tv Squawk on the Street CNBC April 2, 2012 9:00am-12:00pm EDT
you're seeing the merger talk. it has that feeling. my worry is my world, the individual investor, after ten plus years of now r no return. >> sally, thank you for being with us. make sure to join us tomorrow. "squawk on the street" is next. >> those splitting the $640 million mega millions jackpot. >>. >> you never though. could be inval lated. >> good luck. >> they were sure we were going to win. went and spent most of it by the evening. >> good morning out there. welcome to "squawk on the street." i'm melissa lee live from the new york stock exchange. let's look at how we're setting up on the first day of the
second quarter. dow looking to lose 15. as for europe, a bump of pmi numbers but driven by the pmi numbers out of china. just fraction of changes. >> there is a $10 billion takeover bid by coty. >> meantime, group upon and revision of the first quarter, wall street is not worried. they call it a small hiccup. >> cramer already has his shopping list. we'll talk about what he wants to see that he is not getting yet. >> alan greenspan to the rescue. he's protecting ben bernanke. he says attacks are wholly inappropriate. but we've got to start off with this big multimillion dollar
deal. avon rejecting the bid by coty. it bids avon at $3.25 a share. it does not intend to pursue a hostile bill. avon is trading above, as i understand it, from last check, about that offer. this is the fourth time that coty has approached avon and said, you know what, no. >> one important thing is they did begin to talk, these two companies, a number of months ago, but the initial conversations were actually coty saying, avon, would you have interest in buying us? and then apparently things changed and coty came back with this offer, or i should say, an offer first at 22.25 and then increased at a buck. jim cramer has talked about it
many times. they are in shareholder value creation mode as they search for a new ceo. but in this case, again, coty came initially and they didn't think that they could undertake a deal of this size. let's forget, coty far smaller than avon. it's private. it would mean over $10 billion in financing. it has jpmorgan on board to help in terms of financing. but by the way, it's not coming hostile any way. it has missed a slate for the directors of the annual meeting which is a significant pressure point companies put on when they really want to move ahead. so one is left with the question, why now? why are they bothering given that avon has said no thank you, given that they've originally decided to buy them. >> yes. this is puzzling. remember the tremendous value
destruction we've seen in avon. this stock repeatedly -- let's say very undermanaged because i want to be a diplomatic. >> undermanaged? >> undermanaged. this company was at 28382. they have tremendous value in china. there's some value. someone has to bring it out bigger than these guys. >> taking a look at the emerging market, i would say, many would say that it's been mismanaged and that's why the shares have not been performing. the fact that andrea will stay on as chairman even after a new ceo is found is a problem as well. do you believe that a company can be at a turn around mode if the old ceo, who mismanaged or under managed the company and sticks around as chairperson? >> no. she was on my wall of shame. she's one of the worst managers
i have ever seen in my career. and the fact is that she's still involved in trying to pick the ceo. >> it's comical. >> yes, it is. it's comments and it's -- >> a lot of reports last week about the alumni of the organization trying to coerce the board into doing something. i wonder if this opens the door to a buyout push. >> it's unclear whether there will be a significant push beyond this offer because there is no real path here t. would seem, for coty. you have a board of directors focused on hiring the ceo. regardless of whether you think it's being managed or not, the only way it would move ahead now is they believe they are making significant progress. fourth quarter they said they were going to hire a new ceo. from here they are making progress or perhaps that announcement is not that far away. coty felt -- >> coty changed its approach as well.
early march they were, please, let's keep everything secret. let's not any of this out. and then they send them a letter over the weekend and say, if you dobt acce don't accept, we're coming public. perhaps a ceo pick. >> there's value. that's just it. it's hard to get that big network. you couldn't create it from scratch. obviously there are a lot of regulatory challenges, meaning that there are issues about bribery, a new broom would sweep clean and there's real worth at this company. i'm just surprised that this company is the case. >> coty is only -- i shouldn't say only. it's a 20% premium to the closing price on friday. it's only about one times revenues and about 8.7 times last years ebitba. >> granted this years earnings, nonetheless, not a great valuation for a change of
control transaction. that's why avon is saying, no thank you. >> but they did leave the door open for a price hike. >> coty said we might go higher, we might go lower. >> give anything realistic about this bid. just give me something that tells me that they've thought about it more than you've just described. >> in terms of the stock action, shares are up sharply. they are not quite at the offer price. what is your interpretation of that? that this will in fact open new bidders to the process, that coty's offer may in fact have a shred of truth to it? >> the people buying the company and the fact that coty will pursue a higher offer, maybe they can't get the financing that they need. if this would p ha happen, it would be an enormous leverage buyout. that would be one thought. another perhaps would be that
this in somewhat puts avon in play. that there are others out there. jim, you know that landscape better than i. >> tremendous amount of money has been made by herbalife. and when you look at how good this model can be -- i'm not talking about -- yes, the mid-level marketing model, it does work in emerging markets quite well. i'm surprised there's no mexican avon push like with h ecerbalif. you can make a rot of money because there's a lot of empowerment of women to the workforce. i want to follow this one. i don't want to give up. >> final thought, there is a board under pressure trying to create value and finding a new ceo. at the same time, any other company also would not be in a position to challenge for the board of directors, for example, if they were to go hostile.
so let's wait and see how this thing plays out. >> meantime, group upon revising results from the first quarter as a public company after failing to set aside enough money for company refund. earnst & young calls it a weakness and reduces shares 47 cents a share. jim, they keep their outlook for q1. someone earlier called it a mild hiccup. >> to me you need the heimlich maneuver for this one. the accounting system is not set up for what they do. but the returns of coupons, what are they worth? i like irony. i'm a big believe in groupon. do you want them -- do you want to use someone they recommend as
for a tax return preparation? >> it's getting a little late. anybody is -- >> 93% off. i think they probably used the same guy. 93%. i know it's ernst and young. a company where you can't monitor because of accounting problems, how do you come up with a valuation? >> i completely agree. i don't understand how a material weakness can be okay and how you can simply look past it and how it's a compelling long-term story when you don't understand what is driving it. morgan stanley coming out with a compelling story. jpmorgan saying, you know what, it is not a problem. the reduction in the price target only goes down from 22 to 24. >> it goes back to fears that people had when the initial offering was in place about management, about their ability to handle the growth of this company and simply handle it overall, a company that hired thousands of employees over a short amount of time. >> copyrighters. >> it goes back to that fear that investors had at the beginning.
>> the returns are somewhat significant. again, are people not likely the daily deal that is set? the laser hair removal, how many times can you have your hair -- >> you've obviously taken a break for the graphic with that. >> you know, i feel strongly that maybe this whole model, the whole offering model is tire some. what was today's deal? >> mid-town between 2 and 4. it's like those are the deals that you can get. who can do that? >> can you stop between shows and take the 57% offering that they are giving you in wine and cheese? >> i wish i could. but that's -- >> try wayne gretzky, the only thing that people remember about hockey is using this slap sticker. who writes this stuff? avon -- >> one of the thousands of people that they've hired. >> $20 trillion for a wine glass with cheese. i'm going to have to skip it and do a little work today.
>> i'm not going to follow that. >> it's really hard. >> groupon by the way is trading down from $2 to $16 and change. we're seeing the minor hiccup play out today. meanwhile, the second quarter begins today. stocks coming off the best of the year. dow gaining 8%. s&p up 12%. nasdaq up 19% and the russell a whopping 10%. the title, as best sector performer. the question, though, jim is can we power through. the key to that is q1 earning season and whether they will go higher in q1 as we see the numbers roll in. >> over the weekend i like to look at charts. oil and gas are going to have some very bad numbers. against that, i think the banks
are going to surprise. they are a very huge cohert. the financials can see our way through here if we get our earnings and revisions up and i think we're going to. >> on friday night you said as of this morning you're going to buy ibm, some gold, apple, abbott, kraft and -- >> that was if i won that. was my mega millions game plan. yes, i think a broad portfolio like that is still going to work in the second quarter. may i also added, i felt kind of on hold for gold and i keep coming back to the amazing cnbc poll that we had. 30% of people like gold but they are underinvested in gold. wasn't that astonishing to you? >> you also said you would have liked to have seen a chinese rate cut as of this morning.
>> how amazing. you get the pmi number while everyone is out having a good time. >> you were out having a god time. he's getting laser removal. >> you get the immediate back question, europe, wow, china is doing well so maybe they won't cut? come on. good is good. i think you take hardly anything off the table and get growth out of europe and we are in great shape. >> a lot of questions about the pmi number although it was a lot more than people anticipated. it tells a somewhat different story. >> it's the way that data slices. it's skewed towards larger companies. so it has a negative reading month on month. that's why. >> with shanghai closed, it's hard to get a read on that chinese market. >> yes. i think in terms of where i see
the second quarter, it's very hard to top that first quarter so beautiful. but i am not like -- there's apple and everybody else. if you take apple out of the revisions, it's not so good. >> but does it matter in the first quarter? yes, we had a stellar performance and that's off of the back of a fourth stellar performance. volume is down by 15% and u.s. stock funds still totalled, what, $15.5 billion with money still going into bonds. >> what happens if they reverse? >> you mean the flows that they just all of a sudden reverse? >> it slows down. >> come on. where am i going? the groupon deal? >> never going to happen. if i say that, it will finally happen. >> it's going to make it, right? >> the mets. >> that's a tough sell. >> it's begun already. >> the mets have some great
players. it's just that now they are on other teams. the marlins. >> when the mets win, equity inflow will begin. >> don't say that. >> senior assisted living by then. >> that's like cramer's ameritus. >> 2 billion. >> the dodgers -- >> before we go, former fed chairman alan greenspan taking presidential candidates to task. green pan is quoted saying that everyone has a right but wholly inappropriate and destructive to engage in ad hominem attacks. >> the tone of the earlier republican party where hu ron paul say they should dismantle the fed has given way to people focusing on social issues. it's almost as if green pan was
looking back about what they were talking about. everything i've seen is social issues. maybe i'm blind to their federal reserve analysis. >> bernanke wants to keep his job, right? he likes what he's doing? >> i think he wants to make sure his legacy ends on a positive note. >> exactly right. >> obama wins, perhaps he stays? >> the republican stays if the democrat wins. the republican wins, the republican goes? >> yeah. >> bernanke being a republican, right? >> yes. >> appointed by ronald reagan, 1987, right? >> greenspan, yes. and greenspan appointed by bush. >> he's going to do everything that he can to keep the economy looking as good as it can. >> bernanke has never left. he's teaching now. >> he is teaching.
>> is it white glove or something else. >> i was never punched but that could very much be -- whoa, we're talking about religious freedom. >> even though it is the off season, football has been in the spotlight. coming up, a live interview on the business of the nfl with commissioner roger goodell. and we'll meet the ceo of this. it's a flying car. live when we return. zap technology. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. then don't get nickle and dimed by high cost investments and annoying account fees.
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welcome back to "squawk on the street." if i look at a ten-year this morning, we sit at 228 and close at 221. as we begin a second quarter, rates have moved a lot in the first quarter and that's a big deal. where do we close out, end of last year, the fourth quarter, a spij below 190. we're up about 33 basis points.
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into five minutes to the opening bell on a monday. time for cramer's mad dash. starting with amazon -- i know you're looking at people in the balcony. >> these are fabulous people doing great things for autism speaks which i'm happy to be a supportive of. carl, once again, is the digital marketplace so ferocious that even amazon, which is spending a fortune, can they compete against apple? >> no. no one can. >> a long-time bull on amazon, raising some eyebrows at sher win williams, right? >> the housing story was the story of the first quarter and
lennar, that number was terrific. we've seen tremendous difference that goes into homes. home depot, i don't know. we've gotten too far ahead of ourselves. maybe housing is not as strong. i don't know. i'm a big dlefr that real estate investment trusts and by lennar, housing is for real. i think it's going to stay a good deal. >> melissa, now over to you. >> just moments away it's a very big day here at the new york stock exchange. the third light it up blue campaign. that's why we are wearing these blue pins for autism speaks. much more "squawk on the street" straight ahead. st want to confia few things with fiona.
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at the big board autism speaks. it's autism awareness day. focusing on new york youth, both on and off the basketball courts. a big day as we look up the new quarter. >> jim, one of your kree points on friday was that a string of secondaries, not necessarily ipo market but secondaries are rolling into q2. >> new deal with coke, duncan donuts, dollar general. i cannot tell you how fabulous that is at dollar general. the p.e. people, anybody who bought the secondary, remember they only had five stores in california. i mean, come on. california's going to be a fab lose growth market. that stock is not done going higher. >> meanwhile, starbucks has a
few stores in china. >> a lot of cities that i have not been to, which i know you've been, that only have a couple starbucks. the big issue is starbucks. apparently it's the lines. they need more stores because of the lines. this is the chipolte problem, too. >> kfc, being kentucky fried chicken, 52-week high last week. i think starbucks is a remarkable, great growth story still. let me throw in that nike and mcdonalds are done going down. >> largely a t, culture in that country, which howard schultz believes it can turn into that.
beating 80% of bond funds, this is the victory lap if you want to call it that. >> it may be early to take a victory lap but i'm sure that they have a good quarter under their belt after a very poor performance a year ago. did not see the outflows that some would have anticipated given their underperformance. >> sticky money, sticky money. it doesn't pull out that kind of money and yet we saw an article about hedge funds underperforming for large pension funds. again, what does it take for the pension funds to recognize, maybe i'm not doing that well but i'm paying big fees. >> interesting to note, with the china and pmi numbers, we're seeing copper travel higher today. jc tra up. ibm hitting a fresh record high intraday right here at the open.
209.15. i think it's a mega millions portfolio holding or a nonmega millions portfolio holding. >> i think it works for both and i've got to say that it remains much cheaper than technology stocks with the exception of intel and microsoft. which continues to have low valuations. >> the second biggest gainer, number one, it's avon, express scripps. >> there's been a great deal about that, given the anti-trust climate over the last year. particularly, at&t's inability to close a deal. express scripps thinking they can take the industry down. there is a restraining order against the pharmacies out there
and -- >> walgreens. call it like you see it. >> it's the chairman, not the ceo. they got the deal done and at the outset, a lot of people thought it was 50 sla/50. >> this is one where walgreens has fought and has lost a great deal of revenue because they have chosen to not -- they chose to stick it to the man, which is express scripts. >> meanwhile, we mentioned avon right at the top. what is happening in that would-be deal? >> one of the more interesting developments. stepping back, if you want to look at a sign of confidence in the market, one company, regardless of whether it's private and less than half the size of avon, at another company, twice its size, it's
good, m and a market in the first quarter was dismal. that being said, stepping back again and taking a look at this based on conversations i've had with people close to the situation, avon had been talking to coty. in fact, coty approached a number of months ago. and the primary topic of conversation back then was, would avon be interested in buying coty. apparently they might have the wherewi wherewithal financially. perhaps interested in buying us, then came with its own offer. the avon board looked at the initial offer and that was not much. they've increased over the weekend and have said, we're coming at 23.25 publicly. but that doesn't mean they will be able to challenge for board
of director seats. they can't file proxies. they've said that they won't go hostile and they don't have all of the financing lined up. one has to believe it's a possibility that they can get it. >> it makes sense, right? it's a perfume company. >> i bought some nonwaterproof mascara this weekend at neimann. it was outrageously expensive. shouldn't the waterproof be more. >> there are some those that wonder whether the stock should be moving up 19%. that's a significant move. we will see.
in november of 10 they bought the german cosmetic company. also in 2010, skin care company philosophy. they've done a lot of different things and there have been rumors about whether they would ever go public. of course, if they were going to succeed, they wouldn't be going public. they would be taking them on private. >> jim, that's a reach. >> by the way -- >> why would they do that? >> i'm just saying perfume. i'm trying to build a case here. because otherwise the stocks should be substantially lower, is what i'm saying. somebody should be waiting in the wings here. >> there is a snip of truth in those scenarios. >> a snip of truth? >> a snip of truth. >> beyonce, j. low, the question
s. who deserves their own fragrance? >> old spice. >> @cnbcsquawkst. >> let's get to bob pisani who is watching what is moving on the floor. hi, bob. >> you guys are having a lot of fun. >> too much. >> you can convince yourself that things are getting better. there is better evidence that china is going to have the m and a. have you noticed there's two pmis? what is that about? isn't that all strange? i've inquired about this and i'm told that there are smaller companies, slightly different survey. it's a little bit strange and an official government pmi and a private pmi. private is weaker than the
official pmi. nonetheless, i've said my peace on that. soft landing is sort of indicated for china. why aren't we getting higher? because it's about europe. did you see what is going on? eighth straight month of contraction now and spain sure as heck is not helping. it's right near closing at the lowest level that we've seen going back to november. spanish banks are again weak. i think that's going to be the main issue. europe is continuing to moving things. i spoke with bob niederhauer but it's investment day at the new york stock exchange. what do you do now that the merger didn't go through? and there's two issues. one, all exchanges are having a problem with lousy volume. that's the number one issue. the problem is, they can't do
anything about lousy volume. what are they going to do? change the volume? no. they've got to address that. the problem that they are all dealing with is how to lower their cost and lack of revenue growth. it's still very dependent on cash trading and the stuff thaw see all around you, they get that from cash trading and listings. they are trying to go the technology business but it's tougher. finally, a big victory for democracy guides. you saw aung san. i met her in 1996. believe me, that was an impressive day. melissa, let's hope that that victory for democracy continues over there. melissa, back to you. >> rick santelli is at the cme group. hey, rick. >> melissa, we're seeing very light buying in treasuries on the first day of the second
quarter. you've talked about market increases in yield over the quarter. about 33 basis points. the the dollar index closed yesterday around 80.19. it's roughly off 1.25%. any single data could move that much. i think it's interesting because the dollar looked like it was going to take off. whether it was commodity prices, potential for further twists or qe or liquefication by central banks, we are seeing the dollar in constant strain. where he continue to see a lot of people talk about china and the potential that's been around, whether it's real or memorex, traders talk about it.
makes them nervous. melissa, back to you. >> thank you very much, rick santelli. we'll check in with sharon epperson at the nymex. >> who do you believe when it comes to china's pmi data? showing last week from the manufacturing sector in china contracting. a lot of traders saying that they are incredulous and that's why oil prices are off here. wti trading above 103.50 when the market opened last night and now we're approaching $102 a barrel. we're seeing weakness across the energy complex and definitely in natural gas as well. even though temperatures have more normalized here, we're continuing to see technical trading bringing those prices down towards the $2 level. we have a 15% increase in the last week. so there are a lot of shorts still in this market. over to you at the nyse.
>> sharon, thank you very much. straight from the opening bell, the fifth autism awareness day. bob wright, the former chairman, vice chairman of nbc. and nyse, be duncan need der haur is here with his son as well. tommy hill figu tommy hilfiker. >> thank you. we have a study in korea that is the gold standard and that's where we're headed here in the united states. not headed because that's what the real numbers are probably going to be and we have to protect. we have 30 states now with insurance. we don't have federal government mandates for the large corporations. the smaller corporations are covered. we have to hold on to this as
benefits get rolled out into the affordable care act. we could potentially lose all of the things that we gain. we have to really be on alert now. >> they've been watering things down n response to all of the big work that you do, the reaction has been, we'll cut the definition and get the number of people that need help. >> well, if you make the bills just be the lowest common denominator, a number of people are not going to be in those plans. they will become the principal medical plan of the united states. we have to be there. and there's no reason why this should be ignored. these numbers are staggering now. >> and it comes on the heels of the cdc looking at the skyrocketing diagnosis. >> it is amazing, as jim just said, that at the state government level. we're having exactly the opposite reaction we should be having and you're going to hear people say, maybe it's the popular diagnosis.
we actually don't care whether the diagnostics are higher or the prevalence or both. it's time for the state to push forward and not narrowly define the market. not to narrowly define the market and say a lot of people who need help no longer qualify? it's nonsense. >> please address the notion of the number of people who have gone bankrupt fighting school districts just to get a decent education. >> we're lucky we live in new jersey. it's so connected to autism i think it's a great example of why new jersey is working in a lot of ways that other states are not. when you think about what alison and i have worked so hard at, you have more rights than you think. the public school district owes your child a free education and it's amazing how hard we make it for people to get that free education and get sent out of
district. >> bob, on the trajectory of easiness of raising money, are we on the upswing or downswing? >> we're on the upswing. we can raise the money. we can't do it all by ourselves. the federal government has stepped up on that issue. we have to get more triprioriti. just to pick up on something that jim said, we have some of the largest law firms in the country now that provide free of charge appellate work, not only with their associates but their partners to help fight the school issues and we've ron cases all over the country. three have gone to the supreme court and we've won all three. >> to me, there's 20 states that have been doing nothing. if they are listening right now, what should they do? >> they have to continue to press their local government. 30 governors assigned have been doing their job.
you've got to do your job because we can't cover the big companies. that's what you do. you cover the victims. >> liam, how many opening bells have you helped ring? >> 5. >> this is your fifth year? >> yes. fifth year and i really hope this new school does a really good job and i hope some day we can all light up blue. >> does this get more fun every year? >> sure does. >> how many more years do you want to do this? >> the rest of my life. >> i think that can be arranged, liam. thank you so much. >> hello. what's your name? >> matiaz. >> he's christian's brother. >> christian's brother? >> yes. >> what do you want to say about christian? >> he's the nicest brother i could ever wish for. >> you want to help him, right? >> yeah. >> that's why you're here? >> thank you very much, bob. congratulations. >> continue to do the great
work. bob wright, duncan, thank you guys. we'll toss it back up to melissa z thank you, carl. what a great cause. taking a toll on groupon, we'll be right back. [ artis brown ] america is facing some tough challenges right now. two of the most important are energy security and economic growth. north america actually has one of the largest oil reserves in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands with the same emissions as many other oils and that's a huge breakthrough.
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demand. and "the hunger games" taking the box office for the second straight weekend. the blockbuster film has crossed the $250 million mark in north america. trading day is young. a lot more "squawk on the street" straight ahead. >> announcer: coming up, say you didn't win the mega millions? well, neither did cramer but he's not letting that get him down. he still has six stocks in 60 seconds and he'll be sharing that with you when "squawk on the street" returns. you just sold one right now didn't you? that's correct. major brands. 11 major brands. oop,there goes another one. well we'll beat anybody's advertised price. and you just did it right there, what's that called? the low price tire guarantee. wait for it, there goes another one. get a $100 rebate, plus the low price tire guarantee during the big tire event. look at that. it's happening right there every five seconds.
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let's go to simon hobbs. good morning. >> good morning. what on earth is going on with groupon. plus, in an investor sense, putting lipstick on the pig, what is going on between avon and coty? and we'll also speak with roger goodell, the nfl commissioner. back to you. >> thank you, simon. time now for six stocks in 60 seconds.
we start off with the natural resources getting an upgrade to a buy at barclays. >> i don't know anyone that has natural gas and they have a lot of natural gas. >> a buy who a hold at morgan stanley? >> the market has been exploding and this is the next year and it works. >> gm, price target is 45. >> phil lebeau talking about tremendous gas mileage. i worry about china. can china deliver? >> we saw tommy hilfiger. they are doing a great job. >> materials doing better without china. this is a sell, not a buy. >> really? okay. and a boost in 3-d could help sales at imax? >> yes, and let's see, it is an expensive stock but it is a dreamer stock if you like 3-d, got to go to the movies and like
3-d. i've got to get more excited about it. >> imax is 10% of hunger games. >> in terms of tonight, you have richard delafonte? >> yes, i do. they boosted the quarter so large, it's bigger and better than ever. >> all right. much more at 6:00 p.m. and 11:00 p.m. meanwhile, on the other side of the break, stay tuned. americans believe they should be in charge of their own future.
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january and february, prices paid did not move up as they did on the report last week from chicago. on this report, last month 61.5, this looks 61 on prices paid. and higher commodity prices and pushing down the yields 3 to 4 points on the long end. steve liesman is back at hq. they look stronger and
employment is higher and inventories reported on this survey, prices have not moved up very aggressively. they actually fell at the index here. the backlog was reasonably strong. and i'm looking at a index even higher. and as well as employment and new orders all look pretty solid. i'd point out here that the unchanged and public spending was down pretty sharply. meanwhile, there's a pretty strong debate among economists after last week's spending numbers showed higher than expected consumer spending and what all of this means. the growth forecast coming up,
they may be influenced by the construction number as well. i want to show you what the guys are saying. bernanke will extend the fed and the data is showing signs of improving. icap, meanwhile, it might be the qe 3 and of course, john, who has been pretty much consistent bandwagon about there being no need, gdp growth has been understating the growth of recovery. we do not see how the fed stays on hold until late 2014. of course, others are saying they still see further combination along with morgan stanley. guys, this data is like a day to
day thing when it comes to the gdp and the fed here. at this point, heading towards april, i'm tending to agree with an economist who says it's going to be tough to get additional qe and the only question now is do they continue the twist? >> steve liesman, thanks so much. >> sure. >> the capital markets saying that it will become a reality. the chief economist joins us here. great to see you. >> hi, good to be here. >> why is it definite? >> i'm sorry? >> why is qe 3ing about to happen? >> well, we think the economy is at a state where you're not getting a momentum. more over, it's going to be a one handle sort of growth year, a growth half of year. and we think that would be enough to usher in the fed. and i think in particular when you think back on what bernanke said last week, he was sort of dismissive of the unemployment numbers. highlighting the fact, as we
have been highlighting for a while now, the reason why you're seeing job growth form bet ser because firings have abated. not necessarily that firings have increased. i think there are a number of question reasons why the fed would act the middle of the year. >> so what form would it be? >> they have a really small number to act. you have twisted ends and then, of course, you bump up against the election. we think it's a small window for them to act. if they do engage in another round of purchases, it would be focused on mbs for sure in our view. they own too many fluid treasuries. they've made it a point to say that one of the reasons why the recovery is not giving a momentum is around the housing. they would want to focus on mbs as a result. there's an important point here.
i'm just sort of highlighting the rationale to why they might approach it. >> it's fascinating, three weeks ago we got a statement that said things were getting better. >> right. >> you get a 40-point rally on the ten-year bond and then bernanke is talking down the situation. >> yes. >> what is happening there? >> i think this is a great point. there's obviously a lot of -- there's a political divide within the fed. at the end of the day, there are core members that matter more than others. and i think what they say basically is what is going to drive the decision making. so i think it's important to hear that other side of the story and we've heard it here this morning. but at the end of the day it's the core members that happen still again, that's a great question. i don't think it's necessarily a 200,000 in and of itself, it
seems amazing. combined with decent wage gains. we're not seeing that now. that doesn't necessarily mean a college kid you look at the average less than the total. >> that's not a very conducive environment, particularly when real wages are declining and energy prices are rising. when you think of the consumptionability, it's fading. >> hold on. you're an economist. this may be what we have to go through in a a lot of western societies. >> i'm looking for the bang for the buck right now. their wages just aren't there to
support a higher rate of consumption. that's the important point. >> what difference would qe 3 make for me? >> i don't think it makes any difference. i'm telling what you i think the fed will do. not what they should do. >> what do you think they should do? >> i think they should stay off the table. you can talk about having some announcement effect on he can quit ties and indeed when we saw bernanke speak and hinted at it, you saw that benefit. but how fleeting is that? just look back at qe 2. it was ever fleeting. >> tom, good to see you. >> thank you. >> big round of data. let's get to the road map for the rest of the hour. groupon under fire setting aside enough money for customer refund. what must the company do to restore its credibility? we'll talk about the big accounting mistake.
>> nfl commissioner roger goodell. >> big casino and resorts. >> last, we'll talk about the u.s. corporate tax rate. the former pennsylvania governor ed rendell. >> the merger has come over in the last couple of weeks and the $29 billion deal first announced, the largest managers, of course, the company. >> it was bound to happen and on mobile on china. it expects china mobile to offer
the iphone within the next year. >> topeka. >> topeka. >> so we have to talk about them even though we've never heard of them. it's like if somebody came out and said they have a $50 price target and one wall street firm says a $50 -- >> if i was holding apple shares, i would want to hear that. >> absolutely. >> that would reaffirm -- >> there you go. >> it will add to the fiscal earnings in the third half of 2015. enterprise solution for more cloud. >> the accounting mess weighing on the stock for groupon. it's down a little more than
that to 1618. what do they have to do to restore its credibility? dennis berman is on the show z great to see you guys. >> we know it's bad. >> it's bad. >> how bad is it? >> look, it's basically a $30 million swing. it's a very important $30 million swing. remember, this company reported a $15 million operating profit. it now moves into a $15 million operating loss. for a company like groupon, to move from one category to the next, means a lot. david is nodding in agreement. that's a big difference. what does it have to do to restore that credibility? i would say, you know, you've got to fire some heads. you just have to. the cfo actually got a raise effective on april the 1st. they seem to be sticking by him. for me i think the first thing is, you have to say, hey,
someone's got to take the fall for this. the second thing, what they might want to do is halt their acquisitions a bit. they've consumed dozens of companies, 17 companies over the last year or. so they are growing into 45 different countries. i would say, hey, we're going to take a pause, focus on getting everything right. here's where our core metrics are. here's where our core objectives are and we're going to make it happen so you as investors can make an informed decision. >> why do you think wall street seems to want to look past this? there has been a downgrade since the statement but at the same time, were these the underwriters? >> wall street loves a growth side. overlooks it. >> i understand that it's hugely unsettling but there's no wrongdoing. >> correct. >> all they've done is failed to
predict that there would be $14 million of refund as they move into a higher margin of the business. >> correct. >> this is 3% to revenue. >> correct. and you could buy the stock at 11% discount today. >> 12 now. >> but i would say, one problem in that view point is, and this revision, basically you're saying our customers are returning to the products or the coupons that he this buy in a way that they did not before. it speaks to the core weakness and business if you extrapolate that into other categories, perhaps the business is not as strong as perceived. >> take a few points off the multiple given that lack of growth. this goes back to a fear that this company that investors had with this company, namely the no adult supervision tag.
does this exacerbate those kinds of fears that they don't have deep enough manage talent? >> how can it not? perhaps that it's named unfairly reinforces -- >> oh, come on. >> david brings up a very good point. from the beginning groupon has tried to play fast and gross revenues as a conversation that goes along. >> which is even more disturbing. >> of course, morgan stanley and credit suisse, do you think they have any market to report?
>> those underwriters, they are using their reputation, their names to back the deal. i think they have somewhat of an obligation here. are your numbers lined up? guys, this is crazy. tlears a series of them policed by the underwriters. maybe this company isn't doing things the right way. maybe there's a direct obligation for each individual point but overall and policing the quality -- >> released by the underwriters. that's a nice world we live in, huh? >> it is one of those names that people knew this when it went public that a lot of the original investors and venture capital had already exited to one degree or another. >> yes. and there's a new book coming out about the groupon ceo.
there's great detail about how he built this company and how he behaved in building it. some of it makes no sense whatsoever. beyond what you would think for a normal ceo. but you have to give him his due. he's created something. that's what makes this market work. do you think a chance to buy this as a discount or perhaps it was overvalued in the first place. simon, do you have a point on this? >> i think there are two very interesting things. one, the lockup is expiring and that may be also what we are waiting to see today, the huge overhang is there. and secondly, a lot of big institutions are buying into shares and holding them off the ipos in the hopes that they will get to further ipos, notably facebook. >> and even more broadly, will there be a turning point where investors say this had is all
off. we're going to take this down two or three turns because we don't believe the numbers and don't believe the growth is there. at some point i believe we'll have one of those. this is probably not it but it is an additive part of it. >> great to see you guys. thanks. >> sports fans take heed. it's a big day for the nfl. power contracts between nfl and nike and under armour are getting under way. we'll talk to none other than the nfl commissioner himself in a cnbc exclusive after the break. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve.
50 minutes into trade and we turn positive on the dow. sharon williams downgraded to neutral. the price target there, really? $12? >> that can't be. >> that can't be right. price target has been increased to $63 by 9 by someone. s&p downgraded it to underweight. >> i'm going to throw out random numbers and random names. >> i just read the stuff. >> with a skeptical eye, though. that's nice. >> let's stop disparaging
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has increased. >> yes. big time for the nfl. a new apparel contract with nike. darren rovell joins us with a very special guest. darren? >> thanks so much, carl. i'm here with nfl commissioner, roger goodell. thanks for joining us. >> it's great to be here. >> why this now? i mean, the nfl is so hot in terms of licensing in general but you have two huge partners coming in in new era and nike. so why do this now? >> well, it starts with that. it starts where we have two partners coming in with other licensees to relaunch our whole apparel line. and we believe in better. we believe our products can become more innovative and we're doing this around the transition into their licensed products and also around the draft.
we're just three weeks away from the draft and this is a time when fans are starting to focus on the next season and the merchandise that goes with it. >> this stuff is not cheap. the new era hats are $34.99. the nike jerseys will probably be 10 to $15 more than the reebok jerseys. in this economy, if things are changed up, nike jerseys going to be a little different, these hats are something that people haven't seen, do people buy? >> we think they will. we think fans want quality. they want innovation. they will see that in the products, in the hats, in the jerseys. they will see that in all of the apparel and fans want quality and we'll have different price points for different fans. and we believe that they are going to really love us. >> what's the timetable on the saints and the bounty gate? we've heard that there ais goin to be the appeal tomorrow. give me a time line on when things happen? >> well, we will hear it on an
expedited fashion. i assume we'll be able to have the hearings this week and have decisions by the end of the week. >> what could change by what has been handed down by you, to sean payton, what can change in their appeal? >> well, darren, they are appealing for a reason. once we've had an opportunity to hear that and understand what the circumstances are, we'll make our decision from there. >> the nfl has ridiculous mine share in terms of the guys on espn radio are talking about the nfl three weeks after the super bowl. tell me what it's been like for you, peyton manning leaving the
colts and that setting off tebow to the jets? >> it's been great for the fans because so much has happened since the off season. things are changing. peyton manning leaves the colts and heads to denver. that is what is great about our game. while we're trying to build the off season into a time where it's really exciting for our fans to follow football because this is when teams are made. this off season is really critical coming into the draft in a few weeks. it's an important time for teams as they prepare for the 2012 season. >> obviously, how much healthier is the league from a financial perspective than it was maybe before? >> i think the league is healthier, our club is
healthier, our players are healthier. we have an agreement that is responsive to everyone's concern. we made changes on the player health and safety side that i think is great for players, both short and long term. we made changers to the rookie pool system that i think will be good for the clubs and the players. so i think what we have now is ten-years of labor. when you look at that, i never would have guessed that a year ago and we have that and that will allow all of us, our partners and players and clubs to plan out for the future and take our game to another level. >> nfl commissioner goodell, thank you for joining us. >> thank you. >> darren rovell, with the commissioner of the nfl. when we come back, groupon's accounting mess. is it specific or reflective of other social media names? we'll talk about that when we come back.
consumer products company. shares of colgate, palmolive and kimberly-clark hitting all-time highs. new 52-week lows. the supermarket chain down from a year ago. >> day one of the new quarter, first trading day of q2 and we are basically hugging the flat line. it looks like the volume is to the upside down here at the nyse. let's look at this. there you go. it's surprising. almost two to one. let's take a look at what is happening at the nasdaq and see if that compares. not quite so exaggerated. close to two. four to three. melissa tells me with her fingers. >> you just keep throwing numbers out there. you'll hit. i promise. >> it will eventually be right. >> but it didn't work for the mega millions. >> good comeback. >> i bought $100 a ticket. >> did you really? >> i did.
>> did you really think that you could win? >> i just wanted to enjoy the moment. it was an all americano moment. the guy driving my car stood behind me and then got $3 in tickets and i felt really guilty. >> why? >> because it was a disparity. >> did they have a mega millions equivalent in great britain? >> we do but we don't have all of the states come together. there is one between the countries. >> really? >> that's what the euro zone needs. >> >> okay. let's get back to the market, shall we, and see what is going on at chicago. where do you want to start? what is your focus as we start a new quarter? >> well, unfortunately, i didn't win the mega millions either. so that's where i have to start. we have a positive sign this morning in that the s&p 500
futures held 1401 even. that's a big support level. so many people have their eyes on that. one of the other major stories that everyone down here is watching and you guys will talk about it all week is the fact that we'll have the unemployment numbers on a day when the market is normally closed. the futures market will still be opened. i would imagine at 8:30 a.m. eastern time so are with we in an environment debating whether there will be a qe 3, are we in an environment where good news is bad news? at the top of the hour, it was above expectations and the market actually moved slightly lower before recovering. >> right. >> i don't necessarily know if i believe that. i think there's a lot of nervousness because of the levels that we're at. i don't think the necessarily good news is bad news to go along with what you're saying.
obviously mr. bernanke himself has said that he's watching employment and housing. those numbers get weighed more heavily than any of the other financial numbers that we have coming out. but the sense is that because the volume has been kind of not really, really strong, gotten a little stronger as the quarter progressed, there are many people who believe that we can go higher because it hasn't been an all in. rather than a toe-in, people are in a kneecap in the water. that's a very bullish sign as we continue higher. >> melissa, what do we expect as we progress through the week? >> and if you look at the trading last week at the end of the week we saw people coming
into the vix and so it's kind of interesting, we see the pattern repeat itself so many times in the past and there's not as much -- >> as we mentioned earlier, groupon said executives failed to set off customer refund over the weekend. going from 28 to $20 a change, what does this accounting change mean for investors and other names? joining us is ken. great to see you. >> thank you. >> you don't seem too alarmed by this but what does this glimpse into the higher ticket categories actually mean? should we be concerned that customers are not sticking up, that they are initially purchasing the goods and unhappy with them? >> i think some of them will have to do with the growing pains of the new geography.
from an accounting standpoint, it can be expected. when you look at the numbers in a quarter, they were below what we were hoping for. we found out through a restatement. when you combine that with the fact that some of the health met tliks are no longer being provided, i think it's in their minds as well as many investors. >> in terms of higher ticket categories, groupon get aways and goods, therefore, it's not the fact that customers are refunding but it's a negative pressure on margins overall? >> well, i think groupon takes a cut of those. from that perspective, too, they could reserve additionally. but i think from that perspective it's not as alarming from a return standpoint. they refiled basically about 30 million swing. went from 15 positive to 15 negative. roughly two-thirds came from the return reserve.
and i think those are other concerns that investors v. in terms of the ongoing change here. >> but when you say some of this is to be expected, a the lot of companies go public and never are called weak. how much are you willing to tolerate? >> i think less and less. this was a noncash adjustment but i think we're still trying to reflect the fact that there is an additional risk. >> ken, $20 is a 20% return from where we are right now. that's still -- >> i think from a local opportunity standpoint, you are still talking about the leader here. they are still share gainers. that's still important to keep in mind. >> hang on, the bigger picture with your analysis is that you were at $28. >> right. >> and is this an excuse here to make what is a huge change in the price target from 28 to 20? that's not -- >> no. >> -- that's not marginal, is
it? would you admit to being bullish over on the stock? >> i think, yes. for us the whole concept really comes down to groupon being able to know its customers better and being able to look at the groupon now product, it's hard to justify that there's been amazing traction there. i think they are still looking at major competitives in a local space who are well funded and well positioned. i think this is just a daily deals business, it's harder to justify that high ver valuation >> should we look at companies that offer daily deals that have refund activities that are not reflected so far? >> as long as they continue to grow into new categories, which they will probably do, from now forward they need to make sure that they are accurately, of course, reserving enough. now, you could take a positive from this. they did reiterate their first quarter guidance. that means they are trending
ahead at 30, $40 million. i think it does suggest that there is some underlying strength in the business. >> you're talking about the lead on the local level. which competitor at this stage is poised to pounce first or best? >> you know, i think anybody who could help merge a consumer, essentially find what they are looking to buy and in that case it's also google. i think you could argue that apple longer term to make a space into this as well as facebook. >> thank you. appreciate it. >> thank you. the u.s. reportedly has the highest corporate tax rate around, or does it? we're going to debate tax breaks after the break. good morning. thanks for switching us on. tdd# 1-800-345-2550 let's talk about fees.
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but i have this new smartphone. and now i can see everything more clearly. ♪ i can organize the analysis. sort through all the data. maybe even rattle some cages. i predict that i'm going to like the future. because the future is where i'll be serving up humble pie. a la mode. [ male announcer ] at&t introduces the samsung galaxy note. phone. tablet. both. ♪ the u.s. corporate tax rate is the highest in the world. republicans and democrats have expressed an interest in reforming the tax code. joining us is ed rendell from
philadelphia. good to see you again. good morning. >> good morning. >> i keep hearing this is some kind of bipartisan issue and it's hard to find the traction that's moving the policy forward. how much do you give something like this? >> this has to be done as a bigger deal on reducing the deficit and the debt. i think we should lower corporate rates and individual rates and get rid of all of the exemptions, use it to produce significant new revenue, which we surely need to get rid of our deficit and go forward from there. one of the things that you said in the lead-in, i'd like to address. i don't believe for a minute that we have a 34% tax rate on corporations. >> that was my next question. >> forbes released a report that the 2,000 largest corporations in the united states pay an effective rate of 17%. nearly 38% of corporations pay zero under the u.s. corporate income tax and, of course, general electric is the most famous last year making $13 billion, paid no federal tax at
all. effectively if you take our effective rate, we're probably right in the middle of developed nations and taxing. >> i wonder what you think is the toughest hill to climb, getting the two i'lls to put legislation together or getting the lobbyist who keep these loopholes in place to say, okay, we'll let go of them in return for an overall lower rate? >> again, i think this is a time for us and elected officials to stand up and be counted, be be counted on behalf of the american people. the american people want us to get out of this deficit. they are going to have to cut entitlement. people are living 20 years longer than they used to. we've got to make changes to the medicare. republicans are going to have to realize we need to raise revenues, as we raise revenues, we can lower our rates, the corporate tax rate but produce
more revenue by plugging these loopholes. loopholes have grown. in 1980, the loopholes were worth $681 billion in lost income to the treasury. it's now over 1.3 trillion. >> governor, may i ask you a question. in terms of closing those loopholes would that effectively raise the tax rate compared to the effective rate that we have with the loopholes? isn't p it now time for an effective tax increase on corporate tax rates? >> look, we are in some ways hoisting them. they say we have the highest tax rate in the developing world, et cetera, et cetera. look, the corporate america is doing fairly well. you look at corporate profits and they are doing great. they can afford to pay a little bit more. we can afford to have a rational tax system in this country and just like the people on medicaid and medicare, there can -- we
can afford to have changes there. >> sir, but to be clear -- >> we're not going to get through this without a little pain on either side. >> to be clear, governor, you are calling for higher effective corporate tax rates? >> i'm calling for a lower corporate tax rate, plug the loopholes. >> that's not what i said to you. >> we are going to lower the tax rate. >> a corporation tax, come on, that's where you are? >> i'm talking about fair taxation of corporations and individuals in this country. there's no reason -- go back to the warren buffett rule. there's no reason why warren buffett pays 15% and his secretary pays 28%. we can do this without hurting the economy. you hear all of this stuff about if we raise taxes on the job creators, it's going to hurt the economy. guys, you heard that same rhetoric when bill clinton proposed raising taxes on the top 2% in 1992. we did it. and whether what clinton did, it
surely didn't hurt the economy. we produced 23.5 million new jobs in the next six years. it doesn't hurt job creation to make a slight, fair adjustment. >> thank you. >> let's get another perspective on what has just been said. joining me now is the chairman of the republican national committee. good morning to you, sir. you heard it just now. a call for higher effective rates, corporate tax rates as part of a burden-sharing agreements. >> yeah. i wasn't sure where governor rendell was going. he's certainly not an obama democrat, that's for sure. but the reality is that we have -- and i'm not the tax policy guy. my buddy paul ryan is. and that's what he did. that's what he proposed in congress last week, which was to cut out some of these loopholes but lower rates and make a predictable tax system so we can
make it easier for businesses to compete. it's not the ges of the world that than businesses in mexico and canada and brazil and all over the world. that's the problem. the problem is we shouldn't be striving for a system that tries to capture more money. we're all about revenue and money. we need to make things easier for small businesses so that people can get back to work and that we can compete. that's what this is all about. >> mr. chairman, the governor made the difference. >> i get it. you can pick out some examples and go to your fortune list, but reality is you know that there are -- the backbone of our
country and i come from wisconsin where 90% of all employment in wisconsin comes from small businesses. it's not ge and it's not some of these other companies. these are small operations. in many cases they're the future apples and future companies that will employ hundreds of thousands of people around the world. that to me is where the focus needs to be. as far as this loophole argument, it's the republicans that have been offering the solutions. it's obama and the democrats that are proposing multitrillion dollar budget deficits that are going down with not a single democratic vote in the house or the senate and it's the republicans like paul ryan that are offering a solution. it's the president's own jobs council. it's his own people that aren't embracing the obama st. louis. >> do you think more broadly -- the type of conversation that we are having now that you are putting forward now, i can tell you is being had around the world for corporate tax rates
from germany to ireland to asia. that's what everybody is talking about. is the reality that we live in a world now where jobs and growth may become so scarce that actually individuals and people need to pay more of the tax burden themselves in order to keep those corporations, to keep that capital investment in their country and in effect subsidize their own jobs. >> i hope not. i don't think that's the case here. we have an opportunity here. this is still the best place in the world to do business if our government would quit taking money out of small businesses pockets and allow them to expand and make this a competitive place. i think that -- let me back up. it's a good thing that we're having this conversation. i think people all over the world having this conversation is a good thing here in america. it's a good thing that as chairman of the party, i'm
talking about it. it's good that the vice president is talking about this. this is something that's so serious to the future of this country that we need to get the mainstream america tuned in on the fact that lowering rates in small businesses will make our country stronger and more competitive. if we don't, then companies are going to go overseas and idea that we'll tax our companies more than foreign companies with some global minimum tax, it's absu absurdy. we'll lose in the end. companies will do business in other places and our people in our states and our communities are not going to see the good jobs. >> you made your case very well. thank you for your time. >> thank you, sir. straight ahead this morning, a new resort casino rolling the dice in atlantic city. we'll take you live to the center of the excitement next. americans are always ready to work hard for a better future.
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reasons why this might be a difficult thing. avon already rejected the overture. there is no path so to speak in terms of trying to take over, a few board seats and the like in that way. there is at least a possibility it will try to come back with a higher offer. there's a belief that it could finance to a higher offer although you don't want to pay for your financing until you need it so it kind of becomes circular because that gets expensive. interesting to note that avon shares are off sharply from highs they had seen earlier in the session. nice to see a little m&a even though not likely to happen. the next big news for avon may be a new ceo replacing andrea young. >> one of your theories is this deal comes or this offer comes because maybe they are farther along that path. >> in trying to think of why you would do this when you want to keep it private and hoping to
have conversations with avon that may lead you somewhere with a board of directors that may be under pressure. perhaps you just gained traction with shareholders for a board that is -- let's call it at least up in the air. >> when you look at a 12-month chart, if we can put that up on avon, the price that they're offering you can understand present shareholders say given where we've been but three or four months ago, this looks inadequate. >> this takes it back to levels of october. >> we're not a broken company in that sense. >> they're trying to be opportunistic but to your point it's about one times revenue. not a high valuation in any sense. >> overall, we haven't talked broadly about m & a in i deon't know how long. will q-2 be better in terms of dollar volume than q-1 was? >> hope springs eternal.
there is a pickup in people saying we have more conversations. if there's anything positive about this, it's the idea that one company is willing to come public with a $10 billion offer for another one. it does speak perhaps to some level of confidence and that's what you need in this market. there is expectations that things will get better. they couldn't get much worse than the dismal first quarter in terms of volume. >> shares well off of the session high. coming up next, take you live to the atlantic city for the opening of a new resort and casino. stay tuned. for me, it's really about building this extraordinary community. american express is passionate about the same thing. they're one of those partners that i would really rely on whether it's finding new customers, or, a new location for my next restaurant. when we all come together, my restaurants, my partners, and the community amazing things happen. to me, that's the membership effect.
a new resort casino rolling the dice in atlantic city. >> reporter: this is the first casino to open in atlantic city in eight years. they hope to lure more than new gamblers to new york city. it has a 32,000 square foot spa. a number of people called it a savior for atlantic city which is struggling with declining gaming revenue but the company's ceo downplays that characterization calling it a partner in atlantic city's
revitalization. >> we've created something that will enhance what already exists in atlantic city. i don't really see us as a savior of atlantic city. it clearly broadens the offering and i think that's a very positive thing. >> analysts aren't to sure. their concern is revel will cannibalize customers and their money from other atlantic city properties. coming up on "closing bell," i'll have a lot more from my interview. meanwhile, i'll toss it back to you guys. >> very interesting stuff. we'll see you then. mary thompson in atlantic city this morning. let's get to the third hour of "squawk on the street." here's what you might have missed if you're just tuning in this morning. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> cody is proposing to acquire avon for $23.25. it's a $19 stock. >> before the collapse will happen with mr. bernanke at the fed they're going to have to
print money and print and print 57 and so what you can get is a bad economy with rising prices. >> coty's offer was rejected. it was opportunistic and not in the best interest of avon shareholders. >> i call on "mad money" directly for firing. she was on my wall of shame. one of the worst managers i have seen in my career and fact is that she's still involved in trying to pick the ceo. where is this board? >> the opening bell on this first trading session of the second quarter here at the big board. >> we have to hold onto this. it's essential health benefits get rolled out and affordable care act, we could potentially lose all of the things we've gained. we really have to be on alert now. >> ism manufacturing. this is a national number. it's march. 53.4.
that indeed is better than the 53 we expected. >> there's a political divide, if you will, within the fed. i think at the end of the day their core members that matter more than others and that's dudley and bernanke and yellen and what they say is what's going to drive decision making. >> good monday morning. welcome to the third hour of "squawk on the street." get a check on the markets this morning. the dow barely moving just off three or four points right now. s&p mildly positive. nasdaq up almost eight as we begin the second quarter here. meantime, global payments, visa and mastercard processor at the heart of a major security breach last week after the company was removed from a list of complement service providers. amazon is one of the biggest losers on the s&p today after a downgrade to neutral over at b of a merrill lynch. one of the longtime pubulls on e stock. avon rejected a buyout offer from coty.
what does that mean for the future of avon stock? and the president of a management company joins us with advice on how to play the markets. and then it's a bird, it's a plane, no it's a flying car. the fantasy is a reality. the plane that can go straight from the runway to the highway. we get the first look at that and losing the lotto. happened to me. happened to you most likely and if you are watching us from work, we know it happened to you. we'll hit the streets and talk to losers about what they're going to do next. all that and more coming up in the next hour. first to our capital markets editor, gary kaminsky. you were watching "squawk" this morning and you you heard things you don't want viewers to miss. >> sometimes you hear things and you say this is the kind of thing that six months from now we may look back and say i heard that first on cnbc. let's listen and check out what dallas fed president richard fisher said in terms of the
possible q-3. >> i think the easy part for those that just rode on the jet stream of federal reserve accommodation is over. >> again, i don't want to put this in the category of irrational exuberance, it didn't have much impact for some time. riding the jet stream of quantitative easing is the way to make money in the several years. it was something we may look at six months from now and say we heard that. the fact that there will no longer be quantitative easing is the point. steve liesman did point out to me after we were chatting about it, this is not a new stance from fisher. this is what he's been saying all along. there's always a time in the moment where you say, you know what? that jet stream is no longer floating. >> are you suggesting all gains this year have been due to promise of more easing and nothing about employment rate coming down a full point or
manufacturing coming back? >> if i had to quantify it, 80% of what we've seen since the october/november time frame, 70% to 80% of it is this idea of moving money into equities forcing through quantitative easing this reasset allocation into stocks. obviously the economy has had some impact but the great bulk of it in my opinion has been and the people i speak with, quantitative easing, huge influence. >> david came on "squawk" and he said the economy is going to help you or the fed is going to help the economy help you. >> right. we've had periods since that point was made where that kind of strategy worked and then periods like last summer into early last fall where it didn't work. the overriding attitude is that we will look back at something. we will say, we got the writing. we got the signal there would no
longer be quantitative easing. maybe that was the point this morning on "squawk box." >> sharp ears. thank you. rick santelli with monday edition of santelli exchange. good morning, rick. >> good morning, carl. welcome to the second quarter. i think it's important to start out the santelli exchange and second quarter by kind of looking at the lay of the land. we've had some data today. ism. it wasn't too bad. if you look at construction spending, that was a bit disappointing. moral of the story is construction whether it is multifamily, single family, there's a cultural change that's going on regarding housing and how that pans out will give you your next trades. interest rates are cooperating at least the first business day of this quarter. ten-year close to 33 basis points for the first quarter. it's moderating a bit. in terms of the second quarter, politics in the markets. we haven't seen a whole lot of intersection but i want you to listen to this sound bite from governor rendell who was on "squawk on the street" not too long ago this morning.
>> we produced 23.5 million new jobs in the next six years. it doesn't hurt job creation to make a slight fair adjustment to the tax rate. >> now, what governor rendell was obviously referring to is the clinton administration. there's a very important notion that raising taxes is not a job buster but the problem is that it's all about the growth aspects of an economy, okay. and the growth aspects of the economy in clinton administration was wild. we had a huge piece going on with regard to after the wall fall and we saw silicon valley was creating boat load of jobs. tax rate mattered worse. we're in a contractual or barely growing economy. completely different economy and what happened after clinton left in 2000? those jobs disappeared. now in terms of more politics in the markets, right now much of the focus is on social issues. but at the end of august when the republicans, the
conservative party picks their candidate, many believe it will turn to more economic issues. and why is that going to be important? the economic issues along with many of the issues regarding the global economy are going to be key. we just haven't gotten there yet. mf guest coming up in 30 minutes. must see. >> can't wait for that. rick santelli in chicago. avon products rejecting the $10 billion takeover bid from coty. david faber reporting the talks were going on for months. linda, good morning to you. >> hi. >> your general take is if it turns into nothing it may be a positive. how? >> it highlights the relevance of the direct selling business model and that beauty direct sellers are valuable to certain strategic buyers. it puts a lift in the valuation even if no deal happens. >> a lot of discussion was on
the infrastructure. >> you think she should reject any offer lower than 30. what's the number 30. >> on my low numbers on avon i think are conservative and if you use 17 multiple on my 2013 estimate, you get $28 a share. with a new ceo that can make those numbers realistic, why would you sell the company at 23 when i can even justify on my numbers something like my 20s type of price. >> you also believe that at the minimum we might see an upside surprise to some of the coming quarters. you see possibly sooner rather than later. explain what's behind that. >> it's funny. just before this hit the tape with coty i said it was lower.
the street is coming in more realistically setting the bar more realistically for positive upside surprises. >> is this a coty story or another buyer in the wings? >> a few months ago i wrote a theoretical report talking about tupperware combining with avon. i found that was possible in a debt and stock deal that tupperware could acquire avon. i wouldn't say never. i think it's probably unlikely. >> interesting. we haven't heard that name today in connection with avon. appreciate the insight, linda. thank you very much. when we come back, how should you be investing going into q-2? scott back with us to talk about that and a lot more. back in just two minutes. great shot.
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the stock market had the best first quarter in 14 years. can it continue? scott black joins us from boston. good morning to you. >> thank you for having me, carl. >> looking over some of your notes, not exactly encouraging. market may be cheap but also picked over. as a value guy, that's tough to hear. >> if you look at the s&p close at 102.70 we're carrying up
about 6%. s&p numbers are up about 8%. we don't think that's realistic. that puts you just below a 14 pe. by historic standards, it's probably one multiple point lower than it should be by tradition. the only thing is we have done high screens at the end of friday and they're not that many stocks with top line growth selling at 12 multiple or below with high returns on equity. across the board markets are fairly well picked over. >> there is some high hanging stock i guess you could say that you are still after. dana for instance multinational company largely industrial, what do you like about it? >> i like the fact they have a global footprint roughly 75% is noneurope. revenues will be up 6% this year to over 8 trillion. they should do about 1.95. they'll do about 18% return on equity. debt free balance sheet which is
good. more cash than debt. they'll generate 200 million a year in free cash flow. if you look at it relative to johnson controls which we also own, similar business. they are basically four multiple points below it. it's a cheap stock here in a.p.e. >> ticker cvu do retro fits. >> they are based out of long island. about 97 million in revenue. revenues up 30% this year and stock is selling at roughly an a.p.e. interestingly enough, 63% of the backlog is commercial. only 44% is d.o.d. and d.o.d. products they have like e2c are well funded in the next couple of years. the company has a low to debt ratio. ends 15% on book. there aren't many aerospace
defense companies whose top line has grown. >> i never you never like to say whether the overall market will go up and down in a quarter or a year. you do say that the u.s. is susceptible to shocks and by that you mean something out of china and something out of europe. >> i'm constructive at this point because interest rates are so low. you have really very few alternatives. china lowers the growth rate from 8% to 7.5% and commodity stocks get killed. you have restructuring in greece and you may have more shocks in portugal and italy and spain. that still influences what's going on in the united states. you have to be careful. if you take the long view of buying good businesses and holding them with low multiples, you should do well over time. >> scott, always good to talk to you. thanks for the time. >> thank you. >> coming up next, if you are one of three winners of the meggy millions jackpot, congratulations. second though, we have advice on
how to manage that cash and when you have your new fortune you may want to consider buying something like this. phil lebeau, what do you have with you? >> i know i can hear you laughing, carl. what gets over 35 miles a gallon and fly over 400 miles and cost a quarter million dollars? the story behind the first flying car coming up on "squawk on the street."
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>> let's get to gary kaminsky who has advice for the three families that did win megamillions on friday. >> we don't know all of the facts here. we don't know for example life expectancy. we don't know in terms of risk appetite. let's make certain assumptions and figure out what would you do if in fact you won the money. we'll assume there was a lump sum and for purposes of making
this simple. present amount you'll receive is $100 million. we don't know what the tax situation will be. let's again assume you'll be left with 60 million. probably a little more than that. left with 60 million after taxes. then the question is going to be, you're going to want to have spending money. everyone wants spending money. $10 million? >> how about 15. >> let's say 10. you buy a vacation home. you buy a car. you'll net yourself about $50 million. what you're going to want to do so you don't end up like 70% of the lottery that end up bankrupt, you'll take that 50 million and you'll say to yourself, i want capital preservation. we talked about interest rates on friday in terms of what it is. that $50 million in a conservatively managed laddered short-term portfolio will probably generate for you something like $1.2 million.
again. these are close estimates. that $1.2 million will give you a hundred thousand dollars a month after taxes of spending money. those are numbers. this is taking where interest rates are. that's taking where risk perimeters would be. hundred thousand dollars after taxes, i could find a way to live on that. what about you? >> i could handle it. your point is never to touch the 50, radio it's? . >> absolutely. don't touch it. that money that you're going to take and spend that money, you make that decision. you never, ever go back and touch the principle. my advice is very simple having seen this. when you touch the principle once, you touch it two times and three times and it doesn't end. take that money. take that. put it in conservatively managed bond portfolio. buy the bonds.
get yourself the income. have some fun. >> that's great advice. i wonder how many people actually go anywhere near that model. that's good of to you bring that to us. >> unfortunately what happens is those that win will be contacted by a lot of people and say if we put this in a certain portfolio, we could generate 10% or 11%. history shows those are not the way to asset allocate a portfolio like this. >> great stuff. see you in a bit. a few minutes until the bell sounds overseas. back with european close in just a moment. but some have had a hard time understanding my accent. so to make sure people get every word of the geico savings message i've been practicing how to talk like a true chicagoan. switching to geico could save you hundreds of dollars on car insurance... da bears. haha... you people sure do talk funny. geico®. fifteen minutes could save you fifteen percent or more on car insurance.
so -- tell me again what happened. i was downstairs making coffee, and we heard it. it just came crashing through the roof, out of nowhere. what is it? it's our ira. any idea what coulda caused this? maybe. i just sorta threw a little money here, a little money there. and i loaded up on something my dentist told me was hot. yeah. ♪
much the data out of europe as we await the european close. a slew of pmis and not many good. the number of jobless in the eurozone, highest in recorded history. >> 17 million. 10.7%. you would expect it to be a high rate of unemployment than the united states. we've always had that. it's not good. eight-month contraction there on the pmi. manufacturing clearly is an issue. what's interesting is european markets have rallied and broken away from the united states and we'll discuss why that might be and might have something to do
with the data we're getting here. let's look at the map. for the first trading session of the second quarter in europe. here we go. >> the european markets are closing now. >> there you go. spain and italy are down. showing red. many markets have risen. i can show you that on a chart of the top three markets in europe. london, germany and paris. you can see the way in which you get this rally coming through. quite a powerful rally in terms of the price action toward the end of the session. london is up almost 2%. i think it has a lot to do with data that came here in the united states. ism above expectations. if you are european looking into the united states, it's a one-way bet. global recovery. good for equities. if you are here in the united states, you might look at that figure here and say we have to
subtract the possibility that we won't now get qe-3. that's why perhaps you haven't rallied as much in america as they have over in europe. i need to also show you where we have traded during the course of the year. for example those top three markets. this is really very important. we have gained throughout the year and don't forget this is against the s&p up 12%. we did some damage during march in europe. technical damage. also of course that increases valuations or makes some of the equities look more valuable there. that may be why we rally on the first day in the first quarter in europe and not here in the united states. let me just check in quickly where we are on italy and spain. clearly those markets have not done so well. tomorrow we'll get the detail on that austerity budget and huge question as to whether or not they can carry through and in particular get the regions to
cut on health and education to bring that budget deficit down. it's one hell of a job and tomorrow we get details on the headlines that they dpgave on friday. >> assume you saw coverage over the weekend about poor in areas like france with people living in parks that are not used to that kind of lifestyle. >> it's absolutely devastating. this is the nature of having huge amounts of debt and at some point paying the piper. this is where it can take you if you have to do it. >> thank you, simon. get to gary archibakaminsky. >> i want to mention barclays. formerly the global head of capital markets, good friend of mine. has been on this program. been with us many times. and given viewers great advice. i can't to congratulate larry that he'll assume a new position over there at barclays. based out of new york.
it's very interesting in the press release they say barclays is operating in an environment of significant regulatory and market change. we must remain disciplined and coordinated as we continue to gain momentum. larry will work with all of our businesses and regions to ensure alignment between intermediate and long-term objectives. this is a new position over there. i wonder if in fact you'll see other investment banks decide that in this new regulatory as well as being conscious of the client in terms of conflicts, if this is something other banks decide to do as well. good position for larry. i congratulate him on it. >> thank you very much. bob pisani has joined us here on post nine. they say selling may go away. what do they say about april? >> april is a fabulous month. that line is the big problem. it's always followed by may. that's an issue. i keep getting asked how are we doing in april? look at what's been going on today. we started in negative
territory. we've been moving up all throughout the morning. it's not because europe here. we're moving up because this is traditionally a very good month. we get great inflows in april. that's because of tax season. the two best months of the year for stocks, put up the screen here, january and april. january you get people with new year and april you get months where the tax flow season is happening. here's the good news. i'll give you good news and bad news. it's the biggest inflows of the month of january and april. second, it's the best month for the dow. believe it or not, i know november and december are great months for the s&p 500 and they are historically but april is the best month for the dow. it's been up six straight years now and up an average of 2% in the last 60 years. bad news here and carl had it right, it ends the best six years of the period. traders who laugh at santa claus rallies and things do believe in the best six months they're in. this was uncovered many years
ago by stock tradersnac. it's very simple. stocks outperform from november to april and underperform from may to october. and there's been a lot of research done on this and believe it or not and i hate old wives tales and theories like this. there's a lot to support the idea actually. i took this out of stock traders alman ya almanac. in the laugh 6 61 years, you had $609 after the last years. this is significant. that's part of the mythology that's built up around the whole idea. traders kind of believe this. in a sense it's hard to distinguish between what's real and what becomes a self-fulfilling prophecy that people just lighten up. let's talk about earnings. i have questions about how earnings are going to look. earnings are going to be okay but not great. bottom line is s&p, which is what we're looking for.
what kind of earnings growth? expectations are up 1%. they were much higher in the beginning of japan and much higher even a month before that. this is statistically significant. 4.5% growth and now it's down to 0.95%. they are lowering numbers. this happens often. this is more than they traditionally have been lowering them. bottom line is we have a lot of hopes riding on the second half of the year. significant earnings growth particularly in the fourth quarter. now you have to start deliver on this. this is modest growth so far. >> the flows in april, does that come from tax refunds? >> people are putting money to work in the stock market and various other places and in recent years it hasn't been as much as has been prior years in the '70s, '80s and '90s but still significant and it still does happen. you don't get much in the way of inflows. you know as well as i do how poor they have been into equity mutual funds. some is masked because of
inflows into etfs. we're anticipating. you can see today people are anticipating. >> interesting. thanks, bob. bob pisani. hop over to rick santelli who is talking the latest in mmf globa saga with a guest. >> associate with the commodity coalition that is trying to get money back for many thousands of investors regarding mf. welcome, james. i'm going to give a quick set up and it's all yours. it's very difficult for prove intent to fraud. you do believe that there is fraud and criminal intent that will be a case you're going to bring against mf and it's all about those wires. fill me in on your case and how excited or optimistic you are that you're going to be able to win. >> we're very optimistic, rick. let me tell you. you say it's difficult to prove fraud. obviously the person that joe biden describes as the smartest guy i know isn't going to write an e-mail that says steal the
customer money. but what we do have here is a situation where on october 27th, the chicago mercantile exchange, regulator for mf global said that mf global is not allowed to make external transfers without our approval. the very next day mf global produces a report of their segregated funds that cme later said were falsified and showed 200 million excess in segregated accounts. that same day jon corzine sent an e-mail saying transfer $200 million to jpmorgan or something pro approximating that and the very same day edith o'brien signed checks to customers that requested wire transfers of their money of which there was several billions of dollars in
those accounts but were not given wire transfers. >> i tell you, james, let me interrupt you right there. i think what you're describing is it was normal operating procedures because i know boat loads of traders that were at mf that when they wanted money out of their account, they would either make a phone call or send an e-mail and it would be wired. at this point they changed their normal operating procedures right at that spot the last part of october where they were writing checks for those requests but still wiring out money to entities like jpmorgan. continue. >> that's exactly right, rick. it's basically akin to check hiding. mf global had no right to use customer money to meet obligations. it's not like a bank. the accounts are actually supposed to be much more secure than a bank. in a bank, the bank can take customer deposits and fractionally lend them out. that's how wealth is created. >> so your case is on the
premise to prove fraud they changed normal operating procedures and reason they did that is they knew they couldn't wire funds that they are already sending to other entities and that's the linchpin of your case, is it not? >> that's right. they are trying to prop up the value of the accounts on reports they were sending to interactive brokers to try to complete a sale of the brokerage. >> james, we're going to have to stop it there. i want to have you back again and continue to go over this especially after you file the direct paperwork to this particular angle on the case. thank you for coming. >> thanks. >> back to you. >> that saga will continue. thank you very much. when we come back, the car that could save you from ever having to buy a plane ticket again. we'll be right back.
now back to carl. >> if you are tired of stress of airports and long road trips, a company may have the solution you're looking for. phil lebeau is back starring in his own version of "chitty-chitty bang bang." >> they are unfolding the wings as we speak. the world's first flying car. as wings unfold i'll get inside and talk to the ceo and chief technical officer. carl, explain to me. this is both a car and a plane. this is not a gimmick. >> that's exactly right. this is very real. this is an airplane with added capability of folding up wings and driving down the road and parking in a single car garage. runs on super unleaded gasoline like your car. >> let's get out of here and give people perspective. we are talking about getting up to 450 miles of range, am i correct? so 450 miles of range as we come around here at the same time you're looking at a car when it
is actually on the road, 35 miles per gallon. >> 35 miles per gallon. >> it runs on straight unleaded fuel. this is not jet fuel that it's running on. >> exactly. >> you have 100 of these ordered at $279,000 a piece. paint a picture for these people who have ordered this already. who is buying the transition? >> most of them are pilots. most of them know what it is like to fly an airplane today. one of the things we're interested and one of the reasons we're here in new york city is to learn about people who aren't pilots who might like the functionality of flying on their own schedule and park the plane in their garage and have freedom of operating a vehicle like the transition. >> people will look at this and say it's a gimmick and there may be a few people out there that want this but you believe you'll ramp up production over the next several years and that it's a much bigger market that people are anticipating.
>> people have tried it in the past but no one made a vehicle that can convert from plane to car faster than you can call a cab. you have that freedom and flexibility and ability to convert that fast. >> you expect delivery to start later this year once you get full certification? >> that's correct. >> it's already certificaed as road vehicle. >> yes. >> what does it feel like driving as well as flying. >> it drives like a normal car. you have a steering wheel, brake pedal and gas pedal. it's all about lowering barriers to entry for nonpilots. >> it feels like a piper cub. just like a little airplane. we're looking forward to sharing that experience with a bigger segment of the population. >> a lot of people are looking at this and saying look at this. were there people that say you
are nuts? >> there always are. the thing that we were looking to do is address the four biggest obstacles to more widespread use of general aviation. you won't get stopped if you own a transition. you can drive when the weather gets bad. you can keep this plane at home. >> 279 is a bargain in the world of general aviation. carl, the man who dreamed up this idea of the first flying car with terrafugia transition. they are taking deposits. you can check it out down at the new york auto show this week. i know even though you live in the city you are thinking about finding some kind of air strip somewhere. >> my only question is whether or not they have a lease option on this thing? >> they would like to know is there a lease option yet? >> we are working on that right now actually. our vice president of sales is working on a lease option right now. >> even though he's in general aviation, i teach him the world
of autos. he said what will it take to get you in this flying car today? >> absolutely. fascinating. innovation is what it is all about this country. thank you, phil lebeau. when we come back, if you didn't win the lottery on friday which is most of us, jane wells wants to talk to you. she's pounding the pavement seeing what the lotto losers are going to do next. we'll talk about that in just two minutes.
every time a local business opens its doors or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year. because the more we help them, the more we help make opportunity possible.
wall street's poison pen goes digital. a new website created value yaho yahoo!.com that details the fight for yahoo!'s future. several colleagues pushing for nomination to yahoo!'s board but they have been unable to reach agreement with the company. third point accuses yahoo! of making a mockery of sound corporate governance principle. one fight that's not going away any time soon. it's monday. if you didn't win the lottery, don't worry. jane wells has been hitting the
streets talking to people not lucky enough to win the megamillions jackpot. hey, jane. >> here's my broken heart. $5 spent to win 656 million worth. nothing. so like tens of millions of others of people, hundreds of millions, it's just another monday morning. >> we had 22 people in there times $5. that's $110 and we didn't win five cents. >> here at the lenda alegendary boy, they were crying. locals told us how they would have spent their winnings. >> that money goes to everyone that i know. help are other people. >> sell the house, buy an rv and travel. >> i might buy a bigger house. >> buy gas for my car. maybe for the whole neighborhood. >> i would put it in the bank and go away for a month.
the mail man wants to come over. i'll start my own mail route. >> i like my own mail route. that's tony who suggested that winners get out of town and take the next train to new york to hide out. really, hide out? they are crying in their coffee on the east coast as well. how would they have spent their millions jersey style? >> donate 10 million to homeless on the streets of new york city. and then probably drag in front of kim kardashian's house and say i'm homeless. that's it. take 10 million give it to a homeless guy and drag them to
kim kardashian's house. >> that may be the only time we're able to identify guest on our air with the word megaloser. >> nobody is a megaloser like i am. i spent this money. i was going to do something about this. >> i don't think you have any worries there. >> now you're stuck with it. god bless you, carl. keep those tweets coming. coty launching a bit for avon. we want to know what business leaders needs his or her perfume and what should it be called. we'll get your ideas in just a moment. c'mon dad! i'm here to unleash my inner cowboy. instead i got heartburn. [ horse neighs ] hold up partner. prilosec isn't for fast relief. try alka-seltzer. it kills heartburn fast. yeehaw! ♪
others. nick writes -- you guys are harsh. gary cap i gary kaminsky is watching. story of the lottery with people who played on friday. >> i was looking at people who didn't win. we have to put coveraa close on lottery coverage. one man bought three tickets. i have a better chance of getting hit by lightning and what happened to bill? he actually got hit by lightning after he purchased those three tickets. he's okay. but just sort of a good way to wrap up the lottery coverage there. >> i don't know fits a good way to wrap it up. >> he got hit by lightning. he didn't win. i'm sure he's happy today that everything is okay even though he didn't win megamillions. >> i would play again if i were him because odds are in his favor since he's already been
hit. >> i'll be down at the new york stock exchange tomorrow. we pointed out last week it report on the street about apple portfolio manager did not buy it. long apple, short apple, no opinion of apple, check it out tomorrow. he'll be with us first to talk about why he wrote this report, what does he see that south side analysts don't see and then make their own opinion if this guy is off his mind or if he makes sense. >> first time he's done a television interview. we'll see you this en. rick, talking 4 x before we close out the hour. >> over the last year many traders tried to trade the ueur versus the green back. many developed economies have similar problems to the u.s. it will be very limi