tv Street Signs CNBC May 7, 2012 2:00pm-3:00pm EDT
was the sexiest man alive. i didn't ask her who the least sexiest guy was. >> that will do it for "power lunch." >> "street signs" begins right now. could stocks take -- today we're going to ask if all the chaos on the continent of europe can be bullish for america. warren buffett says gold is for suckers. a street fight on gold coming up. what exactly would warren buy? we've run our own screener to find some names and a price target and a buy recommendation
for facebook. i any european election disappointment, the dow rebounding off an early 68 point loss. the nasdaq composite also its lowest, to stage a come back. let's get down to the floor. we'll get to bob in a second and talk more about what's happening in terms of today's trade. bob is there. fantastic to see you. we were just talking about how it's kind of interesting despite what was going on over the weekend, in terms of political shufflings in europe. our markets and european markets aren't particularly ruffled. >> it's easy to argue everybody is numb to france and greece. but there's another point to be made here that everybody says to me, what are you going to do with your money at this point? what are you going to do when the ten-year is at 1.87%? who's going to put money into the bond market?
nobody at this point. it's not so much everybody is ennature orred with stocks, if you look at what's moving day throughout the day, the financials in europe were up, in united states it's been heavy volume in the xlf which is the primary vehicle. and even energy stocks are starting to stabilize a little. i would call this a wash on a day where a lot of people thought things could be worse? >> thank you very much, bob. well you know it's a big buffett day here on cnbc. let us listen to what warren buffett had to say about stocks this morning. >> i think equities are attractive for the long term. the same thing i said in october testify 2008. equities producing businesses, good producing businesses are a great thing to own over time.
and they've been a good thing to own over several hundred years in this country. >> so the buffett bottom line, he's a buyer. but is that a smart move? let us bring in clem chambers, and barry james president of james advantage funds. all right, barry. do you agree with warren buffett on stocks? are you a buyer today? >> not today. i agree with him longer term, certainly the next ten years as we get into a more inflationary environment, stocks will be much better. but probably for the summer, we're pretty cautious, sentiment has got a little too bullish. and we find that a lot of stocks are trading above the 200 moving average, a lot of technical items are saying we should have a pullback, sentiment so
overoverwhelmly bullish for stocks. >> i see that you are expecting a 10% market pullback by summer. and clem, what about you? are you like barry or a buyer or seller? >> i'm a mild buyer. there is this worry that the last couple of years we've had these big corrections in the summer and everybody is waiting for the next one. i like to be contrarn about that and i like to say we're not going to get one this year. so in the short term, you've got to be a bit careful but long term buffett is right. and equities are good. we're going to get this nagging inflation for a long time to come yet and it's going to push equities up. you've got to be short money. and of course being long equities. >> what does that mean, clem, be short money? does short the euro? >> well, i am short the euro. yes. but in an inflationary environment, if you can get cheap finance, you want to do
that and buy assets with it. i'm also pretty contrarian about that. i'm loading up on property right now. i want to be out of money, i want to be in debt, low interest rate, long-term debt and that's my positions. because inflation is going to be going through the system big time over the next few years. one way to do that is buy gold. that's one way to short money. a lot of people have town that route. if you want to take more risk, you want to borrow money at low interest and have that locked in. >> i see that your prediction for the euro to fold 110. even with. >> well, i mean the strength of the euro is now broken and america will try to keep in line with the euro. all the big currencies are trying to keep in line with each other. trying to stop the devaluation. but i think the euro is going to be much weaker than even a weak
dollar and there's going to be a fight to the bottom of the barrel but europe is going to win that barrel. >> barry your golden rainbow fund ask fairly balanced. when we talk about europe, everybody seems to focus on the banks. these are banking problems. are you lightening up on u.s. financials because of what is going on in europe? >> no. we're not accelerating, though, into the big money centers because of europe. we're at the second tier of more of the regional banks, the keys and the fifth-thirds and the pncs and the like. and the smaller folks that can be helped by a weaker economy. we see a weaker economy coming ahead. we don't see much inflation this year in all reality because there's not a demand for goods and we're starting to see commodity prices fall. if you look at the household survey, 800,000 people lost
full-time jobs last month. >> can you leave us on a high note? it's a monday. one stock you love? >> sure. well, i like the reits. from boston properties into some of the other commercial reits and we like bonds of the we were buying longer term bonds last week. 40 to 1 is the sentiment, i like to go contrarian too and i think that's a good place to be right now. >> thank you very much. let's get out to tailor, this is a road show not quite like any other. >> that's. >> reporter: some 6 hundred attendees, as they were leaving the meeting shs they were less than thrilled having to wait about an hour in line only to get into the ballroom and for facebook management to replay a video that was posted online
last thursday. many of them, if not all of them, were already familiar with this video and it only ate up time that could have and should have been used for the question-and-answer session. that's notization that important issues didn't come up in the q and a. a lot did, starting with insta gram. mark zuckerberg striking this deal by himself and when asked the audience he said he would do it again, i love the deal and it he feels good about it. on china, that question elicited some gasps from the audience when sheryl sandberg said the problem starts with the government. we can't talk about facebook's practices and policies in china until we can solve the overall -- that was the last question that was asked before the meeting actually let out.
and using 2012 revenue and profit versus 2011 numbers is sort of an unfair disadvantage because they had some game-changing numbers on the payment side, especially from zynga in 2011 that really really made those numbers stand out and without another game changer you can't have the explosive revenue growth in the same period to 2012 without something similar. that being said, he thinks that one of the company's knewest products could be a game changer. but i think it's interesting that he said there's an unfair disadvantage to the 2012 numbers, especially as the company is going out on the road to launch the ipo. >> okay thank you very much. and folks out there watching us in about 20 minutes time from now, we have an analyst coming on the show who already has a buy rating on facebook. also on deck, warren buffett says only losers buy gold and
he's not alone in that school of thought. but is he right? a good old fashion street fight is next. >> so what would warren buy? he didn't name any names. but we're going to try to. we want an sclusive stock screener to find out what companies warren might be interested in. that's ahead. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 let's talk about that 401(k) you picked up back in the '80s. tdd#: 1-800-345-2550 like a lot of things, the market has changed, tdd#: 1-800-345-2550 and your plans probably have too.
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are not what you would call gold bugs. take a listen. >> when we took over berkshire, it was selling at $15 a share and gold was selling at $20 an ounce. and gold is now 1600 and berkshire is 120,000. i think gold is a great thing to sew into your garments of your family. but i think otherwise self liesed people don't by gold. >> gold up almost 5%. it is of course down today so are the men of berkshire right or completely off target? gentlemen, welcome to our depot. tom, let me start with you. you are the bear in this debate. it is quite interesting the way gold has done a switch aroo. because this time last year when we were seeing european problems
it drove gold prices to record highs and now it's not dpog anything at all. >> gold ran from 282 bucks up to $1900. that's the buffett and munger you don't have to own anything forever. off of 1900, what en$1900, what happening? the dollar hit a low in 2007. the dollar is trash, but it's been coming back since 2007. gold has been coming -- the physical bold hasn't been bad. the equities have gotten killed. the xau is back to 2007. the bottom line is the dollar wants to go higher. it wants to get to 82, 89, gold is priced in dollars. and when people talk about risk on, risk off, it's all about when we had the financial debacle in 2008 -- the bottom line is we're at a huge
consolidation and gold wants to run down to 1500 now. >> michael, can gold move higher if the dollar does as well and if so, why? >> sure it can. people are saying the gold run was over when was around 5 or 600. the reality is that paper assets being created around the world continue to get printed and they devalue in unit cost or unit value and gold is an anchor to that. it's true it doesn't pay earnings or dividends. it's a steal as set from that point but as a diversifdiversif provides an anchor. and at certain times a performance. i would compare the performance of gold versus berkshire stock for example to find its relative yu tillty in the economic or so. it could go higher from here. there's a lot of uncertainty, real interest ratesuate there, inflation are negative. that's traditionally been
bullish, the pressure is on higher rates. we may not see them for a long time to go. so i think it is still prudent to hold some. >> so put your money where your mouth is. how much higher and when to buy. >> i'm not big on price targets, but i think in this environment, the focus on easy money, the issues around the world with respect to the european economy, our own economy, the uncertainties politically economically, those bode well for a continue run in gold. it would be volatile but it would continue to go up. >> i believe the euro will eventually hit parity. maybe 1 to $110. if the dollar strengthens up that much, where will that be? >> 1250 asta. and what michael is talking about, if you listen there, he's talking about an insurance policy. because if you look at the portfolio, catch and eventually gold is only 14%. it's not like there's a lot pf
gold inside that portfolio. so as an insurance policy, great. but the bottom line, as where this is going right now, this dollar wants higher. and commodities want lower. and bottom line is that what's i'm looking at. >> the one thing i would say though is gold is a chameleon in a sense that recently its traded off the dollar but at other points in time it's roaded off the euro, off the yen, off the price of a barrel of oil. >> for four or five days, yes. but when you look at gold 120 the dollar was in 2001, gold was 282. the bottom line is they're priced in dollars. and you also have with the dollar, by the way, is there are so many dollar bonds being issued in asia now that that is putting more force into the doll lar.
they neetd dollars to buy the bond and to pay the interest. the dollar is king dollar right now and it's moving. >> great debate. thank you for joining us today. >> have a great one. >> it takes a market, right? still to come, we're playing a little game. who said what in the battle for your tv. >> and facebook ipo fever is hitting up. we have one analyst who has a buy on it. final out what the social offering could bring to your portfolio. [ donovan ] i hit a wall.
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we're watching chesapeake shares slipping here a few minutes after a filing from a major holder in chesapeake, southeastern asset management with three points that they make to management in a letter. number one they say we are in favor of the company reducing debt but they don't need to manage a specific target right now. more to the point, they think that management needs to stop unproductive communications right now and really focus on their knitting and they also urge management to consider any offers to buy the whole company. initially it moved higher now it
seems to be slipping. certainly one more piece here of yet another major shareholder very concerned about this company. >> thank you for that, bertha. every one is fighting for the piece of the next multimillion bonanza. julia boorstin is here with a game of who said what. >> i went one on one with media and tech ceos and they had a lot to say about the future of television. a lot of opinions of the so let's see if you can figure out who said it. we have three quotes here. we have five people that could have said each of these quotes. the first quote is this. "there will be a lot more change in television in the next five or ten years than the last 25 years combined" was it disney ceo, comcast ceo, research, ashton kutcher or cnbc's own
herb greenberg? >> i'm going to rule out herb green werg on this one. >> kutcher? >> no. >> the other one. >> brian. >> it was brian roberts. >> so next. an eyeball in television, an eye balance in internet will start to become one to one and once it becomes one to one, the whole damn thing is going to tip. who do you think it could be? >> kutcher? >> that's right. >> well done. you got your job back. >> and he was talking about advertising. and you know, when viewers the internet on television and a lot of advertising dollars. >> here's the last quote. "it is, quote, net flex is a dead end business". >> greenberg. >> you know he loves to hate on
netflix, but this was james mcquivey. >> i want to talk about oprah, because they're talking that they have lost $330 million since the launch. where do you go from here? what's the future of the o network? >> i think she needs to be more involved and that's been the secret so far. she's becoming more involved and as we saw this year, since her own tv show launched, the ratings have gone up. and there have been improvements. but i think there's this realization it's a lot 45rder to run a tv network than it is to have a talk show. the discovery is starting to take an active role in managing this and trying to figure out how to make it more than an oprah show. >> they must be annoyed, right?
they have. >> they co-own this channel with oprah. but the idea is this is how they want their channel to work. they want to have her brand supporting the traffic to the website and viewers. >> oprah is a continent on to yourself. she's reallyizing that content is king, but it's hard. >> so when you're in a situation where people want to watch oprah but they have a ga zillion options both on television and the internet, what are they going to do? we're now in a mega-channel universe. >> we were -- our team was talking about this earlier, because we looked at the data on how many people watched tv how many hours a day, but of course how many hours of day are they on the web, the numbers don't add up. so be honest. because i'm going to admit i've done it. feet up, laptop out, tv on.
>> the tv on in the background but you're not actually watching it. >> my point is, advertisers aren't getting the value for their money as much because i'm not engaged really as much as i should be in either one. >> the smart advertisers are going to be in the same places at once. so if you're online and watching the tv at the same time, they're going to make sure they're going to be in both places. >> the other thing is tweeting. that's scenario to harness. >> we've got a special report from you tonight, right? it's "stay tuned, the future of tv". >> you should tune in. >> i will. i want to know if i'm going to have a job in five years. >> the future of television is bright, i'll put it that way.
>> there's always naked news dot come. the disaster in bed. >> and are machines ruining it for the rest of us. we are going to talk about the state of trading. we've also got our warren buffett stock screener coming up. halfway down, a lot more to go. stick around. this man is about to be the millionth customer. would you mind if i go ahead of you? instead we had someone go ahead of him and win fifty thousand dollars.
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welcome back, everybody. let's take a look at where we are standing. this of course is the silver lining. as for the market, look at this, the nasdaq and s&p 500 are positive right now. the market kind of sold off after all those uncertainties that came out of europe but as you can see we seem to be taking it in stride as we speak. let's get down to some of the individual stock stories. let's make some news here. first of all, cognizant, what's going on with it sf. >> outsourcing firm, has an office here in new jersey, the stock is getting crushed today. we know the ceo was on "squawk on the street" this morning.
listen to this. >> while we're disappointed that we took our outline down a little bit as a result of this lack of acceleration that we saw coming into the second quarter, we're still very confident in the strength of our business model in the fact that we're taking considerably in the share going forward. >> if we didn't have another disaster this would have been it. >> let's talk yahoo as well. they're in a huge big fight with a hedge fund and we got some news today and i wonder if this was selectively released at a convenient time to distract people away from the scandal involving the ceo and his resume. >> the old timely leak, if you will much "the wall street journal" is they're in talks about selling the alibaba in asia. the news -- maybe it is, it's
not really the stock but something to note. >> warren buffett had an interesting take on the ceo issue by the way. let's have a listen to that. >> if i thought that as a director that a officer had consistently misstated some fact, i think i would probably do something about it. we actually had that one time, and if you can't trust the people you're working with, you've got a problem. >> and let's talk group on. the ceo saying there could be a bumpy road ahead. >> what he's talking about, he issued a shareholder letter. two things came out of it. number one he's looking at creating an operating system for local commerce, trying to maybe change their -- i don't want to change their business model, adding on to the model but he
talks about how the stock has been volatile, and he blamed it on an unfortunate consequence of the company's rapid growth so he's trying to take a negative and spin it in a positive. >> it's like in a job interview it's like what is your worst point and you say it's my attention to detail. you flip it around. >> fab's ipo, the road show, warren buffett has to say, referring to himself as agnos c agnostic. you've come along here to weigh in on this. we've also got a second -- an analyst with stern, and initiated coverage. >> i'm looking at the retail investor angle. one burning question surrounding this ipo has to do with what size of the offering small investors will get. will the 901 million users get a
piece of the action. they're considering hiring a usually allocation for investors. which might mean 25% or more of this company that could be going to the little guy. but the reality of their ipo sources tell me it's complicated. institutions make up the backbone investor base and ipos are risky for individual holders. guaranteeing as lease some links to individual bases. e trade will try to give every single actor who fits the investor profile an allocation of some sort even if their slice is so small. other firms may only get about 1% of the deal, meaning there's precious little to go around for those retail investors. we'll see. they're not going to decide for sure until next week. >> they certainly owe those investors. but let's take a time-out on
facebook. i want to get to some breaking news on google. >> yes, there is a partial verd in that google versus oracle case and it is a verd in favor of oracle. the jury there in northern california has found that google did in fact infringe on some, some oracle copyrights. but there is some undecided. they said they did not reach a verdict on whether google might have had some reason to use those patents based on fair use and based on a finding, the jury says, that the sun in oracle, the nexus there, may have led google to believe that they didn't need a license to use it in smart phone technology. google says no, they want a mistrial based on these partial findings. oracle has said, we want a share of google's profits that derived from what they say is alleged
misuse of their patents. and the judge says that's not likely to happen. so it's in the hands of the lawyers now, but the headline here folks is a partial verdict in that case in favor of oracle, finding, the jury did, that google did in fact violate copyrights on part of the java programming language. so when we lurn more, we'll tell you. >> we are going to start a break away channel that only covers patent law trials. there's enough news to fill 24-hour programming. >> let's get back to facebook, because we mentioned that the analyst at stern -- who just initiative on facebook with a buy. how come? >> well, we think facebook -- what is a large market, worldwide advertising market,
something like $600 billion and a subset of that is also pretty large at $68 billion. if you think about where they are today, they only have 5% of the online advertising market, but they have 48% of the worldwide internet users that come to facebook on a monthly basis, and that excludes china. so there's a disconnect there. we think they will gain a significant market share in the coming years. >> you have a $45 price target, right? >> $46. >> how did you arrive at that number? >> looking at several things. we're looking at the growth potential of this company. we think they're growing their ebitda at about 25 to 30% over the coming years. also we looked at where google traded back eight or ten years ago and they were in the middle of disrupting the advertising market with search.
we also looked at where facebook was trading in the private market. i think we're comfortable with that target price. >> we have to cut it short because of breaking news. quickly is there any threat to facebook, google plus? >> absolutely. i think there are plenty of threats out there but i do think facebook will be able to gain significant share despite all the threats out there. >> thank you for joining us. >> the cfa institution is having its meeting in chicago today. mary thompson joins us now. >> reporter: thanks, so much. you know, i want to jump right in. you are going to be talking about the new muni market in just a couple of minutes. what exactly is this? >> what makes it new?
>> yes. >> well, it started becoming new with the collapse of the bond insurers back in 2007. it's also new because there are more credit problems around than there were since really the mid 1907s. >> reporter: so how do you manage it? >> stay high in quality. but i think you have to go out loner in maturity than an awful lot of people want to. people are desperate for yields, because they have so much in cash because their portfolios have gotten shorter and shorter. >> reporter: talk about going out longer in maturity, because people say the risk to that is the we are going to see interest rates pop up and that's aets going to destroy the underlying value of these funds. >> for one thing you still have long munis yielding significant -- we do have some cushion. that helps cushion.
we also, we believe that treasury yields will eventually erode higher. we are not of the camp that it's going to be -- where all of a sudden we go from 3.5% to long bond environment to 6 or something like that. we don't believe it. >> reporter: we have to cut this short, for retail investors out there if you were going to buy a muni bond, what duration, what quality and what would you avoid? >> i look at maturity in that duration, about 12 to 17 years is the best value. >> reporter: quality? >> high. lots of revenue bonds, water and sewer, other -- even airports. they're protected pretty well from the bankruptcy issues that are around right now. >> reporter: and quickly last there i i, are there state bonds that you would be avoiding right now? >> not really. it's more a matter of price and
diversificati diversification. back to you. >> coming up next, three wb, what would warren buy? >> this morning he dropped that he was looking at a $22 billion deal. we ran a screener, certain market caps, certain criteria, we've got a screener results and a guest to say whether or not he likes them or what he has in his portfolio. a lot more to do when "street signs" returns. ♪ [ piano chords ] [ man announcing ] what we created here. what we achieved here. what we learned here. and what we pioneered here.
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what would warren buy? that is the question that we are asking today as the oracle of omaha said that he was looking to buy an unnamed company for $22 billion. >> you almost spent $22 billion buying a company a couple of months ago. do you want to tell us who it is or a hint about what happened, but more necessarily about why you didn't buy the company. >> we couldn't come to terms. but we're always looking. >> and of course since warren is so tight lipped, we want to narrow down some target. we ran a stock screener for you. he could go outside the u.s., we
want to narrow it down. market cap between 16 and $28 billion. so we had to give a 30% premium on either side. forward p/e less than 14, that's the average of berkshire publicly traded, and a price to book which would be high for his current portfolio. about 25 names came up, so we eyeballed them. got some smart people together and said we know the industries, we know kind of what he likes, so here are four names basically that we have come up with with our screener that might be, based on some of the ideas. mosaic company, fertilizer maker. he likes things that are needed. we're always going to need ferret liedser. devon energy, so an energy name. chsmt hubb, high end insurance.
this meets those criteria, all the numbers do. and archer daniels. so again, that's our screener. did you does a guy that makes these kinds of screens for a living agree with these names. john reese joins us now. you heard our screener, you heard our names. do you agree with any of those names that warren buffett may be poking around or would he even be interested? >> bottom line, no. although the closest ones that you have, archer daniels has a long-term earnings record, ten years positive earns, the same thing is true for chubb. >> what about chubb? it fit our criteria, great balance sheet, high end.
>> and generating lots of cash. >> is that a possibility? >> it's a possibility. but it's still not priced right and the growth of the company is still very very small for it. so in the end, it is not likely to be a viable candidate. >> who do you think he should buy? >> well, i have a model based upon my best interpretation of everybody who's read, written about warren buffett's strategy, and that's the book "buffettology" and that's had a great record since i've been following it. based upon that model, it likes general dynamics. general dynamics has had ten years of great earns. market cap about $24 billion, so approximately in the right price range. some slightly smaller firms,
fastenal corporation, make -- laboratory equipment, services. >> we've got to leave it there, john. we know that will always be in demand and that's one of his criteria, right? >> very much so. >> john reese, thank you. appreciate you come on a short notice. see you soon. >> up next, why is the volume so bad? what exactly is spooking individual investors lately? >> perhaps the rise of the machines. warren buffett's right-hand man wands to terminate rapid fire trades. we're going to ask aby cohen of goldman sachs what he thinks. more than 150 million professionals
>> could this be why the investors is still sitting on side lines? do you agree, are the machines to blame? >> i'm sorry, i didn't hear the whole quote, so it is hard for me to respond. i am, however, happy to be here in chicago with the cfa institute. 2,000 people strong are meeting to discuss best practice in the industry. >> soer with talking about who is holding back retail and the incredible liked volume. we have debated this on cnbc. do they feel like it is all gained and they are not on the level playing field? weigh in here, what do you think is holding back the individual investor? >> there are a number of factors, including some of those that you've mentioned. but i think overriding has been the fact that we have been through such a difficult time in the economy, when people are still so concerned about job losses. they're concerned about very
sluggish pace of economic activity here in the united states and ongoing recession elsewhere. i think investors are quite nervous about the equity market. one of the things that will restore confidence, i believe, will be not just improved performance in the equity market, we are in fact at prices that are double what they were at the bottom. but also ongoing improvement in the economy. particularly those variables that people feel each and everyday, how their neighborhood is doing. how their families are doing on the job market as well. >> you know, to mandy's point, i think it is a huge issue. how do we regain the trufrt of mom and pop in america in the equity mark snets i'm sure you talk to people. i do. mandy does. we all do here. they say, you know what, i don't trust it. it is a rigged game, i'm out. frts. >> well, what we have to understand of course, is that the equity market is something
that shouldn't be viewed in a straight line. i think that many investors in the period before the credit crisis become lulled into a sense that things would move uni directionally. that's not the case. that's point one. point two, we have had a shock to the economy. whether retail spending, what happened to people's savings, what happened to their jobs and so on. this takes a long time to recover. and the third thing too, is i think that for many individual investors, there is an clear sense, perhaps, in terms of what can move the market. you know, we spend so much time talking about the short term moves. what is going to happen between now and tomorrow morning. the very often we forget to step back and therefore individual investors, don't step back either, to think about what are the bod things that will drive the equity market higher. what we do know of course -- >> is the equity market going to be higher six months time from now? and is the economy going to be
okay? since we had that real thud of payroll on friday. everything will be scrutinized and people asking themselves, are we losing pace in this recovery? are we falling back, or is this just a little blip? >> that is exactly the right question to be asking about the economy right now. our initial analysis is that what has happened in the u.s. economy in the past few months is some deceleration, but deceleration down to two or 2.5% rate of gdp growth, clearly an recession. would we like it to be faster? of course. we would like job creation to be faster. we also have to recognize that one month doesn't tell you the trend. there are flaky things happening in the winter months. weather was so good that from a seasonal adjustment standpoint, data looks fabulous and in some ways better than they truly were. so we have a little bit of mathematical or statistical adjustment happening right now. the intermediate to long-term
outlook -- >> i'm so sorry, i have to jump in here. we are out of time. thank you so much. >> fitting the disaster du jour. herb, if you are listening out there, a big shout out. raymond james analyst says he is hearing about, seeing, whatever, surprised discounting on the company's best selling mattress, the cloud supreme. forget cloud computing, this is a mattress. he think that indicates, it is not selling well, also says the short sellers are hammering temper paidic. >> and a dose of sunshine as drug makers stock is jumping after cystic fibrosis therapy showing vertex over the past year. oh, look at the spike today. up 54%, incredible over the past year, up 5.7%. >> up next, gluten free pizza. sort of.
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