tv Squawk on the Street CNBC April 13, 2012 9:00am-12:00pm EDT
think they are? >> i do. companies are efficient, savvy, productive, navigating through this market. even though they get mixed analysis on the demand side. >> ann, thank you for being here. you do it. >> good-bye, everybody. >> good-bye, everybody. see you on monday. ♪ ♪ welcome to the jungle good morning and welcome to "squawk on the street". we're live from the new york stock exchange. carl quintanilla is on assignment. let's take a look at how futures are setting up after the biggest two day winning streak for the year. we're looking at a lower open. dow looking to open lower by 34 points. let's look how the european board is trading. tremendous weakness particularly
in spain but there you have it the dax and cacbot down. jpmorgan and wells fargo is beasting estimates. along with a weaker gdp out of china could mean headwinds. the day after the best two day advance for stocks in twot. google in the spotlight this morning after a mixed earnings report and effective two for one stock split that keeps the company firmly in control of r sergey brin. >> let's start off with jpmorgan. looks like a very strong quarter across the board for jpmorgan. there's a couple of, not complications, but things you need to keep in mind. >> one of them is reversal of
loan loss provisions. we've seen this over a number of quarters. it's not real earnings. he didn't say that on the press call we had this morning. he did say about us, at least a year ago it's not real earnings. it helps when you can reverse loan loss reserves back in. it's a sign of improving credit and that was a theme again. those of us in the press had a chance to talk to jamie and doug. and credit is getting better. that was one of the key things that he mentioned in the call. the analysts call is ongoing as of now. both on credit cards, on mortgages. so that's a positive. the investment bank they are saying was good even though when you look at it year-over-year it wasn't great, given the lack of activity over the first quarter. there also was these dba charges their spread lessened, more to
buy back their debt. point is not a bad quarter. credit improving. that's where we stand. >> should we be concerned that nonperforming loans has increased -- i mean the trend is goodyear on year. quarter on quarter there's some signs that delinquencies is an issue. >> i have a different rap. they are lending a lot. when you lend a lot you have more nonperformers. the revenues were good. they should have highlighted that. that's a mistake on this day. >> not the way he handles himself. you were a little critical. >> i was undiplomatic. >> his shareholder letter that came out last week. >> i want to point out they are -- like the commercials. like when he said this is a bullish on america call. he's lending. when you lend you'll make a few mistakes. i like the revenues. a couple of months ago we said we want revenue growth.
we got ref now growth. >> piece together wells fargo strongiest revenue growth in nine months. nine quarters. that's even better. >> wells fargo is another juggernaut. let's compare these. sold to you. these companies are so strong, the fortress balance sheet is a fortress balance sheet at jpmorgan. wells fargo is lending. this morning business is terrific. i like what i see. so easy to pick these things apart and you'll be brong if you pick them apart. >> a lot of different things to talk about. you cut things out, which i love. >> i get newspapers. >> times of yore. >> my mother would cut things out from the newspapers. send me the met scores. nice. >> it's like that.
>> i got paper too. i'll match your paper and raise you some paper. >> i got scissors. >> this move we saw for jpmorgan, especially, jim, a lot larger move when they increased the dividend, jump started everybody or jumped ahead of everybody. >> people like dividends. >> he did say, jamie was asked on our press call about the buy backs. list enunclear where but we'll buy 3 billion back every year because we got to offset what we're giving people in stock. >> what was the share count? didn't see a dramatic decline. i didn't see a big decline. >> the big macro picture from jpmorgan is a positive one. dimon was more positive on this call than the other one. dismissing recent indicators giving people a pause. things are getting better. they are and continuing to get better particularly in the middle mark.
they are making a lot more loans and things of that nature. >> no complaining about the government. >> no whining as you would put it. >> no whine before its time. >> he's done his time. durbin is costing him $600 a year. >> everybody that's this durbin figure. it's 600 million a year. i do like this quarter, melissa. i got to tell you that we need this. we need this because as we said, we've been up two straight days and it's been used. we need to see earnings because we have to continue to balance out against how horrible it is in europe. >> nobody thought it would be a bad quarter. first of all, it is the first quarter. and i mean there was an expectation it would be pretty good. and that the economy is okay. >> there's a lot of stories where the banks can't make money. >> 16% is not the greatest. >> no. >> is that what we're living with. is that the new reality. >> the fed has rates so low it's
imfo make money. what do they do? they make money. >> is this enough to support the good earnings out of jpmorgan and wells fargo. that's the question at this point in time for investors. not whether or not the business is improving or the economy is improving. but from this point on can you get better returns elsewhere? >> it's a great question. if you look at a longer term chart, it to see a longer term chart with jpmorgan, maybe two years. what you'll see is, okay, it's done nothing. what a chart. this is the old reverse head and shoulders. i ought to know because i use that shampoo. look at that. it's beautiful. >> is that beautiful? >> hadn't you ever looked at a chart? >> no, i never look at charts. >> that's why you're great. >> charts? i don't know what that is. >> that's gorgeous.
>> it's done nothing. how has the market done? >> wow. >> three years. >> 34%. >> okay. come on. this was when it was nuclear against the banks. takes a little time after nuclear war. >> '09. that was it. three years ago. all right. want to move on to china. china's economy growing at its slowest pace in three years during the first quarter gdp expanding at lower than expected rate that was 8.1%. economists were looking for 8.3% or 8.4%. the number is down from 8.9% that the country rang up in the fourth quarter. >> i don't know. >> not expecting. >> bmws -- i mean it's inward purchasing. it's bmw buying.
it's audi buying. they love audis. >> it's okay if it's too hot and okay if it's too weak. either way, if you take a look at the reaction of the shanghai composite was nil to higher. if it's hot it's fine. if it's weaker there's policy easing. that's the consensus on the street at this point given this number and other data points we've gotten that the government will step in and ease to make sure growth will be there. either way, good. >> thank you for mentioning how the stock market did over there. i'm sitting here like, you're watching on the web. people say oh, china growth plumment iplu plummeting, 8.1%. which country wouldn't want that. to me sometimes again i'm in a don't look through it. i saw like, there was a guy wailing on this morning, saying
everything was bad. i wanted to hide under my bed. >> he said everything has been bad for quite some time. so you have to discount what he sawed. >> i'm still using the stock prices as a gauge. if stocks go up that's positive. >> it doesn't mean it will erase fears that growth is slowing and we won't be sitting here on many mornings worrying about chinese gdp. >> you worry about spending every day. >> i am. i still am. the people i speak to they are worried about spain. whether it's small businesses or medium size businesses that deal with the banks and in a lot morrow bust way than our dose. >> i wouldn't say they are better. this is hideous. this is a great bank. deutsche bank is great. i'm not trading the spanish economy.
i can't get a bid on the spanish economy. no. but i can get a price here. it was $44.48 about an hour ago and i wanted that. >> if hedge funds control 2 trillion in assets and a lot of going risk on/risk off and if they feel spain is not looking good they are going to sell and you'll be screwed. >> we should get to google. >> you used the word screw. >> was that all right? >> i guess. it's done. cat is out of the bag. >> you did too. >> i was quote ug. >> let's get to google unveiling a controversial stock plan first quarter profits come in better than forecast the company announcing a two for one effective stock split that create as new class of nonvoting shares. now there are two ishs here with goolg. the results which came in mixed. better than expected on the top line and bottom line essentially. but it decline more than people thought. that's a continue for concerns. they were able to manage
expenses. mixed bag. then we have this whole issue of the effective stock split. >> the retail love stock splits. i feel compelled to say what a stock split is. suddenly we get two pencils. >> what a waste of a pencil. >> it's a jim cramer pencil. i want to point out the conference call -- it is jim cramer. >> it does say that. >> the conference call -- conference calls are not interrogations or station house rubber hoses, conference calls are not press conferences. what they are are endorsement. what matters display, display ads and how we have 100 channels on youtube. when you think about it they have content that's free, they can advertise display ads. it sells at 11 1/2 times
earnings. stock split that retail likes. i'll take that all versus the super duper -- >> volume up. what about the idea that apple and face book move to their own search platform eventual. mobile is everything for them. mobile, in terms of growth. >> okay. but how about the way they managed to massage on the conference call which they spent maybe about 30 seconds on mobile by saying it's a continuum when you advertise on our mobile, you advertise on our youtube or website you get that penetration which allowed them to get away with the idea that gross margins will come down. it was a seamless presentation. it was literally a great broadway show. the analysts played along with what you regarded as no offense to anyone on that call, truth happened. >> those who either own it or have owned it or selling it short, not overly concerned about this voting share issue. an issue of a knew class of
shares that's how the split is being accomplished which will have no vote but which they will use for deals. for you they said there aren't any deals on the horizon but i'll tell you this. that's where the focus is from this issue. not about corporate governance. they own 67% of the vote right now. is google thinking -- they got 49 billion in cash. >> that's for the mobility. >> motorola has -- >> i didn't ask about the conference call. >> a lot of it is overseas. you have that much cash and you do this, are you thinking down the road you have to do an enormous deal? >> that's the takeaway. >> that's the scary thing. >> that's the thing. >> doesn't matter. if you're a shareholder -- >> it's a case of the media. >> if you own google stock you have been screwed as you like to put it on a corporate
governance. >> they generated 3 billion in free cash flow. 600 people during a quarter. this question about, all right, fine no big deal now, you're saying, why would you do this at 67%. not like 52% in danger of going bloe 50. >> you took the stock down with your rap. >> it wasn't me. i don't move stocks. >> there's a whole universe of people. >> there's a unfierce of people? this is a federation. >> coming up here after reporting earnings this morning we have exclusive interview with jpmorgan's cfo.
welcome back to "squawk on the street". we had inflation today that was darn close to expectations. we had chinese data that was not. the markets grappling with that. equities are lower. interest rates are moving lower. actually that's not the biggest story i'm dealing with. i would like the camera to pan a little bit on what's going on cme group floor. we have a difference of opinion here and we'll be covering this throughout the day. you know what? we have floor people. i used to be floor person. we have electronic people. the way trading is done on different platforms. i have david stein. we're staying out of the pits. we're airing our grievances. david, quite simply stated what is your issue today? >> not an electronic issue versus a pit issue. it's a call around market versus an open out cry issue. we're held to certain rules as to what prices can trade in the
pit. we make a market. we're forced to trade inside it. the merck has a system that makes call around fashion asking them to make a market and then they can trade any price they want regardless of whether it's in the bid ask in the same product at the same time. >> let's simplify this. if i'm in the trading pit, there's a price discovery. you can't buy something that is different than the offer that's offered, you can't sell something that's different than the bid, somebody makes a market, turns be a market and there's trade. on the electronic platform, they can -- okay. >> big difference. electronic platforms are open to everyone. it's a fair. >> call around market. couple of people up in the office upstairs that are consummating a trade, billboarding on the exchange and not within the range of the current prices. >> it's a none competitive market. >> what's the bottom line in terms of whether or not we'll see a disruption in trading or
volumes or anything? >> well, i'm sure you're going to see a bit of a reduction in volume. but trade is ongoing. there's still something going on in the pit although very little. >> not much. >> the answer is we're going have to wait and see. doesn't seem to be lot of noise coming out of that pit. we know in options back to the electronic, the human nature is where most of the action is on the options, the call around market he's talking about, we'll continue to follow this throughout the day. basically is that they don't like people trading outside of the range and using the boards to advertise the trade. they could have done a better price in the pit. that's it so far. we'll continue to bring you updates on this story. >> all right. thanks very much. interesting what's going on. strange not to hear. >> people are in sleeping bags across the street. that's a protest.
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coinstar. this is a very retail name. they ought to rename it red box first of all like hanson was smart enough to rename hanson beverage. this is a heavily shorted name. yesterday we talked this is a short. he's taking a long term view. but when you can raise a price like they did and get away with it, versus netflix, i think it's incredible. >> yeah. >> netflix has been a strong performer this year having come back sharply after a terrible year last year. this stock up 40% from last year. >> i'm a netflix user. this company has some sort of affinity, there's a loyalty to it i find shocking because the numbers, it was the biggest outside surprise of the whole year. more than sherwin williams. more than tractor supply. >> really? more than tractor supply?
come on. tractor supply. >> you're making fun of me. tcso was a monster. >> not monster hanson. >> mst has been amazing. monster worldwide versus monster beverage. i also want to talk dow chemical. one of the things we keep getting is these dividend boosts. do you want to be in dow an upside and dividend boosts or be in a ten year treasury? >> same conversation we had yesterday about at&t. i'm sure something that figures into jpmorgan as well. all right. we'll keep an eye on all of those. >> tractor supply? >> to melissa. >> thanks, guys. opening bell is straight ahead. much more ahead on wall street. [ male announcer ] you are a business pro.
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at a lower open for jpmorgan and wells fargo as well as shares of google. an interesting one here at the new york stock exchange. here we go on this friday, s&p 500 opening up at the real-time exchange. a provider of international services steel mill listing its first anniversary. champion vladimir does the honor there's. interesting choice to do the opening bell for nasdaq. anyway we were talking about the bank earnings and they are trading lower at this point. they've had a tremendous run since october. >> look. i've been getting push back on twitter about my idea this market is better now because we got china which by the way was not bad, just a media color because they cut. united states obviously europe. you know something, the first thing you said today, melissa, two best days back-to-back. do we really have to have a third best day in order to
convince people they should come back? look at the retreat. the numbers we got for the amount of money coming out of equities on wednesday once again shows me people don't want to be part of this party. the way you become a part of this party go in and buy wells fargo right here. >> right here. wells fargo. >> i like the growth. >> you believe the growth there? >> i do believe the growth, yes, i do. >> some people have had questions about wells fargo over time. they have put the numbers up. they aren't as transparent as some other banks. >> you're such a diplomat. they are not transparent at all. >> no. >> they disappeared their ceo a couple of years back. >> he was on tv constantly and then one day he wasn't on tv. >> he was gone. >> it wasn't like this brian dunn saga. >> or having a board investigation. he was just gone. very important guy. i just raise it because there's always been at least this drum beat of lack of transparency
although extraordinarily well run, has the buffet machine. >> thank you. that's where i'm coming from. warren buffett is still my idol. peter lynch and warren buffett are my idols. i have learned that to bank with buffet not against him. >> if you mention the gray western portfolio or what they took over from wachovia, they call you up and say come on. >> yes. >> here's my problem with saying that these banks are sales. they are not expensive if we get any sort of change in the yield curve, and we kept saying if they ever give us revenue growth we'll be happy. >> well, what we could be seeing here is the impact of europe and what's going on with the europe lenders. about spanish banks lending. borrowing. excuse me. 29% from the ecb.
this is a heavy amount. we're seeing the spanish banks do worse than some of the rest of the european banks. >> very conservative. overseas, obviously in spain they have had a boom in spain that we forget. they had the greatest housing market, great solar market. they felt that spain was back. >> housing bubble like we do. now they have 23% overall unemployment, 50% youth unemployment. a budget deficit. and a lot of concern yet again that's going to be with us again. >> it reminds me, in the spanish civil war, they had separate states that really were running amuck. they have separate states. more of a confederation than it is a country. they don't have control over some of the confederates. >> all right. >> let's go to pisani. bob pisani has what's moving.
>> here's how i look at wells fargo. i look at wells fargo as a proxy for the mortgage business in the united states. i don't try to break down everything. they have a very simple business. they sell a lot of mortgages to customers and some other kinds of loans and they have a commercial loan business as well. that's the way i look at the world. when i look at their numbers the mortgage business is doing excellent. you know wells fargo is far and away the largest mortgage originator in the united states. they originate almost one-third of all the mortgages in the united states. it's an amazing number. most people don't know this. if you put wells forgo together with bank of america and citigroup those two companies do 50% of the mortgage origination in the united states. 50%. from what i can see from looking at their numbers their business is growing. wells fargo is taking market share away from their competitors. jim, quarter over quarter if you don't follow this, that's a huge number. their numbers, their costs are
going up. it looks to me like they are paying their people more to get business. that means they are trying to pull in market share. what does this mean? two things. i think this is bad news for the regional banks because the big guys are continuing to get a lot bigger. the small guys are not. i also think it's fairly good news for are mortgage servicing names. remember we had these names down recently because we had issues with lender processing, concern that business will slow down. i think that those guys overall had positive comments. let me comment on china. 8.1% is disappointing. remember the march statistics have been getting a lot better. guys, back to you. >> thanks so much, bob pisani. we're taking a look at google. down 2%. starting to chew over the results that have been mixed. the top and bottom line looked fine. there are some concerns. this whole notion perhaps it can use a c class of shares for acquisitions which is exactly -- for a company that funds things
like solar plants, you know that solar ipo. >> that was awful. >> google was an investor in bright source. >> we remember, let's keep in mind what's the cost of keeping motorola a viable entity. that probably wasn't discussed in the call either. >> facebook, no one asked anything. apple. motorola -- shouldn't that be fair game to talk about? >> you would think so. you want to understand what the plan is there. listen, cheap stock. >> 11 1/2 times earnings. >> enormous amounts of cash. and it's key business volume still keep going up. so all good but -- >> cap x down. costs in line or better. big question is about apple, facebook and search and what they are going to do and mobile and how it is going impact this business as it continues to expand. that being said people search on google for commerce. they don't search on facebook
for commerce. >> many people's home page. let's shift to bonds. at the incredibly exciting cme group. >> let's talk markets and then we'll talk about that commit pentagon. one week charts whether it's tens 30rs, several basis points lower on the week on both of those maturities. the germany 10 year bond in europe is young changed. trading down historic lows in the 1.60. the point of the story whether it's chinese data or issues about funding in europe, they are all keeping interest rates low where in the u.s. qe seems to have the least amount of favoritism in terms of a program that will make any kind of resurgence. as far as what's going on here, this is why america is great. the cme group, the traders, they have an issue. they are working it out. and throughout the day we'll bring you updates. we'll really bring the point home at 11:05.
santelli exchange. we'll talk to both sides. they have issues with block trading, fairness, price discovery. the process here is very admirable. but the volume in the pit today is not due to obviously this issue. back to you. >> all right. let's check out the latest for energy. let's go to bertha coombs. >> reporter: oil is on the down side after that disappointing gdp data coming from china. products have seen a little bit more strength. what's interesting this week, actually is when you look at the gasoline futures which are based on gasoline prices here on the east coast they outperformed much of the complex, outperforming brent. in terms of the national average with some refiners coming back online we've seen prices drop some four cents this week. a lot of folks saying we may have peaks, certainly out in california a big dropout there. meantime, natural gas, 1.99.
today there's resistant. we hit a new ten year low this morning. we'll see if we can get back up to $2. david, over to you. >> if you're just joining us, one of the keys is jpmorgan's earning report. stock in the early going down, not a great dale but down about 1%. somewhat typical in what we see, what i can remember the trading. the biggest update was that day they announced the dividend increase. let's go through some of the numbers for you if we can. it's not just a reflection of the health of the banking industry but give us some sense in how things stand in the overall u.s. economy. there's a look at inchrome in terms of where it came from, where it didn't, where it was in terms of a year ago, retail financial service. commercial banking, investment bank had a rough quarter but they had a good quarter. just a lack of some activity that we saw over the course of that quarter. let's move on as well. i don't know if we have a balance sheet. we have look more at the investment bank. we can get into that in terms of
net revenue. they had an adjustment, 970 million. one day they will get rid of these adjustments because they do create a lot of noise. >> it confuses people. they have been very transparent. terrific about that. >> interesting to note they had 10.5 million litigation issue. that was the put back issue. they were saying the warranties were not what they said they were. that's a big number. they said on our press call or analyst call that they hope that is all they have to deal with in terms of that litigation. >> let me give you a behind the scenes look. a lot of bankers tell me look it's an election year, fannie mae and freddie mac are going to come after us july, august, september, dramatic increase because they don't want to look weak about the fact that the american people were ripped off by the banks. >> so that's important to note.
>> finally long end reserves. this tells the story of the great recession and since. i hope we have that graph. that gives you some since as to where things stand. the bottom is the capital. threw see it. reserves continue to come down. that's a release. it helps earnings. whether jamie dimon says that or not. that's a good story. that's the story of banking industry. >> you call him jamie damon. he fancies himself like matt damon. >> google shares down by 2.8% right now. let's bring in herb greenberg on his take what's going on there. >> reporter: this is yet another case of silicon valley living by its own set of rules by creating a third class of shares that
have no loading power. sergey brine secured the control they were on track to lose. the way i look at it is this. this is a company saying they own the stock or not own the stock. what i like here is that they were over the top transparent. they told you what they are doing. they said they are doing this so they themselves can maintain control. they even said that when the new shares structure goes to a vote that brin already controls everything. the anger i saw on pi twitter stream people were talking about this instead of earnings, maybe this is another google invention that should have stayed in beta a bit longer. >> i'm curious of all the anger on your twitter stream, were those actual shareholders because as you mentioned shareholders knew what they were getting into in the first place. so i would think they would still be okay with it
considering their voting control hasn't changed. >> reporter: that's a great question. i don't know who owns one. karen finderman who was on "fast money" last night and was very angry. you have to understand the significance of this. this isn't just a company that already had a dual class of stock or already controlled entity as facebook will be. what they are doing these guys set up a selling program, they were going to slowly lose control by creating this new class. they will end up gaining that control back. they will not lose it. there's something called stapling. if they sell these shares they will lose economic interest but only to a point. but the company didn't tell you what that point is. they were transparent to the point of how much that sale will affect them. >> apple is cheaper than google. >> i know a guy who is pretty good. i'll be talking to him later on.
he thinks google will go 1,000 before apple and he also thinks google is much cheaper than facebook. everybody is slicing and dicing this thing. >> you were saying cost. got to stay close to that. that was minus 12. look people got excited about a split. can't get excited about a split. >> i want to clarify in terms of what karen said last night. yes she's upset it from a corporate governance standpoint but she's still a shareholder because the valuation of the company is so compelling. this doesn't make her think it's not worth owning. >> as long as the stock goes up nobody will worry about this. what's important is the corporate governance guys say this is going down a dangerous path. one day there will be some companies, the shareholders wish they more flower. >> herb, thanks so much for your report. coming up a bat gets trapped on a delta airlines flight and spend the entire ride buzzing around passengers.
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trapped with. one tweeted the multiple blackberry ceo, they keep jumping up yelling we're going down. scratching cats inside a box made of blackboard. being trapped with a market bear. >> they have sonar. they are fine. they won't hit you. >> they eat mosquitos. >> snakes on plane was a terrible movie but the best title movie. >> simon hobbs is here. well tell you what's coming up as soon as we actually know. i think melissa, do you have -- >> more "squawk on the street" straight ahead. how is that? >> sounds good to me. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap.
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your favorites. >> time for 60 stocks in 60 seconds. >> cheniere energy. >> if they get it, that is low they are the winner. >> microsoft, it's still cheap? >> i like these low multiple tech stocks. they hold up. >> illinois tool works getting a downgrade to underweight from equal weight. >> industrials are red hot. if it's up 18%, 20% we'll downgrade it. >> johnson controls. >> stock has done nothing. >> goldman sachs bullish on ensco. >> if you do not have any natural gas you can rally. >> we have a believer in the gap turn around story. jeffries raising the price
target. >> people are shopping at banana republic and old navy is working. >> for more go to cnbc.com. there's weakness in the financials overall so was there anything in jpmorgan or wells fargo earnings release that makes you believe there's weakness. >> people freak out when the mortgage put back is back on the table. there's a lot of feeling in washington that the banks really hurt people and they are going to continue to try to get money back for them. but i also want to point out the stocks have been strong. great first quarter stocks. the market is having a bit of a correction. i'm not freaking out. i think jpmorgan is a buy. >> goldman sachs ceo, $16.2 billion for compensation in 2011. that was an increase from the prior year. >> went above book value. >> we're watching the european close. that's key. we're seeing pronounced weakness
in the spanish banks. it's down between 2% and 3%. having an impact in some respects on the u.s. banks here. >> look, there's a constant freak out about spain. david has talked about it all week. spain is important. >> i want to go to rick santelli with breaking news on consumer sentiment. rick. he's not there yet. >> i do want to point out one thing. i have a company called chart industries. they and make the equipment to liquify natural gas. i want to point out that we will be the biggest exporter i believe of natural gas within the next five years. >> sam thomas. that's a good one. that's tonight at 6:00 and 11:00 p.m. continuing on with the markets, it does feel like it's stable which is a good sign given the tremendous gains we've seen in the past two days.
>> i know this sounds tire some. i'm going back to apple. google is 11 1/2 times earnings and apple is ten timesing earnings. we see stabilization, they seem like high flyers but they are very inexpensive. they sell roughly the same as microsoft and intel. >> we do have thesume sentiment. 7.77. so slight decline month on month. rick do you have more? >> 75.7 obviously is a bit of a disappointment. however that's only one the context of where it's currently been between 76 and a little over 77. we see that the market is paying attention to this. there's a little bit of movement going on as we're getting ready to test 2% in tens. so macro view, these aren't bad numbers. based on expectations on a day where equities are down, disappointment. back to you. >> all right.
coming up our big earnings extravaganza will continue looking at jpmorgan, wells fargo and google. plus china's hard landing off the table could it cause soft spots in the economy? stay with us. "squawk on the street" is back in two. ♪ [ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪ to hold over 80,000... well that would make you... the creators of the 2012 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. starting at $50,490.
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♪ welcome to the second hour of "squawk on the street", this friday the 13th. let's get our road map. jpmorgan top of the line. does jamie dimon have more to smile about. we'll break it down. google trending lower after management announced a two for one effective stock split. is it making shareholders powerless or just the same as it ever was? china's weaker than expected gdp numbers. what's the trade here? we'll talk all things china with our emerging market strategist.
coinstar sending shorts running for the hills. this is just the beginning for red box. >> global announcement. nook ereader called the nook simple touch with a screen that gloss in the dark. the e nook is set to be optimized for low light conditions and will be sold for $139. and is sure to be a big hit in the faber household. >> dow chemical has raised dividend. shares of dow chemical up about 2.6%. best buy's investigation into the personal conduct of brian dunn is continuing to explore whether he misused company assets. the "wall street journal report"ing best buy is declining to disclose whether the woman a 29-year-old who worked in a
leadership training at the company's headquarters is still employed by the company. the woman in question has declined to speak to the "journal." when the "journal" was talking to brian anderson, he's saying this is a blow for company morale when the company needs to be working together to fend off competition from amazon. >> forgetting this scandal, i don't know what you do if you take over as ceo what your strategy needs to be to try to revitalize that business and fend off the showrooming that's taken place. >> we're not suggesting his departure is going to change the strategy. >> and the thing about the global ceo search is they say it will take six to nine months. as a shareholders do you stick around for six to nine months. you don't know who the ceo will
be. would be a leap of faith to continue owning best buy shares. >> actually you worked in retail, would you take best buy? would you say structurally that's so difficult that it's not where i want to make my mark. >> best buy shares are trading higher, up by .2%. >> jpmorgan shares lower by 2% following a first quarter earnings report which did exceed estimates. so far this year shares, though, up more than -- yeah, 30%. michael scanlon, his fund owns jpmorgan making it one of the fund's largeest possession. todd, let me start with you. what is the market seeing that it doesn't like this morning somewhat unexpectedly given what was a decent earnings report. >> a couple of things, david, i
want point to. certainly going into today's earnings for jpmorgan and wells fargo, expectations were high going into the quarter. that being said i think that really the sore spot for these companies today is really the ongoing weakness within the consumer banking unit. consumer banking and mortgage in particular, are continuing to show weakness, high levels of losses, as well as elevated costs, quite frankly likely to continue over the foreseeable future. i think that's making investors a little bit nervous on the news, particularly as you think about valuations and how these things run up over the course the year. >> michael, are you concerned with some of the things todd noted particularly weakness in the consumer and what it means to valuation? >> what you saw in this quarter a little bit in there for the bulls and bears. for the bears you had a streak of long growth. longer term deposit growth is
still strong. got strong capital growth story. you still have the best management team in the business. maybe a little bit of a mixed message this quarter but longer term this is still a stock you got to own. >> interesting, that $2.5 billion for litigation reserve. this is an issue doggone many of the big banks, namely bank of america. jpmorgan taking its share of hits here. >> no doubt there's still some healing to be done in the industry. anybody in a position to handle these issues as housing continues to bubble along the bottom and the economy continues to heal is jamie dimon. he's done a great job thus far. we expect him to continue. >> how deeply in reality can you look into what is happening within jpmorgan. are you concern, for example, about the speculation that actually the chief investment officer may have massively increased its exposure to
derivatives. it goes to corporate in which treasury sits. >> there will be issues with banks that you can't get your arms around. when you look what's going on in the u.s. we're on a much firmer footing. gdp growth improved last year. ltro has stabilized europe on a larger scale than it was last year, you know, some of these issues out there they catch on to the press on a day-to-day basis. they will be out there but in the longer term the company will do well. >> ltro, 16%. is that what we can expect? are we in the new normal or can we anticipate that will start to go higher? >> don't think we're even remotely close to the new normal. we're still in a very challenging environment. as i mentioned before not only was consumer banking and mortgage particularly a concern with these companies, what also stands out is the pressure
you're seeing 0 on both spread income, margin from each of these companies. certainly the pressure from the persistent low rate environment is certainly having a more effect today and continuing into the future. but, again, as you just referred to on the litigation. it's a big concern with these companies guiding to lower costs in 2012 yet we see this significant chart coming out of jpmorgan out of the recent ag settlement. you have to wonder what would actually cause these things to moderate over the course the year. it just seems to be very persistent and relative to what we've seen in the last few quarters out of this company. >> todd, string together what we've heard out of jpmorgan the concerns you have. the concerns over wells forgo. does this make you less bullish for story lines for bank of america and citi, companies that are more exposed to the consumer and mortgages? >> yeah. you got a number of events here.
you got ongoing surprises or weaknesses per se within the mortgage units of these companies. you're starting to see more pressure coming through these companies as it relates to what's happening in both europe and china. growth rates falling off. you know it's going have a residual impact here in the united states and it will affect these companies the most. >> michael, last word to you. you've owned these shares for a while. do you anticipate you'll continue to >> absolutely. a lot of the stresses that todd referred to, they are going to float through in the longer term. there's a lot of expense leverage. j.p. morgan generated another 50 points of basil one. they are in the best position. as i mentioned at the onset they are returning 75% pay out ratio between the payback and dividend yield. they are in a strong position going forward. >> we'll keep an eye on the stock and appreciate it. >> watching google this morning
which is trading lower after we came through with that two for one stock split. down 2.5%. earnings beat analysts estimates. anthony declemente is an investor at barclay. he thinks the stock should be 7% or 8% higher than it is now. is this about combing through what happened in this quarter for you or is it more about those bid long term unanswered questions like for example what they will do with motorola mobility which i understand did not get a lot of comment on the analyst call. >> our view is about two things. first branded advertisers using google as a must buy whether it's search or display. we think big brands in the u.s. have to use google given its reach and given its traffic. then the second thing is, you know, kind of forgetting about valuation but related to
motorola is mobile. google is very well strategically positioned with android and if you think about it the number of search clicks google's market share goes up on mobile device, much higher than in the desk top world. those are two things even away from valuation that we think structurally favor google in the tech space as a premier platform longer term. >> anthony, actually you raised your price target from 700 to 750. that $50 in share price where does it come from? is it from mobile? do you believe that will materialize at $50 per share additional? >> i'll tell you, for me it's more comfort around google being able to monetize mobile. this is the greatest global aggregate bay click quarter in google's history. that 39% is just huge. for me i feel more confident giving it a higher multiple, the market multiples moved up.
we're only giving it 15 times 52 bucks on next year's number. i think compared to other internet companies i think this will be a safe haven, nice core, reasonable valuation. compared to media, when you think about google growing its media, additional media companies won't like to hear this, if their revenue growth is 5% to 7% and trading around the same multiple you rather kind of have a faster growth. >> that makes sense. when you come back to mobile and how important it is, already is for this company, what about the idea that an apple or a facebook move to, for example, their own search platform and try to push google out? >> i think you said it earlier this morning, david, which is that people search for commerce and product on google and that's really the key. >> thank you for listening so closely by the way. >> exactly. and so, you know, people talk
about application. if ios will gain share of mobile devices, then maybe that leads us to more vertical search as opposed to mobile web search. apps are really bookmarks on your ipad and we think google is a big brand name and will not, like i said earlier lose share in a mobile search world. >> this is the calm before the storm. our own gary kaminsky was reporting yesterday that after facebook comes to market they do an asset swap with bing. such is the desire to go after google. if you look at the announcement of the c class shares today, they say they are not intending to make a big acquisition they are gearing up down the line to pull the trigger on a big acquisition but to ensure that their own stakes are not diluted. >> simon, i totally disagree with the premise of both of your questions.
the first one i can't directly address for a number of reasons on the other company that you mentioned but on the second one, you know, i think there's really -- this is a no change event on the corporate governance. you knew as an investor in google you were a minority shareholder. this changes the structure a little bit in terms of longer term, whether or not the founders can sell down their economic stake without giving up their voting stake. >> but they can issue? >> doesn't indicate they are gearing up. in fact last night the ceo said this is not, specifically not an indication that there are anyone usual large acquisitions. >> specifically for now if you read carefully what they are saying at the moment is what they are saying. why would they do it if it wasn't to make way for the future? >> it's to make sure that longer, longer term they and their families and estates can sell down the economic position they have while maintaining control on the voting position. so you don't have other things we see in this space in terms of
shareholder activism and other kind of new york based funds. it's not -- you're misinterpreting the reason for it. >> thank you for set me right. we'll see what happens. thank you very much. anthony clemente joining us there from barclays. >> we want to check the markets. first down day in about two sessions. biggest two day session for the markets in 2012. we're looking pretty much at session lows. the dow is down by 68 points. nasdaq down by 19. where we're seeing weakness is in financials. european financials are very weak. interesting to see how we trade going into the johnson close. bba is down by a full 3%. here in the united states we're seeing some of that carry over as well as concerns as a result of jpmorgan and wells fargo quarter. banking stocks is down and apple is trading down by 1%. giving the waiting of apple in the markets that's something we're watching.
>> something else we're watching. china's economy. it's growing at its slowest pace in over three years. gdp did expand at a lower than expected rate of 8.1%. that's a high class problem. is it enough to justify concerns over a hard landing? and still to come an exclusive interview with jpmorgan's ceo, douglas braunstein. stick around. in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history. so why should our anniversary matter to you? because for 200 years, we've been helping ideas move from ambition to achievement. and the next great idea could be yours. ♪ ttd#: 1-800-345-2550 let's talk about the cookie-cutter retirement advice ttd#: 1-800-345-2550 you get at some places.
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china gdp dropped to 8.1% from 8.9% the last quarter the world's second largest economy slowed to three year loss. has the china domino started to fall. brian jackson is joining us. brian, great to have you with us. it's interesting to see the divergence how that data is interpreted here in the united states and how it's interpreted in shea. here in the united states it's feared as a hard landing. in asia they think there's going be policy easing. how do you interpret it? >> i think, first of all, it's no big surprise we had a drop in gdp growth in q1. if you look at the monthly numbers we're getting out early
in the year it pointed to weaker extent on demand and further slowdown in the chinese property market. if you look forward there's positive signs. we expect to see growth in both the u.s. and the euro area start to stabilize and recover later on this year. i think on the domestic side you got a situation where policy, the impact of policy will change in china. you had a lot of policy tightening say 12, 18 months ago. that's dropping out now. the impact of easier policy over the last six months will find an increasing role on the china growth story. >> do you believe that monetary easing is a certainty at this point? even just this morning and overnight in your world there were rumors of an rrr cut. >> i think we are likely to see some more triple r cuts in the months ahead. we've already had quite a few cuts say over the last four or
five months and we've also seen bank lending start to pick up quite strongly. we had data from yesterday which showed a big pickup. i think you've already got some of it in the pipeline. there's more to be done in the next few months. that should increasingly drive a bit of a stabilization alibi a recovery in growth. >> against that, brian, of course, you have what may or may not be a deteriorating external sector as you alluded to. possibility of a double whammy going forward not just in exports that you see now but the fall in imports which may be a lead indicator one terms of importing raw materials than exporters finished goods that further down the line that export situation may further deteriorate and local economic policy can only do so much against those external forces. >> there's no doubt that the
external situation is one of the key down side risks going forward and i think that's why we've had this policy easing put in place by the chinese authorities over the last 36 months. clearly been looking at the situation in europe and that's been driving not only some reductions in reserve for banks but the stall in the currency appreciation that we've seen since the start the year, the yuan has done nothing since the end of last year. that being said we think we'll see a modest but appreciable pick up in growth in china's trading partners. that's going to provide a bit of a support to the chinese economy. >> brian, before we let you go off for a friday evening drink, how do i make money. where do you think the market is mispricing things and the opportunity for profit from your view in hong kong tonight? >> well in terms of fx markets that's a market i tend to focus
on. i think, you know, market expectations of no move at all in the china currency over the next 12 months is probably reflecting an overly pessimistic outlook for the chinese economy. we'll see growth stabilize and recover modestly over the rest the year. i think that will provide scope for some modest currency appreciation over the second half the year relative to the current market expectations of no change at all. i think also you got to pactor in the political developments. we got the u.s. presidential elections at the end the year and that's a number, a factor that convince policymakers in beijing they need to give a little bit on the currency. >> brian, a pleasure speaking to you. have a please night. >> let's have a look at where we are in the markets. we're down 93 points. bear in mind that over the last two sessions the dow put on 270 points. so we're coming off again a good bounce. we want to check in on
financials clearly in the wake of jpmorgan and wells fargo reporting. they are sleight lower. again after a fantastic run for most of those guys during the course of the first quarter. stick around, we'll be sitting down with jpmorgan's cfo in just a few minutes on cnbc. americans are always ready to work hard for a better future.
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♪ welcome back. the selloff of most pronounced on the nasdaq. tough time for large cap technology shares. apple shares for the past five trading sessions apple has been an underperformer. down by 3.5% compared to the s&p 5001.5% drop. apple set fresh record highs about a week ago. that's in context. this is certainly weighing on the overall markets as well as the nasdaq specifically. >> big day for financials as we away jpmorgan cfo on the
network. let's just check in with mary thompson at headquarters. wells fargo has been holding its conference call. >> wells coming in with stronger than expected earns at 75 cents a share. correcteding its key mortgage business and strength in its very diversified portfolio on the call the company's ceo highlighting the fact that cross sells at the company rose to a record 5.98 and that cross selling products in the east continues to be at lower levels than in the west. they see great opportunities there again as they completed that conversion of the wachovia acquisition they made a couple of years ago. they said the company has continued to benefit from what he said to be improvements in the economy. again that's john stump the ceo of wells fargo speaking on the call. noting the company's return on assets rose to a record high.
he's expecting them to decline by 500 to 700 million in the second quarter and continue to decline through the rest the year. this is key for wells because it has established a cost-cutting program that's expected to cut over a billion dollars in expenses. the company is on track to hit expenses of 11.25 billion at the end of this year which is ahead of expectations in large part because the company has seen increased revenue. again those are the highlights from the conference call. it continues right now. if there's any news we'll bring it right back to you. >> thanks very much. u.s. equity showing strong gains this week on the back of what were very strong or blow-out earnings. the dollar sliding on weak jobs data, back in the green today on china's gdp numbers. so what's the take away? we'll talk the dollar equities, commodities and who knows what else coming up next. changed the modern world...
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welcome back to "squawk on the street". i have some updates from goldman sachs proxy filing submitted just before the markets opened this morning. couple of interesting things i want to draw your attention to. first of all goldman is launching a defense of the combination of the chairman and ceo roles which are held by fairly long time ceo and chairman lloyd blank das fine. he appointed a director to take on the responsibilities that
used to be in the hands of others. board doesn't have an official policy as to whether the role of chairman and ceo should be combined. in addition the board has determined if the chairman is not an independent director it would be notices have a lead director which is what they just named. the lead director will be the chair of the corporate governance and nom napting committees opinion they say a combined chairman and ceo structure provides our firm with a single leader who speaks with one voice to our shareholders, clients, employees, regulators and stakeholders and the public. that's what they are saying about this question. a couple of other things, ceo compensation always an interesting thing to look at. this year it looks as though the summary comp for lloyd blankfine was about 16 million and change. jamie dimon made a little over
23 million and the head of morgan stanley made about 13 million in comp. gary cohn about 16 million. david viniar, a little shy of 16 million as well. one other interesting thing to point out there's been some headlines and rumors about the idea of gary cohn becoming lloyd's successor. the sources i've talked to who are familiar with goldman say they think it's unlikely gary will get that job at any point and what we may see is a skipping of a generation, if you will, to other folks like michael evans the firm's vice chairman or another person who is a notch below gary right now. >> very interesting. let's have a check -- we're an hour to the close of european markets. we're breaking down there. in particular the spanish market is down almost 4%. not a good picture there.
the yields in spain are still a concern. >> the spanish banks, bba is about 4%. the losses there are accelerating going into the close. >> in essence because they are holding, of course spanish sovereign debt which if you have it fully at value don't want to thereabout. here we're not at triple-digit loss on the dow but weighing heavily. tech is lower. google down 3%. we spoke about the likes of jpmorgan and wells fargo. let's check the breadth of the move as we head into the weekend. almost 5-1. and at the nasdaq, again 4-1. >> let's get the traders take on the markets here and checking with john, senior vice president, interest rate products at r.j. o'brien. what's your interpret jaguars of
today because there's a period of time we thought we were decoupled from europe. we're following the european markets into the close. weakness in the euro. weakness in u.s. stocks. >> right. i think going into the afternoon session most of the economic data behind us, the focus is on europe. there's a little bit of concern regarding the sovereign debt issuance counter next week in europe which is why the traders are defensive. we need weakness in equities probably in relation to what's going on in europe. it's short covering going into the weekend. main focus next week will be the auction cycling in europe. >> much more say the big earnings week we have next week? >> well i think for earnings, they will be difficult to parse. most of the focus will be on top line revenue growth. those numbers may not matter
much. you'll see pockets of strength. consumer cyclicals. listen closely for how mortgages are performing. we think there will be positive strengths. for traders this week, 1370, 1371 key support level. we don't want to see that level break. >> the last time we saw that break that was a big selloff. i think it was on tuesday. john, thanks so much for your time. what of metals and energy you ask? bertha coombs has the answer and she joins us now. >> reporter: you know this week with the sense of people coming to the realization that the speaker saying we're not likely to see any qe3, we've seen some blis changes. energy pits a bit of a pull
back. no doubt the situation with china's gdp coming in in a disappointing 8%. natural gas can't find a bottom each and every day we had a new bottom. today bottom is 195.9. we're slightly above that. watch going into the close into the weekend. as far as oil, traders will be watching to see what happens with talks between iran and the west and over iran's nuclear program. very interesting thing. you can't find a bottom. take a look at gas. gas at the pump even as the gas lean futures have been very strong have started to decline and what's interest is in 2008 when we got about $4 that peak came in july. last year when we were near $4 the peak came in may. some are thinking we may have seen the peak now here, we're down four cents overall nationally and big decline especially in california. so those are some of the upsipds
to the gasoline could start to see a little bit of an edge off. back to you. thank you so much, bertha coombs. after a week of fed speak what do we know about the outlook for qe3. steve liesman joins us now. >> reporter: melissa, what a week it was. nine of 17 foc members taking to the podium. on balance the market takeaway has been it's weakened the case for additional quantitative easing. one chance left. bernanke speaking at 1:00. he's been mum on economy and monetary policy. his speech is not expected to be about eater but there's q and a so there's still some possibility the fed chairman will speak. otherwise the question is he happy with the guidance that is out there? so far that guidance has been that fed officials are not
making the case for additional quantitative easing. let me give you some of the comments. dennis lockhart saying qe would require fairly dramatic negative change to the outlook for the economy. janet yellen saying ending without extension not a tightening. if the fed stopped doing that it would not be reversal of policy. and bill dudley of the new york fed said additional qe has costs and could raise inflation anxiety. they are not spooked by that skbloorkts. but that's so far, they are holding out really final judgment on that to see what other labor market indicators have to say as the months go by. they are still defending the existing policy. really little change in the status quo. some hawks were emboldened. like one from minneapolis saying the fed could begin to tighten from six to nine months from now. that's not seen by the markets
as the balance of the committee. read all about this on cnbc.com where i post ad piece. >> thank you very much, steve. looking forward to ben bernanke later on the network. with europe is a major focus heading in to the weekend whether we like it or not with the falls on the european markets and euro breaking through some support levels on the down side. axle merck is the president and chief investment officer for merck investments. how concerned should people be? >> we differentiated between the euro and the province in the eurozone. we've argued the issues in the eurozone are very serious but the reason we have these issues is because we're not printing as much money. as such they should be expressed. the main emphasis has to be and has been on making the banking system strong enough to stomach sovereign defaults. you're injecting liquidity. so eventually the system doesn't fall apart when the sovereigns default. some of these countries will
have to default but we need to make sure this contagion is limited. >> you believe the european central bank is stuffing cheap cash into these banks in anticipation of further sovereign defaults, is that what you're saying? >> that's what they do. look at the federal reserve. >> i didn't think it was in anticipation that a big economy like spain could fail? >> that's a matter of which side of the coin you look at. federal reserve buys security, taking it in and give 80 billion a year to the treasury. because the banks have a difficult time getting the money in the market well the ecb is pretty much giving it to them and that's because we need to soften the blow of further sharks down the road. people think we'll have some sort of miracle come out at the end. that's wrong. this fiscal compact we already have because somebody that needs help gets the help. we need an orderly process on how this help success arranged. in the meantime they are trying to gain time by pushing these
issues down the road. >> was your view as to where it goes in the medium term because right now there are concerns about spain, about spanish specifically and contagion effect on italy. >> policymakers around the world are hoping for the best but planning for the worst. everybody is printing money. what that means europe will not fall apart but there will be better opportunities elsewhere. the euro should however, maybe strengthen. >> do you think that the foreign exchange traders can break the resolve of the swiss fwhanks. on the euro cross we had a big move. >> in places like japan they are incapable of pursuing any policy. swiss if they want to destroy the currency they can do it. in switzerland you have to watch the political short fallout.
if the swiss were asked do you want to adopt euro it would be a resounding no. watch the domestic political short fallout. that's the litmus test. >> i have to come back to something you said. wean a trillion dollars or trillion euros, many would disagree with your assumption the banking system in europe can with stand a sovereign such as spain. >> we do know from the japanese experience in the 90 that central bank is able to keep even a zombie banking system afloat. you can keep an insolvent banking system afloat. that's what the fed did in 2008. that's what the japanese did. >> we want to you stand by. we have some breaking news. >> reporter: we've got the tax returns from the president and vice president and their spouse. the headlines read like this. the president and first lady reporting gross adjusted income,
$789,674. donated more than $172,000 or 22% of their taxes to 39 different charities. the president's effective federal income tax rate 20.5%. now for the vice president. vice president and dr. jill biden suggested gross income $379,000005. by comparison mitt romney back in january his team released his 2010 tax returns, 2011 estimate they showed romney earning 42.7 million over the past two years paying 6.2 million in taxes. he took 21.7 million in long term capital gains and 20 million in carried interest. romney's effective tax rate 14.5%. at this hour president obama is en route to tampa, florida where he'll deliver a speech on latin
america trade and then to colombia for the summit. >> mitt romney's tax rate was 14% last year but the new news is obama's tax rate was only 20%. >> well, essentially that's the headline i'm sure the white house will talk up given its pitch for the buffet rule that the president is paying a higher effective tax rate of 230i7 5% but he'll also continue to make the argument, i'm sure in the days and weeks ahead that he as a wealthy individual can do more. >> hampton pearson thanks so much. axle, we have limited amount of time. you mentioned the currencies. what's your top commodity currency pick. >> right no, it's canadian dollar and just generally speaking singapore dollar as an inflation play. >> thanks so much for your time. >> my pleasure. >> facebook speaks instantgram
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log on now to androgeloffer.com and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. facebook expected to raise up to or perhaps more than $10 billion with it's upcoming ipo. "the social network" picked up instantgram, 13 employees. yes they spent a billion dollars in cash and stock earlier this week. what's the next big thing in technology particularly of course, social networking? dana stalder. nice to have you here. mobile, we've been talking about it a lot this morning with google. it stems have been key with facebook. give me your sense here those, is at any time breakout category in terms of venture investing and what our audience should be
focused on? >> there's no question that the innovation cycle we're in right now is one probably the most important innovation cycle that will our lifetimes, and number two, it is the innovation cycle we need to pay attention to over the course of the next five to ten years here. it accounts for half of our new investments we've made in our current $500 million fund in fact. >> and you know, we still don't have what we would call, i guess a mobile native company yet amongst the larger companies in this country, correct? >> that's right. i mean, i think if you look at the fortune 500 or the big mobile plays, the handset guys are probably the most notable big players. but i think there is a whole new generation of companies to emerge here that are, as you say, mobile native. that means they start mobile, they end mobile, and this is everything they do, and they design for that world. >> all right, but what about an instagram? you know, i mean, again, so early stage, no revenues to speak of. why would a facebook perceive real value there?
$1 billion is a very big number, no doubt about that. >> it is. you know, look, i think the way to think about instagram, there are a few proxies in the history of the internet to instagram. i actually think if you look at what instagram was to facebook, you really can say youtube was that to myspace in the old days and probably the big failed acquisition was myspace not buying youtube. paypal was in a very similar position to ebay, where they built a big business off the back of that network. and in that case, obviously, ebay did buy the paypal business and it's been a huge success. so you know, i think $1 billion is a lot, but in the grand scheme of things, if you're facebook, it's 1% of, you know, rough value of that company. this is the most important potential competitor that's emerged. and you know, these guys amassed in less than two years what took facebook years to amass. >> the most important potential competitor that's emerged? you believe that, why? >> i think potentially.
look, facebook is a photo-sharing platform, first and foremost. and number two, mobile is emerging as the most important platform for facebook in the future. instagram is the photo-sharing platform that is mobile native, and these guys went from zero to 30 million users in 18 months. so, if you're facebook, you'd better pay attention. >> so i mean, you're a vc guy, so in a sense, i know what your answer's going to be. do you think, therefore, that we're chasing silver bullets in technology now that will be so disruptive, potentially, that the outcome is almost binary almost immediately? is that the degree of acceleration that we've gone? >> so, you anticipated my answer. i think, yes. i think what's incredible about this cycle is the rate and pace at which companies are emerging. you look back, what time in history have you seen companies like a groupon generate, you know, $500 million to $1 billion of revenue inside of five years? and instagram, add up 30 million
users inside of, you know, two years. >> right. go ahead, simon. >> but are you also saying that the big companies cannot generate these solutions? why cannot facebook generate these sorts of solutions, or indeed, google, within the apparatus they have at the moment? or are we talking as google creates class c shares, of course, to do who knows what in the future for acquisitions. are you saying, inevitably, this becomes about m&a? >> look, i think technology has often, well, has always been about m&a. you look at the history of ebay, look at the history of the likes of cisco, it's been critical to the success of those companies. this is classic innovators' dilemma. it's not that facebook or google are not very innovative companies, but you think and operate differently when you're a bunch of young founders focused on a really narrow solution for consumers. and you can move a lot faster.
>> right. so i mean, i would assume we may not even know yet what the next facebook is going to be, but it will be mobile from the beginning. >> there is no question in my mind, ten years from now, the fortune 500 will have probably a half dozen companies that are mobile native companies. i actually don't think any of those companies have been started today. i spend all day every day, as does the team at matrix, trying to find, you know, the teams that are going to start those companies. >> right, but we've got some companies that were sold seven or eight weeks after they started. m i mean, how is that even possible? is the pace of acceleration -- it can't get any faster than that, can it? >> yeah, well, i think when you see the companies that are being sold in these, you know, seven, eight-week cycles, a big part of what you're seeing is, you know, the term they use in the valley here is aquihire, this acquisition for hire. >> right. >> there is such an enormous amount of innovation going on that in general, the best and brightest technical talent in
the world wants to start a company today. they don't want to go to work for big, established companies. they want, you know, that potential to be the $400 million found gler in two years. so the way the big companies are competing for talent is they're buying these teams. >> right. finally, simon mentioned it, the google plan in terms of the nonvoting shares they're issuing. what's your take on that? we already knew they were in control, but do you see something as well, perhaps, in that? and is that a development we should be following closely, perhaps because it will be taken on by other companies? >> i don't -- look, i think in general, the big, the large-cap internet companies will be more inquisitive through this cycle. i view what google has done here as just good housekeeping in preparation for the next cycle in the life of that company. but i would look at it as a signal of something imminent or near-term. >> all right. dan, as always, appreciate your insights. dana stalder, matrix, joining us. >> my pleasure. >> makes you want to give up, david, and start a tech company, doesn't it?
>> yeah. >> that's what he does in his spare time. >> i try. i'm thinking of apps all the time. >> constantly now. >> your laptop life. >> my laptop? my mobile. i'm all mobile, man. >> on the loose. >> so far, i've got nothing, though, zero. all right, straight ahead this morning, much more coverage amidst a sell-off. we'll talk to coinstar's big items after this. the chevy cruze eco also offers 42 mpg on the highway. actually, it's cruze e-co, not ec-o. just like e-ither. or ei-ther. or e-conomical. [ chuckling ] or ec-onomical. pa-tato, po-tato, huh? actually, it's to-mato, ta-mato. oh, that's right. [ laughs ] [ car door shuts ] [ male announcer ] visit your local chevy dealer today. now very well qualified lessees can get a 2012 chevy cruze ls for around $159 per month. e.p.a. estimated 36 mileer gallon highway. ♪ there'll be the usual presentations on research. and development.
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particularly important today will be how the european markets close, because we have seen some accelerated selling, as we're seeing the weakness in europe continue here. the s&p 500 is down by almost 13 points, almost a percentage loss there. the nasdaq is really the loser of the three major averages, down 36 points, more than 1%. we're seeing a weakness in some of the big-cap technology stocks. google, for one, is down 2.9%, and apple is close to session lows, down by 2.4% so far this morning. >> financials. the financials are falling away, some of those down 4%. though it looks like europe has stabilized, actually. >> that's a good sign for us here. >> yep. we also have the yield, we should point out, on the
ten-year. it's taken a tumble over the last couple weeks, down the 2% range again. in fact, i think it broke briefly below 2%. unbelievable. >> that's it for us. that's it for the hour. if you've just joined us, good morning. this is what you might have missed so far. welcome to hour three of "squawk on the street." here's what's happening so far. >> i've seen as high as $45.10, $45.20 on the bid after the company beat expectations by earning $1.31 versus expectations. >> things are moving along, and what i fear is we're going to end up with a principal reduction program that really causes people to begin to default. and then you look at the moral hazard that is created there. >> wells fargo is out and it looks like 75 cents versus the 73 cents the street had been expecting. >> up 0.3% on headline. >> we're living in a world where the fed has got rates so low, it's almost impossible to make money, and what do they do? they make money. i always feel compelled to say
what a stock's put is. here's here's a little magic, the david blaine thing. >> sacrifice it? go ahead. >> suddenly, we get two pencils -- >> oh, wow! >> yeah. >> what a waste of pencil. >> here we go on this friday. s&p 500 opened up at the cnbc realtime exchange. >> when you look longer term, deposit growth is still strong, you've got a really strong capital return story, especially this year, that's here and now. and you've still got the best management team in the business, so maybe a mixed message this quarter, but longer term, it's a slow stock to get along. >> if you look at the monthly numbers we're getting out early in the year, they're definitely pointing to weak external demand and slowdown in the chinese property market. looking forward, i think there are some positive signs. >> good friday morning. welcome to the third hour of "squawk on the street" on this friday the 13th, and it does look a little unlucky. take a look at the markets right
now. dow down 92, s&p down almost 13, nasdaq down 36. the dow on track for the worst two weeks since thanksgiving. financials, meantime, some of the biggest losers today, both big banks and regionals. bank of america, jpmorgan, wells fargo, regions, suntrust all sharply in the red. barnes & noble down 4%, despite unveiling their new nook today. book retailer still hurting from amazon's announcement of its price cuts on those e-readers. let's get to the roadmap today. wild week for the markets finally coming to a close. we'll show you how to position yourself going into the weekend with a market strategist who manages more than $400 billion. then, an exclusive interview with the cfo of jpmorgan. we'll get his take on the bank's earnings and a lot more. the post 9 investor club is back. our expert answering your questions about investing and telling you what you may want to know about your favorite stocks. and the president and vice president releasing their tax returns to the public in the midst of the promotion of the buffett rule. will gop presidential hopeful
mitt romney do the same? larry kudlow's going to make his triumphant return to "post 9" next hour. let's get to the capital markets editor doug "gary" kaminsky. we had a great quarter, as you know, and based on today, people are asking if the bullish case will sustain itself. >> we pointed out that sometimes there is a disconnect between anticipated performance and what you actually get. you could pick apart the earnings you get today if you want to, but there are really no major negative surprises. but in fact, the stocks as we pointed out, had reflected the type of performance you've gotten. and so, maybe just a bit of anticipation being just too aggressive on the positive side. >> yeah. internally, though, say in the jpmorgan numbers, is it worries about europe? is it more worries about mortgage-related losses here, tighter regulation as we get closer to the election? what is it? >> a combination of everything, but if i had to pinpoint one thing, i think it's the idea that the mortgage issues, many
of the mortgage issues, many of them being inherited, just aren't going away as fast as -- and i want to say as fast as some would like, as some would like. >> yeah. then you've got crude oil at $103.20, right? we know that financials and tech had lead in the first quarter. >> correct. >> does the weakness in financials today mean we should anticipate more weakness in tech, too? >> gosh, i guess, you know, we're going to have some big tech earnings. we obviously got the google numbers, but we'll have some big tech earnings next week that may be more of a sort disbursion between tech and financials. the financials needed to come out of the quarter with strong earnings. we'll have to stay tuned next week. i was trying to take the approach this morning, i was going to -- you know, i was criticized for being too negative recently, and i don't try to be negative. >> but you have been skeptical. >> well, not -- listen, i have to remind people that i had a career where i basically learned and i was trained to think about investing on what is your down side, what could go wrong? and i always have operated that
way. but i was fortunate enough as a loan-only manager over the last decade to make a lot of money when the s&p did nothing. i actually wanted to come here today and say i actually spoke to some people who are aggressively bullish right now and expect the rest of the year to be unbelievably optimistic. i wanted to point out to you, carl, some of the things on a down day, especially, that are the reasons why some people are so bullish. take a quick look at this. here's the thesis why the stock market is very cheap right now and why we're going to get a rally the rest of the year. s&p earnings, $25. this is brown brothers harriman data. $25, up 19% year over year for the first quarter. full-year earnings of $105. put a multiple of that on the s&p, you're basically going to have economists, there's a number of economists who have said that even with the recent revisions, we're going to have a better-than-expected u.s. economy in 2012. ed hyman, jan hatzius, even larry, you can ask him.
at the end of the day, there is a conversation that the hedge funds, who many of them underperform the s&p because they are hedging in the first quarter, are finally going to throw in and put all this money. i wanted to come in today on a friday and say, you know what? these are the reasons why the stock market may rip here. >> and you just did that, but you think there's still some questions, given the action today? >> again, it's in my dna to try to think about what can go wrong. what if apple, again, what if apple says something a little cautious next week? >> that would be troublesome. >> say they had unbelievable earnings, they blow out the numbers. >> yeah? >> they give great guidance, but they say something on a cautionary note. who knows what's going to happen? >> yeah, that's a good point. >> we've got to go. we've got to go. >> stick around. markets trending lower after obviously a roller coaster of a week. we have the chief market strategist with alliance bernstein, managing more than $400 billion. vadim, always good to talk to you. welcome back. >> thank you. >> we had a couple days there where neither the bulls nor the bears knew exactly the firmness of the ground that they stood
on. which do you think is stronger? >> i think in the short term, caution is warranted. you still have a fair bit of uncertainty in the market and the market is reacting to that. well, i expect companies to still beat first-quarter estimates, as they provide guidance for the rest of the year. they can't help but remain uncertain or somewhat cautious in their guidance. you still haven't seen a reacceleration of growth in asia following some inventory build-up in the last quarter, and europe, the degree of deceleration, while anticipated, we don't know the magnitude just yet. >> yeah. overweight health care, overweight cyclical tech and things like semis. you like microsoft and some consumer cyclicals. you're underweight utilities, telecom and commodities. can you walk us through how you parsed the sectors? >> sure. let me start with the underweights. the utilities and telecom have been bid up. they're still quite expensive, partly because they're a dividend play. my strategy would be much more to emphasize dividend growth
than to chase the companies that are already paying high dividends. secondly, on the commodities side and some of the industrial sides, the stocks have traded off. my worry is you've still seen a fairly high level of inventory, particularly in the emerging markets and asia. you'll take at least another quarter to work through that, so i would not jump in just yet. and as far as health care, it's somewhat of a play in the emerging markets, still quite attractive in valuation. and on the consumer cyclical side, it's a bit of a play on stabilization in housing, while it's widely acknowledged, i don't think the magnitude is quite appreciated. >> the vix, as we know, we got through most of the first quarter with barely a heartbeat. once it got close to 20, people started paying attention. overall, you think volatility is unsustainably low, correct? >> i do, and that's really a very important point. recently, much more than ever in history, the market has been trading off of the perception of risk, which is partly embodied in the vix.
there are a couple of things that continue to drive uncertainty. one, i'm not convinced that china's going to reaccelerate in the second quarter. in fact, if anything, there's probably more of a downside surprise. and also, as we move toward the middle of the year, investors will start to focus on the fact that next year's expectations for earnings are overly aggressive. there are just a few too many things that i think will provide increased volatility. >> yeah. before we let you go, vadim, somebody just sent us a chart of apple. without talking about specific names, breaching some support at 609, people now talking about $585, $595. my broader question is, if it does break support and stays there, do you think the appetite for investors is to come back in, or does that make everybody turn tail? >> so, if i could answer the question a little bit, like you said, more broadly. there's been a real scarcity of growth in the market. there's been very few companies that can offer you a strong path for double-digit growth. and what has happened since,
perhaps january of this year, many of these stocks, for example, cloud computing stocks, certain restaurants, are now trading at the highest relative valuation multiples in history. and so, a lot of that optimism, a lot of the bidding up of the growth i believe is about to revert, and it will take down some of the more popular names in the market. >> yeah, a lot of the names that we talk about the most, perhaps. vadim, always good insight. please come back soon. >> it's my pleasure. thank you. >> joining us from alliance bernstein. >> that's an excellent point because there's so many, what i would call value investors, who want to see this sort of rotation, because they will say if the equity markets can sustain it, you know, it's not just about that handful of hypergrowth names. that will be a very positive sign. again, i'm trying to be so positive today. what happened to me? i'm just like mr. positive here. but again, it's been pointed out many times, you want to see this rotation out. let's get to a story that might not be so positive. the cme group today, rick
santelli with "the santelli exchange," amid a lot of activity in chicago today, rick. >> absolutely, carl. quickly, there is a bit of a work stoppage going on in one of the largest, most successful options pits in the world, the euro/dollar futures options, and it's in regards to block trading. and a quick overview on block trading is this. if you're a customer and you want a large order filled at one price, you want to potentially deal with a block trade. but there are issues with block trades, and the issues are going to be expressed by a floor member, dave stein. let's look at the issues of block trading, dave. and we've talked about it. one, you believe there's a competition issue. you don't believe block trades are competitive. explain. >> well, the way a block trade's executed is that some person gets a phone call somewhere and is asked to market, but no one else is encouraged to make a market at the sail time. the way our customers are guaranteed the best price is many people make a market at the same time and the customer is offered the best possible price. when only one person is offered the opportunity to make a market, then there's no guarantee that the market is in
any way competitive. >> all right. so, nontransparent. you kind of touched on it. so, block trade might be somebody not on the trading floor dealing with a couple customers, puts a trade, basically, together. it's all done, okay? now, why is that not transparent? it's kind of obvious, i guess. >> because it's prearranged between two people who aren't on the floor, aren't trading the product where everyone can see it and aren't allowing the rest of the trading community to see the price they've decided to trade. >> all right, next issue. there's a 20-minute info blackout. explain that. >> when a block trade occurs, the people who have done the block trade have 20 minutes before they're required to report the trade to the exchange, and it comes up on the board, basically 20 minutes -- >> price and quantity? >> price and quantity. >> so, price and quantity, the trade's done, it doesn't go through the pit and there's 20 minutes where both parties of the trade and the person who put the trade together have information nobody else has. >> right. and then there's no blackout on trading in that window. so the person who's done the trade can trade against it in the pit, knowing the trade has
occurred while no one else knows the trade has occurred. >> now, there obviously may be another side to this and we'll have another side at the bottom of the hour, but this is dave's turn. now, solutions. you know, sometimes we have complicated problems, there's complicated solutions. dave, you had a solution you thought was very easy. what is it called? >> the exchange has in place a mechanism called an all-or-none. >> let's write that down. okay, all-or-none. so, basically, if you want to do an all-or-none order, same analogy. tell me how it's different. >> a broker in the pit asked the trading committee to make a market for a fixed volume of trades. >> so, the large volume. >> right. so, the broker will say what's your 20,000 all or none? meaning when you make your market, you're required to take all 20,000 or none of them. >> okay. so, and if the pit doesn't go along with it, then you have no problem that this goes back into the block trading mode. >> right. there's no difference between a block trade and an all-or-none, except -- >> but the competitor has a chance to look at it. >> it's made competitively. >> back to you. at the bottom of the hour, we'll
have another side, if there is another side. there always is another side. carl, back to you. >> thank you, rick santelli in chicago. coming up, an interview with the cfo of jpmorgan. doug braunstein will join us after this break. checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade. tdd# 1-800-345-2550 and i do it all with charles schwab, tdd# 1-800-345-2550 because their streetsmart edge platform tdd# 1-800-345-2550 helps me trade quickly, intuitively. tdd# 1-800-345-2550 staying on top of the market is key! tdd# 1-800-345-2550 and the momentum tool, tdd# 1-800-345-2550 it lets me do it at a glance, tdd# 1-800-345-2550 so when things shift, i'm ready. tdd# 1-800-345-2550 then to track the stocks i have my eye on, tdd# 1-800-345-2550 i turn to schwab's high/low ticker. tdd# 1-800-345-2550 so i can spot a potential breakout tdd# 1-800-345-2550 before it breaks out. tdd# 1-800-345-2550 and get this...i can even trade, tdd# 1-800-345-2550 change my orders or check out my positions tdd# 1-800-345-2550 right on my chart. tdd# 1-800-345-2550 my system works for me. tdd# 1-800-345-2550 does yours work for you? tdd# 1-800-345-2550 get streetsmart edge
as you mentioned, we have an exclusive interview with cfo doug braunstein. thank you for joining us. >> a pleasure. >> been a busy one for you. earnings better than expected at $1.31. first of all, give us a quick synopsis of what drove the results. >> first of all, four themes. we had very good underlying fundamentals, growth year over year. so wholesale loans were up 23%, small business loans up 35%, our mortgage originations up 11%, our mortgage applications up 33%, deposits in commercial bank up, cbb up 8%, and cart spend was up 12% year on year. so that was all strong underlying results. second theme was credit -- net charge-offs improving in the consumer side, down 25% in mortgages year on year, 37% in card and very strong, stable results in wholesale. third, we had some positive market flows, and that helped a number of our market-sensitive businesses. then finally, we built capital
again this quarter, $6 billion of incremental capital. so, we ended with 8.4% basel. >> a lot of the focus on the calls was a $2.5 million reserve for legal issues. >> unfortunately it was $2.5 billion. >> billion, yes. what's it for specifically? why so much in this quarter? because it took a lot of people by surprise. >> well, for us, we have been facing these private-label litigations as well as repurchase risks, and we've been building reserves over a number of quarters. and the $2.5 billion today really reflects, in our view, based on what we know today, a very comprehensive and appropriately conservative view of those exposures. and what i said on today's call is that based on what we know today, absent some material change in our understanding, we don't expect to add
significantly to those reserves. now, in fairness, the world will change and our posture may change, but we feel we're very comprehensive in those risks across the whole portfolio. >> another area that was talked about and that's been in the news lately is your chief investment office, which is based in london. there are reports suggesting this could be a proprietary trading operation. what exactly is it? >> so, our cio, which is actually based in new york but has operations around the globe, is the business, it helps manage the structural interest rate risk, the credit risk, basis risk, fx risk of the firm. and to put it simply, we generate $1.1 billion in liabilities deposits. we have $720 billion in assets, loans. the difference between those two, which the cio invests about $360 billion today, is really the investments that help manage those risks. and the recent articles really
reflect our managing the stress associated with that portfolio and really nothing more. and so, we're very comfortable with where those positions are today. we're very comfortable with our exposures and feel very good about the operations of that business. >> two questions off this. >> sure. >> you said it did contribute to your net interest income. what percentage does it contribute to your net interest income? >> well, those assets are invested on behalf of the deposit-taking businesses. and so, that $1.1 trillion of deposits gets reinvested and then reallocated back to the business, which is normal and ordinary and standard practice for all banks. >> second is that you said all of this was clear and transparent to regulators. regul have regulators suggested you make any changes to this because of changes in the regulatory environment? >> mary, it's interesting, the regulators see this material on a regular basis, they see it daily. they have all the information that we have access to. and so, none of what's been, at
least talked about in the paper, is new information from a regulatory standpoint, and i would step back and say, relative to the spirit of the discussions on volcker, relative to what we understand the language of volcker is, all of these operations are very consistent with the spirit and the context of volcker. >> let's turn to some of your businesses. you pointed out there was loan growth in some business, vut but overall, loan growth was relatively flat in the quarter. why is this? are we seeing organic growth in any of your businesses? if so, where are you taking market share from people? >> sure. well, on the wholesale side, i cited some of the statistics. i think the most interesting to zero in on is the commercial bank, and that business is up again. it's the seventh consecutive quarter of middle market growth. we actually set a record there in middle market loans. it's our eighth consecutive quarter of growth for the business overall, and that really reflects, you know, small to mid-sized businesses in the u.s. on the consumer side, mary,
we've been running off a large portfolio from the wamu acquisition. and so, every year, we're going to run off about $20 billion to $25 billion worth of loans. so on balance, those runoffs offset the growth that we're seeing in quite strong growth across our wholesale businesses. >> talk about the increase in credit card loans. that suggests consumers continue to spend, that suggests some strength at least in that part of the economy? >> yeah. if you focus in on spending, our spending was up year over year for our customers 12%. we actually sold a portfolio for kohl's. and if you exclude that, the data is even better. it was up 15% year on year. and we have seen consistently for the last number of quarters that our spend has been up double digit. now, some of that, in fairness, mary, is our market share gains, and so, we're growing much faster than the spend rates for the visa and mastercard system overall. >> okay. a couple of other questions. just quickly on your european
exposu exposure. it was $15 billion at the end of the year. spain and italy actually was a significant part of this. has this changed at all since the last time you updated it, that being on investor day last month? >> we haven't -- it's gone up slightly and it will move based on how the markets move. rates go up, spreads go up, curves flatten. but we're very comfortable with the loss estimates we've had around this portfolio, about $3 billion in a downside scenario. >> okay. a couple of other questions. you know, there's been a lot said about who might succeed your boss. you are one of the people whose name comes up every once in a while. is this something you'd like to do? and do you see it in your future? >> you know, first off, i hope we have our boss for a very long time. i am privileged to serve as the chief financial officer of jpmorgan. we employ 260,000 people.
every day we serve our communities, we provide loans to small businesses, to governments and the like. and my job helping maintain a fortress balance sheet and help to manage the company to improve our performance, i think that's a remarkably special and privileged position to be in, and i'm just happy to do it. >> can you give us any update on what your outlook is for the rest of this year? let's talk little bit about trading, which of course, improved in the first quarter after a terrible fourth quarter, loan growth and just the overall expectation for the economy? >> well, so, if you start on the economy, look, we're not going to predict where it's going to be, but if you look at the shape of corporate america, better balance sheets, more cash, improved earnings. they're investing right now and they're borrowing more from us. if you look at the consumer and you talk about the spend data that we shared with you. and then finally, if you look at our mortgage portfolio with improving delinquencies, lower charge-offs, increased demand, lower inventory, all those
things point, at least at the margin for a positive opera environment to operate on. we wish wiit were stronger. >> doug, thank you for spending time with us today. doug braunstein, cfo of jpmorgan. >> mary thompson back at headquarters. here with gary to react to some of that. he talks about the spending issues and they clearly are taking some share, especially in business loans. >> you know, a couple quick thoughts. obviously, i enjoyed doug's answer in terms of becoming ceo one day potentially of jpmorgan. great answer. couple things. obviously, the litigation reserves that mary asked about early on, the sizable amount that they put there in terms of some of these private mortgage, private-label mortgages. obviously, the thought initially is what does that mean for bank of america, vis-a-vis countrywide? that is something people want to see next week. secondly, the whole issue about the investing that's being done, what they call this cio office. i know that he gave an explanation. i don't think it's that big of a
deal. i don't know why there's such a focus on it, but i didn't come away understanding that relationship for the overall bank's profits any better. it's still a little confusing to me, but i don't think it's a big deal. i mean, all banks have to manage their own balance sheet risk in house. the fact that they happen to have made some number foreshadowing how they're doing it is a good thing. >> lighting up twitter and the like. they've beaten seven out of eight quarters, matched once. six out of eight times, the day after earnings, stock is lower. today is no different in that regard. >> and again, look at the performance of these names over the last three months. >> yeah. european close coming up in just a few moments. we will get that for you right after this break. this is an rc robotic claw. my high school science teacher made me what i am today. our science teacher helped us build it. ♪ now i'm a geologist at chevron, and i get to help science teachers. it has four servo motors and a wireless microcontroller.
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♪ well, we thought today might be about china gdp. that does not seem to be the overriding factor today, talking a lot about banks in this country, of course. and in europe, simon hobbs, they are still talking about spanish debt and especially today, cds. >> it's a very troubling close we're now working our way through. this is the fourth straight week of losses and there's a huge concern now about spain.
we're going to test spain and its ability to raise debt, it would appear on tuesday and thursday of next week. huge moves in spain and on the other european banks. let's just close you out now and have a look at where we are on the map of europe. >> european markets are closing now. >> check out the figures for spain. it's a sea of red, that goes without saying. france is also quite negatively skewed, as you can see. it is all about spain, or at least that seems to be where the concerns start. it may not be where they end up. and today, we actually had the cost of insuring spanish debt actually now at a record high. not necessarily that that should be your main focus, but it clearly is one reason why you've seen again the yields spike in spain back up towards 6%. this is the cds we've got here. let's go back to the yields, if we can, guys, just have a look at where we are on that ten-year. not quite sure what they will auction next week on tuesday and thursday, but you can see, we're just shy on our data here of that 6% level, which is where we
had approached and then, of course, the ecb, french minister talked us down through the prospect of intervention through the week. that's now gone. the italian and spanish markets have come down to a similar extent. it's driven from spain with that contagion link because the italian situation, in many people's eyes, with the banks and their holding of sovereign debt is similar. you see the way in which during the course of the session, both indeces have moved lower, though we did have stabilization within the last hour, down 3.5% on spain, down 3.3% on italy. let's look at some of the names within that, some of those big banking issues. down 6.5% for santander. huge issues for that. you have to recapitalize the bank. we've learned they borrowed 316 billion euros last month. how on earth will they continue
to buy the sovereign debt. looking at the italian situation, big falls also in milan. check that out, falls of 7% or even 8%, and that on the major markets is not through yet. let me show you the intraday charts of germany, of london, and indeed, where we are in paris. and you'll see again, we've got a stabilization coming through the session, but within that, it is a pretty poor showing for notably, again, yes, you guessed it, the french banks. let's have a look at where we are. we went through all this last year. down 5% for societe. and euro has taken the down drop. the dollar is higher across the board, but you can say it's been a one-way track so far, but still trading at $1.3076. carl, have a great weekend. >> see you next week. gary kaminsky also looking at spanish debt as well. at a multiyear low again. >> hobbs and i never get a chance, as much as people think -- i didn't know what
simon was going to say and he didn't know i was going to add credit default swaps on to the banks. he showed the equities. look at this. not only is it the equities, it's the credit default swaps which are again being traded and are reflecting the type of concerns, need i say, that we had a year ago when there was these concerns, as simon pointed out, with the french banks about the sort of interbank contagion. >> three companies have taken aid. ireland, greece, portugal. if spain became the fourth, how much damage would there be? how much of a surprise would that be to people? >> you know, that is an interesting question because we began -- when we talk about spain and we talk about italy, we start talking about a different size. and the question simply becomes, is it there because there is a sort of, the likelihood that this is an attempt to basket everything and put it all together? so, i don't know the answer to
that, carl. i don't know if spain essentially is saying we need to have a backing out of germany that will basically substantiate that we will be able to come through this. i'm not sure whether that's going to be a good thing or a bad thing. i just don't know. >> yeah. people talked about ring fencing with greece. >> exactly. >> that would mean that the fire has hopped the fence. >> and then again, we could think that that would be a negative thing, and then all of a sudden, people say, you know what? the fact that the germans have finally come here and said we're basically going to ring-fence everything, it becomes a good thing. i just don't -- we don't know -- i don't think we know what the reaction will be. that's why we've got to pay attention to this every day. >> did it surprise you that even though china gdp was "soft," right? we always use caveats with that data -- >> well, we don't know if the numbers are real anyhow. what surprised me about china is you remember 24 hours ago the e-mails we were getting the tweets going out there. >> it's got to run hot. >> what happened to the hedge funds leaking the information yesterday? i'm sorry. what happened to the hedge funds that were leaking information yesterday that this was going to be an upside surprise?
>> yeah. it did not happen. >> i don't know. >> bob pisani's joined us here on "post 9." >> what i would say on gdp on china is this, the question is are we bottoming? mizuho, morgan stanley had notes out saying they thought china was bottoming in the first quarter. march numbers, if you just bring up the march numbers, bank lending, 14-month high. crude still production in march historic high, industrial production, retail sales were up in march. so, a number of firms, including morgan and mizuho, were out this morning saying these numbers are better and we may have hit the bottom here. i think that's the way to leave it right now. let me just talk about the big decoupling thing. boy, do i get e-mails about this. the bottom line is it's been an ugly week. however, down and really down, there's a distinction here. this is not a great week, down 1.7% on the s&p. but germany, which had a fantastic quarter, arguably did better than us, is down 2.8%. that's a qualitative interest,
1.7% versus 2.8%. both lousy, i would agree. italy's down 5%. again, a notable difference, all down. china is up, australia is flat. i wouldn't call this exactly the whole world moving in exactly the same position. so, i'm not arguing that there is no such thing as decoupling or it's real or not. i'm just saying things are different depending where you go. on the bank weakness today, i want to point out, people don't realize how big wells fargo is in the mortgage business. they are far and away the biggest mortgage originator in the united states. they're about a third of all mortgages in the united states, and they increase their mortgage origination. they're gaining market share here. wells fargo, bank of america, jpmorgan, put these three banks together, they're about half of all the mortgage business in the united states. most people don't realize that, gary. they're just -- these three guys are absolute giants. now, let's take a look at what they're doing today. i think there was a real problem because jpmorgan broke out their second lyien book of business. there is a first lien and second
liens, $1.6 billion. they've never broken that out before. i think people were surprised how big their second lien book of business is. put up some of the banks and you can see we have weakness at some of the big banks that have particularly large mortgage position. so suntrust, for example, bank of america, companies that have big mortgages business are all a little bit weak on this news about the second liens out there. of course, this whole business about reps and warranties still not going away. bank of america has a lot of exposure in that area. >> that's exactly what we pointed out. if you want to try to find one thing to not hold to jpmorgan, it's the idea that the mortgage issues have still not gone away totally, and doesn't look like they will any time soon. >> yeah. but i do want to say, though, wells fargo is increasing its position. the originations increased 7%. that is a lot for a bank that's one-third of all the mortgages in the united states. >> right. >> and their costs went up. they're paying their people more to get business. that's what it looks like to me. that's a sign that it's going to be tougher for the smaller, the regional banks to get their
originations. >> thanks so much, bob. bob pisani. rick santelli's in chicago with the other half of a story he first brought us at the top of the hour. hey again, rick. >> hi, carl. absolutely anybody who hasn't been watching, viewers, listeners, block trading isn't an issue. some of the pit traders didn't want to do their jobs in the pits today until it was addressed. we had the trader's side with dave stein. now brian durkin, chief operating officer topic block trading. can you give us your take? >> thank you, rick. block trading is a facility that's been in place for many, many years in most marketplaces as well as at the cme group. block trading is one of a variety of facilities to accommodate the needs of our customer base to be able to execute large-order executions at a single price. with respect to the various venues that we offer, as you know, very liquid marketplace and globe exit in our trading floors as well as facilities to
effectuate the needs of our trading base. block trading facilities that are offered are very much within the confines of the rules and regulations of the cme group as well as our government regulator. >> now, okay, let's kind of hit issues that were brought up and hear your side, okay? with respect to the clients that want to do the block trades, the pit contends that their issue is in sympathy with the client issue because they believe that the human element, if it has a crack at disorder, can do it at a better, more efficient, transparent price. and your answer? >> well, that's not always the case, and you don't know all of the intricacies of what goes into driving that customer's decision. >> could there -- and i don't mean to pepper you, but i don't know that i could come up with any reason why a client would want to get the best fill for his order if it's all at one price and it's all for his block. >> but that's the issue is whether or not the transaction can be done all at one price and
all in one block. >> now let's stop because i see a common denominator. let's wipe the slate clean. there is an all-or-none order brought out. and this client, whatever his goals are, if his goal is to do the big order in one price in a timely fashion, if the exchange required an all-or-none, where somebody walked into pit and said, you know, three bid on 50,000, all or not none. if the pit doesn't rise to the occasion and it now goes into the current block trading mode, isn't that a good solution? >> well, one of the things that you noted is time, and time is of the essence in these markets, as you well recognize. first of all, we allow for all-or-none transactions to be conducted, but timing, price and the block are all components that are essential and are the elements that go into driving the demands and the needs of that client base, and we want to make sure that we're being responsive and flexible to a global marketplace. >> well, those are both sides of the issue, and i have a feeling both sides are going to be
sitting down. i'm very impressed with the traders, i'm very impressed with the exchange, and i'm impressed that they're working towards a slurks and we'll keep you on top of what that is exactly. carl, back to you. >> rick santelli, great stuff. rick santelli in chicago. when we come back, the "post 9" investor club is back with your questions on stocks and investing. first, a look at winning and losing stocks from europe's trading day. polar shifts will e the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans?
welcome back. coming up on the "halftime report," a few stocks on track for their worst week of 2012. apple slumping, worrisome sign? we've got the trade. and as china economy bottoms, find out what expert stephen roach is telling the "halftime report." plus, will google's split help it become the breakout stock it was supposed to be or keep it flat-lining? that's at the top of the hour. now back to the exchange. time for the "post 9" investor club. we've invited you to tweet us on the stocks you want to know about and we'll now answer those tweets with a customized analysis because we're here for you, the viewer. today's equity expert stephanie link, director of research, vp of strategy the at street, a cnbc contributor and cramer's right-hand woman and co-portfolio manager at his trust. welcome back.
>> thanks for having me. >> i love all of these, but travis has one of the best. "just curious if i should start taking advantage of my company's stock purchasing plan? i work for gap." >> yeah, well, the gap, it's a great restructuring story, and i do think there's margin opportunity, and i like that in a retailer. but the stock's up 40% year to date and i think comps in april are going to be challenged because they have very tough comparisons. remember, they just posted a very good number in march. anyway, i think you have some headwinds. they don't really have a lot of growth, so i would wait for this to pull back, maybe into the april comp number, if it pulls back, you can take advantage then. >> people like the quarter. it was the first time in a while where all the divisions had posted some gains, but you like tjx as an alternative? >> i do. i like the off-priced retail sector best because in this environment with high commodity costs, oil prices, gasoline and such, people are looking for a bargain, but they don't want to compromise on merchandise and they've got quality merchandise and store growth. >> this tweet "ford stock below $12 a share, a steal or dead
money?" >> i think it's dead money. i like the auto sector and the replacement cycle story, but they're losing share in china to gm and bmw. i'd rather own the parts companies. >> that's a restructuring story. you weren't worried about losing share in asia or the overall weakness in europe? >> well, both. i think 40% of their sales is international, right? so you kind of get the one-two punch. they're doing very well in the united states, so that's a good thing. i just think there are other places, if you want -- gm is doing pretty well in china. >> jim writes "kraft food stock, buy not now or wait for the spinoff"? >> we have been buying this week on the weakness there. was really no news out. i like it i think that's a catalyst that they are breaking up the company. even though we know it, i think they are creating shareholder value with the two pieces they're going to separate. >> and trading at a discount right now at least. >> that's right. >> patrick writes "coal catching some heat. what about peebt"?
>> coal was decimated last year and then this year. peabody is the bellwether, the best in breed, great international exposure in terms of australia and asia. it's trading as a group, so i'd rather own alpha natural resources. but focus on coal if you want to play in this space. >> would you say you need a strong stomach to do. >> absolutely. >> especially after what we've been through. >> and you have to believe natural gas prices are bottoming. >> gus writes "with all the noise on nat gas, what is up or down with westport innovations?" >> i like the truck cycle and i think gus is spot on in terms of focusing on the nat gas engines. i am nervous that there's competition coming into the marketplace. cummins, navistar in particular. so, i'd rather own the cummins. own the best in breed. own the one that's the leader with the best technology and gaining market share. i just wouldn't buy cummins until it falls below $110. >> steph, help us quickly on apple. is it good or bad if apple is
not the leader, if we lose that leadership with apple? is that good or bad for the overall market? >> i don't think it's a great thing. if you add on financials, you'll have a one-two punch, right? those have been the two groups and areas people have been focusk focu focusing on. i'm not sure we've lost it yet. it may be just taking a breather. >> i love how you and cramer almost say the same words. >> uh-oh. >> a symbiotic relationship. very cool. thank you, stephanie link. >> thanks for having me. when we come back, larry kudlow talkslitics to comments from the fed. back in two minutes. e belief that bringing you better technology helps make you a better investor. with our revolutionary new e-trade 360 dashboard you see exactly where your money is and what it's doing live. our e-trade pro platform offers powerful functionality that's still so usable you'll actually use it. and our mobile apps are the ultimate in wherever whenever investing. no matter what kind of investor you are, you'll find the technology to help you become a better one
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welcome to superderivatives. ♪ the president releasing his 2011 federal income and gift tax returns this morning, reporting an adjusted gross income of over $789,000. who better to talk about those numbers than our good friend larry kudlow, who joins us here at "post 9." larry, good morning to you. >> good morning. >> effective federal rate 20.5%. what do you make of it? >> yeah, a little low. [ laughter ] >> ouch! >> sounds like he ought to pay 30%. i mean, the buffett rule, man. no, but it all -- look, i regard all this stuff as a big distraction. i am totally opposed to the buffett rule because it's a stealth tax on capital gains, which is probably the most important risk and investment tax in the economy, and i don't
believe in punishing success. having said that, i'm glad mr. obama paid what he paid. i noted in the stories he gave a good amount of money to charity and i say good for him. >> do you think the fairness argument, as the white house makes it, is sincere or is it really about targeting what romney will one day eventually disclose himself? >> it's all about mitt romney. the entire buffett rule, tax release return is all about mitt ro since they got scorched on the war against women yesterday, they're now going back to, i guess some kind of class warfare on income taxes today. none of this is going to impress voters. carl, you know this. you've covered this beat. people want to know what to do about the economy, deficits, debt, entitlements and america's role in the 21st century. this stuff is just a political distraction. >> well, i notice now hillary rosen has canceled on "meet the press" for sunday. do you not think that the women vote, the mommy vote, as it's
called today, is not powerful, not election-moving? >> no, i think it's hugely powerful, but i think because of this hillary rosen democratic lobbyist person, all of a sudden, mitt romney's problem is shrinking because of how ann romney handled it so beautifully. i mean, that's the key point. and if you attack stay-at-home moms, who, by the way, have substantial economic value. we went and looked it up at salary.com. they probably are worth about $140,000 a year. and of course, their total value to the world is incalculable. but having bungled that, the gender gap now is far less of a problem today for mitt romney than, frankly, it was yesterday. and ann romney is a star, for heaven's sake. i'm not saying anything negative about michelle obama. i mean, she tweeted nicely to defend ann. the president tweeted to defend ann. i'm just saying, the fortunes of politics can flip overnight. this was a trade that flipped. all of a sudden, the gender gap's a whole less of a problem for mitt romney, and romney's
polls -- look at his national polls out from rasmussen and other places, it's head to head. it's a horse race. it's even up. >> larry, let me ask you quic y quickly -- >> don't worry about china. i'm here to tell you -- >> i channeled the super bowls early in the program today and they mentioned you along with ed hyman and economists who will prove to be rooit right, that the u.s. will exceed expectations this year. >> i think so, on profits, on profits, and the economy is at least 2.5% if not 3%. it ain't fabulous. i never argue that. i'm just saying it's okay. on china, gdp 8.1%. it may be the low of the year. here's why. look at their retail sales report, strong double digits. look at china's industrial production report, strong double digits. look at their lending, strong double digits. that tells you there is no hard landing in china and the stock market remains a buying opportunity. in my humble opinion. >> finally, was that really you
on the hammock in those promos? looking awfully good. >> did you see that i was reading frederick's "the constitution of liberty" and i had milton friedman's book next to me. my summer vacation reading list. >> larry, see you tonight. larry kudlow joining us at "post 9." don't forget to send us your tweets. have you heard about this bat stuck on a delta flight? complete the sentence -- "the only thing worse than being trapped on an airplane with a flying bat is being trapped with -- blank." @cnbcsquawkst. your responses in a moment. [ male announcer ] we imagined a vehicle
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server room on ipo debut day." and "in the middle seat between steve liesman and rick santelli after any fed meeting minutes are published!" rick santelli, you know better than anyone. i would get out of the way, would you? >> absolutely. absolutely. i want to put a tombstone not only on the fed minutes, but also on the issue we've been looking at all day, and that's block trades. to summarize quickly, the exchange wants to facilitate block trades for clients they believe have special needs. the pit seems to sympathize with that, but they'd like a crack at the orders, and some of the residual issues as both sides work it out was brought up, fees. are either side of the equation going to make extra money one way or the other? i don't know, but it's something to look at. order secrecy. the exchange official said, you know, maybe the customers doinz don't want the order to go into the pit because of secrecy, but they don't need to know if you're on the buy or sell side, so i don't knew about that one. timing, i can see both sides. they may order time to the or