the vanguard dividend, and people buy it for dividend growth, but it's the who's who of quality. it's a 230-stock portfolio, with the top 20 stocks comprising about 80% of the portfolio. so you're getting great quality, companies with incredible financial integrity and the ability to grow the dividend. that's a great thing over the next two months. >> maybe you're not going to give a recommendation, sort of the single name or etf or whatever that you're watching that would tell you something -- >> that is vig. that is vanguard dividend. vig, just look up the portfolio, the top 20 stocks will tell you exactly the names i like.

>> gordon? >> i want education, erin. that's what it's all about. as far as i'm concerned, anybody -- >> -- >> i would say so. >> thank you very much. gordon, we appreciate it, and phil, also thank you for your time. we've got a final check of the markets coming your way on the other side of the break. and we are awaiting -- >> the news conference. >> the news conference. the opulent room. >> it is. t is.

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a live look now at the room where president obama and russian president medvedev will hold their joint news conference momentarily. we will take you there as soon as it begins live. and also, coming up on street signs today, hard rock is about to build the biggest casino in europe. 19 miles outside of -- who knew? it is it's actually, it's a fascinating story. we've got the ceo jim allen with us on street signs this afternoon. we are excited about that. in the meantime, scott, it continues to be the commodity story, although, we started downright about 275 for crude,

right now we're at $2.63. >> and the market's holding in that range, dow down 55, nasdaq down 23. so it has moved down and the nasdaq's pretty significant today. >> yeah. in terms of a couple of other things that are of interest. and we're going to talk about this on "street signs" too and when he talk about markets, there's a great example out there right now and it is anything to do with michael jackson memorabilia. right now the pricing is all off, okay. you've got the same thing going for $100,000 that's going for $10,000. will the market work or not? we'll talk about that. take a look on ebay. >> all right. thanks so much for joining us. >> great to have you. stocks are moving lower today despite a better than expected reading. that measure of the u.s. service economy came in at 47 for june, that's up from 44 in may. oil prices are down nearly 4% as economic worries weigh on traders, it's down about 10% over f