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tv   The Call  CNBC  August 17, 2009 11:00am-12:00pm EDT

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you know, if you look at some of the earnings reports, a lot of people are anticipating new highs, highs, that is, in 2011 that is a long ways out. they are going to say what is going to propel this market, other than earnings, to move forward it could be a long wait. that is what you have the bears saying. bulls are saying, s & p, trading 13 times earnings or so, so there could be good bargains. . we are going to discuss, coming up, very shortly, whether or not the sell offis a good thing for you as an investor if you want to get in. bob pisani on the floor with me. lowe's a biggie today. >> we have a problem. remember this idea of growth, of same-store sales growth in the second half, top-line growth, low's isn't providing the ammunition the bulls need, it is pretty simple, same store sales growth is is a problem here. stocks up 25% but telling us not much in the term of in way of top line pickup in the third quarter guidance. 6 to 10%, they declined 9.5% in
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the second quarter, not a sequential improvement we are seeing. as a result, trish, analysts raising estimates the second half of the year and 2010 are going to have pressure lowering the s & p there is lowe's from the month, 18 to $23. >> a subsector. lowe's is so tied to the housing market and not having a recovery. >> they did say they were -- receive sold signs of bottom. remember, these stocks have been moving up in anticipation of top line growth would be manifesting itself in some way, even modestly, and they are not really getting that, not getting the support they need from the bulls. >> talk about later in today's session, late-day rallies, it possible today? >> going to be harder today for a very simple reason. the market opened down immediately almost 200 points. think about what's happened in the last month and a half. when the market opens, people who don't believe in it start shorting the middle of the day and have to cover at the end of the day. the market opens down 200
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points, tougher to short the market net first half hour so probably less shorting going on here today, means less short covering later in the day, might be tougher to get that last half-hour rally. >> we will watch for t boss pisani, thank you very much. uptown, mr. nest stow live. hey there matt. >> the action here is pretty y much the same as everywhere, lots of red al lows, very little gainers, few gainers, i should say, in the market. down a full 2.5%. nasdaq index, slightly worse than the dow and s & p here today. you look at the nasdaq 100, 100 biggest stocks here, u.s. wind resorts, consumer discretionary space, down 6% here today. worst performer here, steel dynamics, talked about materials, materials are among the hardest hit, giving it back here today, down about 6%. foster wheeler industrial, they build power plants and all sorts of stimulus-lake projects. foster wheeler having a tough go of it. hardest hit bank, worst
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performer of the financials, many down sharply, 4, 5, 6%. i also point out express script up 2% today, the lone gainer in the nasdaq 100. just to show you the three big horsemen here today, microsoft, apple and google, of those three, microsoft looks the best with a 1.5% decline here today, which is, well, a full percentage point better than the give back we are seeing for the nasdaq here today. now to brian schactman for the latest at the nynex. matt it is interesting we talk about the dollar impact, equity impact, now the storms to talk about, a little bit of a buzz going here on the floor, not really sure what it is it is not about the prices, we are down. one thing we haven't talked about is china. disappointing data over the weekend with. of course, the stock market tanked pretty solidly overnight. share a quote with you from mike fitzpatrick at ms global. oil record oil demand from
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china, where record imports were registered recently will not be enough to carry the world out of the recession either. this is the lows for the whole month of august. a lot of traders coming up to me and saying see how $65 is defended that will be key. preaching to the downside, look out. i also want to take a quick look at the metals market, down across-the-board in commodities, you look at goals a weak ago, talking about potentially poised for another push toward 1,000 that is off the table now. i want to point out, similar to equities, right now, settled into a range in the metals. whether there is anything to break it out toward the end of the session, remains to be seen. commodities across-the-board, melissa, down $2709. how quickly things change, lost $3 on friday, then this 70-plus four days ago. >> the bears are in control. brian, thanks so much. stocks beginning the week on the downside but is this selloff a healthy sign for investors? joining us now to discuss, mike rubino, president of rubino financial and bob phillips from spectrum management.
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thanks both of you for joining us. mike, i will go rate to you. what is going on here? >> as you know, businesses large and small are hurting due to a lack of consumption and although the quarterly profits have been positive as of recently it is mostly dawe to cost cutting. the largest part of that cost cutting has been job reduction. unemployed people don't buy things, people that are worried about being unemployed don't buy things and we expect that that's going to continue and it is really going to be hard for companies to continue to cost cut any further. >> hey, bob, the story that mike just told is not a new story, saying that for the past month or two. seems like it hasn't made a difference in the market before that. the market has really in spite of sentiment. what's changed? >> i think the news has been that we are due for a conal is days of the market, that everything is overbought. i think that is all that we are seeing right now, in a conal is days phase. the overall trend is up and i think it is very healthy.
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over 80% of those are showing positive momentum and positive support. i think what we will see is surprise to the upside in terms of the growth. ism numbers relative to inventories of 30% above historical norms, so, i believe that we come off earnings season right now and there's no news to track, so the news is turning negative. >> okay, but you are talking the long-term here. if i'm looking for the next three months, mike, what is it that's going to get me to a higher level after we've already seen such a run-up? we still have about 18% or so to go if we want to get back to prelehman brothers levels. so, when does that happen? >> well, in april of this year, we saw 9300 to 11,000 on the dow would be a target, things are slowing down, we are nervous. we are ready to exit and we think september is quite
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possibility end of the rally. i would love to see -- >> do we stay in this sideways zone, mike or do we go down? >> it is hard to tell that is the toughest part, finally call the top, that's what we always want to do, but it's going to be you have to do-to-do that. if you're conservative, i would suggest you start lighting up positions now. >> you said you are nervous and getting ready to exit, that what a is going to give that you cue to get out? >> we see greater deterioration in the market, our clients are already edgy. . >> what level? >> oh, i would say anything below 8800 on the dow would cause us to worry. >> okay. go ahead. >> mike what are you buying? what are you selling right now? give us sort of your landscape. >> well, if you are aggressive and want to continue to stay, you stay with the leaders, the emerging markets, the financials, small cap growth, maybe technology as well. those are the ones that will continue to do well if the market does continue to push forward. >> bob, how are you trading this market? >> well, i think by and large
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are underweight equity, and i think that puts a floor beneath the market. pull back, really want to buy into your position, 'cause i don't think that the bottom is that far below us, so technology we like, because of the corporate spending cycle. corporation goes out and the first thing they do is try to increase their technology, increase productivity, that cycle has got a ways to run and also like -- >> bob, you think the pull back is healthy? what would make you change the sentiment all together? >> change in sentiment would be, say, for instance, today, let's say the market closes down strong in the last hour, that would tell me maybe i have to go back and reassess my assumption because, you know -- >> but it's one day. >> i know it's one day and i said change my assumption. i wouldn't change the entire story but cause us to check. the market trading stronger into
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the close for the last several months and i think that shows us that people are trying to get back in based upon any kind of weakness. >> all right, guys, thanks so much for joining us. >> thank you. >> trish? >> okay, thanks, guys. when we come back, fallout from ubs goes global as regulators crackdown on u.s. tax evaders. new details on where americans are allegedly hiding their money, coming up next. and economic recovery or not, u.s. airline industry sees no light at the end of the tunnel. find out why prolonged weakness is expected, how you can capitalize on it, that's ahead, only right here on "the call." but i did. you need to talk to your doctor about aspirin. you need to be your own advocate. be sure to talk to your doctor before you begin an aspirin regimen. you take care of your kids, now it's time to take care of yourself.
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welcome backs, everyone, off 189 right now on the dow. so we are seeing this selloff pressure continue as investors debate and try and figure out whether or not this market has gotten ahead of the overall economy itself. meanwhile, the crackdown on tax evaders at ubs is widening into a global hunt. the government detailing how the swiss bank and outside advisers helped americans to hide money using enterprises in hopping congress. hampton pearson has more from washington. hi, hampton. >> hi, trish it appears the ubs -- excuse me, the u.s. government and switzerland have reached an agreement whereby ubs will reportedly turn over the names of at least another 5,000 swiss bank account holders. a justice department spokesperson i talked to said the details of that agreement could come any day now, certainly expected by the end of
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the week. it is part of what is emerging as a global probe of tax havens around the world. on friday, u.s. attorney's office in los angeles reached a plea agree well a malibu man, john mccarthy, who admits to moving at least $1 million through a ubs swiss bank account held in the name of a hong kong entity and there by avoiding paying at least $200,000 in taxes. he will make his first court appearance in mid september. the chief of the irs criminal investigation division says that case is just the tip of the iceberg. remember back in february, ubs turned up some 250 names to the government as part of the preliminary investigation. the hopping congress link is part of what justice and irs investigators uncovering, what appears to be a winding probe. no comment on any of this from ubs. now, at the same time, the irs is urging those with questionable offstore assets to, if you will, come in out of the cold, offering minimum reduced penalties between now and
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september 23rd. lawyers i talked to representing possible clients say those clients have the choice of taking irs up on its modified amnesty offer, full, or taking a kind of catch me if you can approach and perhaps even fighting some of these possible charges. remember, initially, the government was looking for something like 50,000 swiss account names. this apparent agreement accounts for 5,000 of those. meanwhile there, a lot of those same lawyers are saying the who wholeablety tax avoidance phenomena is becoming global, not just the u.s. or the obama administration. germany and france have also been very aggressive on the whole idea of cracking down on international tax cheats if you will, and of course, a bigger story here is after decades of legendary bank secrecy, are we in fact seeing cracks in that legendary swiss bank accounts that we have heard so much about historically? trish? >> seems like t thank you so
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much, hampton. stay with us if you would, we want to bring in a financial correspondent, good to see you back on the program, amman. >> thanks for having me. >> you heard hamp onoutline it there, very much a global issue and a global crackdown, something that, as far as i'm concerned, i think most people would be concerned it is for the better. >> absolutely. if you are one of the 5,000 people whose name is turned over to the government now and have a swiss bank account, i would be very version careful now. in this political climate in washington with after the aig scandal and anger we have seen, international tax cheats are using swiss bank accounts to hide american taxes and this climate are going to be some of the least sympathetic people in american public life. i think they ought to be very, very careful about how this plays out and really worry that this could become the next big scandal in american life. >> so, amman, how would you play that, if you think your name might be on that list?
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would you turn yourself in? >> melissa what a question. >> i'm not necessarily asking for myself. would you sit back and hope that you get by or would you fess up right away? what do you think -- >> you pay have one or two viewers who are a little nervous today. >> you might.t. >> i think what i would do is pay my taxes, i think that is what everybody should do i would call my lawyer and say go investigate that modifiedism rs amnesty and fee there is some way we can work this thing out without my name get nothing the headlines. you don't want to be the next aig, you have tour buses touring your house and throwing eggs at you. >> that is no fun. >> very tricky.. >> hampton, how big do you think this gets? beyond the group at ubs, the beginning of a new wave of crackdowns? >> all signs seem to say yes, especially if you take into account the international component. as i said and even the lawyers for some of the potential clients are saying this is not now just a u.s. or obama
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administration-type crackdown this it is global, france is in play, germany is in play in terms of cracking down on the international tax thieves. however, on the other side, if you have, you know, swiss banking secrecy more or less historically inscrutable, adding another layer in terms of trying to crackdown threw own the hong kong side, they are getting in and don't know the level of cooperation you may get in the hong kong sphere as well. >> hang on, before we go hampton, 'cause we have only got about 15 seconds left, one of the things a little bit disappointing here, they were looking for about 50,000 names they only got 5. amman, do you consider this a failure of what we will be able to get out of ubs. >> one step in the process, the investigation continues. remember, this is just one bank there are a lot of other swiss banks the american investigation might crack into at some point. this thing will go on for some time. >> on that note, thanks so much, guys. melissa?
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coming up, citigroup's $100 million man is under fire againsome his compensation exempt from government regulation? we will talk about that. first, the strugging airline industry and why some say it won't recover from the recession. implications and how to invest on this straight ahead only on "the call." melissa and i will be right back. we food you, no commercial for you, the market, dunn 200
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points here. we talked about airline stocks, how are they faring this morning? continental, dealtal, northwest, all hammered. a tough road for the stocks as the economy weakens and higher oil prices taking their toll on the industry. can they bounce back and if and when the economy does, should you be investing in them now? joining us is hunter kay, senior airline analyst at a stifel nicolaus, also, bob mcadoo, senior research analyst for airlines at avondale partners. thanks both of you for joining us. hunter, let me start with you, i don't understand this every time i get on a plane, there isn't an empty seat. oil prices are up on the year but down from the peak of last summer, airlines haven't taken away the fuel surcharge they had before. why are they not making money now? >> flying for business reasons or leisure? >> flying for both but understand i may not be typical. >> the planes are generally full during peak problems, the problem not very full during trough periods much the
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additional problem, not full of high-yielding passengers. the problem is most of the people you will see, more backpacks and suitcase than briefcases, full. most of the fliers right now are paying very, very low fares for it and again, these airlines are still working through paying for fuel, a little bit above the spot price. the hedge issue has worn off, a perfect storm of higher fuel prices because of locked in hedges and very, very bad pricing environment, which is going to continue past labor day as well. >> bob is that right? >> the profitability -- >> go ahead, i'm sorry, you are done. government ahead, bob. go ahead. >> i think he has got it right. very difficult first half of the year, oil prices went up and we haven't seen a demand. >> bob is this an airline, a business, shall i say, these air loons that can ever really, really recover? it seems like there are so many problems, so many difficulties, as an investor, my inisn't is to
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go running the other way. >> wouldn't have cost you anything, running the other way, probably better off the last year or so. i think there will come a time you can make money on them again. right now, interesting, they are beaten down, everybody is going to assume there will be bankruptcy. the reduction in capacity we are seeing this fall, wouldn't be surprised to see numbers better than everybody was expecting. >> bob, where would you expect to see those bankruptcies? >> quite frankly don't expect any bankruptcy. i think we have gone through some pretty difficult times in the past and i think that with the guys that are running airlines right now the ceo group that is out there right now, really running them for profit rather than for growth, and by shrinking the business, i think they will be able to pull it down, pull down the capacity and probably get through it. >> do you think there is a shot that we might see some mergers in the near future? bob is talking about shrinking the businesses and certainly we have seen that over the course of the last year. there have already been quite a
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few mergers, might there be more in the works and what are you looking at? >> no, i don't think there will be any -- sorry, i don't think there will be mergers. >> that game is in play? >> i think there could be, there is a case for mergers, but the government sun likely to approve mergers that have significant root over last. and the most effective capacity reductions would come from. merger integrations are the history of this industry have been very, very poor and the industry doesn't have much interest in trying to merge seniority lists and labor groups when they have this economic crisis to deal with. you need to is see it get on more firm footing, a back part of next year, see a continental, united making a run at one but i don't think you will see broad industry-wide integration activities unless it is some sort of in bankruptcy type event. outside of bankruptcy, not until you see firmer economic footing are we going to get m & a. >> bob, any airline stocks would you buy now? >> bullish on the old legacy
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airlines, all trading as if they are going out of business, we obviously don't have a las vegas is to traveling without airplanes. >> even if oil goes up, even if oil goes up and melissa has certainly predicted big increases when the economy starts to improve. >> if you shrink the airlines, you basically squeeze out the cheap seats and the people who are paying are paying a fare compensatory, full, you can make money on it that way, too. >> hunter, you like delta and continental? how come? >> i do they are survivor plays. i agree with bob, i don't expect the big five to file for bankruptcy this year, but a little bit more probable than for continental or delta a
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liquidity profile and access to cash if necessary. >> i don't you don't think there are any airline stocks would you short or sell right now? hunter? >> not at this point. i wouldn't be shorting these things at this point. they have gotten beaten up so badly, as bob mentioned, difficult with a ceo, 3 bucks, american at four. div difficult to built blad short case. >> why do you think people are beating these up so badly given that there is some sentiment that this economy is improving out there we have certainly seen the market as a whole move with it. why do the airlines lag so badly? >> comes back to what you said, the bigger fear is, some view the airline as lose/lose situation. you will see -- some people view that as a potential problem there are people that think they will struggle as long as the economy is bad and going to
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struggle if the business traveler doesn't return and we have oil prices, larger people that are skeptics at this point. >> a function of the unions that exist in the airlines. >> airlines an issue in the industry but hasn't stopped airlines from returning substantial profits in years past. a typical flag. unions aren't going any where investors will tolerate that. they have an appetite for that stuff they will get involved in. >> bob, hard to see the long-run good news for this industry, seems when things are going strong and the economy is robust, oil prices are high they use that as the reason why, you know, and the legacy cost issue, they sort of don't do well when things are going well. now that oil prices are down, they say no one is traveling, seems like there is never any good news in the sector, how do they turn that around in the long run? >> shrinking the industry is a cause for the problems, the other thing, there is a difference between what goes on, whether or not a shareholder in today's world with make money.
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look how badly these thing have been wasn't, u.s. air, talking about a minute ago people lack for, gee, something up 20, 30%, u.s. air, goes back to what it was in january, clearly the middle of the recession, a three-bagger from there, to get to that point. if off tolerance to see bad news from time to time, i think as badly as these things have been beaten, a lot of upside. that doesn't necessarily mean the companies will be profitable but in terms of making money on the stocks, i think there is an opportunity. >> guys, thank you so much for joining us today. . we appreciate it. i think we are going to take a quick break now. >> a commercial for you. the big move into treasuries, investors seek out safe haven investments, check with mr. san telein the pits in chicago. plus, not all stocks are in the red today. we will name tickers to watch throughout the afternoon's trading to watch up next here on "the call." introducing one a day women's 2o.
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a loss of almost 2% right now on the dow.w.
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part of that, a result of lows and that earnings report, part of it also just a result of people wondering whether or not this run-up in the stock market has gotten ahead of the run-up in the recovery -- economic recovery. s & p 500 trading down more than 2%. meanwhile, over on the nasdaq, up 2 1/2%. 1936 is the level, bond markets moving higher, investors move their bonds in as a safe haven play. rick santelli is in chicago with more. safety the name of the game? >> well, you know, safety is the name of the game and i don't know that anything has really changed with regard to some of the bigger ills, whether it is toxic assets still on the backs of banks or just a general state of we want to put our toe in the water for riskier assets when equity prices are going up there is a comfort factor there. you can see how quickly things change and people reassess where all the buyers have dips. but on the equity side, i want to point out one thing it really is kind of what traders are
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looking at in the fixed income markets. if you look at the adx, a feel-good indices for investment grade, you can see deterioration, ten-year, two days of yields falling to what is, as we sit at 348, trish, about a one month low in yields, see the dollar index and it is at two and a half week highs. at the end of the day, last week was supply, not this week, we will get it this week, supply not a factor, horsepower in the treasuries, doesn't mean supply isn't important, one day, the stock market and commodities pulled back a bit, we see how quickly we jump in what was safe and ignored after the safe areas. at least the signal briefly and all clear. >> talk more about that supply issue, supply not mattering as much anyway today, safety at this point. >> yeah, and i think next week,
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we get the two-year, five-year and seven-year, obviously get the same anxieties, but if equities are moving lower, anxieties exist, maybe supplies will not push yields back up so much as safety pushed them down, going to be a constant tug-of-war, trish. >> thanks so much, trish. rick cancelly in chicago. melissa? time for call to action, things you need to watch rest of the trading day. cnbc's bertha coombs has the latest. >> health care stocks are on fire in this down market, particularly the health insurers. watch coventry health, up more than 5% today. that is because indications on the talk shows that the obama administration may be willing to back off the controversial public plan option. look at united health care, the hmos over all had been up 27% during this debit. united one of the livelier, only up 5%. today, up $1 and change, despite the fact that warren buffett's
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berkshire hathaway cut its stakes in unh, according to its most recent filings. the health care services are riding right along with the managed care providers, benefits manager med co-health, up a new high today, up 15% the last two months, double that the last six months. and while we are talking about berkshire hathaway, cut back on health insurers, took a new 1.2 million share stake in medical device maker becton dickinson, one to watch, not just this afternoon but the long haul here, it is down on the year and a real underperformer, interesting to see if it gets that buffet boost here as we look ahead the next couple of quarters. taking a look at the big box stores today, of course, you know there is a headline on lowe's, but home depot is the one to watch, especial had i going into tomorrow. home depot will be reporting tomorrow. today is a hat trick of bad news, got the lowe's disappointment. both warren buffett and eddie lamp the's hedge funds cut their positions on hd. and this afternoon, we are going to get that home builders index
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that is likely to also weigh on the home retailers. walmart, another one of the big box stores, extended losses, try to go positive, see that earlier in the day, an upgrade from rose dale to buy from a neutral, but as we continue to worry about the consumer though stocks continue to be under pressure today. the credit card companies are reporting their monthly positions, their chargeoff, capital one this morning reported a chargeoff that inched up ten basis points to 883 in july from june and delinquencies rose as well from june, when it was 477. this month, this past july, 483, but discover financial just came out within the last couple of hours, their analyzed knelt chargeoff rate actually sell in july to 8.43 from 8.75 in june. we will wait this afternoon for american express to report their numbers. finally, bb & t, over the weekend, we saw that they ended up buying up the colonial
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assets. they are now going to issue 750 million, trying to raise that to try to build up the tier one capital there. melissa? >> we are looking at these trades, i know i was just checking, volume is pretty light, normal this time of year, nothing keep in mind and then also something to watch throughout the day, it starts to get pretty heavy?y? >> exactly. although there may not be a lot of players, do you tend to see once you hit certain levels, you get buy programs come in or sell programs, a lot of times, as you get closer to the close, a lot of those start to kick in. >> yeah. and one way to tell whether this is for reel real, has meaning or temporary, how big the volume is. bertha, thanks so much. trish? >> up next, pay for performance is under fire fuelled by citigroup, none other than andrew hall. we will have the man behind the pay package. is andrew hall exempt from government regulation? that is the debate straight ahead here on the call. we will be right back. i never thought it could happen to me...
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okay, welcome back, everyone. bertha was just telling us about anticipating american express data it just came in, we want to share that with you, on a managed basis, american express had an annual credit card
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writeoff rate of 9.2%. paper performance under fire again. obama -- andrew hall's $100 million pay day at citigroup now he could push the top he werer to accept stock instead of cash for 2010. who is the man behind the buzz? scott cone join us. >> a guy who made an amazing bet on the oil markets in 2003 when oil was around $30 a barrel, then managed to get out of that long position before oil crashed from its near $150 high. he is also incredibly rich. he made $100 million on that oil bet last year, reportedly could make a similar amount this year. he is 58 years old, oxford ex-kated in chemistry, a home in connecticut and 1,000-year-old castle in germany, which is supposedly filled with german art. the notoriously reclusive andrew
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hall has been a huge rainmaker for sit at this and he wants his money. a citi spokesperson would not comment to us on the "new york times" over the weekend that the bank wants to exempt hall's contract for review by the white house payczar that man, kenneth fineberg, on the grounds that the contract was signed before the february 11th cutoff date for federal review. fineberg said over the weekend he hasn't decided what to do but reportedly noted he has authority to claw back compensation, even on cracks signed before that cutoff date. so, where does that leave citi and andrew hall? citi will only say it provided treasury with all the information it was required to. that reportedly includes information on hall's compensation. there are reports, as you heard that the bank will find a way to retruck sure hall's payment into stock but sounding less likely among the scenarios out there, citi spins off fibro, a tremendously profitable business for the company as well as for andrew hall. melissa? >> thanks so much, scott.
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should the government rescind or roll back andrew hall's $100 million pay package?e? bring in jay brown, professor at the university of denver, stern college of law and also bob profusic, partner of jones day. thanks for joining us. the problem i have with this story, jay, he didn't do anything wrong. he did -- set up a contract, he made money, wasn't to get pay aid cording to the contract. i understand a huge amount of money and understand the outrage, but i don't know. what do you think? >> you know what, i don't think he did anything wrong. i think if anybody did anything wrong, it was citigroup. what is the bank doing entering into a compensation arrangement like this, essentially what you are doing is you are compensating somebody as your prior reporter just said, for taking an amazing bet. remember, this is an institution that takes deposits -- >> hang on there, because part of the contract stipulated the more risk woe take on, the less he would be comp sensated, so there was a provision so he wouldn't take on to excessive
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risk. >> from everything that i can tell from the public domain, i don't see anything that says that if he, for example, lost money, he had to pay it back. in other words this is a -- you know, the trader wins and the shareholders lose kind of arrangement. this is if he takes risk and successful, he gets paid a a lot of money. if he takes bad risk and citigroup lose a lot of money, i didn't see anything that suggested -- >> he might get fired. he might get fired. >> oh, sure. but the risk of getting fired for somebody who has for 15 straight years made money for citigroup, i think he has got a lot of money, i think a lot of incentive to want to take a lot of risk and make a big pay day. i don't think he did anything wrongdoing that i think citigroup shouldn't be entering into these contracts and one of the things fineberg is going to be looking at and thinking about when he reviews the compensation. >> upon, isn't the problem the taxpayer involvement?t? would you have an objection to
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the situation if there wasn't taxpayer involved? if citigroup disallowed by the shareholders they lost money, shareholder does sell the stock if they don't like the way the government is run. is that the only problem here? >> we are shifting the argument here. when this became a business headline problem two or three months ago, we were talking about pay for performance, now we are talking about risk, don't want banks to take on risk. the fact is while they don't specifically disclose it, according to report on fibro, it's made a lot of money the last two years, way over $1 billion. this kind of compensation structure is not atypical for a hedge fund manager, other people. all of a sudden, we are saying, well, now because it is a bank, we don't want to take on this risk. i guess with he would lake to go back to pleasantville. go back to '50s and '60s, banks
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took deposits, made mortgage loans and that's it globally, that wouldn't work. >> wouldn't be the business if the government wasn't involved, right? >> i don't think it is our business anyway. i think as a taxpayer, in terms of governmental interest, this contract has paid off handsomely. we want the bank to be successful. why are we complaining about somebody's ultimate pay for performance situation in the number is too big, what we are saying. >> jay what do you think about that? >> well, you know, when you talk about, you know, the amount of money that, for example, andrew hall has earned for citigroup, you know, we earned a whole lot of money taking on high-risk debt the last few years and that explains the collapse of the financial market he is. i don't think saying that he made an amazing bet and the bet turned out right this time is a way -- is the way we should be encouraging citigroup to act. >> is that how these businesses are run? at the end of the day, a a bank is all about taking on some risk
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for some reward. . >> some risk, but you know, bob just said this would be perfectly okay for a hedge fund. i don't have a problem with that. put all of this in a hedge fund. >> back to the -- your money is at stake. >> that's what we are saying. >> of course. >> banks ought to go back to christmas clubs and passing to out toaster it is you put $500 in them. that's not the way banks work in today's world. >> not the way banks work in -- >> the most successful balance sheet bank in terms of what it's been doing in the last six months is whom? it is goldman sachs. they had a tremendous quarter. they didn't make it by underwriting securities and taking in deposits. >> no, well on the market. >> proprietary trading.g. >> bet well on the market. >> guys, remember, go back to '90s with barons, merchant bank in britain, where a trader brought to its niece and lost its independence.
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even though goldman sachs converted to a commercial bank it is not a deposit taker f goldman sachs wants to take risk and lose its money and go bankrupt that is fine but citigroup as a deposit taker can't take that risk. it is the government who thank is going to have to pay off the depositors, this is an excessive amount of risk for a bank like sit itty group to be taking and doesn't have to go back to giving out toasters to not taking that level. >> sounds like you don't want people to reap the huge rewards but also set up a system where we don't want them to bear the punishment either. didn't let citigroup go out of business when maybe it should have. at the same time, we don't want to bonus these people, trying to normalize the system is that the way to run the system? >> well, i mean, the system has to have a penalty for -- has to have a downside penalty, right? >> right. >> seems like we didn't have that except for at lehman's. >> well, in fact -- >> that's right. yeah, go ahead, bob, i'm sorry.
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>> again, i'm not an expert on the specifics here but there is a contract which is a critical thing here for ken fineberg. it is not something that, you know, he can just change, if you ask me. i mean there is a --. if he does, what would it do to the industry? bob, hang on, what does it do to the industry if he does change it, what does that do to every other banker and trader working? >> come on, every other banker, how many energy traders are there in the commercial banking business? >> $100 mall year, making $1 million a year or $500,000 a year, whatever it is, if you know -- claw back that bonus and you may not get it, how are you going to feel? bob? >> that's right. and so you know what i would do, if i were fineberg, the debate were made, if i were fineberg, i would pay the $100 million and ex-a act a penalty on management for entering into the contract. >> the fact that citibank suspect trading in the energy mark sets certainly not news. that's been going on for a long
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time. are we saying we are going to change everything retrospectively just because we want things to go back to pleasantville? >> no.o. >> just not going to happen. >> thief there, guys, thanks so much for joining us, i appreciate it. >> my pleasure. okay, "power lunch" at the top of the hour and standing by, telling us what he has in store, hey, bill. >> nothing wrong with pleasantville. don't knock pleasantville. coming up, is this the beginning of the big correction a lot of people will be waiting for? we will discuss that with traders and investors. and lowe's out with its earnings, the profits down 19%, the stock is down hard but is that a buying opportunity?y? if you believe housing will get better from here, we will talk to analysts about that.. and "newsweek" out with the latest issue on colleges, it is not the best colleges to talk about but way to the play the financial aid game when money is tight everywhere. mandy drew very with us for a couple of days. >> you guys have mandy? >> we do. >> okay. the show of shows, the
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invitation-only high-end auto show at pebble beach took police over the weekend. our jim goldman has a look at the luxury car industry. jim? >> hey, melissa, cash for clunkers might dominate the discussion when you are talking about the auto industry, but this weekend, it was all about cash for classics, some eye-popping stickers and car-collecting advice from jay leno, when we come back. i was in the grocery store when i had a heart attack. my daughter was with me. i took a bayer aspirin out of my purse and chewed it. my doctor said the bayer aspirin saved my life. please talk to your doctor about aspirin and your heart. i'm going to be grandma for a long time. shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from over 300 online retailers
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citi says net chargeoffs dropped from 10.5% in june. a few minutes ago, told but american express saw a drop in credit dashed loan it is had to write off. citi trading lower on the day, higher on the news it is down about 1.25%, almost even on the day. the annual pegle beach luxury car show took place, like the weakening economy, the luxury car collecting market is doing darn well as people look for alternative investments, jim goldman is there and join us from the san jose bureau with details on this. did you have a good time? >> you know, you know, you need like a little box of kleenex to sort of mop up the drool when you are done with this he show. it was truly spectacular. the pebble beach is the world's top car show without question, a show place for old and new, auction destination for car companies to unveil what's coming next. the world's famous gooding auction raised more than $50
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million in two days. $2.75 million alone for this baby, the ferrari 250 gtlwb california spider and this by gatty 57 special c it brought in $1.375 million. 83% of the lots sold, many cars sold less than their estimated catalog price. still, several record-breakers and car experts including none other than jay leno, checkbook in hand, he thinks car collecting is still a good place for investors to park their money. >> a lot of people going, hey, what car should i buy? i don't know, then don't buy anything. if you buy a car you like and it goes down in value, at least you have something you like. if you buy something you like, there is a good chance other people like it too. so, you might not make money on it but probably won't lose anything on it. >> that is a feck cuss on cars
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from the past and cars on the way. infinity took the wraps off the m sedan built at an infin the plant in nashville combining a physical foam model sculpture of the car itself with 3-d animated imagery projected on it gives you a bizarre sense of seeing something that really isn't even there. the same kind of technology car designers are using to create new vehicles in a more quicker and cost effective way. >> with owe develop designs in the world, handling characteristics of a car, before we put steel on a war, wood and plastic and materials and make a car, we can save and be very, very efficient. >> that was a pretty one. 400 pon nist under the hood, sleek infinity m, start showing up in metal, wood and plastic this year. >> thanks so much. appreciate it, jim a quick break and then could this selloff be good, good news for investors? be right back to discuss it in our last call. some people buy a car based on the deal they get.
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90s slacker hip-hop. ♪ that can strain your relationships and hurt yourody 'cause we'pride ♪ng a ride ♪ ♪ it's the credit roller coaster ♪ ♪ and as you can see it kinda bites! ♪ ♪ so sing the lyrics with me: ♪ when your debt goes up your score goes down ♪ ♪ when you pay a little off it goes the other way 'round ♪ ♪ it's just the same for everybody, every boy and girl ♪ ♪ the credit roller coaster makes you wanna hurl ♪ ♪ so throw your hands in the air, and wave 'em around ♪ ♪ like a wanna-be frat boy trying to get down ♪ ♪ then bring 'em right back to where your laptop's at... ♪ ♪ log on to free credit report dot com - stat! ♪ vo: free credit score and report with enrollment in triple advantage. all right. we are off our lows of the
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session but the market still having a tough day the nasdaq getting hit hardest on a percentage rate. see where this goes, huh, trish? >> people very much concerned right now that perhaps this market got ahead of itself and that the economy has some catching up to do at least with the stock market. so we will see where it does go. the day is young. >> that's it for the call, i'm melissa francis. >> i'm trish regan. thanks for watching. "power lunch" is next. welcome to "power lunch" with a whole new cast this week. >> right. . >> welcome back. >> thank you. it's great to be back. >> if you are real good, she will show you a slide. >> of the rv. >> michelle off for a couple of days, welcome mandy drury. looking forward to a few days here. the global spilloff selled onto wall street, the stocks tumbling at this hour the global economy is the concern, japan's gdp numbers overnight, while they showed growth, not as much h
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growth as the world had hoped for, the major averages having their biggest decline since early july right now. health care stocks are among the best performers which we will explain in a little while why. the question is whether or not this is the beginning of a big correction. so, we are going to gather the "power lunch" task force to guide you through the volatility and show you how to play this pull back. >> i'm mandy drury, the world economy grows, we look at what shape the recovery might take l we see continued global growth or will it be a double dip. here's what else is on the menu. i'm diana olick in washington. the nation's home builders have been more confident of late but will that sentiment continue, especially with the first time home buyer cash credit expire. we find out next actually one hour. the crackdown on tax evaders at ubs is widening into a global probe. the american government may get 5,000 new names on swiss bank accounts as early as this week. i'm darren ravel, tiger

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