Skip to main content

tv   Street Signs  CNBC  May 11, 2012 2:00pm-3:00pm EDT

2:00 pm
nasdaq higher by 15. s&p up by 9. jim iuorio, thanks for being with us this past week. that will do it for "power lunch," sue. >> and "street signs" begins right now. everybody have a great weekend. >> happy mother's day, sue. >> thanks, ty. all right. welcome to "street signs." i'm brian sullivan. stocks mostly shaking off a slam on jpmorgan. the dow not crashing despite the bank blowing it with a $2 billion bad trade. is it time for a financial intervention? time to diffuse the weapons of mass destruction, eliot spitzer and others here for a debate. is china maybe a bigger concern than jpmorgan or europe? new data shows china continues to slow. we keep connecting the china story to your money. plus, a possible leak on the rumored new apple tv. and a big insider buy helps a beaten up name, mandy, we're going to tell you who that is. >> cannot wait to find out. thanks, brian.
2:01 pm
market holding strong despite the financials getting whacked today. two hours left in the trading session and the dow is on track to give up more than 1% over the course of the week. take a look at the dollar index. it is up for the tenth straight session. it is the best ten-day winning streak since august of 2008. and the big story today, you've heard all about it, jpmorgan, that stock down more than 8% today. but still up 12% year-to-date. and shares of jpmorgan seeing some of the heaviest trading, as you would imagine, but it seems since the financial crisis more than 162 million shares of jpm have changed hands in today's session. >> wow. and of course the jpmorgan loss dominating the news. people are understandably upset. this just the latest in a string of events that has crushed a lot of confidence in the financial market. just take a look at the last five years, folks. let's go through the calendar. 2007, 2008, 2009. you can even argue still today the subprime crisis and the fallout. then you've got 2008, right. bank bailouts, t.a.r.p.,
2:02 pm
meetings on the hill. and still nobody has really gotten in any trouble at all, have they? then in may 2010, the flash crash, one bad trade brought the dow down for just a few seconds, but brought it down 1,000 points because of "a market so fragile and fragmented that a single large trade could send stocks into a sudden spiral and then now." jpmorgan saying it made a $2 billion bad bet with the possibility of losses to come. ceo jamie dimon admitting the bank simply blew it and didn't monitor the risk enough. sounds bad. it is. but maybe, maybe, there's a positive here. perhaps finally wall street is waking up to the fact that it has been engaging in what some would call risky behavior, trading too fast, trading too complex. and maybe this will make banks get back to basics. in other words, are we finally at a tipping point where real change can happen, mandy? >> that is the question, brian. let's begin the conversation
2:03 pm
with the former sheriff of wall street and the governor of new york, eliot spitzer, who's joining us today from new york. governor, fantastic to have you on the show. >> pleasure to be here. >> i know you targeted henry blodget of insider came out and likened some of these wall streeters to a bunch of kids playing with dynamite. essentially banks have got, as brian just said, too complicated taking on too much risk. do you feel this mistake by jpmorgan might be that tipping point that rolls some of that back? >> no. i wish it were. i wish that i could agree with the optimism here that finally we would have a consensus that fundamental reform is necessary. the banks, the chamber of commerce, the financial forum, the financial services forum, still objecting pushing back against this sort of reform that should be put in place. we should go back to a glass world, require much greater capitalization, we should pass the safe act that brown is promoting. all sorts of simple things could be done to build a financial services sector that would perform its proper function without these risks.
2:04 pm
now, i don't see this $1 billion, $2 billion trade as the end of earth. it's merely symptom mattic. jamie dimon is probably the best of the bunch and that's bhie this is an important message. even when he tries to do something reasonable, it's going to fail. one point about a $2 billion loss in a stable market. understand this is not a choppy market. this is not a market with great volatility. this is a relatively stable, easy market to game. look at how the major players did in the last quarter. virtually every one of them was up every day in the last quarter. and they still managed to lose $2 billion on this. that shows you the inherent risk. to go back to your first question, this isn't kids playing with dynamite. when kids play with dynamite, they get hurt. this is more akin to somebody tossing a grenade into a public fis k because the banks will toss out. >> if this is not the tipping
2:05 pm
point, if this is not the wake up call, what more do we need? >> we need a president and s.e.c. in congress more willing to perform. dodd frank was insufficient. in this week's "rolling stone" even that bill has been cobbled, hobbled, sliced and diced by the continuing lobbying by the securities industry by their ownership of capitol hill. they passed a so-called jobs act a couple weeks ago that visor ated. members of the house committee bunch a jokers don't have any idea what is going on. the s.e.c. has failed to bring a significant case. of course this is going to happen. >> let's bring in other views. we have scott, frank and tito north jersey community bank as well as governor spitzer sticking around as well. frank, i want to go to you first. you heard what the governor had to say.
2:06 pm
strong words about the s.e.c. pushing for the volcker rule. the volcker rule is not yet written, right? we've heard it's a couple hundred pages. we doept know what's in it. we don't know how it's going to end up looking. is the volcker rule, whatever you understand it to be, a good thing? >> i think the intent is a good thing. i don't think banks that have fdic protection should be trading for their own account. proprietary trading under those types of institutions probably is not a good idea. the problem with the volcker rule is how are you going to write those rules? how are you going to deal with all the complexities of that legislation? and therein lies the problem. >> scott, you're going to write the rules based on what the banks lobbiests tell you to write in there. i hate to be so cynical, but they're going to have a big influence on how that looks if it ever gets done. >> of course. and they probably should. but the problem with writing too many rules, you're going to get another code of the irs, an internal revenue code. and the smartest guys gravitate to that code and find ways to
2:07 pm
drive through it. the banks have already stated they're not dpoing to be greatly impacted by the volcker rule in activities going on. they're already looking at ways to drive through the rule. >> couldn't this incident show firms to use hedging to prop trades and still get around and still be in compliance with the volcker rule? >> precisely. you're talking about hedging your entire business risk, perhaps, i know that's what the jpmorgan office is trying to do. they're going to do things that have basis risk to different instruments. they are not involved in perfect hedges for perfect instruments. they're trying to hedge macro risk. >> we also need to hedge risk and even community banks, small banks, agricultural banks, banks that have to take on interest rate risk or commodity risk even on such a small scale as a small bank in iowa has to hedge its risk. the fear here is that the volcker rule could actually impact banks like that as banks -- by the way will not fix what happened today at jpmorgan chase. >> let me jump in here for one
2:08 pm
second. of course hedging is part and parcel of virtually every business model. everybody wants to do it and everybody should be able to do it. the banks jump up and down say it's complicated therefore it's bad. that's a canard akin to saying all the rules are destroying confidence. we don't know what things will look like. that was never the reason for lack of investment. it was greed, cynicism and gaming the market. warren stevens wrote i think a spectacular op ed in "the wall street journal," it does banking the old fashioned way. he said cut the banks in half in terms of order of magnitude, tbtf, too big to fail, is still a risk. increase capitalization, go back to a glass steebl world. it's simple. >> how would you have the world deal with multinational corporations residing here in the united states that will have the only choice left to them will be a foreign national bank. >> not at all. >> i totally disagree, governor. >> you want to do business here, you play by our rules. we're still the largest economy
2:09 pm
in the world. >> we're not going to have the largest banks in the world with the largest economies in the world? i don't believe in too big -- i do believe in too big to fail, but i do not believe in too big. >> let me tell you something, we have listened to that argument in the '70s and '80s. what it led to is follow the european model. it led to a concentration of capital that led to greater risk, greater distortion in the market and financial cataclysm, the likes of which we haven't had since the new deal. the european model, the european leadership -- >> governor, that's not what caused the issue. >> you know it certainly is part of it. the europeans are way ahead of us on this. you look at what they're saying. they're saying concentration is bad. it increases risk. it puts the taxpayer at risk. when that happens are crazy bets because we've socialized risk and privatized gain. that's not capitalism. it's bad for everybody. >> i absolutely agree. i do not believe, however, as we sit here today we have institutions that are just too big. they may be too big to fail, and that has to be resolved with dodd frank. >> guys, we're going to continue the conversation after the break. we have to take a short break
2:10 pm
here. we are going to continue this dialogue. it's an excellent conversation. we'll find out maybe what the appropriate level of regulation is, right? you don't want to swing too far the other way. to frank's point, what is that? we're going to continue our dialogue. >> and do the machines on the street need to be slowed down as well? is that another issue to be tackled to so-call level the playing field for the retail investor? do not leave our channel. ttd#: 1-800-345-2550 let's talk about market volatility. ttd#: 1-800-345-2550 in times like these, it can be tough to know which
2:11 pm
ttd#: 1-800-345-2550 way the wind is blowing. ttd#: 1-800-345-2550 at charles schwab, we're ready with objective insights about ttd#: 1-800-345-2550 the present market and economic conditions. ttd#: 1-800-345-2550 and can help turn those insights into ttd#: 1-800-345-2550 a plan of action that's right for you. ttd#: 1-800-345-2550 so don't let the current situation take you off course. ttd#: 1-800-345-2550 talk to chuck. ttd#: 1-800-345-2550
2:12 pm
i don't have any evidence that it violated the previous
2:13 pm
law, but it is clearly inconsistent with what we did in so-called dodd frank bill or the volcker rule, which is to say to these big banks, you cannot take these big proprietary bets. you cannot bet on the direction of the economy. you can hedge, but this was not a hedge. >> okay. well, that was senator carl levin today on capitol hill speaking with our very own john harwood. we still have our round table here with us. eliot spitzer out of new york and here at hq, scott ja cobson and frank. scott, let me get to you first of all, what's your reaction to what mr. levin was saying a moment ago? >> whether it's hedging or not part of the global or macro parts that large institutions have to take. large institutions are important to grease the wheels of the economy, and we rely on that. but there is an asymmetric playing field with risk/reward. let's say jpmorgan is the new
2:14 pm
york knicks. if they lose the series against the heat, should they get another chance to play? that may not be fair to all the other teams in the league or the taxpayers. so the taxpayers and society as a whole needs to decide how much they're willing to sacrifice for these large institutions. >> something we got into a little bit before the break, do you agree or disagree with the following statement, if we allow or eliminate prop trading here in the united states through the volcker rule, that people who maybe want to engage it in will move -- maybe the banks themselves, the headquarters, will move to singapore, like a unit of proctor & gamble did yesterday so that they can do it, or maybe clients will take their business to standard charter bank in asia rather than us, is that a risk or as the governor said, a canard to scare people? >> no. it will happen. capital's going to flow. capital's going to flow freely in this society. it's hard to turn off the flow of capital. and do you want to? we're already suffering under over consumption. we need to grow to pay that off. do you want to have greek austerity? >> first, i'm a knicks fan. don't compare the knicks to jpmorgan chase.
2:15 pm
that's cruel beyond the pale of fair argument. second, i think we've heard this argument about regulatory arbitrage before. we heard it when suddenly all the ipos were going to go to london and we all know that was a canard. that's not why ipos to an extent. they did it because the companies were there, because the capital was there, because a multitude of other reasons. regulatory arbitrage is also something we should be careful about. we don't want it to drop to a lowest common denominator because we're afraid of capital flight. >> no, but governor, we can't control what china does. so you have to acknowledge it is somewhat of a risk, yes or no? >> it's a risk, but it shouldn't drive our policy. in other words, we cannot let our financial services industry drop to a regulatory framework or drop into a regulatory framework that will bring us back to 2008 again simply because china or singapore or some other regime out there says we're going to permit fraud and misbehavior. we need to create a stable platform because the lack of stability is what has hurt our economy more than anything else. >> and i would tell you that we certainly sit here today in a
2:16 pm
much more stable environment. again, i would emphasize that we need to separate the world between too big and too big to fail. yesterday martin greenberg gave a great speech at the chicago fed speaking about the fdic's capability to now resolve a systemically important financial institution. that's way more important than this discussion as it relates to jpmorgan and whether they lost a billion, two billion or four billion in this quarter. it's not a systemic risk. >> can i jump in for that? here's where i disagree with you. a systemic risk will strike all the major banks simultaneously. when there's a downdraft, it will overwhelm the capacity of the fdic or any one agency to bail them out or to take the measures that it thinks are in isolation it might be able to handle. that's why i do not accept the premise that they have these living wills and -- >> governor, that's wlhy you ned a central bank system. we need a lender of last resort for those types of issues when they occur. and when that occur, that's the only way we're going to get out
2:17 pm
of them. >> i agree with you on that. >> we're not going to get away from a regulated banking system or large financial institutions. we're just not. we do not want to go back to horse and buggy days or the stagecoach. we've grown as a society. we rely on these large institutions to create a greater gdp. the question is how much are you willing to pay for that as a taxpayer? how much are you willing to give up? >> what i'm willing to pay as a taxpayer would not have forced us to pay what we had to pay in the bailouts because i never would have repealed, i never would have gone to the point where we had tbtf institutions. playing the sorts of risks we had. it was the chamber of commerce and financial services forum got us into this because they believed their own rhetoric that they could control their greed and they can't. >> sit tight, gentlemen. we'll bring you back. joining us now with his insights into the regulator of record for the banks thinks of all this, the federal reserve of course, our very own, steve liesman, steve. you heard the discussion, you heard the debate. your thoughts and what is the fed likely thinking? the reports are they knew about this trade. >> about a month ago the reports
2:18 pm
that i read, brian. but the jpmorgan financial debacle raising substantial questions about how effective is the fed's oversight of big banks? how good are the stress tests and whether the fed is now more likely to toughen up the draft volcker rule as it exists? among the questions, did it miss the risk in the jpmorgan portfolio? did it correctly show jpmorgan's ability to weather losses? there's the estimated hedging loss $2 billion to $3 billion according to jamie dimon. the stress test tested the loss of up to $56 billion. the far greater loss estimate will prompt the fed to say the process is a success. not that the specific economic downturn happened, but the bank correctly showed it has the capital to absorb unforeseen shock. critics are going to say it missed. and there's a cautionary tale for investors. just because the feds stress tested the portfolio and has regulators sitting right inside the bank, it doesn't eliminate the risk of a huge blowup like this in the balance sheet. raising the age old question,
2:19 pm
what did the fed know? what should it have known? how aware was the fed of jpm of these risky bets? how much responsibility does the fed actually have for oversight? and at what point does a bank become just a ward of the state? the fed would almost certainly point out there's a limit to how much it can approve individual bank trades or portfolio positions. at some point the government ends up running the bank. and yet that kind of out from the fed means it's impossible to ever place any responsibility on the regulators for missing anything. brian. >> all right. steve, thanks very much. i know the governor's got to go. governor, i want to read you a quote here. it's from walter ris techb, you probably know. 1992, 1992, mandy was in third grade. this is what he said. how does the government track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them? it's a darn good question. >> it's a great question. he was one of the great bankers of all-time. he led his bank through ups and
2:20 pm
down periods with great stability. the notion of evolution of credit default swaps and all of these sort of acronyms that did blow up our financial system, regulators have to be smart and nimble, and we have to make sure that the incentive for the bankers is that when there's a downside that they bear it. that's the problem here. we have a disequal librium in terms of incentives. they get the upside and not the downside. that's why they do not properly handle their own risk. >> eliot, here we are just months after passing dodd frank, just years after the financial crisis, and they miss this massively risky derivative position on the books at jpmorgan. i think it might raise some questions. some republicans might come forward and say, you know what, the regulators are not and will never be up to the task. >> i agree with you. last point and i unfortunately do have to run, regulators will never be able to make and i don't want them to make the decisions for the banks. that's why you've got to keep the banks small enough to their systemic risk is cabin.
2:21 pm
>> remember, this is a risk business. so when the risks are outsized, the banks should be allowed to fail. it's really that simple. i do not believe in too big to fail. and provided that we can have that mechanism, we'll be just fine. >> i don't mean to change the suspect, but governor spitzer, i know you need to go. and i have a question here and i'm speaking on behalf of all the people out there, the individual investors like my parents, my friends, who are saying what if i feel that i look at this and i feel like the decks are stacked for the house against me. the little guy. >> right. >> is there anything that's going to change now? >> no. >> whether we rubber stamp the volcker rule or something else? is there anything going to change to level the playing field? >> to a certain extent this is apples and oranges issue. whether banks are stable doesn't effect the other issue which is your parents and grandparents and all of ours, correct, the small investor cannot stand up in this marketplace where others have greater information, greater speed.
2:22 pm
>> what do we do? >> if you want to have money, look, i'm not a financial advisor. take this with a pound of salt, but if you want to have money at risk in the equity markets buy a low fee hedge fund. i'm with burt, random walk down wall street, i'm with jack bogle about who created vanguard, low fee mutual index fund. don't try to trade, don't be smarter than the market, you can't be. >> you sound like steven rattner on "squawk box". >> i said over the long run you won't. the long run the fees that you pay to try to do so will completely overwhelm the likelihood that you will do so. and this is a history of numbers, jack bogle, burt -- >> the princeton school. i get it. governor, i know you got to go. thank you very much, governor. >> my pleasure. thanks for inviting me on. >> steve liesman, we have to wrap it up with these guys as
2:23 pm
well. steve, very quickly, i want to ask, y you still out there? >> yes, i am. >> your comment, i want you to answer your own question. . should the fed be concerned about this? it's a lot of money. nobody's suggesting they can't handle it. it's their own money. the shareholders should be ticked off. should the fed care. >> i'm almost certain the fed will investigate this. it's going to look at what the positions are. and i think this raises political pressure on the fed to toughen up the volcker rule. and i think the fed is going to care an awful lot about this. there's a big position that has a lot of weight. i think the fed's going to want to know why this went bad. was this an issue it wasn't looking at it? one thing i want to tell you, senator levin on a conference call was asked if he had advice for jamie dimon, he said if you want to be a hedge fund manager, be a hedge fund manager, terminate your access to the window and stop garned financial deposits. >> steve liesman, thank you very much. i believe the s.e.c.'s already opened an investigation into this trading loss.
2:24 pm
we'll have to see what the results are. steve liesman, thank you. gentlemen, scott, frank, it's been fantastic to have you on the show. thank you very much for joining on the debate as well. >> thank you. >> certainly was a great group and a great discussion. we also did reach out to others. we'd like to note these people were invited and said no. don't say no. we're going to put your name in a graphic. >> there you go. you were told. in the meantime, coming up on "closing bell," former fdic chair explains why jpmorgan's debacle has proved her right to call for a break-up of the big banks. that's at 3:00 p.m. eastern time today and that's on "closing bell," the show after this. up next, even if we stop wall street from making mind boggling trades, we still have to deal with the machines that have seemingly taken over trading. how can we slow down that train? we'll debate. >> mind bogglingly is hard to pronounce. speaking of trains moving in the wrong direction, have you seen video game sales lately? is it time for traders to get off the tracks before they crash?
2:25 pm
our call of duty when we come back. ck. teaching data how to do more for business. [ beeping ] in here, data knows what to do. because the network finds it and tailors it across all the right points, automating all the right actions, to bring all the right results. [ whirring and beeping ] it's the at&t network -- doing more with data to help business do more for customers. ♪
2:26 pm
2:27 pm
beyond the exotic bets like the one that cost jpmorgan $2 billion, is it time to deal with the rise of the machines on wall street? slow down high frequency trading
2:28 pm
really for the good of everyone. founder and ceo of tradework, a firm specializing in these rapid fire computer trades is here. dennis, ceo of better markets, supporter of a tougher market regulation. high frequency trading has almost no good name, right? it's almost always mentioned as a negative. what's the argument for it? >> the argument for is that without high frequency trading, there's no entity providing liquidity to the markets. and liquidity's sole purpose of the equity market. >> a lot of people say liquidity argument is well overdone because liquidity provided any way is provided before high frequency trading and that liquidity is not -- well, they agree it will add some liquidity is not enough of an excuse to deal with the risks such as the flash crash and the pricing that leaves the little guy out. >> that's true. liquidity used to be provided by entities other than high frequency traders. that was before high frequency traders virtually took over that entire function. nowadays computers fly our
2:29 pm
airplanes, they help doctors do your surgery and just like is the case in every other industry, technology's now a fixture in the financial industry as well including high frequency trading. >> dennis, should high frequency trading be put under category of high or category. >> they all need to be regulated. i have to laugh when he says we have computers running our airlines. if hft, which is proprietary trading, not liquidity making or market making, if they ran our airlines, all the planes would be crashing left and right. hft is every independent study established do not provide liquidity. in fact, they're liquidity takers. what they provide is volume. and market makers have a legal duty to provide a fair andrderly market and to participate in the market in all market conditions. market makers have been around forever.
2:30 pm
everybody knows what they are. an hft has no characteristics of an actual marketmaker. they use that name and label to try and wedge themselves into a special category and not get regulated. well, that's absurd. what in fact hft does almost always is proprietary predatory conduct to try and take advantage of those who are in the market. and they are hurting our capital markets. and if people don't get smart, and we don't get some sensible regulation about them, it's going to be the goose that -- they're going to kill the golden goose here. the best, deepest, most efficient capital markets in the world. >> that's an extraordinarily absurd and ill-informed statement. you have it exactly backwards. >> well, the problem is if you look -- >> academic study concluded the opposite of what you just said, that high frequency traders are these principle source of liquidity if not the sole source of liquidity in the market. i think it's useful to define what liquidity is. liquidity is basically the resting orders that sit inside the limit order of books
2:31 pm
exchanges so real investors can come in and transact when they want to. if you take those away, there are no orders for mr. keller to trade against. >> you want to respond to that, dennis? quickly. >> a very sophisticated person and intellectual, works for the bank of england, this is what he says, hft provides liquidity in a monsoon and consumes it in a drought. what that means, in fact if you go to famous trading's website, they have a whole list of the studies established beyond dispute. these are studies not done by the industry, not paid for by the industry, independent studies show that hft only provides volume, not liquidity. hft is proprietary trading. and they're entitled to make all the money they want although they're not entitled to do it as an abusive practice. if what a machine is doing would be inappropriate or against the law if an individual had done it
2:32 pm
in years passed, there's no reason it should be permissible because it's done by a machine and hundreds of needed to drop people out. >> am i right in thinking that you've already said that high frequency trading is slowing down because there's just a lack of dearth of retail investors. >> yeah. the statement provide volume instead of liquidity is propostrous and wrong. you would never see a low volume day again. high frequency traders do not control the amount of volatility in the market. they certainly benefit when volatility is high because that's a reflection of the fact that the demand for liquidity outstrips the supply. and it's profitable to be a supplier in that kind of environment. but, if high frequency traders could manufacture conditions for their own prosperity, such as high volume and high volatility, you would never have low volume or low volatility days. what we have now is a precipitous decline in volatility and that's largely because of the liquidity adding
2:33 pm
function of high frequency traders. >> the problem is privileged access, co-location and special deals generate pinging and ponging and all sorts of other high -- all sorts of high frequency activities are causing the vast majority of investors to start thinking that the markets are rigged. and that's what's going to kill the golden goose here. the fact is a lot of volume is dropping because investors are getting out of the markets. even sophisticated investors. this tells you the most of all you need to know, sophisticated investors are leaving the markets and going into dark pools. dark pools exist because what the sophisticated investors are trying to do is prevent getting ripped off by hft. you even have one of the most sophisticated investors in the world, blackrock, actually creating an internal dark pool to avoid the effects of most of the hft. >> dark pools of dark pools. listen, great discussion. i'm sure it's not over. joe was busy, we invited him on. thank you very much. good discussion. i'm sure it is not over.
2:34 pm
gentlemen, have a great weekend. >> i suspect it's going to be a perennial discussion. with europe's crisis worsening and volatility spiking here in the united states, could asia be the big safe bet for your money? just take a look at how well they have been doing so far this year. keep in mind this is coming off a low base. last year was terrible for most of the emerging markets. nonetheless, you've got vietnam for example up by 37%. so far this year the philippines up by 18%. thailand up 17%. indonesia up 8%. and india, although it has had a bit of a rocky time just recently, it is still up year-to-date by 5%. >> the big question mark though, the one not on that wall, is china. we've been getting data all week suggesting that things are beginning to slow in the world's second largest economy. then today it really sunk in. china saying that industrial output is now near a two-year low. so does that kill the opportunity not only in china but in the markets that mandy just showed you? let us bring in jeff dennis, global emerging market
2:35 pm
strategist at citi and drew. jeff, i'll ask you, if i believe china's slowing, should i immediately dump any stocks or index funds or etfs that i own in the surrounding region? >> definitely not. i mean, first of all, i don't think china is slowing any more than perhaps anticipated. it's been slowing for a while. certainly the april data that we've had in the last few days as you said have been disappointing. and they do point to the risk that things could be slowing somewhat more than we expected. but we still think this thing is going to bottom out some time in the second quarter, the economy. there's probably more monetary and fiscal easing still to come. and the chinese equity market, which it's started to do a little better this quarter at least in relative terms, is extremely cheap in our view. so i think to panic on the back of these numbers would probably not be right. >> and certainly the pbac has a vast arsenal at their disposal
2:36 pm
to be able to boost things should they want to. but, drew, i understand that you are waiting to try and double your exposure to emerging markets and specifically asia. what are you waiting for? are you waiting for the headlines to get so bad that you think it's a bottom? >> well, you certainly want to see some more valuation, right? to help you out. but longer term everybody knows this is where the growth rates are going to be. you've just had a valuation problem. this year you really -- it's sort of a snap back in some of those emerging markets that got tranched last year. we want to double our position. we're only about 10% in emerging markets right now. we're going to need to double that over the coming years. so every time you get some headline risk or news like this, you're going to be looking for your opportunity -- >> but, drew, i understand that -- >> what i was going to say -- >> what about the demographic issue in china? >> well, you're talking about you're experiencing double digit growth rates before.
2:37 pm
and that's just not sustainable. so now we're all trying to figure out where's the number going to be? is it going to be 6.5 or 7? even at 6.5 or 7 it's still significantly better than the growth rate you're seeing here. and absolutely in europe. that's why you see us with a zero weight in europe. and large cap dividend players waiting for an opportunity to get back -- better weighting in emerging markets. >> that's a good point. you can do it through the u.s. multinationals. jeff, if we talk about the emerging market, specifically the asian emerging markets that you don't like and we should be avoiding, i see here you've got on the list india and indonesia. why specifically? >> well, they're completely different stories. india is just very, very poor fundamentals right now. they have an enormous budget deficit, 8% of gdp at the total public sector level, they've got a sizable deficit, policy
2:38 pm
paralysis, you need reforms there. really isn't a market we will be chasing here at all. it's pulled back as you rightly said in the last several weeks. indonesia we think is a really, really good classical long-term investment story in emerging markets. a big country with natural resources, great population dynamics. but the reason we're underweight now is the market's had a very good run. it was the only emerging market that actually rose last year. and it's now currently very expensive. so this right now is a little bit of a trading wait. wait for it to pull back. also a bit of a market darling. a lot of people like it. reason to wait. >> yeah. i don't think it should be the i in brics as oppose today india. >> drew, you said you're waiting for the right time to double your exposure. what is the right time? and don't say the nighttime. >> no. i hear you. we've had a zero weight in our commodities. it's a good time to add into our
2:39 pm
broad base commodity fund. if you look at commodities, they're all falling off just like you see european stocks and these emerging market stocks. so they're probably going to bottom first, aren't they? it's a good soft way to get a foot in the door there. it's a nice long-term play because we believe weaver going to reflate out of all of this in the long run. so that's the right time. it's probably later on this year we're going to be looking to add into those markets probably some time this fall. >> okay. jeff and drew, thank you very much. i should also add despite the fact a lot of those asian markets have made a good comeback this year, if you look at just the past week's performance, been pretty dismal. developing news on facebook and ipo fever when we return. >> and as we head to break, take a look at some of the market moving events on your calendar for the next -- guys, we're trying to bring this to you every friday. the events that stand out as maybe being the big ones. earnings, et cetera. groupon, home depot, target, walmart. >> retail sales on tuesday.
2:40 pm
the fed releasing its minutes on wednesday right here on "street signs" that is. >> i can't wait. on thursday the latest reading on initial jobless claims. again, we're going to try to bring this to you every friday. so you know exactly what to pay attention to next week. >> actionable trader information coming your way. stay tuned. you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade. of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees... take away the pixie dust. take away the singing animals,
2:41 pm
and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes... which still makes for a pretty enchanted tale. ♪ la la la [ man ] whoops, forgot one... [ male announcer ] sustainable solutions. fedex. solutions that matter.
2:42 pm
2:43 pm
and welcome back. coming up on the "closing bell," we're jam packed with the jpmorgan fallout. is the firm's massive trade iin loss fueling calls for breaking up the big banks? former fdic chair weighs in on that one. plus, the stock's getting hammered on this news. is it looking attractive at these levels, or is there still too much uncertainty about that right now? we'll break down the charts in talking numbers. and should jamie dimon be fired for this debacle? or has he handled it pretty well? both sides of that debate. first a market flash with brian shactman. >> thank you, bob pisani. i want to look at shares of hnz, heinz, 13-year highs a stock in the last sessions up about 6%
2:44 pm
where the s&p is down about 0.5%. the s&p and dow are negative. also tempur-pedic is up sharply today. the reports are that morgan stanley disclosing with the s.e.c. a 5% stake. you see that stock up more than 5% thanks to sully for the tip on that one. mandy, back to you. >> thank you for the tip, sully. thank you, brian. >> what? he's not sully, too? he's shaco. >> you know, i be mando. that's how we do it. >> you can stop with an o and that's an aussie word. >> i was the last one. i'm just shac. >> too lazy to give you an o. >> brian radio schactman. >> kayla tausche is joining us more. >> facebook is joining a week from today, but we just heard
2:45 pm
from sources mark zuckerberg is planning to ring in from headquarters. facebook currently considering what would be a dual coast bell ringing. a very rare occurrence, but the east coast part of that has yet to be nailed down. facebook has been in planning for the market site which traditionally uses times square real estate for offerings. asked what executive if any would travel to new york for the festivities remains unclear. they're trading on friday, so it will be hammered out next week. stay tuned for more on that. >> kayla, thank you very much. well, just a few months ago i had a chance to catch up with facebook co-founder, eduardo salve rin in singapore. he will be staying in singapore indefinitely. he has renounced his u.s. citizenship. he's become a resident of singapore. now, he was born in brazil. he moved to the states in 1992, he became a citizen six years later. in addition to the balmy climate, could save him a considerable amount of money in
2:46 pm
taxes related to the aforementioned facebook ipo. could be worth nearly $4 billion and as mandy knows more than all of us, singapore has no capital gains personal income tax. especially on income earned overseas. through a spokesman, he says "this was done many, many months ago and has nothing to do with the ipo." he's a nice kid. very shy. >> first-ever tv interview? >> as far as i know. the first and only tv interview. he's a very reserved -- he's not this -- >> he's not chasing after the media hype. >> no. in fact, he kind of keeps a low profilpr we appreciate him sitting down with us. now he's going to be staying in the great city state of singapore. >> good choice, young man. fantastic lifestyle. reminder you can go to for our extensive facebook ipo coverage. that includes the story summarizing what we know right now about next week's offering.
2:47 pm
and if you have been watching the show, you know our friend, boone pickens, has been on a big push to use natural gas to power a fleet of big rig trucks. with nat gas near decade lows, could the pickens plan soon become reality? jane wells has that story. >> president obama went to a u.p.s. facility this year to tout natural gas as $100 oil has been eating into the costs of transporting goods across america. >> we've got a supply of natural gas under our feet that can last america nearly a hundred years. >> and it's $1.50 cheaper per gallon than diesel. for years nat gas has been used in trash trucks and buses. but getting it into the over 3 million class-a long haul trucks in the u.s. has been tough. that's changing. first, you need infrastructure. chesapeake energy is funding a nationwide rollout of lng
2:48 pm
refueling stations being built by clean energy fuels. >> you'll be able to go from l.a. to dallas to chicago to the east coast all on an lng powered truck. >> now companies like navastar are building nat gas trucks in all classes. the trucks will cost more, but the savings will come quickly. >> this can translate anywhere between $20,000 and $30,000 of annual fuel savings per year. >> believing 30% of sales could come from nat gas trucks. once the fueling stations are in place, once truckers are convinced the product is good, and once we know for sure that there's 100 years of natural gas under america's feet. jane wells, cnbc business news, los angeles. >> well, coming up on "street signs," our sunshine stock and disaster du jour. that has herb's name written all over it. >> and unplugging your portfolio. could the app economy mean game over for gaming stocks? "street signs" back in two.
2:49 pm
♪ why do you whisper, green grass? ♪ [ all ] shh! ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world. together, the elements of science and the human element can solve anything. [ all ] shh! [ male announcer ] solutionism. the new optimism.
2:50 pm
and she's looking directly at your new lumia, thank you at&t. first, why don't you show her the curved edge... now move on to the slick navigation tiles -- bam, right into the people hub. see megan, colin has lots of friends. hey, colin, what kind of phone is that? whaaa -- oh megan -- when did you get here? [ clears throat ] ohh yea no, let's... [ male announcer ] introducing the beautifully different nokia lumia 900. only from at&t. rethink possible.
2:51 pm
all right. the favorite is netflix. nflx getting a good insider buy and bump to the stock price. here's the story. technology crossover adventures.
2:52 pm
one of the earliest adventures in netflix buying 200,000 shares on may 8th and may 9th. still, though, the stock down 75% or so from the all-time highs. but a big boost from an insider of netflix today. >> we'll check out the shares of apple. terry says his company is makinging preparations for apple tv. he said this at a facility opening up. i guess he's trying to get people to read into what making preparations means. >> right. they could mean getting ready if they have the business or some people could take it as, it's coming. >> that's why the stock is moving. >> it is clear, though, the apps are clearing the boxes. let's breakdown the information that came after the bell. sales of hardware, accessories,
2:53 pm
bracelets and hair clips fell 32% versus a year ago. what does this mean for game stops earnings next week? joining us now is evan wilson, julia boorstin from palo alto, california. these numbers are absolutely awful. >> some of the individual publishers are doing fine. they each have small market share. they can kind of navigate through if they have one good game that does well. the industry, there is no place to hide. we have an issue with every different type of software, every different end user. it's pretty bad. >> when you say there's no place to hide, oh, well, that's it for us. what kind of strategy could they take in terms of starting to stopping it? >> there is plenty of business
2:54 pm
in digital game business. if you add that on to have of this data, it's probably still growing a little bit. we need to see a quick transition from just physical to both physical and digital. >> julia, what are you seeing on this. >> reporter: i think it's a hit-driven business and in this past quarter there were not that many big hits. we've seen all of these casual gamers that used to play games like rock band and guitar hero. they just don't need to buy new consoles, spend $50 a pop because they have all of these zynga games and apps like angry birds. >> julia, you're on to something when you mentioned more expensive. because if i look at the app for the ipad, it's $7.
2:55 pm
maybe it's 40, $45 at the stores for the xbox. i understand the experience on the ipad is not going to be as rich as the xbox. but at 7 bucks, it's probably good enough, right? so is the ipad -- is apple also killing the video game industry? >> reporter: i think in a lot of ways it is. you are still going to have the hardcore gamers, the guys that line up at midnight to buy a big hit like call of duty or diablo which is going to sale on tuesday. when it comes to madden or simms, which you can play on facebook, you're not going to spend 60 bucks. it's not worth it for the casual gamer. >> names like game stop, activision, microsoft, nintendo, there are those that are related as well. what's the actual real
2:56 pm
information here that we need to know? >> i think you guys make a good point. this is not industry data that shows us that kids are going to go outside and play video games. there is still plenty of demand. it's a pricinging issue as we go from $60 oh games to 99 cents games. as we look at the companies most risk of that, it's game stop. they are selling plastic and it's going away. >> their whole distribution is going down, right? >> yes. >> why do we need to go into the store to get a box? >> would it be a sell for you, evan? >> yes, that's a sell rating. they have big issues. they preannounced last night and we think there is more to come. the company that's doing the best to transition from physical to digital is still electronic arts. this year we expect 40% of their sales to be digital. the company that can be more profitable than they they looked a couple of years ago. >> evan, julia, thank you very much. coming up, a jolt of caffeine before the trading day
2:57 pm
ends. i could do with that. ♪ at. ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh
2:58 pm
2:59 pm
the hyundai genesis. in a new, faster-acting formula. s tio-y siin lxtes zemethan a porsche panamera s. the 429 horsepower genesis r-spec. from hyundai. the career education, ceco, how about that? >> and as we get to closing out the trading week, shares of done kin donuts hitting a new share. shares up more than


info Stream Only

Uploaded by TV Archive on