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tv   Lunch Money  Bloomberg  April 25, 2014 7:00pm-8:01pm EDT

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>> welcome to "lunch money." i am adam johnson. take a look at the menu today. in sports, pay for play. northwestern football players vote to unionize as the entire ncaa watches. today's investor, warren buffett response to david einhorn. flat tire, for this time, not gm. hurting from the recalls and water, water, everywhere. the challenge is cleaning it and then you have to get it to the people who need it. ie,ally, wu tang clan's newb
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revolutionizing how you are going to pay for music. let's kick it off with what everyone is talking about, when you're president or anyone giving a news conference, you have to be quick on your feet. >> i absolutely would save mr. putin if he were drowning. i would like to think if anybody is out there drowning, i'm going to save them. i used to be pretty good swimmer. i grew up in hawaii. i'm a little out of practice. >> a little out of practice from answering questions like that. the president was asked if you would save a drowning vladimir putin during a joint news conference with the president of south korea. mind you, the country is mourning the loss of hundreds of people in the sunken ferry off the korean coast. needless to say, this was very awkward. in fairness, the reporter who asked the question was merely echoing a similar question that was put to president vladimir putin last week.
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his answer, well, in addition to intergovernmental relations, there also personal relations. i don't think of a close personal relationship with obama. so they agree, but let's be honest, president obama does not enjoy the playful relationship that his predecessor george bush had with putin. and the current tension in ukraine and the sanctions, that doesn't help. >> i think is important not to anticipate the targeted sanctions we are applying now necessarily solve the problem. what we have been trying to do is continually raise the cost for russia of their actions while still leaving the possibility of the moving in a different direction. we will continue to keep some arrows in our quiver in the event that we see further
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deterioration of the situation over the next several days or weeks. >> the tension is growing. an explosion at another checkpoint outside the black sea port of odessa and southeastern ukraine injured seven people earlier today. they say unknown men threw grenade at the checkpoint which was manned by pro-regrade he and -- pro-ukrainian activists. security forces launched an operation to drive them out of occupied buildings, prompting new threats prompt it for mr. putin. >> this is simply a punitive operation. of course, it will have consequences for people who take decisions like this. it also includes relations between our state. we will see how things will develop and draw conclusions based on day-to-day realities. >> meanwhile, the top diplomats from both countries seem to have dropped this whole diplomatic
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thing. lavrov says he was is distorting an agreement by making unilateral demands on russia to disarm pro-russia militias in eastern ukraine. he also said secretary of state john kerry's tone was unacceptable and prosecutorial and he criticized russian state tvs coverage of the ukraine situation. here he is speaking yesterday. >> ukraine was used and is being used as a pawn in geopolitical games. every time the international situation is aggravated, they tell us we have to solve everything alone, said everything depends on us in ukraine. we are flattered, of course, but a state original significance cannot manage everything, so we stand for collective actions. >> secretary john kerry means business, too. that is him with his dog at work yesterday, but don't let the cute little yellow lab full you.
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-- fool you. >> let me be clear. if russia continues in this direction, it will not just be a grave mistake, it will be an expensive mistake. already the international response to the choices made by russia's leaders is taking its toll on russia's economy. prime minister medvedev has alluded to the cost russia is already paying. even president putin has acknowledged. it. >> president obama says he is ready to pull the trigger. >> he is not a stupid man. he acknowledged this has had an impact. and certainly if the situation gets worse and sanctions are broad and to the entire sector, that will have a more severe impact on the russian people. >> president obama is not the only one who has to think on his or her feet.
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>> we are going to come over here. you, in the front. >> i'm going to posit. dallas rachelle obama -- that was michelle obama. something sheaid did not expect. >> my dad had been out of a job and i wanted to give you his resume. >> my goodness. i will take it. it is a little private, that she's doing something for her dad, right? got it. >> she probably handle that better than her husband it with a whole drowning question. when the event ended, mrs. obama gave the girl another hug and reached back to grab the resume off the table. just another day at the office for the obamas. a surprise earnings miss by ford.
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we are going to discuss why. football players potentially changing college athletics. what is at stake. that is coming up. all in a days work, the first lady showed up last night on "parks and recreation." enjoy. >> you know how i feel about chicago. >> you're from chicago, so you like it. >> and we need passionate people like you. they get hundreds of millions of visitors each year. are you nodding because you agree with me? >> i agree with you on all things throughout history and through the end of time forever. you and grant worked together? >> we do. he has helped me integrate the let's move program getting kids , outside, rock climbing, hiking. >> that is incredible. i'm sorry i'm talking so loud. my apologies. >> i hope you take the job. change happens one person at a time.
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good to meet you. ♪
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>> in sports, today is a very big day for college sports. northwestern university football team is voting on whether to form a union. last month a national labor elections board regional director ruled their employees ineligible to form a union. the outcome of this vote will have huge applications for northwestern. they could divide the team and get some players against the school and coaches. they could shake up the $31 billion business of college sports. the president of the ncaa is not too happy about it. >> it so fundamentally changes the nature of what college sport is about and blows up what is one of america's iconic activities. i think it winds up in the supreme court. >> the ncaa's argument, it has been athletes get tuition, room,
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and board and above all the get an education, in many cases, for free. the revenue helps fund a lot of the other teams. athletes, well, they say they see none of it. they need better health care and many times they don't even have enough food to eat. >> there were plenty of times where throughout the month i didn't have enough for food. our stadium had 170,000 seats, buying tickets to watch us play. it is tough just knowing, being aware we had just won and had a good game. you go outside and hundreds of kids are waiting in the tunnel, you're taking pictures and signing autographs. i walked back and reality sets in. i go to my dorm room and open the fridge and nothing is in there. what just happened? why don't i have anything to show for what i just did? >> that was aaron foster.
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he played for university of tennessee. now he is a pro bowler for the houston texans. he is not the only one who has gone hungry. >> i don't see myself so much as an employee, your jersey may not have your last name on it, but you want something in return. sometimes it feels -- i don't feel athletes should get hundreds of thousands of dollars. there are hungry nights, that i go to bed and i'm starving. >> that was ucon basketball player. shabazz napier a few weeks before his huskies won the ncaa championship. a week later, the ncaa approved unlimited meals for all athletes. that is one move. jeffrey kessler once more. he wants a lot more. he is suing the ncaa over rules that limit the amount of financial aid players can
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receive. we spoke to him this morning on "surveillance." >> all of these struggles are about the same issue, which is right now in men's basketball in an football, you have very, very large amounts been generated in one amount to businesses and you have everybody sharing in those benefits except the very people -- the athletes -- who generate that money. >> but what is wrong was of the and -- what is wrong with letting the portion of their sharing be a scholarship and education? >> in any other business, and we're talking about business -- university of texas makes over $175 million a year just from football. that is a pretty good business they are running. they have their own cable television channel. in any other business, no one would say -- because it is illegal -- that the competitors can get together and say, well,
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the workers will only make this. fix the wage. that is what this is. >> share the wealth. >> that's right. what we are really seeking, we are not seeking to mandate anything. we are seeking a free market. let the schools decide if a school was to put aside money for a player every year and say, if you graduate, i will give you a bonus and i will give you extra money for staying in school every year, what is wrong with that? the ncaa right now would say, you can't do that. >> should college athletes be able to form a union? 60% of those surveyed in a new poll say no. next up, an investor tells us how to be a great many
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-- a great money manager. his words of wisdom are coming up. and how to do clean up dirty water. a new venture we will tell you about. this is what it looks like when you're in a sandstorm. reality for people in china. sandstorms have grounded flights and in some cases visibility has fallen to 50 yards. that is half a football field. ♪
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>> time for little investor talk. there's been a lot of talk of a tech bubble recently thanks to in part david einhorn. he warned it is the echo of a previous bubble.
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are we going to witness a pop? this billionaire definitively says no. >> the word bubble, and this will come up with our guest, it is a contentious word. it implies markets are wrong. i am in the middle. i think there have been a few bubbles, but they are rarer than the market tends to think they are. >> where do you think we are? >> i think there's a difference between an expensive market and a bubble. when you say something is going to return less than it used to because it is expensive, that doesn't mean it will crash. i think we are poised for lower returns over the next 10 to 20 years. >> the one and only mr. warren buffett agrees. he did not seem too worried about it earlier. >> there are very few tech stocks i want to buy at the prices they sell for, but it is
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not remotely like the bubble existed 15 years ago or whenever it was. we are not seeing total craziness or anything of the sort, but we're certainly seeing some companies go for high valuations and private transactions a pretty fancy prices. but i don't know those companies well. it is not something you can just go with any piece of junk and call it dot-com and sell it at huge prices. >> although, we have had that happen. >> we are not there, but i don't find myself tempted to buy anything that's coming out. >> you don't need warren buffett to tell you every that has some risks. howard marks says sometimes you even need to be wrong. here he is with erik schatzker. >> everybody dares to be great. who would not dare to have great performance? the real question i ask in the memo, do you dare to do the things you have to do to be great? >> what are those things? >> do you dare to be different?
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do you dare to be wrong? and do you dare to look wrong? you have to have all three of those in order to have a shot a great results. >> let's go into more detail about what it takes to be great. what do most institutional investors, money managers, what do they do and what to do want to stand out from the rest of the crowd do? >> the big question is, how much of your time, effort, and capital will you -- and self-esteem will you risk in the effort of trying to be right? and how much will you spend trying to avoid being wrong? they are two different things. in order to have a good shot at being really right, you have to be a shot at being really wrong. >> right now, for example, where would one say, we're seeing people try hard to get it right, to beg -- daring
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different? >> well, i think the people who are buying the social media stocks at the high prices are trying to be great. they're trying to go from 10 to 40 and now they want to go from 40 to 200. i can't imagine they think it is a low risk strategy. most people driving look at the rear mirror and see what is happening. they are dreaming of an extrapolation. >> are they afraid not to be on the train? last year when people thought not were fools if they were long on the market, they piled in so they would not underperform the s&p. >> there is the fear of being out of step is a great fear. perhaps the most corrosive of all human emotions is having to sit there and watch other people make money when you're not. if you're a professional and other people make money and you're not, you could lose your accounts, your job, whatever it might take. >> there is no question you are right. you feel that way and lots of people feel that way.
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why is it that the majority, the vast majority of investors are not willing to take those risks? >> well, because if you take the risks to try to be right, you know you're not going to be right 100% of the time. you could be wrong. if you are wrong a few times in a row, then maybe you lose your job or your client. >> is it because they are chicken? worried about losing their jobs, which is a legitimate fear for many people. or is it because in some cases, or a combination of the two, their clients won't let them. endowments, the folks who sign up institutional investors to manage the money one great returns. >> they don't want great returns, they want good enough returns. most of our clients in the professional world constrain us. they say you can only have permits for industry, per country. we spent a long time negotiating these constraints.
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they don't say, if you think china's great, put all the money in there. they say, you like china? you can put in up to 6% because if you put in all the money, you could be wrong. i say in the memo, and the one thing i've carried around that occasion a return of the topic was my conviction based on my experience. the main role among investing institutions, we would never do so much of something that if it turned out to be a mistake, we would look bad. now, that makes perfect sense. nobody wants to look bad. however, you have to accept the converse is, we would never do enough so that if it turns out to be a good thing, we will move the needle. the two have to go together. >> you can hear more from our
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interviews on coming up in company, how to get past that big earnings disappointment. in the plans to sell only one copy of the wu-tang clan album. ♪
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in brazil, protesters taking to the street after a young man was killed after a street fight between young man in police. and man may have been shot by police. this is the power struggle between drug dealers and police before the world cup. australia and new zealand are commemorating their version of memorial day. traditions include services,
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marches, and they honor those who have fallen in the line of duty. 80,000 people visited the shrine of remembrance in melbourne. it was special this year including visits from prince william and his family. pope john paul ii is on the cusp of the fastest canonization in recent history. he is on a double ballot for sainthood with pope john xiii. if approved, they will be the first double pope canonization since the middle ages. finishing up the earnings parade, ford missed analysts expectations. wiped out $800 million worth of profit. matt miller broke it all down with betty liu. >> $.25 a share is what ford came out with. investors and analysts were looking for $.31 a share according to our survey. it is interesting to see even when you add in the additional
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items, when you just look at the bottom line, net profit, they're still down 39% from the same time a year ago. $989 million they made net. the reason is, as you said, $400 million in warranty and repair costs. $100 million in costs for the weather in north america. over $300 million in costs from the venezuelan do valuation. a lot of the same thing sitting other automakers are hitting ford as well. for some reason, they just did not telegraph as well to their analysts. i don't know why. >> well, that happens from time to time. a lot of focus is on seo alan mulally and when he will turnover his reign. >> that has been a story i think ford wishes had not stolen so much of the focus in the first quarter and is definitely
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stealing a lot of focus. people will be talking about it all day, even though it doesn't have much to do with earnings in the first quarter. ford is in an interesting place right now. they're introducing 23 new models globally, and that will cost them a lot of money for they will be below what they made last year. things like retooling the f150 factories cost a lot of money. they will do that with a number of different models. it is important to have a steady hand on the tiller right now. as alan mulally prepares to exit, i think bill ford is hoping very much this can be a smooth ceo transition. that has not been the case in the last few ceo traditions. >> he also spoke with bob shanks about the company's plans to move forward from the big earnings miss. >> i think the fact we are still
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generating positive cash flow despite what is happening in emerging markets, despite increasing investments for future growth, which is what all of this is all about, a set of year, if you will, for stronger results in 2015 and beyond, that is encouraging. >> in europe, d.c. real recovery there? -- do you see real recovery there? yep pretty stagnant market share. does it look like it is getting better? >> absolutely. europe is clearly in recovery mode. the industry level is rising a bit faster than we had expected. it increased our guidance for the full year in terms of industry volume for europe. our share was up. we are seeing positive results. we feel positive about the turnaround there. we're clearly on track for
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profit in 2015. >> china, your growing like gangbusters there. coming from a lower bar than your competitors, but you continue to see high double-digits? >> i think we will still see continued strong growth. we still have four plants under construction in china, so there is capacity coming on stream. there are more products we will be adding to the portfolio. they're being well -received by customers. >> all in all, with the exception of investors looking at today as kind of a negative day for the stock, you're set up really well for when mark shields takes over as ceo, right? >> we are set up very well, not only for the balance of this year, the going into 2015 and i think we feel very strongly about the guidance we have given. in the call, mark mentioned for north america, with a little bit of luck and hard work, i think we might be able to get for the top half of the margin range. >> talk about hard work.
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getting water cleaned and in getting it where it is needed most. how innovation is bringing drinking water around the world, coming up. and pop, we will hear from the man behind wu-tang clan's plans for the new album. one brave cameraman base jumps off the tallest building in the world. dubai's burj khalifa. look at this. unbelievable. ?
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>> this is "lunch money." we are streaming live everywhere. online, your phone, tablet, even apple tv and now amazon fire tv. today in innovation, all about water. we're going to start with how to clean it up. two groups run by robert kennedy junior sued the california department of transportation for contaminating water along the
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pacific coast. what resulted was a partnership with a company using technology to make dirty water safe. >> there were thousands of storm drains along the california coast from the highway that were discharging toxic water with viruses, oil, grease, hydrocarbons that were getting into the waterways, onto the surf beaches, kids getting sick. we sued them. and we won the suit. it is a multibillion-dollar judgment. the settlement required us to look at technologies that would allow the state to remove the toxics from their bathing beaches. >> it can be molded in any shape or size. it is a single piece. we can mold it in any shape or
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size. this demonstration really is a civil test tube demonstration. i will take some new york city water, which we all believe is clean, and used motor oil and contaminated so you can see what would be running off our streets like body was talking about in california or it can a steel mill from an industrial facility or oil and gas operation. anywhere that is contaminating water. the idea is to clean the water well enough so you can swim in it, they then it am a fish in it, or reuse it in an oil and gas application. is is just a test tube demonstration. this is just a simple to menstruation or you can see the oily water going into the smart bunch. >> that is amazing. what is absorbed, what is absorbed is personally bound. you cannot squeeze it back out. it will not leach back out.
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you can go to a waste facility burned as a fuel. you can use the power at the end of it. >> just so people can see, the residue there stayed at the top. >> this is the final frontier for clean water, because when we passed the clean water act of 1972, it made all pollution illegal. epa really focused itself on plans. there's a lot of imagery attention. people are looking to these kinds of solutions. >> cleaning water, that is the first step. then he have to get where it is needed. a new technology for developing countries of little infrastructure. here's frank says no. >> proving safe drinking water is one of the key goals and one of the greatest challenges a lot of people face.
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it falls predominate leon women and children. one of the underlying factors of non-attrition is not just access to food, but access to water for preparing food. if we can improve or lower the cost of water delivery, then we can bring access to water closer to people's homes. >> many people have to pay for water and don't were wasted. >> you get a smart card. you go to a shop and use a mobile payment, then you can go or send your kids. you start taking water into meters how much you consume. when you run out of water, it turns the tap off. >> to sue the latest ideas on bloomberg west 6:00 p.m. eastern and 3:00 pacific.
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you can also go to coming up, why you're seeing more records coming out on vintage vinyl and for millions, initial plan to release a single copy of a new album. ♪
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>> this is "lunch money." streaming live on every device imaginable. i am adam johnson. in pop, we're all about music. vinyl is one of the hottest growth areas. heart is like macklemore, it has become a powerful marketing
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tool. jon erlichman went to one of the few factories where records are still made. >> long before there were digital downloads, this is how you made an album. a rainbow records, the recipe hasn't changed. final pellets melted into gooey bubblegum. >> heating up the dye, the hot vinyl, and hydraulic pressure goes under about 1800 pounds of pressure to squeeze it out. kind of like making waffles. >> we're inside just a dozen facilities still pressing records. there were down to producing only 5000 lps a day.
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>> where 22000 and 25,000 a day. >> 25,000 here a day? >> six days a week. >> last year, 6 million lp's were sold in the u.s.. 144% growth in four years. compare that to 54% growth for digital albums and a 44% drop in cd sales. if you want to know why it is hot, look no farther than rap artist macklemore. a year and half after the release of his hit album, rainbows busy manufacturing the vinyl version. there's a digital twist. >> when you buy the physical today, in certain cases like this one, they will give you the digital copy as well. >> that is common. >> they made it available at retailers like whole foods and urban outfitters where it quickly sold out. >> there are not only selling
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those units, but they have a 12 inch by 12 inch picture of themselves in a store that speaks to their brand. >> with music fans feeling nostalgic, rainbow is scrambling to meet the new demand for final with old equipment. its newest record presses 35 years old and album testing takes place on a vintage turntable. >> this was converted for vinyl. >> it was converted for vinyl? >> that tells you where we are going. >> talk about turning things upside down. hip-hop wu-tang clan will release only one copy of his new album. it is part of a marketing campaign that includes sending the only one around the world on a listening tour and auctioning it off, in theory, for millions. >> as annoyed as fans are about what we're doing, this is bigger than the fans. this is really a sacrifice. also a silver ring produced for the wu-tang clan. the concept of the one copy album came to me three years ago
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when artist needed a wake-up call. i said, why not? in order to take a few steps forward, let's take 400 years worth of steps back to the renaissance age and look at it as a commodity from creation to exhibition to sale. when you're looking at for ari -- ferrari and a honda coming except the price difference. because it is tangible. when it comes to music, it is not tangible. it is digitized. it is insulting to me that a song from great artists like jay-z or kanye west is a people value to a box of paper clips from the dollar shop. that is not sustainable model. if we were just to easily sell it off to record company or brand were association, it compromises the integrity of the
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project. in this whole thing becomes a publicity stunt am a cheap marketing ploy. that is not what this is. >> [indiscernible] >> i can't tell you. it was produced in a way that i would produce between 1993 and 1997. the glorious reign of wu-tang clan, the particular sound, grittiness. that is going to be corny. >> this one-of-a-kind album has inspired several fans to kickstarter campaign. they want to buy at industry beta for free over the internet. that is not exactly what they had in mind. from one pop phenomenon to another. nintendo's game boy turned 25 this week. just an excuse to play these really cool commercials that show even working guys love playing tetris. >> you don't stop playing because you get old, but you
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could get old because she stopped playing. ♪
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>> approaching 56 past the hour, i'm julie hyman them. let's take a look at where stocks ended the session and the week, on a down note decidedly so after some high profile earnings report disappointing
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especially from amazon as well as tensions heating up once again in russia, ukraine, and the u.s. ratcheting up rhetoric regarding russia. for more on the market in way it should be putting your money right now, i'm joined by mike crofton, ceo of the philadelphia trust company. it's been an interesting week. beating, companies are estimates but day by day, paying the most attention to the highest profile companies. what do you make of what we have seen, the reaction, and where do e go from here? chuggingave to be along but it is really not a smooth move. certain will do well and others will do poorly and that's indicative of the early stage of any recovery but i actually think it is in place and it will
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continue to gain momentum. we will not see it manifest itself until the third or fourth quarter. at 3%y will be growing gdp and take it to new levels. >> do you get into cyclical? >> you will have to use the next couple weeks. we will have a very choppy market. earnings are not consistent. two, problems in russia and the ukraine which will occupy the market. the 10 year bond is something people are watching. all of these things will be in front of sell in may and go away. we may start to see that a little bit today and next week is may. we will watch the market. if it sells off, pick your spot and get invested.
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you can buy cyclicals, old tag, momentum. there are certain stocks that sold off as if they were momentum but they seek -- ceased to be so. >> you bring up gilead. they have blockbuster results for the hepatitis b drugs. we saw some amazing results with gilead. how concerned are you? >> it is very rare. it is a cure for hepatitis c. they will come to terms with the pharmaceutical benefit companies on a price matrix. they have other keyers in the pipeline based on the same science. i think they are poised to do very well and the growth rate is in the mid teens and 20's. we will get a growth start and you don't see that very often. >> qualcomm, those earnings actually disappointed talking about china as a weak spot.
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that's another. >> qualcomm is on the front of all next-generation chip technology. i'm not worried about qualcomm at all. your leverage to the economy and the emerging markets. emerging market and attrition of wireless devices is just starting. >> we have to leave it there. appreciate it. have a great weekend. for "on the markets," i'm julie hyman. ♪
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