tv Power Lunch CNBC March 15, 2010 12:00pm-2:00pm EDT
welcome, everyone, to "power lunch." i'm tyler mathisen. senator dodd's reform bill takes center stage this afternoon. china's premiere ta taking on the united states. tiger woods hitting a fever pitch. tim finchem going to join us live. 25 years after liars poker, best-selling author michael lewis goes back to wall street with the big short. he joins us live. here's what else is on the menu. i'm hampton pearson in washington. is this the week congress sends the president a health care bill? if that happens, who are the potential winners and losers among investors? >> i'm jim goldman live in the
silicon valley bureau. apple takes hundreds of thousands of orders for its new i pad. this rivalry is getting bitter. i'm julia boorstin. the annual movie theater convention in las vegas. i'll be talking to the ceo of one of thenation e's largest theater chains. bob pisani kicks it off at the new york stock exchange. >> the weakness here is really in the energy sector. we have a little bit of a deal in the natural gas space. bank stocks really not reacting much to the fact that senator dodd will likely introduce that regulatory reform bill. but we did get the news on the delinquency and charge-off rates for credit cards for some of the big credit card issuers. generally the trend is still continuing to improve. delinquencies declining. amex has not yet reported. we're waiting for those numbers. the bottom line is still improvement in the trend. most of the big energy names are to the downside here today.
we had a very interesting deal. consol is acquiring a big part of the appalachian exploration production business from dominion. that's a big natural gas deal. consol is down a bit. likely going to have to raise equity at that point. most of the coal stocks are down as well. at the same time cnx gas is up because consol said it was considering acquiring the out standing shares of cnx gas it doesn't already hold. let's move on to show you a fascinating deal here today. i think one of the most important i've seen in a while. philli phillips-van heusen is going to buy tom mmy hilfiger. it means companies are getting comfortable with putting more debt on their balance sheet. tradertalk.cnbc.com. we're weak here as well. the big drags today from a big cap technology standpoint, certainly apple is one of them. down 2.2% today. amazon is also weak.
down 1.75%. take a look at google as well. a key story develops. google down just about 4%. they continue to spar with china, i should say, over that sensorship issue. now speculation that google could leave china. it shares are lower today. look at baidu. a stock move to the up site. a sharp one at that. 6.5%, the move for baido today. chip stocks weak today as well. semiconductor index down just about 2%. most of the issues within it are also weak today. let's go to sharon epperson at the nymex. oil prices cannot seem to hold above $80 a barrel. every time we get up there we come right back down. today we're looking at prices right now down more than $2, near the lows of the session. keep in mind traders have a lot to watch this week with china and whether or not there's going to be more tightening there of their monetary policy with the fed meeting. then of course with the opec meeting. we're seeing a lot of technical selling. a lot of money managers adding to their long positions last
week according to the cftc report. with some tepid new highs and no follow-through with that $80 level we're seeing a lot of selling today. the dollar is definitely a factor. the dollar index here rising today. in the four-month up trend line is significant. will the fomc see a further up rise in the dollar? that's something the traders will be watching carefully. opec meeting on wednesday. the thought is opec ministers will leave outputting unchanged. several ministers already talking about that. even a big refinery in venezuela is not helping. we know there's a lot of things that move the dollar index. if you look at today you can see, hey, it's a pretty good day. we're up about a half a cent. if you look at friday and today, it's pretty much going nowhere fast. we've negated the down move that we had on friday. there's a lot of range issues going on with fixed income. we see that rates are a bit elevated. but if you look at a one-week
chart of tens, pretty much we walked in last monday about the same 3.72 yield we are experiencing at this point in time. it was all about two-day fed meetings for '09 post crisis. tomorrow we'll get the rate decision. and it's all in one day. maybe that's giving a little less volatility, actually, to treasuries. remember, we've come off some record historic curve sta steepening. >> thank you very much. another big day today because the senate banking committee chairman chris dodd unveils his financial regulatory reform bill. cnbc's steve liesman has an early word on what is in that legislation. steve? >> yeah. we have just gotten word, michelle, a source telling cnbc the volcker rule that bans banks from engaging in proprietary trading will be in the dodd bill coming in less than two hours. the bill will take the approach of the house bill leaving it up to regulators. the dodd version will mandate
regulators -- another surprising development in an attempt to clip the wings of the new york federal reserve bank and limit the influence of the private banks they regulate, sources say the new york fed president will now be chosen under the dodd bill by the president of the united states. not the new york fed's board of directors. still, ranking member richard shelby held out some hope that the compromise between democrats and republicans could be reached. >> there are few sticking points. derivativ derivatives, corporate governance and so forth. we probably conceptually maybe agree on 85% or 90% of a bill. it's a question how do we move it forward. >> the fed originally the big loser in dodd's bill is now a big winner. it will be tasked with supervising bank holding companies with assets greater than $50 billion along with other companies that could be deemed systemically important by a newly created systemic risk council. after months of squabbling between democrats and republicans, consumer protection remains a major sticking point. dodd's bill apparently creates a stand alone division inside the fed with its own rule makes and some enforcement.
under this bill state attorneys general can also enforce it. this issue a federal preemption is a deal killer, i am told, for the republicans. >> do i see two reversals by dodd in this? first giving the fed the power over the consumer protection agency and when the volcker rule was announced by the white house, didn't dodd come out and say, wait a minute, this sounds very political, is this in the wake of massachusetts, where did this come back? >> he was a little circumspect about it. he mains circumspect in the follow weigh. he hands it off to regulators but mandates it. i think that was treasury arm twisting for dodd to get that mandate in there. as for the first reversal, he was originally stripping the fed of all banking supervision. now they've come back to be the supervie sour supervie sour supervisors of the biggest banks. >> did he wimp out by putting it under the control of the federal reserve. david, good to see you. >> thanks for having me. >> what do you think of this
move? >> i think it's a little bit problematic. the fed obviously doesn't have a strong history of consumer protection. on top of that, there's the problem of a central bank versus a regulator. a central bank can be opaque. they can be unaccountable to congress or the people to some extent. there's some justification for that. there isn't really a lot of justification for that when you're talking about a regulator. whether that's over the banks or over consumer protection. it ought to be autonomous. the fed's already having enough problems i think with managing its dual mandate of maximizing -- >> too many things for the federal reserve to be doing all at once. >> that's just -- it makes you look silly at the end of the day. >> david, i think you're right about the fed not doing a good job on consumer protection. but that was mostly true until about '07 when it became a big deal. so the point i would make is that congress gets out of the fed what congress wants from the fed. if congress now mandates that there be some sort of reporting on consumer protection, that it
actually does it and report back to congress and is responsible for it, it'll get it out of -- >> this is what i don't understand. we're also supposed to have someone on from kato. he also doesn't think that the fed should be in charge of this. if both the left and the right do not think the fed should be in charge, steve, how did this happen? >> that's a great question, michelle. i think you could call it bureaucratic default. when you look around washington for what agency ought to do this, a, nobody in washington is in the mood to create a new stand-alone agency. b, when you look around for who has the expertise to do this, as i said, for the past couple years the fed has been concentrating on this consumer protection thing. the question is why wasn't it doing so two years before that. >> if not the fed who should it be? sfoo if the fed gets it by default, that's one thing. is there an agency or entity you think would be better suited to it? >> let me respond to what steve said earlier. i think there is sort of an inherent problem in so far as the fed is obviously a banking culture.
that's not necessarily consistent with a consumer protection culture. i actually think that the answer to why the cfpa is going to be housed in the fed is pretty simple. it's that the republicans were pushing to do that. because they wanted -- >> if the banks got what they wanted. >> exactly. >> that's what it is. this has been lobbied for billions of dollars, probably. >> it -- >> because billions of dollars are at stake. the banks got what they wanted out of this. >> it killed strong consumer protection. that was the goal, i think. if you recall dodd originally had an independent consumer protection agency. it was in negotiation with the republicans that he had to default to this within the fed. >> tyler, you're suggesting both sides of the aisle are open to -- >> in the absence of the kato person i will argue the republican side here. they have deep concerns that consumer protection be divorced from safety and soundness. the example most often given, i've heard this from the banks, let's say a certain class of borrower has a higher default rate. they want to raise the interest rate. and the consumer protection agency says no.
where a safety and soundness would dictate yes. that's the argument there for why, a, it should be inside the fed which is a big supervisor and why the two need to be joined. >> like fanat tend of the day a sustainable loan is good for the safety and soundness of the banks and good for the consumer. the problem with housing in the fed is that's sort of meant for it to die, basically. >> there's bring in mark from the kato institute. you guys usually hate all regulation of any sort. what do you think of the latest dodd plan? >> i'm not a big fan of it either. i guess i would start from a different contrarian perspective. a lot of this stuff, particularly things in the bucket of pushing lending, stuff like -- investment act should be repealed, not simply just readjusted. then you have consumer protections like truth in lending. the problem is not necessarily where it's at. it's where it's structured. so much of our consumer protection legislation is litigation driven, doesn't
expect anything of the consumer. this new cfpa, whether it's the fed, whether it's stand alone, neither case has the ability to raise down payment requirements, for instance. we're not really even doing things that change it. half the argument about the cfpa independent was to be able to go after nonbank financials. and whatever anybody thinks about payday lenders and check cashers, i don't know what they had to do with the crisis. why are we holding up legislation arguing about payday lenders? and we won't even include freddie and fannie who we know did have something to do with the crisis. if you want to go after these nonbank financials, set that issue aside. deal with things that had to do with the crisis. and then deal with the other stuff later. >> if these two guys hate this bill equally enough it might be just the right bill. >> true. >> i'll sit back and say it's a good first step. it's a good first step. >> good discussion, mark. thanks for joining us there at the last second when we were getting technical issues. senate banking committee
chairman christopher dodd is set. straight ahead on "power lunch," moody's warning the u.s. could lose its topnotch credit rating. does anybody care anymore about what moody's thinks? plus -- >> >> this time it's personal. the war between apple and google heats up as ipad preorders blaze. his new book being called the best piece of financial journalism ever written. "the big short" author michael lewis, our featured guest next hour. and the man who may know the most about the key to tiger's return. pga tour commissioner tim finchem swings by. [ crowd gasps ]
what i think you'll see is the same thing when we get the fed decision tomorrow. saying wait and see. okay? they're not going to do anything dramatic because they want to see how this tug of war plays out. >> that was pimco's ceo earlier today on "squawk box." of course, there are a lots of things that wall street is paying attention to. the fed meeting which he mentioned this week. moody's concern eed about aaa
countries and small caps out pacing large caps. joining us now is phil orlando, chief market analyst with fed rated investors. and president of euro pacific capital, author of "crash proof 2.0, how to profit from the economic collapse." welcome, gentlemen. i'm going to start with you, phil. we kind of know where peter's coming from. i'd like to find out how you feel about thijs. this is a key week. we do have the fed making its decision. a lot of people do expect things to be the same. what about this moody's comment that the u.s. may lose its topnotch credit rating? do we care anymore what moody's thinks given the sub prime crisis and the falct they misse so much before the economic crisis? >> i liked your comment before the commercial with regard to moody's. they got freddie and fannie wrong. they got aig wrong.
i think their opinion at this point is a nonevent. we care a lot about what the fed thinks. but we're not expecting anything out of this week's meeting. no change in language. no change in policy. and it's not going to be till the middle of the year, we think, that there'll be that change in language. and probably the second half of the year before we get a change in rates. >> you know, peter, i know that you basically think the country's on the wrong path. that some of the remedies that have been put in place are not appropriate. but what should the stock market be paying attention to right now and doing? >> well, i think they should pay attention to the fact that we're simply exacerbating the structural imbalances that led to the crisis in the first place. from the perspective of our creditors, i mean, who cares what moody's says. they got it wrong in the past. they're wrong now. if you're thinking about u.s. treasury debt, think junk bonds. think subprime mortgages. there's no way we could possibly pay this money back. there's only two things we can do. we can default legitimately or we can do it through inflation. one way or another the creditors are going to lose a lot of money loaning money to the united
states treasury. unfortunately the more money the u.s. government borrows now the worse our economy becomes. because they're using that money to undermine our economy. >> peter, how fast does that show up in stock prices? because i remember you mopping up the floor with me in a debate we had last april. and you pointed out these same concerns and stocks went way up since then. >> i didn't say that stocks were going to go down a year ago. we've been long stocks all year. we've been long chinese stocks. we've been long norwegian stocks. >> what about u.s. stocks? >> you told me the dow was going to 4,000 or something like that. i could swear you said that last april. >> in terms of gold it's going to go a lot lower than that. you have to understand value in real terms. we're debasing our money. prices rise. stocks are prices. >> if i buy your view, peter, excuse me for interrupting. i beg your pardon. if i buy your view, peter, what do i want to own? stuff? >> sure. not just any stuff.
you really want to look at where standards of living are going to rise, where you don't have these huge structural problems. that's why i'm focusing on asian economies, that's why i'm focusing on natural resources, that's why i'm buying a lot of precious metals. >> phil, isn't asia potentially overheating. if you look at shanghai -- >> the reality is that our models are suggesting that emerging markets are still pretty attractive, certainly compared to developed markets. we've still got a pretty sizable exposure there. i agree with peter that commodities at this point, metals, energy, even agricultural commodities still look relatively attractive here as well. >> do you not buy u.s. stocks here, phil? >> we still like u.s. stocks. we're up 73% in the last year. we doenn't expect we're going t see anywhere near that kind of return going forward. we believe the recession ended mid last year. we're seeing solid economic recovery that we think has legs
and will continue over the next year or two. we think economic growth, corporate earnings and corporate revenues are going to continue to chug higher. >> all we're seeing is the fed trying to blow air back in the bubble. they're going to get a little air back in there. it's not going to stay there. it's all going to deflate again. the worst part of the recession is still in front of us. i still think that by the time it's over we're going to be calling it a depression, we'll be calling it an inflationary depression. >> mas tresses for everybody. >> mattresses all around. >> i don't know why you'd mess with overseas stocks if everything's going to blow up. coming up next, not just business anymore. it's getting personal. apple and google in a real war over smart phones. shares of apple sitting near all-time highs fresh off a weekend of booming preorders for the i pad. can you still profit from this super high flier? sticking with the off the charts theme, shares of nike on a rice rnice run over the past . does a tiger return to the links
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here's a look at the most actively traded stocks on the nyse. nasdaq, siriuxm, power shares, microsoft and intel. fda has asked for more information about amilin's diabetes treatment. the battle between apple ceo steve jobs and google ceo eric schmidt getting personal. just as apple receives preorders for the ipad. senior research analyst at pacific crest securities and jim goldman. jim, i remember it wasn't too long ago members of the washington, d.c., administration worried these companies were too close. not so much anymore. >> talk about sending a clear
message to the opposite. yeah. we have been witnessing sort of this chasm growing between apple and google for some time. a lot of people thought it began with eric schmidt's dismissal from apple's board. that was the ongoing interpretation of this relationship simply falling apart. apple right now i'm told is at diametric opposites right now from google. i'm also told and i reported back in january that steve jobs simply hates eric schmidt right now. that's how bitter the rivalry has gotten. >> wonder if that means eric now has more billions than steve has. andy, this really kind of came out in the open when apple filed a patent infringement lawsuit against the maker of the google phone for google. they're going after google's contractor here. yet apple itself stole so much of its early designs from xerox park research. isn't this sort of pot calling kettle black? >> well, that's the nature of
technology, right? in ip law in our country. it is and it isn't. apple brought a lot, a lot of innovation to the market with the iphone. and to have that innovation start to be scoured away so quickly, i think they feel like people had to copy it. and htc is a good person to go after because certainly they have the google tie. but don't quite have the google funding or recognition. >> right. it's kind of hard to figure out who is in the stronger position here. i mean, google in going after this phone market and upsetting the apple iphone really seems to be doing it more out of defensiveness, worried someone is going to cut off their distribution channel, andy? >> yeah, i know. that's the case for both of them, i think. when they were working together it was actually an incredibly complementary relationship. when you looked at apple devices running google services it was something that ran spectacularly. those companies are big companies.
inevitably you start to step on one another's toes. >> they don't want to be beholden to the iphone? is that the idea? >> exactly. originally they were in a deal with apple where they i think pay apple to put google as the default mechanism on the iphone. then they worry can we only go through apple? what if apple shut down the app stores. they want a totally closed system. whereas google is saying openness. no barriers. right? >> google has always preached openness. but, you know, this is why a lot of people are now discussing whether apple might run towards microsoft and possibly use bing as the default search engine on its mobile devices not just for i pad upcoming, but also iphone existing. that could be a very interesting relationship here. remember, as much as we make about the apple microsoft rivalry, again, we've talked about this through the course of this year. it's not so much that steve jobs hates microsoft. the two have worked actually very well together over the decades. the rivalry has been
interesting. but by and large, this has been a complementary relationship. if you look at google now as being the sort of microsoft of the current generation, apple might have a real opportunity here in forging a new mobile relationship with microsoft. wouldn't surprise me in the least to see bing on ipad and iphone. >> on that ipad are we going to see this flush of publicity with huge new orders right away, the question is it going to go beyond the early adopters and be a mainstream product? it's not a cell phone. a cell phone is much easier to sell to a mass audience. >> that is the question. we get a lot of hype around the preorders. to your point what they sell after the device comes out is going to be a lot more important. the device has a very, very wide set of usage scenarios. i think ipod touch and iphone have proven there's a pretty big market for that now. whether or not it ends up being as successful as those devices, i think it's too early to tell.
but i do think that the device brings a lot of value in the app store and itunes and that ecosystem will at least allow it to meet what the expectations are right now. >> the stock market certainly seems to be betting it's going to be a huge hit. thanks, jim and andy. coming up next, the realtime flash. plus a trip off the charts with nike. did you know that since tiger's media mea culpa last month shares of the swoosh are still up nearly 10%? can you still tee up some gains on that stock? "fast money" is set to let the big dogs hunt in 15 minutes. the ceo of consol energy will be on.
announcing it will stop offering free meals to economy class passengers. lots of news today on a slowdown and some default rates. what might that mean for credit ca card stocks. >> keep in mind the s&p 500 financials is the second weakest sector. bank of america, jp morgan. overall delinquencies were down. much weaker on the longer end. the portfolio is yielding slightly more. don't forget "the wall street journal" piece talking about the company. jp morgan trading lower today. five to six months, the trend remains incremental with improvement in charge offs and a higher yield on the portfolio. perhaps the market expected better. discover and capital one also out with numbers. discover's net charge off up to over 9%. delinquencies down just a touch. the stock trading slightly
higher on the news. of course, we also want to take a quick look at capital one because it's down more than just about any name. but it had the best numbers on the day. chargeoffs were down. back to you guys. >> thank you, brian, very much. we now go to a name that's off the radar but moving higher in today's market. shares from nike up. here is eric tracy from fbr capital markets. the company is nike. welcome, sir. good to have you with us. >> good afternoon. >> nike has a lot of drivers of its growth. we like to focus on domestic basketball. we like to focus on tiger woods. i'm going to get to that. but one of the big ones is soccer. the world cup is going to mean a lot to them, isn't it? >> it absolutely is. we expect the world cup before and after to be a very nice catalyst for nike. we saw what they did with the beijing olympics in terms of using leveraging, that platform in terms of penetrating
international markets, china in particular. we expect them to do the same around the world cup. >> few people know one of the things that you point out in a note, that nike is the largest soccer company in the world, right? >> it is. it is. you know, adidas for quite some time was the largest. more recently nike has surpassed. again, we expect that to be a major contributor going forward. >> something like 49 of the 64 teams in the ncaa tournament from nike teams. that's good for them, right? >> absolutely. absolutely. just a part of their marketing strategy in terms of teams. within the world cup as you mentioned they have a very significant presence. >> has tiger woods dented their golf business? >> it hasn't. obviously the media likes to focus on tiger. from a fundamental perspective, it really doesn't move the needle much. obviously from a headline
standpoint, both media and investors focus on. still to come next hour on "power lunch," pga tour commissioner tim finchem first on cnbc to talk tiger, the tour and a new sponsorship deal. next, the president's health care bill heading for a vote any day now. which stocks will win and which will lose? answers on the other side of this quick break.
house democrats admit they're still short of the votes needed for health care reform. democratic leaders remain confident they'll have the votes when the time comes this week. cnbc's hampton pearson is in washington with a look at what it all means for health-related stocks. >> from the capital markets update desk, when it comes to health care investor winners and losers we're basically where we've been for the last nine months. it all depends on if reform passes and what's in the final deal. the house reconciliation package will be unveiled before the budget committee and we get the final cost estimates from the do congressional budget office. now, that could move some democrats off the sidelines. the reconciliation side car
includes fixes to the senate measure including more subsidies for affordable insurance, more state aid for medicaid, the health program for the poor. it also closes the doughnut hole for prescription drug coverage and lessens the tax on high cost insurance plans. sectors that could be winners, pharma, hospitals groups stand to gain from medicaid expension, and looking at the net losers, the insurers, of course, and to a lesser degree medical device makers who are going to be taxed to pay for the cost of the health care reform. st. judes and medtronic have been up today based on favorable reports from a clinical trial of a new less invasive way to treat heart rhythm disorders. next hour on "power lunch," the top of the hour, builder confidence. rising as we enter the crucial spring selling season. that's the question. breaking details at the top of the hour. plus, 3-d movies like
halftime report." is this rally out of steam? the technicals say we are overbought. the sectors that led us higher, banks rolling over. is now the moment to clear those debts? let's get to the word on the street. gentlemen, great to see you. let's start it off with the financials. dr. j., i want to kick it to you. if you take a look at the interday chart, very strange reversal there. what do you make of that move? >> i think there was a lot of focus for the last five or six trading sessions on citi and the unusual volume in there as well as goldman sachs, melissa. so a natural little pullback, this isn't as big as i think this google news is potentially big today. >> definitely. scott nations, what are you noticing in terms of the option activity in shares of citi? we have seen unusual activity for days now. what are you noticing today? >> you know, we continue to have huge volume in citi options. and as you said, that's been going on for a long time. but, you know, this is
professionals. they're trying to capture just a tenth of a penny or so in the options rather than in the stocks. tough to figure out what the bias is or if the options are saying that the market has a bias as far as citi. pulling back a little bit so we can continue to see a little bit more volatility or volume than normal. >> we kicked it off today by saying the technicals say we are overbought. at the same time do you see values in this market? what sectors are you going after at this moment? >> ten day rally in the financials, even though it wasn't other than citi a spectacular rally, you've got to expect some pullback. i think you're going to have some resurgence of financials just in line with economic stabilization. there'll be a good employment report in a few week. maybe not great, but good enough. so i would think that there's a trade there. i'm more interested in the tech side of things and today we're having a big pullback in tech. and this may be a good point to get into google because everyone's selling it off based on news that isn't really going to materially impact their core business. >> pullback of 3.5% on google,
you see that as a buying opportunity even though the stock has basically been dead money since the gunning of this yea -- beginning of this year? >> yeah, unlike citi, google is adamantly a long term core holing for tech at large. let's move on to the chart of the day. scott nations you've been watching this chart very carefully. it's a technical indicator. that has got you worried a little bit. >> absolutely. because the relative strength index, the rsi, points out that the s&p is really close to overbought. so what is the rsi? the relative strength index compares the magnitude of up moves to down moves over a particular period of time. it's really a measure of momentum and it can tell us if that momentum has carried the market beyond where it should be. and it's saying in the s&p that it has. measure on a scale of zero to 100, below 30 is oversold. above 70 is overbought. on friday it closed at 69.80. so the s&p is overbought. >> all right. got to move on to our other top
story here, concerns that an abrupt china tightening is on the way sending commodity stocks into the red right now. oil is back below 80 bucks. in oil we notice an unusual bearish reversal on friday's session as well at around 11:00 eastern time. dr. jay, do you really think it's china? the notion china is going to tighten has been floated around for a couple weeks now. people are kind of bracing themselves for that sort of move in the next couple of weeks. >> yeah, they are bracing for that. but it's also a very technical level up there at 80 whether or not the narcotic can hooil mark. it's not been able to do that. people that are basically in my camp believing we will roll and perhaps come down to 75 or 74 are again pointing to the fact we couldn't hold 80. whether it's china or any other extrinsic input, i'm not seeing the commitment of folks stepping in and buying. instead they're getting out of the way, which is why i think it goes back down, rolls to about 75. >> okay. we do want to stick with the
commodities sector. we've got more m and a in that sector. consol energy paid $3.5 billion in gas for nat gas oil in dominion resources. no surprised, consol shares down by a little more than 9%. here to set the record straight is the boss at consol. brett harvey joins us from his headquarters in pittsburgh. always a pleasure to speak with you. >> hi, melissa. >> hi there. >> good to be with you. >> underpinning the deal obviously, brett, is a bullish view on natural gas. you and your management team have said long term you term yo at $6. when you see that level being reached, it's a rocky ride in the past couple of years and when is this going to be a creed to your bottom line? >> the good deal is this is a low-cost production play. so in any marketplace going forward, we're going to make margin on even at 4.50 gas, we
make a return on investment. it's a good deal for us. this is a powerful play and a good opportunity to do a deal with dominion. we see a big future in it. >> so even at 4.50 it's going to had to your earnings. when will we see that in terms of your quarterly report? we know the deal will close at the end of april. >> right. we'll start to see ebitda earnings next year. this is a play we have to develop. and we have to develop the gas and we have to drill the wells and once we get the rigs in place, you'll see some first and second quarter of next year. >> you made it clear that you're not getting out of the coal business but this beefs up your natural gas exposure. what sort of message should investors walk away with this? is this sort of implicitly saying the best return on our investment at this point in time
is versus our core business of oil? >> coal is the basis of all of our energy in the united states, especially electricity. if you look at gas, gas is considered the cream of the crop. what we've done is got both of them in our area, doubled down on gas. we're still the biggest coal producer in appalacia. it's a double-edged sword in the market. this is a red, white and blue product, coal and natural gas. this is the energy reserve for the eastern united states. >> dr. j., you have a question for him? >> what are his investment bankers telling him the likely financing costs will be for a deal of that size? that will give us a better idea of how much the credit markets are willing to pay for a deal of about $4 billion. >> well, we've got a great balance sheet and we have the ability to borrow all the money
and pay the interest or we can put out some equity. we're looking to do equity and some debt. and i think the borrowing interests are right around 8.5% to 9% on some term deals. >> one last question for you, just about out of time. with regards to con sahel gas, you made some comments you might be interesting in buying the stake that you don't already own. your company owns about 81.5% of it so far. when can we expect to see some sort of deal? you've built a premium in the shares now. >> the focus was to get this deal done. the value of that part of the gas company will settle out over time. when we finish this deal, we'll take a look. we might stay that as an open company or we might bring it in, depending on the price at any given time. that wasn't driving this deal. this deal was driven because the
opportunity was there and dominion was selling. >> always a pleasure to speak with you. hopefully you'll join our show sometime again soon. >> melissa, i still have to job in the mine for you. >> you remember. i'll keep that in my back pocket. thanks so much. i actually went down in the coal mines of consol coal mines. that was a lot of fun. what's the trade here? we've seen deals like this before, like an exxonmobil. that didn't quite work out for them so far. >> i think the whole natural gas thing is dicey if you're assuming more than 450. he says they can make money at 450. so you have a little more comfortable. but we're going to have a huge amount of natural gas coming online. what the rate of replacing dependency on oil versus other options is going to determine price. there's going to be a huge supply which could be good for the environment but not good for
the people like consol buying. >> dr. j, your thoughts? >> i think exxonmobil got too cheap on their deal with xto. i think overall, this is the future for american energy. >> they still have to make a big investment. what does that tell you about all of the companies that have big proven reserves? they are probably undervalued at this point. >> good takeaway there. got to take a break here. on tonight's "fast money," the top wall street analyst with the call of the day. walmart will win the retail battle in 2010. up next, the big shot behind the big short. crude, copper, commodities clobbered on fears china will rein in growth. your top trades. plus imagine surfing the net at 25 times the speed you're stuck with now.
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time to call the close, scott nations. >> s&p is overbought, i'm a seller. >> zachary karabell? >> i think this is thrown upw d upwardly by the markets. fine entry points. >> because of google, the s&p falls further. i'm a seller. >> that does it for us here at halftime. see y'all at 5:00. the latest read on housing hits the tape any second now. we'll have that. plus -- he's the best-selling author
of "liar's poker." he coined a term that defined major league baseball, money ball and his rags-to-riches tale about michael in "the blind side." michael lewis set to join "power lunch" to talk about the crisis, the comeback and his latest look at wall street, the big short. the second hour of "power lunch" starts right now. welcome, everybody, to the second hour of "power lunch." i'm tyler mathisen. breaking news on the homefront. diana olick has it. >> the expectation was for it to return after gaining last month. it's blamd on lack of credit and the, quote, continual flow of distressed properties.
the positive line is 50 between positive and negative. sentiment had been rising last summer. current sales down two points. sales expectations down three points and buyer traffic down two points. the midwest continues to show the lowest builder confidence. but the northeast showed a gain of five points. the west gained one point but is still is second lowest number of the four regions. in the south, which has the largest share of homebuilding activity, the index fell one point. the builders had been big supporters of the homebuyer tax credit. the credit expires april 30th. for more, go to the blog, realcheck.cnbc.com. michael lewis' new book "the big short"s chronicles a handful of key players in the subprime mortgage market. and how they made billions.
lewis says more people learn about what really happy, the angrier they will be. michael, nice to have you here again. people are pretty darn angry about it now. but you think that that anger will simply escalate when they read your book because you really took it from a different standpoint. you didn't go through the crisis itself necessarily. we kind of know what happened with that. but some of the characters behind it. what was the most surprising thing that you discovered in your reporting? >> well, that this story existed surprised me in the first place. that there were these wonderful characters who set themselves up in opposition to the financial system back in 2005, 2006 and had done so well out of that opposition and sort of been diagnosing the problems in real-time and screaming about them and that no one listened to them. that surprised me because i'm a visitor to your planet. i've been off in baseball and
football and other things. i haven't been playing that close attention. i guess as i dug more deeply into it, it surprised me that given how persuasive the arguments were at the time, how few people took them really seriously. >> michael, the interesting thing is all along for the past year, we've been looking for criminality. we want someone to hang. yet you kind of tell us it was more stupidity. >> i do feel like -- look, there's no question there's still public recriminations coming down the road and people are going to get lynched for their role in this debacle. but i do think that that's -- this tends to happen with every wall street crisis. a few guys get rounded up and lynched and everybody moves on without any changes in the basic rules. i think the real story is what
happened that was perfectly legal. that's what's shocking. i don't really think of it as a story mainly of criminality. i think of it as a story of delusion. and i almost thought -- one of the things running under this narrative that i really wanted to bring home was the story about perception. you have a bunch of facts in the financial world. everybody has the same facts and there are 14,000 funds that might have shorted the subprime mortgage market. 13,990 of them see those facts one way. and ten of them see the facts the other way -- >> and it's only ten. when you look at all the thousands of people all over the world, all over the country who could have made money from this debacle, you found ten. >> well, there are a lot of people who would quibble with that in that there are a lot of people -- >> what? 20? >> no. a lot of people who dabbled in
the market for credit default swaps and a lot of people who had minor short positions. but people who went all in with it, very, very few. somewhere between 10 to 15. so the question becomes -- this is the thing, for your audience, the thing that surprised me, i thought of, back in my days at solomon brothers, i thought of investing as a kind of antiseptic oovt. it was more intellectual or emotional. what surprised me was how much these people's decisions were driven by life experiences and who they were. >> we couldn't have had it without the investor side wanting to buy the stuff. why is it that so many end user investors, the institutions were buying it when it was headed for collapse? >> different reasons and different cases. but the investors buying aaa tranches of cdos, maybe the most insane investment in retrospect,
you're paid so little to hold a aaa-rated security that the people who buy them tend not to do a lot of credit analysis. they can't afford it. they rely on the ratings. so they didn't actually look at what they were investing in that -- >> the ratings agencies just merely, are they incompetent or were they willful and complicit? >> this is a great question. and i don't have the definitive answer. it's one of the questions my characters are trying to answer as they're wandering around this world trying to figure out what the hell is going on. they come to different conclusions. but broadly, i think they felt that the ratings agencies were just successfully manipulated by the wall street firms. and, of course, they were paid to rate these things. and so the question is, why that hasn't changed. why on earth are the ratings agencies paid by the people whose bonds --
>> you brought up the issue of rules and regulation. we'd like you to listen to this particular bite because when it comes to regulation, a bit earlier today on "squawk on the street," richard shelby said failure should actually be an option. lp >> nobody wants anything to fail. but everybody thought the sky would fall when lehman went under, but it didn't. and if other big banks had gone under, the sky wouldn't have fallen. it would have been dark for a few days. but this country is resilient. >> do you agree with him, michael? >> right. how could anybody know? you don't know what would have happened if they would have allowed all of wall street to fail? i suspect that wouldn't have been a good thing. if it was done in the way that lehman brothers was throwed to foul. why isn't there a mechanism in place for a more orderly failure? if you look at why when lehman brothers fails or that -- around
that time, why that crisis is such a crisis, why there's so much panic, it's because nobody knows where the risk is or the losses are. there have been this huge market in side bets on subprime mortgage bonds that had gone on that was completely essentially undocumented in the sense there was no exchange these things traded on. no one knew who had the losses. it's like a situation where if you're in a small town and you're told one person has the bubonic plague but you don't know who it is, you're going to create a panic in the town. but if you know who it is, then it's a containable problem. the question is, again, why there hasn't been more of a push to make all these risks that the banks take more transparent. >> michael, what's your thought on goldman sachs? >> is it possible that i have one thought on goldman sachs? >> how much are they to blame?
are they involved, et cetera? >> goldman, i don't think, did much that everybody else didn't do. they were first to aig and that was a calamity. what they did with aig was unconscionab unconscionable. even with -- it's true. we're all big boys here. they were dealing with a kind of equal. but you would think that goldman knowing that this was a horrible risk to be taking would have just said, this is wrong. my problem with goldman sachs -- >> oh, come on. >> if you can hedge it, there's no risk involved. >> it was unhedgeable risk. and the real problem is they said -- there's a status structure on wall street. and goldman sits on top of it. so they're emulated. they should be a leader and lead by example. it bothers me that they
completely abdicated that responsibility. >> we want to talk about some of those rules in our next segment. but in all of your books, michael, you have fascinating characters. and in this one, a fellow named michael burry fundamentally goes and figures out how to short subprime mortgage bonds with this stuff called a credit default swap. and he persuades people, basically, to write those these policies. did the people who wrote the policies like aig know that they were writing policies that they could never hope to cover or did they just think that they were never going to have to cover them? >> aig -- i think this is true. i reported inside aig. i think it's true to say that aig had been ensuring pools of diversified corporate debt. and they were genuinely diversified. which is one thing.
that all of a sudden, they're ensuring these pools of undiversified subprime mortgage risk and they don't actually know what they're insuring. why they didn't know, i don't know. but for a period of about nine months, they rode recklessly into this business. and did stuff that was just insane. they were on the other side -- essentially -- you're right. they were essentially opt other side of michael barry's trades. michael barry is a very smart guy, buying insurance on the very bonds most likely to go bad. and aig is blindly sort of writing insurance on pools of subprime mortgages they haven't evaluated. >> michael, stick around. this is good stuff. remember, he is a hit maker machine. his new book is "the short." 20 years ago, though, his first big hit came out. the tough look at solomon brothe brothers.
they never appeared on television together. >> that's going to change in two minutes' time. it's the reunion on this special edition of "power lunch." [ crowd gasps ] [ announcer ] if you think about it, this is a lot like most job search sites. - they let everyone in, - [ crowd groans ] so the best people can't stand out. join theladders.com.
fast-forward 25 years right here on "power lunch," good frepd and lewis meet on tv for the first time. gentlemen, good to have you here together. mr. goodfrund, i'm going to start with you and with the 800-pound gorilla in the room. after the book came out, your reputation has never really recovered. what would you say to michael lewis about that book? >> it made michael and damaged me momentarily. >> momentarily? >> yeah. >> i think that's fair. >> thank you, michael. >> no, i think that's completely fair. a book only has so much power and i think when it came out, it was -- there was an awful lot of attention paid to it and then it kind of went away. i seldom see it these days. every now and then, i'll see a copy and it will have been inscribed by john.
>> he said he went for the book to be an indictment and yet it made a lot of us who read it of you type of guys as heroes. >> well, i think that's a miscalculation on your part. historically, the way i look at it is we were a product of the time when they eliminated a lot of the regulation when milton friedman was a god and allan greenspan was a demi god. maybe michael had a more sage view of this. >> well, i think it's funny. you can trace an awful lot of the seeds of the current catastrophe back to that era, back to the '80s. but it's a case where what seemed like really great ideas at the time and indeed were great ideas at the time spun out of control.
some bad ideas, too, i think it was a bad idea -- john and i had lunch about a year ago and we talked about this. it's probably not the greatest idea for these big wall street firms taking lots of risks to be structured as corporations rather than partnerships. but the mortgage bond market, in its early incarnation was a wonderful boon to the american economy. it was a great thing that turned into this really pernicious force. but it took 20 years. >> yeah. should you not have been allowed to become a corporation? should it just stayed a partnership? is that the problem what's happened on wall street these days? >> that's a gross oversimplification. the downside was the public shareholders and the upside was the employees and the percentage
paid out to the employees became obscene. >> there's a lot of financial regulation that's pending in washington right now. and the phrase that we keep hearing from a lot of the congresspeople who come on our air is, we need to make sure that a crisis never happens again. can you regulate yourself out of a financial crisis? >> not with these clowns in washington, no. >> which ones in particular? >> could you elaborate? >> and do you approve of the type of regulation that is being proposed in washington right now? >> i'm not clear on what that regulation will be. i think that you can't put the genie back in the bottle. the idea that we're going to reinstate glass steagall is ludicrous to me. we've gone much too far. one of the ideas is the compensation aspect which seems to bother everybody a great deal. that is a very, very difficult issue. but it can be handled.
>> do you feel that compensation did, sir, the structure of it, directly contribute to the entire meltdown? i thought it was more just lousy risk management. >> i think it was greed. i don't know whether you call it risk management or not. the greed applied to the people who worked in the street. and they did very well. the shareholders -- look at the bank shareholders, they were almost out of business. there was a very interesting piece last week in "the new yorker," not to mention another publication away from michael, a fellow wrote a piece on the secretary of the treasury. it was the first time anything decent has been said about him in my memory. it was very, very interesting. john cassidy wrote it. >> yeah, we talked about that last week. >> did cassidy have any insights? >> we had to cancel him because president obama was making a speech. >> michael, let me ask you.
you make the point in your book "the big short," that wall street is structured to make things more complicated and opaque than they need to be. that's their fundamental business model in many ways. these are my words, not necessarily yours. but i wonder whether you think there is any inherent value in the credit default swap or in products like that? do they really serve a purpose other than to be pools and places for naked speculation? >> well, they always start with some purpose that seems good. but if you could rewind the clock and just ban credit default swaps, we'd all be better off. >> why not? >> oh, come on. >> why not? >> you don't believe that? >> no, i agree with that. i think there's no reason for a lot of those products that nobody understands. >> and if they were actually -- the problem would also have been basically solved by regulating them as insurance.
>> that's different than banning them. would you agree that the ability to buy a credit default swap on greece makes somebody far more likely to buy greece's debt and they're thankful for that because you can hedge that debt? >> no, i agree there is a theoretical purpose to credit default swaps and it's a hedging purpose. but the truth is the casino gambling purpose on the side of it is overwhelmed, the hedging purpose -- >> john, you're shaking your head. >> look at what credit default swaps did with the subprime mortgage bond market. it radically amplified the amount of subprime bond mortgage risk out there. it didn't deaden it. and in addition, it disguised it. >> and provided an early warning system because those blew out and told us a year or two ahead of time that things were going to explode. >> you've got it exactly wrong. the credit default swap spreads
didn't move as they should have moved. what happened was the underlying loans started to default. >> that's right. >> it couldn't be ignored. >> by april 7, the spreads started spreading out just on the new issues they were selling because everyone thought it was going to topple. >> could i ask a question? where were the regulatory agencies in this? forget the s.e.c. which was out to lunch. what happened to the moodyy and standard & poor? >> they're legislated into profitability because everybody has to get everything approved by them. they issue a rating on a muni bond and never -- >> what is congress doing about this? >> they're passing a rule when there's no rule that proprietary trading helped trigger the meltdown? >> i think john's point is there nothing in any of the bills that
i'm aware of that would go directly at the point of the ratings agencies. >> the rating agencies are the key to getting in the business. they give you a double or a triple-a rating and it's a license to steal. >> should they be eliminated? >> the rating agencies? >> yes. >> they better be regulated before they're eliminated. i think it's a very difficult issue. >> michael, one last question, in all of this regulation, what about the idea that people got burned so bad in this meltdown that that alone, the sting of that is enough to get us to regulate ourselves better? >> forget it. >> that doesn't make any sense to me either. >> it makes sense, but it ain't going to happen. >> john, thank you for joining us. we appreciate it. michael, you're sticking around because we're really excited about the next guest. >> that's right. because in between his books about wall street, he did indeed write the book "the blind side,"
story of a young man who rises from an impoverished background in the south and achieves his dream of becoming a pro football player. best actress statue for sandra bullock. michael lewis is with us along with sean tuohy, the real-life dad in "the blind side." welcome, mr. tuohy. welcome back, mr. lewis. mr. tuohy, let me ask you, the book "the blind side" was in part about, as so many of michael's books are, about how things get valued. in the case of "the blind side," how a left tackle became an undervalued asset that suddenly became a highly valued one. is that what you saw in your son, michael orr, an undervalued asset? >> well, i think that's obviously the end result. and i'm sean.
i know michael lewis would expect you to call him lewis. but down here, we're on a first-name basis. >> that sounds good. >> the truth is, until michael lewis showed up, we didn't see michael orr as anything but another addition to our family. it seemed to get real interesting to everyone else. but in retrospect, obviously that's the message of the book. and michael lewis did it very, very well in that if the most obvious success story walking down the streets of memphis can fall through the crack, imagine who gets left behind. i think that's what resonated probably in the movie because it was so compacted. you can catch that point so quickly. where the book added a lot more data and interest to it. but when it's done in such a short period, you can see, wow, society, we really miss out on kids. and obviously michael was valued as worthless and obviously that's so inaccurate.
this kid was smart and intelligent and athletically gifted. >> michael lewis, you seem to have a great gut for writing and picking best-sellers. did you have any idea that "blind side" would blow up so big as a movie when you were doing it? >> it sold so poorly as a book. i had no hopes for it after that. i thought i had blown it. i grew up with sean tuohy. he used to routinely take me into his backyard and make me play basketball until he scored 100 points on me. this is such an accidental story to have gotten told. the only reason it happened was i was in memphis anyway on other business writing something about our high school baseball coach and i thought i should get back in touch with sean to ask him about the coach. and michael was sitting in the living room. and it was very early in their relationship. i just started to follow it without ever really thinking it was going to be anything. the way it kind of mushrooms is
spectacular. >> i hate to ask such a blunt financial question, considering the book didn't sell well, what are the financials on the movie? have you gotten any upside out of how well it's done? >> sean, you want to address this question? >> yeah, every morning my wife wakes me up by throwing the newspaper at me every time the numbers come out and say, who negotiated this deal for us? >> yeah, it was me. >> i go, michael lewis did. >> you're not lempveraged to th box office sales in any way? >> no. >> sean, do you think, though, that between the movie and the book that more people will be more aware that fewer kids will fall through the cracks or not? >> i think that's a great question. and if the movie and the book did anything, i think it moved people in some direction.
and that's the -- idle is the worst possible movement. if you get people moving, that's the best thing to happen. 30 million, 40 million people are going to see this movie. you can't tell me nothing good will come from it. i firmly believe you are a different person walking out of the movie than you are walking in. and partly is because of the people sitting there -- same thing with the book, too -- but you sit there and you look up at the screen and you go, well, that's me. i think it resonated -- we're in a great country. we're in the worst economic times that michael lewis makes sure that he tells us about. but our giving is up. my wife and i are writing a book about the power of giving and how it really does affect our country. >> thank you so much, mr. tuohy. michael, before we let you go, e-mails from viewers want to know why when it comes to "the
big short," there's no kendall addition? >> why sell something for 8 bucks when you can sell it for 24. this is not a decision the author gets involved in. they're pricing down the demand curve. all these publishers are doing the same thing. there will be a kendall addition. you have to wait a few months. >> we've obviously given you a lot of praise for your books. but i think the highest praise for your work actually just came from your friend, sean, who said you're a different person of watching the movie and reading the book than you were before you started. >> sean, did you say that? >> yes, he just did, on our air. >> i can't believe you hadn't told them about the no-hitter you threw in high school. >> yeah, that's exactly what i did. sean will tell you that i sat in the back of the class with him all through school and we were the two dumbest kids in the class, too. he's shocked i'm writing books for a living.
>> i know i made the top half of the class possible and i know you weren't far from me. >> that's right. >> thanks, guys. >> you guys need your own show. >> yeah. >> michael lewis, author of "the big short." it's on sale today along with sean tuohy. that was fantastic. i loved that. >> fascinating conversation. coming up next, pisani and santelli are just as fascinating. they're taking the real-time pulse of the market. and -- >> don't you wish you could write like that? >> great eye for characters. that's what he's able to find. you jealous -- >> i want to be him. the tiger clock is ticking. reports he's ready to get back on tour soon. is he? is he not?
they join capital one, bank of america and discover. reporting delinquencies to the downside. the net chargeoffs, accounts that they're writing off, were more on the mixed side. the homebuilders sentiment numbers, clearly a disappointment. they've been holding up very well under the theory that we would get better numbers in the next several months. so far, it's been pretty modest. rick, over to you in chicago? >> thank you very much, bob. we all see that the dollar index is up and we continue to -- many traders on the floor -- point to the fact that the dollar index seem to have big moves during that closing time zone for europe very often. this closed just over 1.52. it's a bit elevated. it wasn't directly moodys. they're talking about a time line. they say the time line is substantially shorter and that's
the issue for the marketplace. tyler, back to you. >> mr. santelli, thank you very much. the business of golf goes on without tiger. but how healthy for how long? who knows? our darren rovell here with a couple of guests here to say the pga tour is still a good investment. >> that's right. when buick dropped its pga tour sponsorship to the san diego event last year, farmers insurance stepped in days before to find out what it's like to be a sponsor. the company was so happy, today we welcome in pga tower commissioner tim finchem, the pj aushgs tour will sign a four-year deal to sponsor. thanks for being here with us. commissioner, what does this deal say about the health of the pga tour?
>> it speaks volumes to the, i think, experience that farmers had at the san diego tournament. but also to the strength of our business model and the value that is generated from being involved in a pga tour event. this arrangement will allow us to actually increase prize money in san diego to a level that is consistent with our tournaments at that time of the year. and also set the stage for continuing to grow charity dollars going forward. so it's very solid, very impressive and our hats are off to bob and his team. they've been great to work with. now we can enter into an era of working in a long-term relationship to build the quality of this tournament and more value to farmers. >> you're getting into sports a lot. your logo is on the l.a. sparks jersey, sponsor of the l.a. tennis open. what is it about sports that appeals to your company and what is it about golf here? >> well, certainly when we think
about the golf tournament here in torrey pines, farmers has a long history, its founding was here in southern california. over the years we've been a big supporter of community events in california and around the country. when the opportunity came for us to participate in this event, what really attracted us was the ability to work with the century club and the pga tour in providing charities dollars that are greatly needed at this point in time and because it's our largest marketplace, california, from a business standpoint, it works very well for us as well. >> tyler mathisen here, i'd like to ask a question that's regulatory and more driven at the insurance business. a lot of stuff going on both in health reform and financial regulatory reform. and one of the questions has been about how the insurance companies in america are regulated state by state. i assume you think that is the way to go. i wonder why.
>> certainly the insurance industry over the years has been regulated on a state-by-state basis. and as a result of the last two years and what's happened in the economy, there's politically a lot of discussion around those items. and from our business perspective, the thing we don't want to have is dual regulation where we would be both regulated at the state level and at the same way at the federal level. so, again, we would be supportive of the concept of optional federal charter that could be considered. >> commissioner, you said last week -- late last week that you would expect tiger to return in either late march or early april. bay hill or maybe the masters and that you would need to know sometime soon. do you know anything more now than you did last week? if so, can you share that with us? and how much do you really have to know in advance? >> well, actually, first of all, i'm impressed that everybody wants to know when he's coming back.
i think that's a change from two weeks ago when he made his statement. people are now focused on the future and i think prepared to let him worry about his personal life. that's great. what i actually said was if he's going to play at the end of march or early april that we would know pretty soon because he knows that we need to know somewhat in advance to prepare. he's aware of that. so i think if we're going to see him at the end of this month or early april, we'll know very soon. >> he had to declare if he's going to go to bay hill, that's friday at 5:00. would you know by then? >> yeah. we'll know sooner than that. i think we'll know before the commitment deadline which is the friday before. we have work to do. but we've gotten prepared a number of weeks in advance for a number of tournaments. so i think we're ready. but we will know. again, i think that he's been practicing for three weeks. every indication is that it's just a question of when he thinks he can win the golf tournament that he'll step out there. we'll know when you know.
but we're as excited as everybody else. >> commissioner finchem, mr. wudtra, thank you for joining us. >> thank you. next, we have "avatar" and "alice" raking in a bundle. julia boorstin is in las vegas with that. >> the box office continues to explode thanks to 3d. but movie theater chains have left millions of dollars on the table thanks to a shortage of 3d screens. i'll be talking to the ceo of one major theater.
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newscorp expected to earn between $350 million to $400 million thanks to james cameron's "avatar." that's when it will be released on pay television and dvd. that sum represents newscorp's 40% cut of as much as $1 billion that film is expected to rake in in total. you see shares of newscorp today a little more than 1%. booming year for movies. "alice in wonderland" racing to a $430 million haul at the worldwide box office up through this sunday. it's also been a booming year for movie theaters. now the industry gathers in las vegas for the annual movie theater convention. julia boorstin is there with the ceo of one of the largest theater chains in the country. julia? >> reporter: hi, dennis. i'm joined by the ceo of
cinemark. they just secured financing to boost the number of your 3d screens to 1,400 by the end of the year. what does this mean for your business? >> our consumers love going to the movies. it's a great opportunity for us to expand and grow our digital and our 3d base and off, we think, better, finer movies. >> reporter: you're all getting this additional financing. what is cinemark doing to get a competitive edge? >> when you're in a good location and you have a good theater, you want to have a digital 3d projector so you can present to your customers. throughout the country, there's room for all of us to grow and get more digital screens. >> reporter: your stocks up over 120% over the last year. you're going to come up against some tough comparisons. what's your plan to continue
this growth? >> hopefully, people are recognizes the reason for the growth is the opportunity that's in front of us with 3d, with alternative content t many things we can do with that. we think over the next couple of years, there is excellent film coming, excellent prospects for more and better product for us. we think our base and what we can continue continues to grow and get better. >> dennis, you wanted to be here. >> yeah, the idea of moving it out to theaters has always been the chicken and egg problem and who's going to pay? is that logjam finally over? are you willing to fund this entire hit yourself as a theater? >> well, the recent financing for dcip, that's where the funding is coming from. it's being done by a third party and the payment for that reimbursement comes from the studio. at the end of the day, we put in a little of the equity for this as well as third party and the studios. all of us together make this thing happen. >> and then you -- go ahead, julia.
>> reporter: go ahead, dennis. >> then you're able to charge what kind of premium on your 3d movie? 20%, 30% higher ticket price? >> most of them today on average, 3d premiums are around $3 to $4 per ticket, kind of depending on the market that you're in. so definitely good premium and a good experience for our customers. >> reporter: we'll see whether consumers will decide that so much is enough for a movie ticket. alan stock, thank you for joining us. back over to you. coming up next, tough talk on china. china's premier lashing out at the u.s. over trade. google close to pulling out of china because of government censorship demands there. >> should the u.s. flex its muscles with china? is it time to get tough or time to get real?
who really has the upper hand here? joining us now, peter navarro and john burlo. who has the upper hand and what should the u.s. do at this juncture? >> in a way, we both kind of have the upper hand, lower hand, whatever you want to call it. but i think it's not in anyone's interest to get in a trade war. google -- what google is doing is separate from what our policy should be because google as to make the choice whether it sees the conditions of china as -- >> it's a private company which is very different than the government. >> right. and the freedom to trade is also the freedom of not to trade. so anyway, it's in no one's interest to get in a trade war. but google can point out chinese censorship and how it wants to deal with china.
>> when china says to the united states, you keep talking about currency -- who are you to lecture us on currency, they have a point, don't they? >> not at all. i think the question is not whether america should get tough, but whether china should get smart. if you look at the press coverage, premier wen said inflation was the biggest enemy of china right now. allowing their currency to intrenten would be the best inflation-fighter. it would reduce the cost of oil and raw materials for the manufacturing machine and would stop the speculative flow of hot money -- >> you're right. why aren't they doing it? >> i'm not sure. i think they're afraid if they raise the value of their currency, it will cut their export edge and create political problems. but the net gain right now, i think ways in favor of fighting inflation. that's the argument we need. i'd love to see hillary clinton get on a plane, go over to china
in secret, sit down, lay out the economic arguments for why this is a win/win for both countries and say, hey, we want you to take the lead on this. but if you don't, we're going to give you 90 days. then you're going to -- the tresh si department april 15th is going to have their third chance -- >> john, isn't the reality that with china, the biggest buyer of our debt and holding so much debt that the likelyhood of any statement out of the treasury accusing them outwardly of -- and directly of currency manipulation probably isn't going to happen? >> i always think it's funny when they talk about currency manipulation because chinese currency is tied to our dollar. so we're the ones doing the manipulating. we've been doing a lot of it the past few years to try to stem late the economy and they're sort of exporting our manipulation. it may be very well in their interest to prevent inflation -- to try to prevent inflation
there and strengthen their currency but nothing we should take punitive measures against because that is going to hurt both countries. >> forgive me, that's the dumbest thing i've ever heard. basically that china undervalues their currency makes it impossible for us to compete. there's a great story out about evergreen solar, a massachusetts-based company, rick feld, the ceo, met with the obama administration and says, i can't create jobs in massachusetts, i have to go to woohan china and do my new production facilities. that's what's happening. and john, memo to you, man, they know that free trade does not work unless there's floating exchange rates. you have fixed exchange rates, you can't rebalance these trade floes and basically 10% growth in china, 10% unemployment rate in the u.s. all can be traced to currency problems. >> sounds pretty simple, john. >> that's assuming -- that's the
excuse of american manufacturers. but really, cheaper imports themselveses are good for us as inputs in some of our goods -- >> it's excuses -- >> john, what do you agree in a perfect world -- in a perfect world, wouldn't you agree that china ought to let its currency float? >> that's free trade. i think that's up to the economies -- >> come on, john. >> we're ending. >> i love that. that does it for us on "power lunch." we'll see you tomorrow. thanks for joining us. >> and the senator dodd press conference where he will unveil the plans of his regulation. you've got the countdown. 2:45 to go.