and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to "the closing bell." monday afternoon on wall street. i'm maria bartiromo on the floor of the new york stock exchange. bit of a rally in the final minutes of trading on wall street today. a volatile session. investors searching for direction for much of the session. and then about quarter to 4:00 something popped to the up side. stocks managed to stage an end of session rally tonight. and we're going to tell you why coming up. there was some encouraging economic data after the services sector posted a larger than expected gain last month. but uncertainty about the larger economic picture sent oil prices tumbling today. oil down 4% on the session to close just about $64 a barrel. take a look at how we're finishing the day on wall street with the dow jones industrial average on the up side by 44 points. 8324 is where things sit'll out tonight. thanks to stocks like jpmorgan, general electric, boeing.

s&p 500 up about two points. and the nasdaq composite finished negative by nine points, although as we know technology and the nasdaq the leadership on the up side in 2009 up about 12% this year. with all the action right now from rebecca jarvis. she's our eye on the floor of the nyse. rebecca. >> thank you so much, maria. and what we did see throughout the day is the same weakness in a number of the commodities names. the commodities complex weak on both the futures side as well as the stock side of the equation. from mining to oil to metals. all of these names have been weaker. in light of today's events you have sort of a double whammy when it comes to these names. first off, you have the strength in the dollar, near two-week highs on that index. but you also have this question going forward of have we overshot our optimism? that's something traders are asking themselves. and it's something we'll get a much better look at when it comes to alcoa and its earnings on wednesday. kicking off the earnings season. taking a look at the second half of the year. what's important to notice here is did traders get ahead of themselves? did they think and overthink essentially that an economic

rebound was really under way? the question there has been answered by some industry insiders. they have been saying, particularly in the steel space, that they don't see necessarily the recovery coming as far as crisis and demand goes at least for some-time time, not the rest of the year. on the alcoa front very specifically we'll be asking two specific questions. first of all, pricing. what do they see as the outlook for pricing? and second of all what do they see as far as demand? is it a matter of a peckup in demand or are people replenishing the inventories that have been depleted? that will be a very important question. what we saw today in particular, it was strength throughout the session in the consumer staples names. but certainly into those final moments of trade those names happened to firm up from kraft to coca-cola and mcdonald's, procter & gamble as you see up there, they all finished the day stronger. and certainly, that helps things along. throughout the day's session but also into the close. one thing that note that's interesting about these consumer staples names, their input costs are reliant in many cases on commodities. so when commodities prices go

lower, they happen in terms of the margin to get a bit of a benefit. and then american express getting the benefit of an upgrade today over at stifel upgrading to a hold but certainly in positive territory throughout the day's session. that was a positive. in financial land. one of a few. however, it did end up today strongly. maria, over to you. >> rebecca, thanks so much. we'll see you later. rebecca jarvis. away from the stock market the institute for supply management reports its services index rose three points last month to an unexpected reading of 47. any reading below 50 indicates contraction in the services sector. the result in june was the highest reading since september. mining giant rio tinto is selling its packaging assets to beamus for $1.2 billion. this helps rie tinto reduce its nearly $22 billion debt load. and the fda approving a new use for eli lilly's cancer treatment alimtta. it can be used for the most common cases of lung cancer

after an initial round of chemotherapy. alimt sachlt already approved to treat two other forms of lung cancer as well as a cancer linked to asbestos exposure. arbitration could be looming over a construction impasse at the world trade center site. developer larry silverstein has walked away from rebuilding talks after accusing the port authority of new york and of new jersey of defaulting on part of its development agreement. the two sides will be forced into arbitration if they cannot work out a deal on their own. that in the next two weeks. we break down all the wall street action with tony dwyer, strategist with ftn capital markets and bruce mccain is chief investment strategist with key private bank. gentlemen, good to have you on the program. >> hi, maria. >> tony, how do you see the second half of the year playing out? >> two ways. i think we're going to pull back here some more below 850 on the s&p, and i think that will prove to be a replay of the '02-03 market bottom where credit continually improves as equity market weakens. remember the returns on fixed income are still hifrktdly

pretty attractive. what you're getting is some of the larger pension funds and institutional client base, they're coming out of equities and government into the corporate fixed income because returns are so attractive. >> bruce, do you agree with that? how do you see the second half? >> we think that the recovery this time is going to be somewhat slower growth than we've seen in past cycles, but we still see signs of improvement. and i think particularly with the early tendency for the markets -- for the economy to snap back in a bungee fashion once it's been stretched to the degree it has been we should get some pretty good numbers in the coming months. >> what about earnings? that's certainly going to be one of the catalysts. alcoa begins second quarter earnings reporting season wednesday night when it comes out with its numbers, and then it's off to the races for the rest of the s&p 500. what are you expecting out of earnings, bruce? >> we think earnings will be probably better than they were in the first quarter, but we don't expect to see major improvement.

earnings tend to show their best improvement about a quarter after the recession ends. to that degree they're a lagging indicator and we've got to be a little more patient to is wait to see how those come around. >> tony, do i want to be investing on the heels of what i'm seeing out of earnings or is it baked in the cake we're going to see a tough quarter here? >> i do think so, maria. as much as i'm looking for a pullback here below 850 i think i want to be smart instead of look smart, thankfully, which you want to use liquid tu. there's been no liquidity. for poom that have been chasing price higher, it's obviously proven not to work out so well. because if you're based on price you're also selling the same way. what i want to do is the equity market pulls back and credit maintains the gains i want to be a buyer into that liquidity. when everybody else is selling because they want to take profits or they made a mistake and want to cut it loose, i want to stand to be a buyer for information technology and health care. i agree with what dan niles was saying with you earlier. i think that technology is poised to do well. and i think health care, despite

all the head winds it has, it's acting very well in & its valuations are pretty attractive. >> it's interesting you say that because i'm just getting an e-mail from rich peterson on basically the best performers since the lows in march. i.t. was the second best performing sector in the s&p 500 since the march 9th lows from standard & poor's. rich peterson there. and financials, number one, up 80% from the low. i.t. up 32% from the low. do i want to be putting new money to work here after a 30% rally? >> it's better than a 100% rally rally you got in the financials. >> that's true. >> so i think you've got to keep it in perspective of how much the market came up from the low. and to the other guest's point of view, bruce's point of view, you've got to see where the fundamental outlook is going to be a year from now. it's going to be difficult to argue the economy's going to boom when consumers are saving and business loan activity is shrinking at a record pace on a year over year basis. >> you're an investment manager.

you've got to look at all at set classes. what are the asset classes i must be exposed to in the second half of 2009 and 2010? it's not just stocks, is it? >> no, it's not. you need to be in emerging markets, have some exposure to commodities, maybe some smaller cap stocks, but especially the international markets in general. later this year the developed markets should be rebounding as well and we want to be in those. >> all right, gentlemen, great conversation as always, we appreciate it. thanks. bruce, tony, take good care. now a look at some other stories we're following on the "closing bell" ticker. stifel knick o'laus upgrades american express tie hold from a sell. concerns about amex's loan losses subsiding because of a drop-off in delinquencies. stock was strong today up 5% at 23.47. emc raises its takeover offer for date o. domain by 3.50 a share. this new bid is valuing the

storage device maker at 33.50 a share. that's $2.1 billion total. the offer tops the deal data domain has agreed to with net app for $1.9 billion. bit of a horse race going on here. and as you can see, net app the loser on the day. 1 1/4%. regis reporting revenue down because of a 4% decline in same-store sales. the operator of the super cuts chain says it will offer 11 1/2 million shares as part of a plan to repay $267 million in debt. regis stock down 21%. quick break and then still to come on "the closing bell" president obama in russia today to try to smooth over the strained relationship between the u.s. and russia. will it work? we are looking at the story out of russia with president medvedev restarting relations. later california state treasurer bill lockyer and my guest telling us the golden state is anywhere near passing a budget deal foote billions of s tt

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welcome back. president obama in russia for the first time, and earlier he met with russian president dmitri medvedev, where they are trying to restart strained relations between the two countries. cnbc's chief washington correspondent john harwood in washington right now with the story. john? >> reporter: maria, the first u.s.-russian summit in seven years got off to a sober start but perhaps a productive one today. president obama and dmitri medvedev, as you mentioned, met behind closed doors. then they walked out to face the press, and they said during their session in private they had achieved their initial goal of resetting u.s.-russian relations. >> today, after less than six months of collaboration, we've done exactly that, by taking concrete steps forward on a range of issues while paving the way for more progress in the future. and i think it's particularly notable that we've addressed the top priorities. these are not second-tier issues. they are fundamental to the security and the prosperity of

both countries. >> and that range of topics was reflected in the initial steps toward agreement on a couple of areas, maria. one is a new framework for nuclear arms reduction. second is an agreement to continue discussions on missile defense. russia has an objection to the u.s. plan to place missile defense sites in poland and the czech republic. and finally, an agreement to lift some russian restrictions on imports of u.s. livestock, something the agriculture industry's going to be very pleased about. the summit continues tomorrow. another session with medvedev. and also a meeting with prime minister vladimir putin. and one of the questions, maria-s who's really in charge when president obama was asked about that in his news conference today, he said it appears both of them are sharing power, he's going to talk to both. >> thanks, john. aside from the preliminary agreement by both sides to reduce their nuclear stockpiles the u.s. also is hoping for russia's help in stopping nuclear proliferation in north korea and iran. i spoke exclusively to the president of russia just last month and asked him about getting north korea back to the negotiating table.

's. >> translator: we hope that the north korean leadership will demonstrate appropriate understanding and will get back to the table of negotiations because there is no other solution to this problem. the world is so tiny, we said about the economic problems which are so common to all of us. but indeed the wmd development or proliferation is a danger which is still higher than that. that is why the international community should oppose any steps which are in contradiction with the international attitude in this area. our position is clear-cut. we are prepared to interact with any sta any state, with our neighbors, with all players globally, and with the united states, and are prepared to discuss this matter in more detail during our

meeting with president obama in moscow in early july. and we're going to discuss this in other forms also. this is our shared concern. >> so how much will this visit by president obama due to repair relations with russia? joining me now to talk about that is alex clement, a europe and eurasia analyst. what is your take on the meeting? do you thi we've seen me accomplishmenthere? >> well, think the rusans and the amers focused on what could be achieved relatively painlessly. those are issues in which they both have an obvious mutual interest. that's strategic arms reduction and the security and stability of afghanistan. beneath that, however, there's a whole raft of issues on which russia and the united states fundamentally disagree, whether it's nato expansion, you're asian energy politics, iran, or north korea, frankly, on which it will be very hard for them to reach agreement.

in a sense the americans see a new relaonship as a basis for changing the status quo, while the russians see the status quo as a limiting factor for starting a new relationship. it's very hard to reboot things when each side is using a different operating software, so to speak. >> yes, you're right. and one thing i found when i spoke with president medvedev last month is that he really has gotten the promise and the support of the people. you know, the question out there of who's running the country no doubt prime minister putin still has a tremendous amount of power and influence there, but do you think that medvedev is coming out from behind his shadow little by little? i certainly had that feeling. although it's clear that putin is stillery mu also with his hands on the whe also. >> yeah, i don't think anyone inside russia or outsiderussia doubts that vladimir putin is still th mt powerful and popular litical figure in russia. that said, therehas been mething of a division labor between the two n that's emerged over the past ye and a half of their tanneddemocracy as

it's called there. i was just in moscow a month ago and the general reaction there was that it had worked more harmoniously, more smoothly than many people had expected in march of 2008. >> yeah, i agree with you, actually, alex. let me ask you this. why do we need russia in our corner? what do you think we're trying to achieve here? how important is it to have russia as an ally of the united states? >> well, washington and moscow can cooperate on a broad range of strategic issues globally, whether it's to,hether it's -- i mean, if they can come to agreement. na nato, particular trorism, proliferation --uclear proliferation. ese are all globa strategic issues on whichhe two sides can cooperate. one thing i don't see coming out of this, however, is any massive flourishing of u.s.-russia economic or investment ties. those have been limited in the past mainly because russia's main economic focus has always been on europe. to the extent they're trying to move away from that it's on asia. investors by and large have made decision investment in russ not so much gauging th relationship between washington an moscow as looking as

limiting factors within russia, whic are cons about rul of law or political risk. and those conditions still obtain. so strategically, yeah, there's opportunities. economically i don't see much brewing. >> you make a lot of good points here. let me ask you about oil and what's going on. the oil story and the dollar story. do you think the u.s. is going to be able to get more out of its relationship when it comes to oil in russia? russia and china seems to be teaming up a lot more than people expected recently. they're doing a deal in terms of oil. and certainly when president medvedev spoke to us he mentioned china very favorably a number of times. >> yeah, think theirect mplementaryties between russia and chien r. are cerinly more immediat the mont. it's difficu to convince the russians that with a fungible commity like oil they're bett f selling to the

americans than anybody else. their deal with china resovld around a $25 billion loan that beijing floated to russia for pipeline construction and other investment. that's a kind of concrete synergy the russians are very interested in. it's going to be difficult to make the case that the same obtains across the pacific. >> let me ask you about the dollar here because president medvedev says a lot and he said it in our interview and i'm sure it came up again with president obama. that the u.s. dollar should not be the sole reserve currency for the world. listen to our exchange as it relates to the dollar last month. >> how do you think the dollar will fare coming out of the recession? do you see it changing in terms of the reserve currency longer term? >> translator: this is a topic which is of concern to us also because the whole world is dependent on the health of the dollar. and despite there are other currencies such as the euro, the

british pounds, or yena, much depends of course on the health of the dollar, and we have our own point of view on this, which i, by the way, outlined already a year ago during, by the way, the st. petersburg economic forum. my idea is that at the moment the world needs a larger number of reserve currencies, and it is not because the dollar is bad or the euro is not sufficient. but the situation is that the current environment requires that we need to have more reserve currencies where people could be investing, where banks could be investing, and which the states could be invting al. >> alex, is that going to happen? >> i wouldn't put much stock in this. for e thing the message is comingut of russia very consistent. presidt medvedev has sken about on a number of occasis. meanwhile, other officials withinis administration, with the finance ministry, have very quicy sought to mper any

expectations tt ssia would y to make a sharp moveway from the dollar. t i think the more important factor is in order for ts to work you need the otherc cotries on board and whawe saw theric summit last month in russia, actually, the russians we moving forward -- the rhetoric was ry strong frhe russian side. complete silence from the chinese, brazilians, and indians on this, and i think without them it's not going to happen. >> let me ask you this about investing in russia today. what do you think the russian leadership has to do to convince people, foreigners, that their money will be, number one, welcome and, number two, most importantly, protected? people are worried about the rule of law, that the laws will change in the middle of the game. is there anything that the russian leadership cado to actually encourageoreign money coming into the untry? >> i ink you've hit the nail right on the head. it's an issue of trust. it's an issue of confidence. it's anss of people being prepared to go into a russia that's predictable. i think the recent years have shown that the russian leadership is willing to make decisions that are unfriendly to

foreign investors and to foreign governments irrespective of the outcome of those decisions when it comes to certain stratec priorities thathe russian government has, whether economically or in terms of geopolitics. and eliminang that uncertaint will ga long way to bringing foreign investors, particularly american investors, back into russia in greater numbers. >> all right. we will leave it there. alex, thanks so much for joining us today. we appreciate it. >> thank you. >> we'll see you soon. up next, after a 40% rally from march to may, stocks have been stalled out from may to july, but there are some significant swings over the period. we're going to break down what it may mean for your money when we come right back stay with us. d#: 1-800-345-2550 "i'm retnking everything...

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hi, folks. welcome back to "closing bell." well, another day has come and gone. we didn't have a big sell-off or big rally. we did close higher in the end. but you know what? the drift continues. we're actually now in our tenth week of this market. if you step back a little bit, you know, we had the little engine that could. we've now got the little market, or the big market, that couldn't. if you look at really what's been happening in this marketplace, since we've peaked out the first week of may, a whole lot of nothing. it feels like a really flat market. but you have to take a look within the numbers. take a look at the s&p and the dow from the may 5th high water mark. man, oh man. there and back again really. half a pernt is all we can do. we might as well -- go away is

right. you're not kidding. and nothing happened in between. well, that's what the indexes would tell you. but if you take a look beneath the still waters. ah, that's where the action is. peak to trough you have almost 700 points of action in the dow. i mean, that's almost 10%, folks. if you can't trade your way through that, then forget about it. if you take a look at some of the industry groups, food, beverage, and tobacco is up a comfortable 13%. definitely tradable in a two-month window. retailers with a 9% move. and crude oil, don't forget about that. 25% move there. if you take a look at some of my far from flat picks, i went out of my way to give you five companies in five different sectors that have had a huge move over the last -- well, from may 1st. aig's up more than 1,000% and the financials. oshkosh i just mentioned earer in the program-w a huge 120% move. it's an industrial. walter energy, former walter

industries. interesting, we need to update our internal software. aes is a utility. very strong, 60% move. and then odp, a retailer in the discretionary group, again with a very big 55% move over the past two months. so there is action out there. maybe not on the benchmarks. but don't be fooled. there's a lot going on. so up next, we have an exclusive interview with the state treasurer of california. there he is, bill lockyer. maria and the "closing bell" team are back in just a moment. >> announcer: here's a look at some of today's winners and losers.

we want to bring your attention to discover financial. the stock is down 3% right here. the company announced that it is going to offer $500 million in new stock to the market. and as a result we are looking at the shares trade down. $500 million secondary offering has discover financial active in the extended hours.

down 8%, actually. .3% is on top of the decline in the regular session. so you've got a total of 8% sell-off on discover financial. meanwhile, new information right now on california. jane wells is in los angeles with the latest on the state of the crisis there. and we just have a new downgrade to tell you about. jane? >> maria, fitch has just downgraded california's long-term general obligation bond ratings two notches to bbb. this is the second downgrade by fitch in just the last couple of weeks. bbb is still two notches above junk, and fitch is saying it believes the risk of default remains low. but still, a two-notch downgrade. this as six days into the new fiscal year there is still no solution to the $26 billion budget hole for this year. the governor has said he won't sign off on any deal that doesn't include the structural reforms he has been fighting for since he came to office. for example, all the fraud he says in state programs, something he talked about today while meeting with district attorneys. >> the faster we solve the

budget crisis and make ends meet and road out the fraud and abuse that's going on, i think the more the people would appreciate and the more i think the financial institutions will look at us in a favorable way and the more it will help our credit rating. >> all right. ious continue to go out to contractors, student aid programs, non-profits. people still waiting for their income tax returns. because the state has to hoard cash needed to make education and those general obligation bond payments, which have now been downgraded. the democrats say they're willing to give up on certain taxes. the governor has indicated he may back off certain education cuts. but still no deal. and our station in sacramento kcra is reporting today that assembly speaker karen bass, a democrat, is threatening to boycott any budget discussions with the governor out of protest because she doesn't think he's "serious about resolving the crisis." maria? >> thanks very much. we get more on the financial crisis facing california right now including the issuing of those ious are w. another cnbc

exclusive. joining me now from the state capital in sacramento is california state treasurer bill lockyer. mr. treasurer, good to have you on the program. thanks so much for spending the time. >> thank you. >> what is your reaction to this latest downgrade by fitch two, notches for the state? >> well, it wasn't a surprise, but it's disappointing of course, to have our credit ratings slip some more. we don't think there's any substantial risk of default, but that's not the only test that goes into their methodology. >> you don't think there's a risk of default, and yet so many people talk about these ious. the state issuing these ious. the redemptions will begin in october. thatwhat are the chances california won't have the money to pay back all of these ious? >> well, we're confident we'll be able to participay the debt, and other debt as it comes due. you know, part of our problem is we always have a dry summer and have to do short-term borrowing in order to pay the bills until

december and next april. without a budget in place we can't do that traditional short-term borrowing. so that's why we're stuck with these ious that have gone out. >> so where in the food chain are the ious in terms of priorities here for the state when you look at state payments, obligations, to actually keep the city running and the state running? >> in our state constitution education disbursements are number one. there are constitutional guarantees, of course, for debt and contracts. and then debt generally is a very high priority, above most of the other payments that have to be made. >> what do you think are the biggest issues in the way here in terms of progressing? what needs to be done? >> well, with respect to our budget, we were cutting very, very substantial amounts out of every major program.

not unusually for the state of california, and it's true around the country, our budget is essentially health care, prisons, and education. it's very hard to cut programs like that 15% or 20%. and so the argument has gone on about whether there ought to be a tax increase or part of the hole should be filled with a tax increase or not. and philosophical disagreements with how much of the safety net can be shredded. >> but of course you're not going to be able to get all the money you need just through tax increases. >> oh, no. no, in fact, we probably won't have any significant tax increase. that seems to be where we're headed politically. but it is a continuing argument. we're one of three states that requires a 2/3 vote to adopt a budget and spend money and raise the tax. so it requires a political consensus that doesn't exist here now and is very difficult to get to. >> well, you have discussed the

possibility of you're considering a run for governor. what would you have done differently as governor than governor schwarzenegger? >> oh, you know, first of all, i'm not sure i'm a candidate for anything. but if there was a fundamental error, i think, it was probably overpromising -- this is not just due to this governor. he the last time we had an old-fashioned balanced budget in california was 12 years ago. and since then there's been internal and external borrowing and fiscal gimmicks and so on. i think those are all a bad idea. i guess i'm conservatively traditional about wanting an old-fashioned budget where revenues and expenditures matched up. we're going to have, even after the cuts contemplated, we're going to still have a continuing structural budget deficit of some magnitude that has just got to get filled. >> so we know that you won't be able to get the revenue needed

just by tax increases. and you're saying, look, you don't even think we're going to see a tax increase. let's talk about the spending. what can be done specifically to lower some of the promises or lower the pension benefits packages to state workers? is that on the table? >> it's an active discussion. there are probably at least some segments of public employee benefits, pension benefits and health care guarantees that are unsustainable long-term. it doesn't produce immediate cost savings when we're faced with a budget prove like we currently have, but it does knead to get addressed, and it's an active discussion. i don't know anybody that's for fraud. so when the governor says let's deal with fraud, i think that's a universally agreed upon effort. actually, when i was attorney general, i ran and got awards for having the most aggressive anti-fraud program in the

country out of the attorney general's office, cracking down on medi-cal fraud. that kind of thing should continue. >> well, what else can continue, though, to actually put a dent in this? i mean, let's speak realistically. you are facing a massive crisis. how is this going to play out? >> well, we're going to have substantial cuts. and one of the debates is to what extent are they essentially across the board cuts, how much do they ripple down to local government and school districts, what's the impact on our markets when there's a substantial shrinkage of government spending? so all of those things are still unknowns. but what we know is there's going to be very significant cuts. you know, they argue they're sort of between -- they're 2 or 3 billion dollars apart. that's not a number that grown-ups can't resolve. >> how much of this $26 billion is either a cash cushion or anticipated growth from current spending? >> actually, we -- it's a

shrinkage. in the last decade california state budget growth has been 29%. during the time when cpi and population have grown 53%. so we're the second thinnest state government in the united states. and it's going to get thinner. >> let me ask you about this fund being created for michael jackson. i mean, a lot of people are saying why are taxpayers putting money in a fund for michael jackson when the state is in such critical upset? >> well, who knows? taxpayers aren't, but -- i mean, they have a family trust, as i understand, if that's what you mean, maria, that's privately funded. but we -- what the attorney general is doing in california is reviewing the medical community prescriptions and so on to see if there was abuse. >> so mr. treasurer, you really have got to get money coming into the state. we know that. and you need to convince

investors that this is a place they want to be, despite what you're facing right now. you would normally be able to cover short-term financing needs through what are called revenue anticipation notes. >> yes. >> could you tell us how they're working and how you're going to convince investors that california is a place to invest? >> well, what we have found is even in these difficult times earlier this year we were able to move $14 billion worth of bonds of various sorts. the new build america bonds is part of the stimulus. and other traditional general obligation debt. we found very robust retail markets for our bond issues. so we don't know yet how that will be when we go back to the market. we don't do it until a state budget is in place. so we can show investors the guarantees of their repayment. >> mr. treasurer, good to have

you on the program. we hope you'll come back and tell us more about the process. and of course we're wishing you the best. >> thank you. >> bill lockyer joining us, california state treasurer, in the middle of a real crisis situation in california. up next, we're speaking to one of the hot hands on wall street. the portfolio manager of the red hot oak mark international fund. tells us why he's going against the grain in picking japan as one the best overas opportunities r investors today. back in a moment.??x@

time now for "going global asia." we're just getting started here in asia and here are the stories to watch. the reserve bank of australia will decide on interest rates at its meeting later today. the market is expecting no change as the central bank has repeatedly hinted that it wants to assess the impact of previous policies before making its next move. we'll be getting analysis and reaction to india's 2009-2010 budget. the world's biggest democracy is grappling with the high fiscal deficit as the stimulus growth. and taiwan posted -- the territory is still facing plunging exports but remains in surplus by $3.2 billion. tune in to cnbc world, catch all the action overseas at c nshs's asia headquarters. i'm adam bakhtiar going global with your money.

>> and all day today cnbc is highlighting some of the best money managers who are playing with a hot hand in 2009. the oak mark international fund fits the bill. it is up almost 20% this year. joining me now to talk about the strategy and some of the more interesting opportunities is david harrell, who manages the fund. good to have you on the program. >> nice to be here. >> the fund is up about 20% this year. what's been your strategy in this turbulence? >> the strategy is to look for those companies which we think were unfairly punished in the big global downturn of the late '07 and all of '08. and in our definition good quality companies are those companies are solid management teams who are good at running their assets, good at allocating capital, but for some reason are selling at a low price. we know all stocks are at a low price but not all companies are good quality. given our three to five-year investment time horizon, we focused on those companies with good franchises and good balance sheets that would enable them to get through this period of

economic weakness. >> so what are the best franchises as well as balance sheet stories that you can pass on to us? >> i think a really good example, i can list two of them. one actually that trades here in the united states. signet jewelers. now, it's an anglo-u.s. company. its origins are in the united kingdom. that's signet jurlz. but they trade very strongly here in the united states under kay jewelers, under jared. and this company's just gone from strength to strength. even in a period of weakness. they have a decent balance sheet that's enabling them to get through this slowdown, and they continue to increase their market share. so this is exactly the type of company we're looking for. good business model, good balance sheet, and we'll benefit by the time the crisis is over. another company is toyota motor, the japanese company. now, of course, we all know what's going on in the turmoil in the automobile industry. toyota has a couple very strong things going for it. one of them a very, very strong

balance sheet. over $50 billion in net cash and liquidity and short-term investments as well as product, good product that people seem eager to buy around world, despite kind of the market slowdown. >> let me ask you about the u.s. versus the rest of the world. a lot of strategists and money managers are looking to the emerging markets to really experience growth versus the contraction we're seeing in the united states. what is your view on emerging markets? then of course i want to get to japan. >> i definitely agree that the engine of economic growth over the short term will not necessarily be the united states. we have to digest the debt that we accumulated, say, between 2002 and 2007. so once we do that, maybe as long as our mentality's right we'll grow again. but in the meantime places like the emerging markets, take china in particular, has a macro economy that is poised to grow because while we've been

spending too much they have actually been saving too much. some of this is the result of a artificially weak exchange rate. but some places in the emerging markets have the fuel to propel growth. i would differentiate between macro economic growth and there being investable targets. i think investors cannot get obsessed with investing just because a company is located where there's strong growth. you have to look at the price of the business, corporate governance, et cetera. >> what about japan, david? a lot of people feel like japan is not out of the woods. we're constantly looking at the missteps in japan around the banking crisis a decade ago. what do you see in japan that perhaps others don't? and how are you investing there today? >> that's a great point. people see the missteps and people see the slow growth and they've completely abandoned it. as they've abandoned it, money's flowed out of japan, and prices weakened dramatically.

even beyond i'd say over the last ten years what other markets have done. but markets have done. at the same time, silently and surely, japanese companies are slowly becoming more profitable. and very basically, price to book values are declining. normalized return on equities are rising. and this provides with an opportunity, especially when you consider that japanese companies, many japanese companies have good exposure to those fast-growing, emerging markets. so they're located in an economy that is slow growing. they have exposure and the ability to make profits off fast-growing asia. and all of this while increasing return on equity and improving corporate governance. >> one area you're avoiding right now, david? >> one area, we're just kind of staying out of -- china has really increased to be the flavor of the month again. why? because, again, that macro economic growth. but one has to be careful.

you have to look at the price you're paying for chinese businesses, and secondly, you have to look at the corporate governance structure. when you invest in most chinese companies, you are basically side by side with the chinese government. their objectives may be very different than our objectives as investors who want long term profit growth. >> that's a good point. >> one other area to be very cautious about is russia. again, it might strengthen, when resources strengthen, because it's a resource-based economy. speaking of terrible corporate governance, there is no place in the world that's semi developed that's as bad as russia. >> wow, all right. interesting thought today. we so appreciate your candor. thanks very much, david. good to have you on the program. con grats on your success. david herro, oak mark professional fund, portfolio manager. michael jackson's memorial service will be held tomorrow in los angeles. not only is it turning into a spectacle, it's also turning into big business for some companie as well as the city of los angeles next.

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welcome back. a los angeles superior court judge denying requests by

michael jackson's mother to take over his estate. the judge handing over control of jackson's estate to his longtime attorney john branca and music executive mclane. jackson asked those two to administer his estate in his 2002 will. his estate is estimated to be more than $500 million. more than 10,000 fans received tickets to attend michael jackson's memorial service tomorrow in los angeles. hundreds of thousands may flock to the city to say their good-byes. that's turning into a big memorial and big business. julia joins us with the details. >> reporter: michael jackson's memorial service at the staples center is the hot ticket. 1.6 million people registered for the lottery, and now concert promoter aeg is trying to make sure that no one scalps the tickets. >> we're going to great lengths per the request of the family to create a system that will allow us to get the tickets and the wristbands in the hands of the fans.

for those that would try to take advantage of this, shame on them. >> that didn't stop people from auctioning vouchers on ebay for tens of thousands of dollars. though ebay is cracking down, pulling all voucher sales from the site. all that interest means big business for los angeles. the espn zone at the staples center has seen a considerable increase in customers, and they expect that to continue. and a dozen los angeles hotels are partnering with the michael jackson fan club to offer discounts for out of towners. hilton and westin each cutting prices at two l.a. hotels. the wilshire grand is discounting food and beverages. the hotels have lost some regulars on concerns about crowds, but they do expect the event to be a net gain. ticket holders have to get there. british airlines says london to los angeles flights were very busy for this time of year. this attention could be great for staples center's other events. 500 million people clicked on the website on friday alone. to give you a sense of tomorrow's memorial reach, there have been over 10,000 media

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