tv Squawk on the Street CNBC May 15, 2012 9:00am-12:00pm EDT
not vet him properly. >> tom stemberg, thank you for being here. make sure to join us tomorrow. "squawk on the street" and thank you, mandy. "squawk on the street" begins right now. ♪ >> good tuesday morning. welcome to "squawk on the street." market is looking to bounce back after that 125 point drop yesterday. the dow hanging on the a gain for a year and about 3.9%, decent numbers out of empire today. retail sales. we'll talk about the data in a moment. as for europe, a lot going on. more discussions about the greek government and, of course, the sovereign debt. >> leading a road map for this morning, home depot, even the
unseasonably warm weather was not enough. still off its forecast for the full year. stock was shortly lower for the free market. >> groupon better-than-expected earnings. but is that enough to make up for the past three statements? >> facebook raises the expected ipo range and is set to close the books early on a deal that has huge demand. so, do you buy if it spikes to 50? what about 80? cramer has his game plan all drawn out. >> jp morgan shareholders are meeting in florida today. we'll begin with home depot matching estimates with first-quarter earnings of 65 cent a share drawing demand for its core products. revenues came in slightly shy. it's still short of wall street expectations. weird, jim, that you miss on the top line and then you boost your guidance for the year.
>> i think may is going to be a very strong month. i met with scott's miracle grow. it was really great. a lot of people got ahead of themselves because they said oh, the weather is good for the first part of the year? home depot sales must be good. that turned out to a spike in the stock that could not be met. >> so just solely based on the stock's miracle grow. how about the other stocks? the lumber? the paint? >> they didn't come on. i mean, pacific says good numbers. but it's difficult to gain because you don't really get an aisle by aisle. but june 6th, they do have a big analyst meeting. th they've been a conservative company. my inclination is to listen to the conference call. but this company does have a tail wind. goldman sachs, very good report today about housing. that is good news. >> discussion about discipline
internally, expenses, inventory. regardless of the macro, head winds or tail winds, execution tends to be pretty strong. >> you've got to guy line-by-line. looks like you made a little bit more money per tick et. obviously, there's parts of the country that have gotten stronger. this company and mcdonalds were really darlings of the dow last year. it's almost, listen, if it was good last year, we don't want it this year. i certainly want to stay close to that. it didn't do what dick's sporting goods did. >> is it trying to get you a sense to the overall environment? >> i actually feel like there was a lot of good news. i always look attic et price. it's funny. this morning, there's a great lead story in the usa today. it literally captures two and three better economies ahead. housing prices seem to have bottomed. this has historically been what you want from home depot. obviously, we need to know may -- we'll certainly have a
look at that in the june 6th meeting. >> you mentioned mcdonalds out with the downgrade. are bullish ten-year investment thesis has played out. we now expect for 12 months. is it true that last year's winners are going to be flat at best? >> this had been such a great stock. and jim skinner had been on "mad money" several times. just a fabulous ceo retiring. but i would warn people before they decide to listen to skinner, each iteration of ceo that this company has come up with has been okay. do i want to throw away mcdonds? i do prefer chipotle. >> great. at the same time, if we are in for a period of volatility, we want to stick with these tried and trues, the blue chips. even if they arehey ust sort of muddling through. maybe they're better off. >> i think that both home depot
and mcdonalds have been fabulous and returning money to sha shareholders. they were returning money to share holgders. holders. it's not a good thing to go away from those companies when they get hit. it's a good thing to go towards those companies. >> let's talk about groupon shares. we are going to see a pretty good jump today. a better-than-expected growth. the web site also issuing upbeat revenue guidance for the current quarter. groupon is still trading well below at twenty bucks a share as accounting issues have taken a toll. and this is a show-me sort of quarter. they have posted good results to at least distract investors from all the statements in the past and maybe from the lock up period which expires june 1st. about 90% of shares will be available junest. >> if it were not for that, i would say this was a conference call literally to meet every
single objection, whether it be listen, we didn't have the great controls. look at the people bringing aboard. look at what we put in place. people felt that mobile -- maybe mobile wasn't strong. mobile was terrific for them. they used a new statistic called deal density. happening to bump into jeff last night, he tells me nothing, of course. like he would tell me anything. but it is a reminder that that is the competition in groupon. and groupon is saying listen, we're getting more local. we're starting to understand where you live and offering better deals. amazon offered me something that was about 20 miles from my house today. a deal i'm not going to take advantage of. i feel like we have to start thinking -- groupon may not be a butt as many jokes as it was. >> you'd rather buy an amazon? >> yes. >> because of livingsocial? >> yes. and amazon, there's a really good note out talking about the productivity games from the
fulfillment krenters. remember, amazon is a company that though knows how to ship cheaper than anybody else and you don't pay taxes. it's a fabulous business model without the inventory. and i think amazon is vastly preferable to groupon. but groupon is down 40%? and somebody is going to get excited. >> huge move up yesterday prior to the earnings. >> what is that all about? >> i know, and then a big move afterwards. percent of revenue plum meted. that has always been a key concern. it was one quarter. it doesn't mean it's a long-term trend, but an important one for them. they can show we're spending a lot less on marketing. and this relevance that you talk about, if you get something you can walk downstairs and use as opposed to drive 20 miles. >> if brasilia is within a block, i would be tempbted. laser hair removal and other thing, i always felt that was a waste of my money.
but if it's cheap enough, i'll take a look. >> if i get a haircut tomorrow, i'm going to tell joe to take it down as far as it can be. you think that's just people who have tremendous wisdom about what might happen in the industry? >> that's all i would imagine it is. i don't believe he was tweeting, you know, the cfo there. >> i've got to start following that guy. i'm following aubrey mcclendan. the guy is having some fun. >> you should follow because you never know. >> right. >> you never know. >> you should mention, guys, really quickly, futures were up 70 points after the data. they're basically flat on some headlines that greek politicians have failed to agree and it looks even more likely that elections will happen. it's amazing how quickly stocks can suffer. >> it's amazing when it's an expected outcome. wasn't it largely expected that there would be an election in june. >> we are still asking this question. it's been over two years and we
are still asking this question. can greece effectively withdraw from the union without spillover and con contagious. here in may of 2012, we're going to anticipate that might be it. we should point out that the euro did trade $1.28 versus $1 from the first time since january 13th. >> germany still not helping spain down again. look, i was talking with some people last night and i said i hate what i see every day. it's decided. my day is decided before i come to work. i don't like that. but it is decided because these things do pull down our futures. we can sit here and debate why we shouldn't buy dick's with an 8% quarter sales, no exposure to spain. no exposure to france. but nobody cares. the futures are linked and that's all there is to it. >> you've got $2 trillion in hedge funds pt.
and a lot of them are derisking as a result of their concern. it's about italy, spain more so than i think than any of them. >> do you think that -- i mean, the markets have been sort of split between the pre-european close, post-european close. do you tend to go shopping in the morning and selling in the afternoon? >> the bottom line is everyone expects spain, greece and italy to be banned tomorrow. so in the last half way, they tend to take away what you made when you bottom fished. we don't go down as much as we did at the opening because there's so much linkage. but at the same time, unless you're doing it with bed, bath&beyond, unless you're trying to speculate, you tend to get ininvolved. there was a lot of chatter yesterday is caterpillar going down too much? i don't know. caterpillar is perceived as being a european chinese play. >> a week will be marked by facebook and a regulatory filing.
facebook says it has increased the price range for it its much anticipated ipo up for a previous estimate of 28-35. a new price range would value the giant at about 93 billion to $104 billion at 36 per share, facebook would raise 12.1 billion surpassing google's debut. in asia alone, it's oversubscribed by 25 times. so all of those reports about tepid response at the road trip. >> i don't know where those came from, but nobody was actually making the calls. >> that's a wrong poll! a lot of people should realize sometimes they're just wrong. >> they talk to two people and make a story out of it. you never know. you never know! so last night, jim, you said it might be one of the great growth stories of you are era, of our time. at 50, maybe. at 80, maybe not. >> 2015, people are using a $2 number.
let's just say zuck, i like to call him zuck. let's say zuck delivers $4 because he's really celebrating growth. you don't want to pay 80, but you're certainly comfortable with 50. >> 80? it's for $200 billion in market value. is it even conceivable we could see that kind of a pop? it may be. >> but go back, david, to 1999, 2000. >> it was. however, they're going to put some shares out there. this is not a small float we're talking about. >> and i know a lot of people say jim, how could you give credence to the idea of 50e. i've got to give credence to what can help people at home. i can say listen, it isn't worth 20. what good is that. cramer says don't buy it above 20. i'm saying get in on the initial public offering. the mutual funds are going to be able to get their gigantic holdings and then they'll be able to average up. so i'm trying to offer some
out-year earnings that could be two, could be four, to figure out what you can pay for in a 2015 number. >> we're sharing the results with our viewers tloult the day. but here's one interesting statistic from that survey. 57% of users, facebook users, never click on ads or sponsored content when they're on the web site. does that make you rethink? >> 18%. 1-8. i'll have confidence in zuckerburg's comfornfidence to the company. >> jobs was a visionary. let's not be so quick to slight him. >> okay, but in terms of the users clicking on ads, 82% of revenues come from advertising. so if only half of users click on ads, doesn't that question the validity and effectiveness of advertising? >> and i went right to bob last night and i said, look, do you think people would rather advertise with facebook or with
tv? particularly broadcast, which a lot of people feel like, as david carr said the other day, broadcast goes down every day. he says listen, you want to be able to launch a problem? you're not going to be able to do it on facebook. you're going to be able to do it on abc. bob geiger is a bankable guy. >> in a few year's time, you're probably going to be able to launch a movie on facebook or some sort of mass market product. >> that's true. i remember when the first dot com revelation came, everyone thought that the dead tree crowd would eventually drop and the newspapers and magazines did well from 1999 to 2002. and then they hit the wall. >> knight-ridder sold for $2 a share. eventually, it happens. it may happen slowly and then suddenly. >> and broadcast. some people could argue that prod cast is something you should get rid of.
espn, obviously not broadcast. >> that's a different model. and then broadcast, they still manage to get paid for a smaller and smaller audience. it's one that is still somewhat large and cohesive. but, one day, when will it change? >> well, what we're hearing, the next generation. i'm watching tv with my 20-year-old. i say listen, let's buy this particular program. we were talking about the killing. let's buy it on itunes. she says dad, no one knows how to fast forward a commercialcia better than i do, let's watch it on dvr. those were the options. >> one of the actors mumbled. >> no, i haven't seen this year's at all. >> why don't you get on the case. >> because i don't think it's any good. >> yeah. i really don't. >> siskel and ebert over here. >> yeah. >> wire is the greatest show of all time. it stands apart.
>> but i do like madmen. >> oh, i love that. >> walking dead. lame brains. i like that. i was really sad to see spoil alert. just hold off. one of the main characters was killed in that last episode. >> on facebook, by the way, we should mention thursday at 1:00 eastern, we're going to go inside the company, literally. we're going to see how the company makes money and find out just how much money everyone involved will make. do not miss facebook, a social offering, it's a special right here on cnbc. >> jamie dimon will face shareholders at the annual meeting today. they undoubtly will have plenty of questions about the $2 billion trading loss revealed just last week. obama says the huge trading loss illustrates the need for reform. he talked to abc's "the view" about that yesterday. >> if you think about it, this is one of the best managed banks. you could have a bank that isn't
as strong, isn't as profitable making those same bets and we might have had to step in. and that's exactly why wall street reform is so important. >> it almost seems a little bit odd. we might have had to step in had the bank not been as strong. so, therefore, we need more regulation just in case we have to step in. >> one thing i liked about him is he did recognize that jaimie dimon was, until last thursday, considered to be a pretty darn good banker. i'm looking for jaimie dimon to do the right thing today. i predict he will say listen, i'm going to give back some of the money and i'm not going to take a bonus. i know you felt that was a little pie in the sky yesterday. >> the idea that they would return money to the treasury was pie in the sky. >> i think he's going to take a pay cut. i think he's going to do the honorable thing. >> even though the biggest shareholders are not calling for it? you have a banning of some pension funds out there.
as for the pay, they're saying 2013, we may rethink 2013, but 2012 is all right. >> i'm with you, jim. i do think that happens. a bigger discussion is what they'll do on a lobbying front. and whether the smart play now, given all the attention is simply to sit back. >> yeah, they spent millions on lobbying. let's not forget they had a billion dollar gain. the trade could still be working against them. we don't know what the costs will be longer term. but to put it in perspective, it's a bank that earned $19 billion last year that is well fortified in many ways. but the president's point is not lost. i mean, if you -- dealing with a weaker bank that is speculating to a certain extent and not hedging. that was the key differentiation here. you could be facing losses that would lose investor confidence that would result in something we don't want to do. >> and i've got to add "the view" now to things i watch to be able to pick your stocks. >> have you done that? have you done "the view".
>> yeah, i've done "the view" a couple times. i talked to barbara walters a couple times. a terrific woman. >> i like when the president says $2 billion, that's real money, even for you, whoopie. >> i think that the president -- let me just be very clear about this. the president seemed to really know his stuff. >> yeah. >> and to distinguish among banks, it's something i didn't think the president had that kind of knowledge. >> when we come back this morning, is the worst over for the web site? taking one more look at futures, it seems today, already almost a hundred point range in the past half hour.
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goods which was off the charts. this rally tells me that there may be money to be made in those two names. >> what separates those names? is it something inside? is it european exposure? >> i think that the higher end consumer may have taken a bit of a pause and the person who wants to be able to get sneakers and buy out door goods, they played a very strong role this spring. this is a remarkable company, dick's. you've got to go to chopotle. >> in addition to those names, there's some pretty big opens for home depot. we've got all the action covered. live tonight on "squawk on the street"
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there are the opening bells hire at the big board. celebrating the tenth listing anniversary. the nasdaq, the national football foundation celebrating this year's college football hall of fame inductees. this should be a very interesting open here, cramer, because we haven't buffeted by these headlines out of europe. it will be interesting to see how we hold. >> it seems to be that at a certain point, people will say, you know what, i don't care about europe. but that might be an issue about price. in other words, maybe where the s&p is at a certain point where it can't be rocked, we might just say, you know what i don't care. but we're not at that s&p point yet. >> just taking a look at the screen.
jp morgan is opening higher by a full percentage point right now. banks overall are fairing pretty well. europe finally getting the downgrade of 26 italian banks. well telegraphed, we did see the reaction last night when that headline crossed in the euro trade. >> right. carl tweets correctly that the thing to watch is the fxe is this. carl, this has really been something that we didn't want to see if you're a stockholder. >> it's been a while since we were below $1.28. january 18th was the last time. we're starting to look at gold negative for the year. i wonder with the dow hanging on, at what point does a money imagi manager say i've got to lock in what i can get? >> this is something we talk about every day, which is, look, if it's all going to go away, why don't we just sell what we can, not what we have to. and the answer is you have to sell what you have to. you have to sell the stuff that
is getting hurt. i think you can lock in some stuff, but it's got to try to raise more cash. it's got to be stuff that has some exposure to europe. it can't be so knee jerk as to say i'm going to sell ross stories. >> i feel like a lot of hedge funds have taken their so called nets, net exposure way down already. they're feeling better about that. and so i don't know that there's that much selling to come. at least, you know, again, that's anecdotal. it's not like i talked to every hedgeman. >> we're not that oversold. i use the s&p oscillator every day. obviously have a lot of negativity. we are not at a point where there's a lot of yield protection. mcdonalds is up today. jeez, what does that say? >> economic downgrade. >> does that say people are wishful thinking? >> people want defensive. they want defensive.
they want yield and maybe it has come down enough. at least it's not at its all-time highs. we'll see the mcdonalds. it is now down by about 4%. people step in and buy this name knowing that there will be stronger sales based on certain channel checks, like perhaps scott's miracle grow. perhaps all of these notes that we're getting in recent days, goldman sachs saying there's a floor in terms of housing prices. existing home sales have come down enough to be supportive of new home sales. on top of this, we have the renovation trade. and that has been an investment thesis that has worked for this year. >> right. this sherwin williams trade. that has worked. you say dick's is really good, nike is down. i'm going to take some nike. under armor could have some
momentum. that's kind of what people do. we know that that's not exactly rocket science. but it does tend to work. >> it does tend to work. if you're working from the church of what's working, as you're used to, you're going to be in the pew praying with everybody else. groupon really knew that. i noticed zynga is up over 4%. that just may be a follow on given those two companies went very closely to each other and then amazon shares also up over 2% on those positive comments. >> i like that. sfwl what i thought was really interesting was not just the productivity gains because of investment fulfillment centers. it was also the notion that the company is buying back stock. and traditionally, historically, it's out bid 132% in the 12 months following a stock buy back. i thought that was staggering. i had no idea that that existed. >> and most buy backs, other than a very few handful, i'm thinking about autozone.
most buy backs are not opportunistic. they're walking dead buy backs to beat that particular horse to death, meaning that they're just in there every day. the cisco buy back is a walking dead buy back. >> you know, talking abouy backs, what about jp morgan? shares up about 1.5% right now. they have been very aggressive in terms of buying back stock. one would imagine they've been buying back a lot down here at these new recent levels. >> could be. >> actual lly shrunk so far. >> 90% of those positions are still on their books and some traders and some reports reporting right now. so therefore, until they do, will they preserve capital? >> no. i think they have a buy back in place that they are pursuing and continuing to. i would not be surprised at all if they have been aggressively buying back shares. >> they have been skittish at the 41 level. this is a different level on the multiple basis. and the fact is that they, while
the trade remains open, the trade is not open ended for losses. he did quantity. you're not going to see the quarter wiped out by this particular trade. >> okay. let's check in with carl, who's found bob here on the floor of the stock exchange. >> didn't take long. i did find him. he's easy to spot. he was watching the markets. and at 9:02 eastern time, something happened. >>. i'm talking to home depot. all of the sudden, the market just goes to pot. i'm sitting there watching things. the dollar goes up, the euro goes down. germany, the dax index just falls apart. i'm looking around say whag the heck is going on? and all of this because the greeks can't form a government? i'm a little surprised to hear that because it seemed like the street yesterday was pretty quite sure this wasn't going to be a big deal and we'd already priced it into the market. apparently not. occasionally, you get surprised by these things. by the way, this is a historic low for the athens stock market. not a one-week, three month,
historic low. a little side bar about greece. they're going to repay a $430 billion euro bond that has come due. this was these foreign law bonds, there's like 7 billion of them. they were bought with a lot of hedge funds at deep discounts. they're getting the money. a hundred cents on the dollar. somebody has just made one heck of a lot of money somewhere out there. please, whoever you are, congratulations. but these were the guy who is held on. they kept the foreign law bonds. they bought it at a discount. i guess good news, i guess congr congratulations is in order for you. germany, 0.5% gdp growth. they saved the euro zone from a rezegs. it's flat. you don't have two consecutive quarters of negative growth. this is a technical victory, okay. obviously, there's 7 or 8 countries that are in recession in europe right now. >> and a lot of them are germany's top export markets, right? >> that's right.
but germany's number was good. and that was the hot topic before the greek government announced they couldn't make the deal to get through here. the dollar rally is now historic. we're at 12 days. the dollar index has never rallied 12 days in a row. i just want to comment on retail sales. they're not that bad. look at the top -- over year growth. 6.4%, year over year growth for retail sales. that's not exactly a horrible numberment did you see home depot? their numbers were just terrific. they've got 6% top line growth. if it's so great, how come the stock is opening to the downside? and i think the problem is there's two or three. i had people out there 10 cent, they thought they were going to be buy. they didn't. they matched. they didn't change the sales guidance. a lot of people were saying okay, you can do 6%, can you do 8%? they didn't change that, but it doesn't mean that they can't do that.
and finally, jim, the stock was $40 a few months ago? it's now essentially $50. but that doesn't mean we can't do a lot better. 17 times 4, guys, just listen to the number. they're expecting $3.30 next year. just on a conservative number, you can do 60. this stock is firing on all cylinders. it's on fire right now. all of those small private builders are trying to get into the remodelling business. >> i've heard somebody else say something like that, j.j.c. >> well, i've got to tell you what you're saying is in sync with the stock in the last nine minutes. the company does an unbelievable conference call. it's a well orchestrated, well thought out conference call. and i think you're totally right about them both, remodelling and the home builder trade. great call. let's hit the c&e group in
chicago. >> thanks, jim, the correlation obviously in the fixed income market still tracking at very high levels. cr today ten year on the greece government and the lack of a coalition hit. well, the yields moved back down. they're in record, all-time low territory. the ten-year treasury low shield since september. euro currency moving under the $1.29 level. as we saw this, actually under the $1.28 level. why are we so worried about what goes on in greece? or the complex of the euro zone? maybe the best way to go to an individual financial stock. look at this 20 year charter, french bank. three plus euros barely holding in. this is a new all-time, all-time low. this is one of the reasons along with the spreads continuing to widen in countries like spain, the issues of contagious can be
affected. starts, continues, whatever word you want to yuds. but very few believe it's going to exist in its current form 6 month frs today. >> thank you so much. let's check out energy. go to brian shackman. >> ahead, brian. >> i think it's like paul riser's character in diner. you want to go up? maybe i'll go up. you want to go down, i don't know, we were down. we were up a few cents, now we're down a few cents. we started the session at lowes for 2012. the dollar continues to be firm and we are pulling back a little bit on oil by just a few cents. if we get something below 93, the next level could be 75. keep an eye if we go down a buck and a half or so. natural gas continues edging behind $2.50. when it comes to metals, pretty mixed picture. platinum is the only thing on my
board slightly to the upside. commerce coming out and saying we should see increased buying interests and opportunities among market players as prices fall below or come close to psychologically important thresholds. maybe things are getting low enough for buyers to swoop in here. but we're pretty mixed and not a lot of traction in either direction. >> thank you, brian, brian shaktman. >> this after cody, which has been seeking to buy the company for at least the last couple of months. with drew, it's all for last night in a letter to avon's bort of directors. pairing losses is a bit of avon, but still down sharply at $18.51. we told you yesterday thcotc wy trying to figure out how to respond. whether to let coty in to do due diligence. to see if it could raise its all-cash offer for the company. but coty didn't let a week go
by. instead, it stuck to its original deadline and has said that avon's total lack of engagement led us to believe that avon is reluctant to explore on a reasonable timetable. two months, they say, is enough. to give you a little bit of background, don't forget that coty and avon had talked last year about avon buying it. i'm told even back then, it would take as much as three weeks to arrange one meeting. and, in fact, given this pattern of avon simply not being interested in anyway, shape or form, coty decided to pack its bags and go home. now, let's not forget its original offer. the fact that it would not go hostile. did not seem to give a lot of accreditation to coty's original bit. but they did come ahead with a higher bid bidding against themselves at 24 p$24.75 despit
avon's bad quarter and certainly bolstered their likes and the controlling shareholder of coty itself. they did give a lot more credibility to the bid. and now avon's board will have to answer to its own shareholders! this is the amateur hour on both sides, david. >> you could argue in some ways. i mean, coty's equity investors would not let it go hostile. now, also, if you recall, we told you both first about coty and avon. we told you that just a few days before it came forward with its unsolicited offer, coty had a meeting of bankers to go public this summer. by the way, my guess is it will go public this summer. and they've certainly raised their profile. we all know who they are now, don't we. >> i've had a lot of chatter today saying you know what, it's like telling someone, you know what, she wouldn't have been good for you anyway. you know what i'm saying? are they better off without it? >> well, they may be. and don't forget, if they do have their own currency and avon
has not fixed its problems and the stock is still quite low, they could come with that cash in stock offer, this is pure speculation, where you give avon shareholders the upside. at this point, they are delivering all cash and saying we think there's a lot of synergies. they never got a chance to get in there. avon, for its part, simply saying we told you we'd respond in a week. come on, guys. >> the company is pathetic. the board is pa thetic. this is ridiculous. >> they name them by name. >> fred, i'm in his book. he made a fortune for people. come on, fred. >> yesterday, avon put a two-line statement out. he's trying to reach out to ason. trying to reach out to a few directors and saying at least give us a dialogue. >> andrew young remains on the board. i'd be scared of her, too. i'll never get to her parties. we don't have parties and we don't have cable and we don't have liquor. dry town.
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15 of the country's most influential people facing off this week for jeopardy's power play competition. our very own david faber who is on the phone. appearing against former white house secretary david carena. >> you know, i've been doing tv a long time and i never get nervous. but i am nervous right now. kareem has been trying to psych me out. which is not that hard. simon hobbs told me to visualize victory.
i'm going to do that. it's all about this. >> yeah, the buzzer controls you. you really have to be patient and not get too anxious. >> your thumb works a lot better if you know the correct response. if you don't, your thumb isn't going to do you a lot of good. >> so if i lose, it's only because i failed to do the buzzer properly. it has nothing to do with my ability to answer the questions. i was trying and just couldn't buzz in. okay? remember that. >> oh, but we all know he's not going to lose. >> oh my gosh. look at that picture. >> i'm not saying faber isn't tall, but that shot makes you look -- >> by the way, carl, you would look really small next to him. he's 7'2". they had me on a box, but i could have used a taller one. >> is ken jennings threatened by
you? or watson? any of the really great jeopardy people? which ones do you know you can take? >> none. nada. i could barely ring that buzzer let alone take watson or general lgs. . >> jim, could you take watson? >> on a good day. >> what were you strongest subjects, david? >> history, obviously finance. >> not bad on history. they didn't come at us with a lot of fnsz. but they did come with some current events and pop culture which i was okay on. >> carl, you would have nailed almost everything. and, in fact, when you watch tonight, you may be frustrated by the inability by some of us to answer what was seemingly very easy f but it's all the buzzer. >> were you nervous? >> yes, i was. a little bit nervous. >> been on tv for 15, 20 years. >> yeah, 20 years. they do have a rehearsal. a full rehearsal. and that actually does let you acclimate particularly to the pace of the show and to that,
people will tell you, it's sort of figuring out when to ring and and do so properly. >> as jamie dimon close? was it that kind of thing? >> yeah, who is jaimie dimon? he could have conceivably been a clue. but i don't remember that that was the case. i do remember one i answered incorrectly that was really embarrassing. but i'll let you all see. >> speaking of which, it is tonight. the jeopardy powers episode with david faber. check your local stations and listings for times. >> meantime, much more "squawk on the street" straight ahead. tdd# 1-800-345-2550 the 5-day moving average just crossed above the 20.
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six stocks in 60 seconds. we'll start with microsoft. >> inexpensive stock when you want to buy microsoft, i'm with this trade! polaris. >> don't sell polaris off of arctic cat. polaris is only 10% snowmobile. >> okay. this is the story. when you see commodities go down, colgate goes much higher. >> health care building. if you think this stock is going higher, you want to own cap. this stock's back door was before support. >> rbc with nice things to say about hewlett packard. >> this isn't a long term play. i would not speculate short term. >> sounds like you like microsoft over hp. >> yes, i do. and with the balance sheet, too. >> seconds to spare and nicely done. what's on mad tonight? >> the department of ag.
i want to point out a lot of stocks that i like, whether it be fertilizer or seed or farm equipment. i just want to get a sense of what the farmers spending on. >> is there a level on the s&p where your feed is you don't sell the raw stores starts to change? >> cramer doesn't care. you're just the opposite. just the opposite. i care tremendously about europe and i'm not ready yet to be able to say hey, by the s&p. >> more after the break. don't go away.
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siemens. answers. welcome back to "squawk on the street." business inventories for march up .3. our last look, up .6. remains very unrevised. markets are a fraction of what they were in terms of equities. and yields, even though they're close, close to the lowest levels since september of last year, they're still up a couple of basis points from their low yields yesterday. carl, back to you? >> all right, thank you very much, rick santelli. another dose of breaking news.
send it over to dianna in washington, d.c. >> home builder confidence dropped five point ins may. april was a big drop. april was really 24. now we hit 29. 50 is the line between positive and negative sentiment. builders are reporting increased buyer traffic in sales after a pause in april. spring demand was pulled forward. then it dropped out and now aparntly it's backed. current sales and buyer traffic. rose three-points. the overall index back in may of 2007. the northeast saw a 6-point game in confidence. only the west posted a decline of two points. also breaking this hour, housing affordability on the realtor's index get a record high. >> thank you very much. let's get to the road map of this next hour of "squawk on the street." two big movers of the morning, home depot and groupon.
we'll find out if the sudden spike is a reason to buy. >> plus, jp morgan shareholders getting their chance to voice their frustrations about that $2 billion trading loss. we'll go live to tampa. >> and one of the biggest names in tech software, the co-ceo of sap will join us live. >> plus, the mini ipad movers with a fever pitch. why it could be here sooner than you think. >> a tad difficult today, especially at financial companies. protesters are making their presence felt certainly this morning. stanley aes annual meeting, they shouted down the results of voting on various proposals. they say the $2 billion trading loss shows financial institutions cannot be trusted. >> and, speaking of jp morgan, let's head south down to tampa, florida where the annual shareholder meeting just got
under way. we might not have thought it was that important or interesting, but that certainly has changed. >> you are exactly right. dimon's role will take center stage where dimon meets with shareholders just five days after disclosing a trading loss that could grow to $3 billion. now, the meeting is getting a lot of attention here. there is a handful of protesters that just arrived. you can see them right there. also, there's a lot of national and local media. security here is very heavy. even president obama weighed in on the losses. listen in. >> if you think about it, you're one of the best managed banks. you could have a bank that isn't as strong, isn't as profitable making those same bets and we might have had to step in. and that's exactly why wall street reform is so important. >> well, among the proposals to be voted on today, one separating the roles of chairman and ceo both held by dominic and
report sourcing people acknowledging the situation. say that dimon's role as chairman is safe. also, shareholders will be voting on a pay plan that made dimon the highest paid big bank ceo last year. and former ceo drew retired yesterday. he ran the unit responsible for those trading lossing. one of the most powerful women on wall street, drew may be subject to claw backs. $18 billion off of jp morgan's trading cap and tarnished by the bank es performance through the financial crisis and by dimon with his reputation as a risk manager. he became the unofficial spokesman on mortgages that contributed to the crisis. now dimon's reputation and his bank is hurt, too. we'll have what -- we'll have to see what shareholders have to say. the meeting starts at 10:30 eastern this morning and we'll have details as they break. back to you guys.
>> all right, thanks very much, mary, mary thompson. >> all right, we certainly have had a lot of earning us out this morning. we've got all ways to trade the earnings results. first off, we'll kick it up with better-than-expected -- weaker-than-expected blaming those shares of home depot trading lower by almost 3%. with us on the fast line is equity analyst. gregory, great to have you with us. in terms of the results, how confident are you in the raise and the revenue forecast given the quarter? >> well, i'm very confident that home improvement demand is well below any sort of 40 year norm. we think 10-15%. so whether it certainly helped the first quarter and there will be a big deceleration the second quarter. i think their numbers are makeable. >> in terms of the home improvement indicator, what are the primary drivers of that?
is it more important to see home sales kick up? or is it sort of the renovation trade that's a better driver of its results? >> the three biggest components, one is exists home sales turnover. it's a lot more about how we're turning over the existing housing stock. the second thing is median home prices, which have finally appear today stabilize, at least nationwide. the market is still down, but nationwide, stabilizing. and then lastly, the direction of 30-year mortgage rates. the other two can improve. >> in terms of the almost 3% decline in the stock, you think that's overblown? is this an opportunity for investors to build a position here? >> i would say longer term. it's a stock that's up a lot in the last three quarters. but overtime, a 7.5% free cash yield to us is more than sustainable. and the free cash yield could go up another couple billion. so we think the stock could ultimately look out two years well above 48.
>> gregory, in the meantime, what is your price target at the moment? >> right now, we're looking for $54. that's sort of by the end of the year. >> so still an upside over the next 6 months? >> oh, absolutely. you've got a great dividend that basically has two billing. it's 5.5 billion in free cash flow. they just buy back their cheap stock with the rest of that capitol. so we think in a ten-year treasury rule of 1.8%, a home depot that's cyclicly still living in a depressed world looks pretty good to us. >> does this tell us anything about lowes in what we should expect there? lowe's is down 1.5%. >> lowe's is down with some sympathy. i think the challenge for lowe's will be their traffic, they were able to get back to home depot in the fourth quarter. but it came at a price. so lowe's, the market is going to be very focused on are they
able to keep up with home depot while not having gross margin degradations. >> it sounds like you're a little bit tepid when it comes to home depot. 54 is a pretty nice upside, but, still, that it's fully valued. i'm wondering, greg, if you are to think of another way of playing this home improvement trend and the improvement in existing home sales, what would be your top pick? >> to me, that's sort of upside in the market that's done well. that's pretty good. but other names that maybe haven't gone up as much, we're taking a look, could be target. it's cheaper on pe and we're thinking it could be north of 3 billion by 2014. another one could be sanoma. the name sake brand has been flattish. but they sell a lot of furniture which can help them, as well. >> gregory, we're going to leave it there. thank you for your time. >> let's turn to one of the star
attractions overnight. check with the shares trading now. do you remember that on friday, it closed at about $9.90. so you've seen 50% up sight since friday? our next guest thinks this stock could raise 80-85% from here. he's mark with capital research. why are you so up base? >> the stock has had a nice ral le in the last few days. a lot of short covering. i think the reason bhwhy we're still upbeat is groupon is tackling a local market which is commerce. we think the local growth in smart phone adoption is going to be there for several years. >> how concerned should i be that they're not generating a profit? >> groupon, i think that's a misperception. groupon generated $71 million in q 1. over the last four quarters, has
generated $310 million in free cash flow. so the company is actually in only its third full year in operation generating substantial cash for shareholders. >> i can understand why there could be a bold case made for groupon. at the same time, given the 18.5% jump yesterday and then the 18.5% jump today. can you concede or can you see that there might be a better entry point after this lock-up expires? if the stock is in for volatility? >> abslultly. i think the lock-up is going to be a major overhang and head wind. as you know, the lock up expires right around june 1st, in a couple of weeks. it's a massive amount of stock that's coming to market. right around 600 million shares. over 90% of the company is outstanding vmt so from a technical standpoint, that's clearly going to weigh on the stock in the short term. but we're obviously making it
here. >> way on the stock -- the head on the street column today calls it a potential tsunami of selling. 90% of the stock available to sell on june 1st. that's phenomenal. >> yeah, but it's typical of any ipo. so groupon is not unlike linkedin or google back in 2004. >> mark, there's always been a lot of question in terms of the management team. its maturity, for example. what would you point to as signs, and your opinion, i would assume you're positive given your take on the company, that are signs that they are, in fact, doing what they need to do to show that they're capable of running this company? >> well, i think that some of the recent additions to the board, 're bringing in very high caliber executives with blue chip accounting backgrounds. it's certainly one sign. and, look, the execution, this is a company that's very young. it's only a handful of years old.
has grown like a rocket ship. yet, we're seeing the kind of numbers that we saw last night. so i think you've got to give, you know, andrew and team some credit for the numbers they're putting on the board! can they keep marketing expense having fallen so dramatically? or does that go back up? >> this is the third quarter in a row that we've seen marketing decline that revenues grow. i think that's a -- look, there's a lot of excuse ahead for this company. one of the thing that is we need to see is continued marketing leverage. but you've got to give them the benefit of the doubt. we've had, you know, three quarters in a row of seeing that leverage. i think the next sign that you'll see is international markets. you'll start to see some leverage there, as well. >> and the material weeklies in there, in their systems that was the focus of the market so recently. we can now discount that, can we? >> no, until the removed -- you can't completely discount them. those will be, you know,
reviewed again at the end of the year, at the annual audit. but, clearly, they're beefing up their finance team. they're adding two key members to the board with substantial, you know, background there. so i think that -- and the other thing we saw is refund rates stabilized in the quarter which is the reason for that. for that disclosure to begin with. >> mark, good to talk to you. 27, $27 is the price target there. thank you for joining us. >> thanks for having me. ah all eyes on facebook ahead of friday's big public debut. but what about the companies that rely on the social media giant to gain more users? we're going to head to the other side of the facebook frenzy, talk to the president of the one of the hottest gathers on the web in just a moment.
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if you want to find something online, you probably google it. but buzz feed is a different story. the social content hub relies on sharing, not googling. it's double the traffic from facebook than from google search and 40% of its traffic is actually mobile. so what does the company think about facebook and what some call this buzz-killing mobile challenge that they face? john steinburg joins us and
anybody who's on the web knows. so we're all asking a question this week ahead of the ipo about when social advertising really takes that giant leap forward. >> when does it happen? from whom does it happen? >> it happens from everybody. and it happens from all big brand advertisers. it's actually starting to happen fast now. we started on this journey of doipg social brand advertising about two years ago. now we're really seeing the cascade hit. washington post had downed digital revenues, aol was down by 1% on their core product. the brands don't want them. they don't work. i believe that social advertising will be definitive in a very short period of time. >> has there been a game-changing purchase yet. or does there need to be something snels. >> i heard the comment that david made. i don't think that's true. i think a major movie would launch on facebook.
in fact, i think they do. people indicate that they're going to see the film. people make plans. and social is really word of mouth on steroids. it's almost everything in one when it comes to advertising. >> one of the concerns is what facebook said about mobile and how much more difficult it is on mobile. is that platform moving so quickly that even a giant like facebook can't keep up? >> i think they're being very cautious in saying that because they're undermonotizing. ultimately, social will work better in goog. social is a sponsored story which is their core advertising flowing the stream. so you'll see carl bought a ford or carl's going to mcdonalds. it lends itself much more to the flow of the stream. this is even better for them. >> won't it be less profitable, though, in terms of what you make off of mobile versus the pc? >> yeah, patrick and googed had a good comment.
he said i don't know why people think that mobile undermonotizes. what we see are people willing to pay in mobile are better in most cases. there's no reason as the world goes mobile that the wall between desktop versus mobile doesn't become ir vel rant and where the eyes are and the interaction is, that's where the interaction will go. >> you're biassed. you're saying this is the way it is and the world may not be the way it is. it is significant when ika says we will not launch a film. that is a significant statement. it is significant that we have repeated reports that the advertising industry is not being courted in a way it's used to. it's used to having a relationship. you know, there's a whole palette of feelings and emotion into which we are told zuckerberg is not plugging in. that is moving forward. >> i a hundred percent agree
with you. when you look at the lack of growth in facebook, it's attributal to what you're saying. this is looking at the media agencies, the brand direct, you need massive brand coverage. you need to embed yourself and explain things. i think facebook is a little bit behind the game. >> but we want to preserve the sanctity of the user experience, right? >> i think it's more than that. i think it's more than that. they think they've invented a silver bullet. that's not how business works. business works around relati relationships that develop over a huge amount of time. >> my one concern is when i hear them say they're going to slow hiring growth. they need a massive sales force, just like google has. google has thousands of people that call on the fortune 500 to explain these products and walk them through it. facebook sponsored stories are a complex product. they need to make that move to understand that we're going to court people, explain and take the time. >> by the way, for the record, i said that they will open a movie
on facebook. but i'm curious, in your dealings with google and facebook, as the president of buzz feed, who is easier to deal with? >> well, we find that the future is really social. and the social traffic that we get is better than search traffic. search is like a wet nerf ball. social is a bouncey kind of traffic. we love the facebook traffic. we're able to buy ads and extend campaigns. we have a great working relationship with them. they're an excellent partner. >> they are. >> but you sound skeptical when it comes to facebook and how well it's positioned to actually partake in this wave towards mobile. >> because you want to do more. >> they're not hiring enough. that's a red flag for you. they're not engaging enough. >> that's in terms of the sales. i think that's why when you look at a report, like out by evercore, which shows the revenue growth, the next year it's not so much. to get to that 20 billion number in 2017, that's a big sales
force. that's having teams dedicated to each brand. >> reading between the lines, you think that they won't reach that target. >> no, i think that if they make the switch in the next year or two, right now, i don't think they have a sales force. >> are you going to get a piece of the ipo? >> i will buy the stock personally. >> is there a price on which you think it's too rich. >> i would go as high as $150 billion right now. when you look at the peg ratio right now, it's .7. why shouldn't it have a peg ratio like linkedin. >> i've known john since he was a young guy. he used to watch me when he was in high school. >> so you're a privately held company, obviously. so what sort of valuation would then that put on your company if fa facebook can go up to 150. >> i can't begin to speculate how their evaluation would trend down to us. i looked at all the mult pls.
and efb when you do it on a gap basis and you have the more stringe stringent version, it comes into line. i have it here that it's, you know, it's -- linkedin, 3.5, amazon 1.1, facebook comes in at .7. >> that says a lot. >> john, thanks for coming. >> thanks for having me on. sfwl all right. all right, oh, yeah, over to me now. we'll get you up to date on bmc software. i'm multitasking here. did want to come out and talk about bmc. shares were up yesterday. you may have seen elliot confirming it owned 5.5% of the company. basically wants to put the company up for sale and put a very interesting letter out today with a lot of details in terms of the studies that they've been doing of bmc's business, why they believe it would benefit from a combination. let's get to the news that we just got to moments ago which is that bmc responded by saying
that while the company is always open to alternatives, the board of directors has confirmed that forming a special committee not in the best interest of stockholders. >> they were up a bit this morning after yesterday's very big move. they are now, as you see, down, although not sharply. we shall see what happens here. there are believed to be a number of strategic buyers, the likes of a dell or an oracle. probably not an hp or an ibm. there's talk that you have interest in private equity. so much of this will be wrapped up in the election of or not, those five board members that are being put up by elliot. i want to update on everybody on the mc software. >> those ipad mini rumors just won't stop. the arrival is sooner than you
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first one is dick's sporting goods. dks, that's up 6%. the company sales were 8.4% and it raised its forecast. also, tjx, tj maxx. they guided to the low end of the expectations. they're spending so much to grow that the market obviously likes the continued growth story and is not as worried, necessarily, about the bottom line right now. tjx, the best performer in the s&p 500. back to you. >> all right, thank you very much. those ipad mini rumors are closer than you may think. andy, great to have you with us. some of the stock that is you go through in your note are just staggering. if you think it's a $300 retail price, that would be 30% gross margins and could add a dollar or more to fiscal 2013 eps. but what makes you think that this thing is on the way?
>> well, for the first time we had guys that we do chats with say that it is on the way. we haven't gotten any kind of volume indications yet. but it seems fairly likely that we'll start later this summer or into the early fall and that we'll actually see the product before the holidays. >> it sounds graet on paper, but is there concern about the cannibalization about the full-sized ipad? >> yeah, there's always concern about that. i think the products are going to be fairly distinct. what we've seen with apple historically, is when they release a low-end product, really all it does is expand the market. that's essentially what we're expecting this time, too. >> what is this going to look like? >> it will look like a the big ipad just shrunken down. it's the same operating system and it will look, basically, like a big screen. >> andy, let's talk about apple tv and the prospects for that. you're actually quite dismissive
in the research that i've seen here of what apple tv will be or won't be. you say you can't do much on content because of the big studios and the cable companies woent allow it. it's a waste of retail space in your view. you have a very different idea of what apple tv than i had. i assumed that apple tv would sort out my problem of having five or six remote controls and that i could talk to it. you and i are very different odds. why do you believe it's all about content and solely about content? >> because that's where the profit is. so if you're apple and you're 5, $600 billion company, you need pretty big profit pools to move the needle. >> but i have two televisions. and i would buy another television if it would solve my remote problem and i could talk to it. >> yeah, that's true. you're probably not the mass market customer. >> that may be true. >> um -- >> thank you. >> and there's only so much
margin, right? you said you would buy one, but would you spend an extra $500 over a samsung zf to solve that problem? i think the problem is when you get right down to it, the value, the consumer value is in tv content, right? when you sit down to watch tv, you watch tv. you don't do other things. well, you might play on your ipad, especially if you have an ipad mini. especially if you watch tv. if you can't make the tv-watching experience beter, it's not worth it to be there. >> so the target is 630, based on the mini ipad. >> and we don't have the mini ipad in those numbers. so 630 is a number we feel pretty good about. >> all right, andy, thanks for your time. >> yes. >> call it a case of bad timing. jp morgan set to face a tough crowd of shareholders in a few moments. there's mr. dimon himself. up next, we'll see down with a jp morgan shareholder and get
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the national association of home builders housing market index rising five point ins may to april 29. jp morgan chase, this morning's biggest gainers on the dow. and the nyse index hitting new record highs. the btk is now up almost 39%, year to date. >> the market is shutting off, correctly in my view, the talks have broken down in athens in forming a new government and taking higher on the data. interesting in the negative utilities, energy, tellecon. let's discuss europe a bit later in the program. this is where we are. even stevens here at the nyse. over at the nasdaq, kind of biassed out-of-bounds upside there, almost 2 to 1. >> all right. well, are the flood gates corporate cash about to swing wide open? steve liesman joins us now.
steve? >> a survey by american express of 541 senior financial executives around the world showing companies are no longer pursuing a cash preservation strategy. now they plan to spend it. 45% say they plan to spend their their cash reserves. 45% say they didn't last year. 62% say they plan to pursue a deliberate cash preservation strategy. where is the money going to go. they asked how are you very likely able to spend it. it's easy across the board. some for acquisitions. expanding jobs in operation. that's very likely. if you just say likely, it's about 7%. spending could be difficult for the economy. surveys suggest jobs are indeed part of the equation. worldwide amex says that 53% of executives say their company plans to add workers in the u.s.
a little bit higher, 56 planning to hire. just 22% plan to cut their labor force. 17% say they're going to do it to bring back or restore cuts in previous years. the overall hunt for the economy, a bit more subdued than last year, however. 64% globally looking for a modest to substantial recough ri. last year, that number was 75%. but the outlook in the u.s. is the second brightest around the world. america ranked just below india when it comes to upbeat expectations for the economy. so simon, pretty good numbers there and we'll really be looking for whether or not that money starts coming out of corporate treasuries. >> steve, for the moment, thank you very much for that. we'll talk about jp morgan's annual shareholder meeting. first, some insight from a money manager whose top holding
remains the bank, jp morgan even after the bank exposed his $2 billion trading blunder. has nearly $20 billion in assets under management. good morning. >> good morning. so in a nutshell, what do you feel about what happened at the end of last week? how would you describe your emotion? >> well, it was a surprise, i think, to everybody. and it was an unfortunate situation. but it's important to put it in perspective from a financial standpoint. $2 billion is not chump change, but it's also small in relation. >> todd: jp morgan's overall size with a $2.3 trillion balance sheet and $7.6 billion that they've made in the first quarter. >> and, yet, if you look at price action, what did we lose in market cut? 15, $16 billion? at a time when jp morgan is buying its own stock because it has the mandate for shared bye back. >> so it's a good opportunity to buy their own stock with the stock being down.
really thrks $2 billion impact should have had a 52% share impact on the stock and really the stock market has totally or reacted! the comments out of dimon so far, "i can't justify the loss." "these mistakes were self inflicted." "what this hedge morph into violates our own principles." the market cap came off because of the reputational loss. do you think of him differently? >> we don't think of him differently. as i said, financially, the company is well positioned to handle it. but where the risk was was in the reputation and potential future losses. but what we liked is he stepped in and took accountability. it's important from what happens from here. the steps that they take and the lessons that they learned. >> do you feel they have taken enough steps so far? do you feel that the risk management team is different from what it was a week ago? i mean, are you satisfied and
comfortable enough to sit here today to say that this will be prevented in the future, given the team that they have in place right now? >> well, mistakes happen, of course. and it's important, again, to what did they do from this point forward. and the team that they had in place has maneuvered through a lot of difficult times and difficult market environments quite effectively. so one mistake they shouldn't be judged on, again, what happens going forward. >> they arele less likely to ma mistakes if they split the role of chairman and ceo. that is one of the clauses that they're going to voet on. you have a vote there. i know that you've farmed it out to a proxy service. should you plit is role of chairman and ceo? >> we don't believe at this point that they should split the role of chairman and ceo. and we don't expect that to happen. just because he has been very effective in those roles and the company has performed quite well. >> i don't understand this in the united states. why you create monarchs at the top of big companies.
you see it with chesapeake, you see it with eva. you see it time and time again. why can't you split those two roles. two brilliant minds working together is better than one brillia brilliant mind on its own. why do you give so much power to one individual time and time again? >> i would argue that jp morgan and jamie dimon doesn't have that much control. he's got the fed in there surrounding him. there's a lot of checks and balance. >> the mistake made, she has now left the company. don't you think if there were more people surrounding him in the immediate vicinity, they could have cross checked what he was making and the information that came from the direct report. >> it is a big issue. and mistakes do continue to happen. but it's important that he's making sure he's building in the appropriate controls going forward. >> yeah, and the chairmen don't usually play that role. but that's -- >> dending on how you set the whole thing up. >> not when you're ceo jamie dimon.
you're not going to have a chairman come in taking a look at the chief investment office. >> if you were in a situation where the wall street journal, the financial times and everyone else was reporting that you have a whale in lond they may call up so that he couldn't do a round of interviews and that it was a storm in a teapot is what he said. that is a cross checking function that the chairman could have carried out. >> that's a fair point! could. could have. could have. >> oh, by the way, they did check it out. >> he said they were too defensive. we were too defensive. we should have taken more notice of that. >> let me ask a final question which is you do have to take it on faith at the end of the day, that he's going to monitor risk and they are going to monitor risk at jp morgan effectively. even the best of investors, and you may be that, doing their due diligence could never have determined that they were taking
this kind of risk from the chief investment office. >> well, chief investment office role is fairly small in the big scheme of jp morgan. >> we never even heard of it. >> well, details are still emerging and we'll find out more, i'm sure, in the next few days and the next few weeks as this transpires. they haven't really december closed the whole structure of the hedge that they put on. >> well, yeah. foolish, too. quite plainly. >> and it wasn't really a hedge is what it seems to be. >> well, there's a hedge on the hedge. >> before we let you go, will you add to your position at these levels? >> well, as our largest position in our fund, you know, right now, i can't speak on any specific trading. but we are comfortable with jp morgan on a long-term basis. we are long-term investors and are looking through the headlines to where they are three to five years out.
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morgan stanley also holding its annual meeting today. chief checktive james gorman says morgan stanley doesn't have those types of derivatives in its portfolio. he says there's no update on the potential morgan stanley downgra downgrade, although he expects one by the end of june. >> 15 of the nation's most influential minds facing off this week for jeopardy's power play competition. our very own david faber appearing tonight and former white house press secretary david purina. we went behind the scenes as he prepped for the big e vent. take a look. >> i've been doing tv a long time and i never get nervous, but i amor in vus right now. kareem is trying to psych me out, which is not that hard.
simon hobbs told me to visualize victory. . i'm going to do that. >> you have the buzzer em plor you. so you really have to be patient and not get so anxious. >> your thumb works a lot better if you know the correct response. if you don't, your thumb isn't going to do you a lot of good. >> so if i lose, it's only because i failed to do the buzzer properly. it has nothing to do with my ability to answer the questions. i was trying to just buzz in. okay? remember that. >> so i have about a hundred questions for you. what's behind the podium? just the pad? i mean, is it old chewing gum wrappers back there? >> they really do a great job kraeting a beautiful se. watch me. people are just going to laugh. dana is even shorter. they put her up. it's ridiculous. kareem, great guy. so exciting to meet him. they have an actual screen there. you don't see the game, but you
would writen on it as you would for a credit card. you write your answer on that on the little pen that they have there. that's about it! is the set large? does it look smaller than it looks on television? >> fairly large. yeah. fairly sizable. and alex is all the way over on the other side. and they have lights. >>. they have lights on the side of the board and that's -- you have to see the lights before you buzz in. and it -- it was difficult, you know, timing wise. and then somebody said to me, it seemed obvious. it was somebody pushing a button to light up the board. so when alex stops talking, they've got to push the button. once you time it to the end of the question, exactly, you can buzz in. >> you've done well. you went in as you saw on that footage there. and you came out with your usual serenity. so i'm assuming that all is good. >> i was very relieved it was over. . .
>> did you go in and say they call me the brain? >> no, he said this might not work very well. >> he is 70 years old, but, man, he is in great shape, alex. >> you should mention to the charity that he's working for. >> i was playing for a vision for public schools who supports the 1.1 million kids in our public school system in a lot of different programs. a couple of which i'm on the board of. we're going to be starting up on the bronx in september. >> education of new york city is a tough thing to tackle. but a lot of people are working hard at it. the big episode tonight with david faber.
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welcome back. software company s.a.p. announcing yesterday it now has 196,000 customers and is aiming for more than 200,000 by the end of the year. bill mcdermott is co-ceo of s.a.p. and is joining us from the tech conference in orlando. bill, always a pleasure to speak with you. >> thank you very much, melissa. great to be with you. >> obviously, we are all watching what is going on in europe. as a german software company, i have to ask you about how important the developments in europe are. how much are they a lever to your forecast for 2012, and in particular, your forecasts of 10% to 12% growth in software and licenses? >> well, we just reiterated our guidance. we stick to our forecast. obviously, southern europe is under some stress. there's no doubt about that. but if you look at germany, uk and other parts of europe, it's quite strong. so, what we do is balance a portfolio. we also see tremendous growth in
the bric, china in particular, where we're overinvesting. so, i think global companies have to go where the opportunity is and grow big where the buyers are. the other thing i'd mention with our technology is we go into southern europe, and if they're under stress, we'll take cost out of the equation. they may have to run more efficiently, automate their supply chain, lower their head count. these are things that our system enables customers to do. so, we'll do well in down and up markets, and we manage it on a global portfolio basis. >> as a german company, though, bill, have you gone through the scenario analysis of whether or not greece, if greece does exit the euro, what that implication may mean for your business and your contracts in europe? >> yeah, we have. i mean, you have to remember, when you look at greece, you know, we wish everybody well there, but it's a very small piece of our portfolio. and as it relates to entanglements and some of the other complexities that banks have to be concerned with, you know, our business will weather this storm as we've weathered a
lot of other ones. and frankly, one of the benefits of being in s.a.p., and that's what we're here talking about at staff fire with 20,000 of my closest friends, by the way, is we run our business in realtime. so i have realtime visibility on the pipelines globally and i know what's going on, not just today, but on a rolling four-quarter average. so, the predictability in knowing where your business is because you're a realtime enterprise is dynamite, and that's what we're doing not only for s.a.p., but for all of our customers. >> bill, as you know better than i, the heat is on for you to basically get your applications on the web successfully, and it's been a trouble d past over the last five or six years, a lot of money spent. clearly now, you've made the acquisition of success factors with a 54% premium in december. now you've got to take all your functionality and get it on the web before a sales force or whoever beats you to that. and i know that's one of the main focuses today. what are you able to tell shareholders? >> well, the main thing is, you know, we just celebrated our
40-year anniversary. and sometimes when people turn 40, they get a new harley-davidson or a great porsche, both great customers of s.a.p. we've bought success factors. so we did our own face-lift in the cloud. what's great now is we have all the best employees from the best-run businesses in the world running on success factors, 56.6 million users. so, today we made a big announcement. whether it's your customers, your money, your suppliers or your people, s.a.p. will handle all those transactions in the cloud. everything we develop will be ready for the cloud, ready to run by industry, by buying center. we will be the dominant force of the cloud -- >> when? when, sir? >> -- the number one cloud company in the world by the midy this decade. >> more importantly, bill from a shareholder perspective, when will the cloud business be profitable? your cfo was quoted saying it won't be profitable in 2012. can you give us guidance? if not 2012, maybe 2013? >> yeah, definitely maybe 2013 -- >> definitely maybe 2013, bill? or definitely 2013? >> well, let's say this, i
believe we will be profitable in the cloud in 2013, unlike the other market participants, because we have leverage at s.a.p. that they don't have. for example, there's a consumer revolution going on in the world today. the consumerization of i.t. is taking over everything. >> sure. >> so, that business consumer, the billions of them that are out there, we're connecting with them on mobile devices. we manage the unwire platform, the applications that enable great companies like burberrys to go direct to their consumer on the internet or give them interference in the outlet so them sell more. >> we're running out of time. at what point will you get all of your functionality into the cloud? >> all of our functionality's in the cloud right now. we have everything that we can bring to a customer in the cloud right now. some clouds will be private, some clouds will be public, some clouds will be hybrid. we put everything we have in the cloud now. we have customers getting up and running on s.a.p. technology in
weeks, sometimes days, no longer months and years. this is a new s.a.p., a revolutionized s.a.p., an s.a.p. leading the industry. >> bill, always great to speak with you. thanks for your time. >> thank you. >> bill mcdermott, co-ceo of s.a.p. >> thank you. >> before we go, melissa, what's coming up on "fast" tonight? >> wilbur ross on two of the most dangerous investments out there, potentially, european banks and natural gas. why he's getting in. also, all the after-hours action in jcpenney. earnings out this afternoon. >> wilbur speaks, a lot of people follow suit. we'll be watching for you 7:00 p.m. eastern time, at least here in new york, david. if you're just joining us, here's what you might have missed earlier this morning. welcome to hour three of "squawk on the street." here's what's happening so far. >> we're looking at a first-quarter number of 68 cents a share. the estimate 65 cents. >> think of every word that becomes a verb in the american vocabulary, to xerox to fedex to
google to facebook. you've wanted to own those stocks during their growth phase, and i don't think this one's any exception. >> the survey says. let's start out with retail sales, up 0.1%. if we look at cpi, it was goose egg, unchanged month over month. >> my inclination is to listen to the conference call and not be as bearish as the stock is indicating, but this company does have a tailwind. >> greek politicians have failed to agree on a government. >> shocking. >> it looks even more likely that elections will happen, and it's amazing how quickly stocks can suffer. >> kicking off trading on this tuesday morning live from the financial capital of the world. >> groupon is tackling a massive multibillion dollar market, which is local commerce, and we think that the growth in mobile smartphone adoption is going to be a tailwind for the company for several years. >> i think a major movie would launch now on facebook. in fact, they do. i think you get a lot more
social interaction. people indicate that they're going to see the film. people make plans. and social is really word of mouth on steroids. so, it's almost everything in one when it comes to advertising. >> good tuesday morning. welcome to the third hour of "squawk on the street." get a check on the markets today, where the dow's hanging on to modest gains, about 15 points or so here at 12,710. s&p hovering right below that 1340 mark at 1339. and the nasdaq's up almost 15 to 2,916. t.j. maxx the biggest gainer on the s&p today, rising sharply after the discount retailer first-quarter profit did top estimates. the company also says its may sales were off to a "strong start." energy stocks also pulling back today, making them some of the market's biggest losers. alpha natural, consol, peabody and newfield all in the red. a good road map for you, facebook upping its ipo price range as investors really chomping at bit to get their piece of the social network, but it turns out the public has some trust issues where facebook is
concerned. will that ultimately hurt the company? we'll talk about that. then we'll talk to one of the top financial advisers on the street about what he's telling clients. ceo of hightower advisers joins us live here at post 9. plus, even as facebook tries to sell itself to investors, mark zuckerberg still famously shies away from the spotlight. we'll get an inside look at the sometimes mysterious ceo. and the most dangerous time to trade stocks. we'll tell you -- you're going to love this -- which four minutes of the trading day you should be avoiding at all costs. some new research out on that, coming up in the next hour. first, let's get to "the santelli exchange," hop over to chicago and rick santelli. morning, rick. >> good morning, carl. of course, everybody wants to talk about jpmorgan and beat up on jamie dimon. of course, we look several hours ago at how the markets were impacted by greece. we continue to watch banks like credit agrico in france that are at the all-time low stock price ever. but i haven't heard enough about
california, right in our own backyard. you know, california has a $91 billion budget, but yet, they have a $15.7 billion shortfall. that same shortfall in january was $9.2 billion. governor brown says, well, he's going to get to this number by first $8.3 billion in cuts. the rest he's going to make up in taxes. and he wants a compromise. that's why it's only partially on cuts. i'll tell you what the compromise is going to look like. you want to know what the compromise is going to look like? the compromise is going to look like happy feet! because the people of california are high-tailing out of the state! just look at what governor brown said. the reason we went from a shortfall that he imagined would be somewhere in the $9.2 billion area to $15.7 billion is because of all these people that have left the state.
the revenues of his last tax increase just didn't generate the revenue. boy, how quickly all the experts are to berate the likes of art laugher, who always seems to have it right with regards to taxes. if you get overtaxed, in a way, where the taxes are paying bills in the rearview mirror, but your income that they try to tap is here moving forward, one of the recourses you have when it is a state is to say ariva under chi, california. many can't do the same thing when it comes to the national level, but the lessons should be about the same. compromise? compromise is a great buzz word, but if spending is this far out of control, why would any taxpayer in his right mind throw more of his dollars into this bottomless pit? think about that person at facebook who decided to give up his citizenship. i know that's in the extreme, but i can't tell you how many business people in their 60s tell me it isn't worth the risk anymore. they're going to wind down as opposed to keep investing. that's going to be more revenue
lost. i'll tell you a compromise -- stop spending, stop spending, stop spending! back to you. >> there's no risk you would ever renounce your citizenship, right, rick? >> i would never! nobody's going to chase me out of my country. i'm going to chase the spenders out of the balance sheet first. >> i like it. we'll talk to you in a little bit. rick santelli in chicago. time for "squawk on the beat." while investors may be fawning over a chance to get a piece of the facebook ipo, public is actually more skeptical, according to a new poll. kayla tausche is at hq exploring trust issues with facebook. interesting stuff, kayla. >> it is interesting, carl. the results came out last night, and of facebook's 900 million users, could it really be that almost 600 million of them don't trust the site? well, we asked them, do you trust the company to keep your personal information private? and the results, in a nutshell, no, i don't. 60% said they had no or little trust in the company when it came to personal information. only 13% saying they trust the
site completely or a lot. so, it's probably not much of a surprise that when asked about using the site when real money is concerned, as not really virtual funds, people were equally distrustful. we asked, how safe would you feel buying goods or services through facebook? and only 8% said they felt extremely or very safe doing that. 54% saying not safe at all, not safe or really not safe, but 35% saying not at all safe to do that. so, where does that lack of trust come from? well, it could partly be a result of zuckerberg himself. because despite his phenomenal success, 60% of people are only somewhat or not confident in his ability to lead the company, but they can't put their finger on really why that is. a significant portion of respondents saying it's not because of his age, it's not because of his temperament, nor his reputation. so, what does it all mean? well, it's really hard to say. facebook users have always been vocal opponents of changing the
site. but despite their gripes, more and more people continue to sign up and spend more of their time on facebook. but guys, coming up on "power lunch," we look at an even bigger concern for the company than trust, a case of ad apathy among facebook users and the uphill battle the company is facing to turn clicks into cash. carl? >> interesting privacy concerns, although you know, it's been written, kayla, that even when zuck zuckerberg has faced resistance when it comes to privacy, he usually finds another way to come around and get the same thing he was looking for through a different avenue. >> right. i mean, consumers are always quick to throw up their arms and complain about something that they don't like or that they want changed, but as far as effecting that change or leading the site, voting with their eyeballs, so to speak, it's not happening at all. and in fact, in the s-1, it says that 13 million users aren't even aware there are privacy settings at all. i mean, that's a small percentage, but it just goes to show you that, you know, a lot of people just don't care. they want it to be a little
safer, but they're still going to use it. >> yeah. and concerns among users, although you've been tweeting this morning about some levels to which the ipo is oversubscribed around the world, right? >> right, and i believe you guys are speaking to evelyn resly a little later today. her article in "the new york times" deal book, she says just in asia, it's 20 times oversubscribed. i've heard from my sources that it was several simz oversubscribed just from the institutional side because a lot of people were wary about how strong institutional versus retail demand was actually going to be, and that was what i had heard several times oversubscribed, but perhaps asia, it is that they feel safer with american ipos. >> for more coverage of the facebook ipo, go to facebook.cnbc.com, including a story on mark zuckerberg's persona paradox. meantime, let's get to brian sullivan, get a "market flash" with the dow up almost four
points. brian? >> yeah, but there's one stock tanking, and darn it, carl, you look like a guy who needs to buy a snowmobile. fewer people, apparently, will buy a snowmobile this year. arctic cat coming out with a concerning outlook, basically saying atv and snowmobile sales may not be as strong as forecast. in fact, atv, four-wheeled motorcycles, the things you ride around in with the roll cages, whatever, they may fall 5% in sales this year. keep in mind, arctic cat has had a great year, up from 22 bucks to where it is now, but tanking big today. by the way, carl, i just tweeted out an excellent oral from the "journal" on may 3rd, about if you're a member of facebook, you are essentially part of the world's largest unpaid workforce. it's a good read. worthwhile. >> i like it. and cramer's point on arctic cat was don't read too much of that into polaris, which i guess is only 10% snowmobiles. >> and not falling at all today. in fact, rising about a percent. so pii going in a different direction. >> yeah. thanks, brian. >> all right, carl. >> brian sullivan. we begin with a big earnings
miss by a dow component. shares of home depot reacting negatively this morning to news that the homebuilder reported weaker than expected quarterly sales. chris is a retail analyst at jpmorgan. good morning. >> good morning. >> concerns about comps, right? walk us through, what was the problem? was it april or something larger? >> you know, basically, expectations were for home depot to do a seven to eight comp. if you talk to investors on the buy side, they came in with about a 6% comp. so that rattled people, especially with the view out there that housing is getting better. the issue was really the guidance as well. they're talking about a 2% to 3% comp guidance for the balance of the year, suggesting that the weather pull-forward was about 300 basis points, whin investors don't like decelerating comps. and it was the warmest spring since 1895. >> so, how much do you need to know about may? what do you think about may? >> you know, we spoke to the company, both on the call and offline. you know, it sounds like they're doing better than that 2% to 3%
comp in may. the weather was still pretty awful last year. it rained a lot in the northern half of the country in may. so, it sounds like they're doing a little bit better, and in typical home depot fashion, looking to be conservative and provide some upside. >> there has been a lot of discussion. look how well the stock has done, especially over the past few months. and still some forecasts that you could be looking at a $50, even $60-a-share price within a year or two. what's your view? >> yeah, you know, if you look back on home depot over the past three years, we've annualized about a 20% return on the stock. it's up about 20% year to date. we expect some consolidation on the weather pull-forward, some deceleration in comps. but you look at home depot, they're buying back 7% of the shares a year. they pay over a 2% dividend yield, so nearly 10% yield, assuming no earnings growth. we expect that dividend to grow 20% per year in that buyback to maintain.
so, over time, home depot is at a much higher level. you be a little patient here, you let it consolidate down and you start buying at a few dollars lower. >> yeah. there's always the classic comparison to lowe's. how much do you extrapolate to that stock as well? >> yeah, expectations were pretty high going in for lowe's as well. i think people were thinking about a 5% to 6% comp. in looking at the numbers and being in the stores, really all spring, it feels more like a 4% comp now. it's a stock that has been more sponsored on the hedge fund side. so a little bit more concerning there. there's a little more momentum in the name, and that could see a pullback to lower levels. >> finally, weather aside, so much discussion about housing sentiment today, obviously posting great numbers among homebuilders, but the actual housing numbers are still close to four-year lows. how do you think housing repairs itself through the course of the year? >> yeah, that's an interesting discussion. we just got off the phone with home depot talking about that, and their point of view is that, hey, look, prices are stabilizing but still down year
over year. it's still really hard to get credit and buy a new house for a first-time home buyer with a, you know, 640 and lower fica score. so, they think it's a little bit better on the macro side, more built out of people staying in their homes, doing the upgrades, repairing the roof, not necessarily on some new bullish housing market. >> all right, chris, thanks for your time today. always good to talk to you. >> thank you. >> jpmorgan with the overweight over at home depot. when we come back, he was named the number one most influential person in the financial adviser community and he is joining us live to tell us about his new model for wall street. we're back after a short break. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal.
derek kaminsky is joining us here at post 9, fresh from las vegas. the tan, i don't think it can beat this one. you must have -- what, did they hold the conference outside? >> you ask them. we had basically very, very little free time, carl, you know? but i want to bring up one of our favorite names, chest peek. let's look at the stock, down 6% today, heavy volume. interestingly enough, yesterday the stock was up on news of the possible filing by carl icahn. in fact, if you've been paying attention to the bonds or the credit default swaps yesterday, this action is not a surprise. and i want to read one quick quote. mcclendon is quoted in "the new york times" today, aubrey mcclendon, that is. take a look at what he said, and i think this is a little bit of the concern that is out there today. "there are lots of options and
lots of levers to pull. we will get our asset sales done." deja vu. carl, where did we hear similar sentiment in an overleveraged story? take you back to 2008, lehman brothers. we can make those sales, we can delever the balance sheet. i think the bond market, which is always smarter than the stock market, is telling you the asset sales aren't going as smooth as mcclendon has led people to believe here. we'll have more on chesapeake and another issue that one of our colleagues actually broke the story yesterday, later in the program. >> does icahn change the game here, the narrative at all? >> no. as i said yesterday on this program, i think carl is looking at the situation as i made a lot of money in the past, traders always have an instinct to go back to a game they made a lot of money in. it's a different situation now. i don't think carl understood that this is a highly leveraged situation, trying to sell assets and into an unfavorable market right now to sell those assets. >> cramer's point, with yahoo and chesapeake, these activist
investors, they can have an impact, but the fundamentals are still rather weak. >> in the case of yahoo, and we talked about this in salt last week, because dan lobe was there. everybody wanted to talk about chesapeake. yahoo was not an overleveraged situation. it may be a hurt company, it may have an earnings problem, but it's not an overleveraged company with a balance issue. in light of mounting woes for big banks, what's a retail investor to do? "investment adviser" magazine is out with their list of the 25 most influential people in the financial services industry. our next guest topped that list. nice cover shot. joining us in a cnbc exclusive interview, elliot weissbluth, ceo of hightower investors. elliot, thanks for coming by. good to see you. >> good to see you. >> what does this mean to you, something like this? >> it's humbling, but i think it's also gratifying, because it shows that the industry is recognizing that there are 300 people at hightower that have effectively built an innovative business, and this is an honor for all of us because it shows
that we've done something that hasn't been done before, and we're quite proud of it. >> you know, elliot, i have to ask you, today there's news about morgan stanley likely not trying to accelerate the buyout of smith barney. hightower has tried to bring a lot of these retail brokers from the big firms, the financial supermarkets. obviously, you've gotten this award, the recognition that you've been successful. but if i'm a broker at morgan stanley or smith barney and i see this news today what does this mean for me and my book of business? >> well, it's basically one more big integration. and what we see in the marketplace is the fallout that impacts the clients. there's changing of technology systems, there's changing of tools, changing of fees. all of that sort of creates havoc for the financial adviser and for the client. so we're getting many phone calls for advisers that are seeing integration not proceeding as planned and want to talk to us about joining hightower. >> i've always wondered specifically, obviously, i have background, experience on the buy and sell sides over the years. what specifically do clients say when they come out of the
financial supermarket model, out of the warehouse model, what do they say that is a benefit to them for their financial adviser not working at one of the large firms specifically? >> well, after they tell their adviser, what took you so long, they realize that they're dealing with a business that has complete transparency into all their costs. so, if they ask a question of their financial adviser of what something costs, they get a direct, factual, candid answer. the second thing they get is a different service level. we're catering to sort of the individuals that have sophisticated needs, and they get quick and fast response. they don't deal with the bureaucracy of some of these larger firms. so, it's an immediate peace of mind and an increase in service level to them. >> i hope you won't mind one question on the mood, the barometer of investors' mood. jimmy rogers was on "closing bell" last night. he has his own opinions, but argues that volume on equities is not coming back, not coming back. do you think people are nervous that that's structural, that
fear, and not cyclical? >> i think in our environment, question is whether the clients and investors are trusting the people giving them advice, and i think what's happened is there is a fracturing of the trust. we're trying to restore some of that trust. so i think when the trust comes back, you'll see people more inclined to take risks by investing capital in the marketplace. >> any major liftout that you can leak to us what firms they're coming from? >> i cannot leak to you, but i'll tell you we did more business in q-1 this year than all of last year and we expect this year to continue on that track. >> congratulations on the honor. >> thanks. >> it's a fantastic photo. >> thank you. >> more handsome in real life. elliot, thank you very much. >> wonderful, thank you. we'll take you down to the close in europe in eight minutes time, get you all the closing action when that happens. and don't miss silva's interview with german chancellor angela merkel tomorrow morning on "squawk box." be right back.
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welcome back to "squawk on the street." i'm eamon javers at cnbc global headquarters in new jersey. a bit of a dust-up between republican senator chuck grassley and the google guys. the question here, why are the google guys parking their jets at moffett air base in california? senator grassley has sent a letter to nasa's administrator. this obtained by cnbc. the letter went out yesterday, in which grassley says "my office recently received troubling allegations regarding the google fleet of aircraft housed at moffett airfield." grassley wants to know exactly how much they're paying and why is it that google is purchasing jet fuel. allegations that google purchasing jet fuel below market prices. carl, we have asked nasa and google for comment on this letter and we'll bring it to you as soon as we've got it. >> wow. they say do no evil, but they never say don't buy gas at a discount, i guess.
>> that's right. >> so they're in the clear there. >> to be clear, this is whistle-blower allegations that grassley is passing along. he wants information here. he's not making these allegations himself. >> thanks, we'll talk to you in a bit. jpmorgan, getting headlines just now out of the shareholder meeting in tampa. jamie dimon has won the vote on the pay package and will keep his chairman's title. he was asked about the trading losses and whether or not it would affect the dividend. in his words, "i strongly hope not" when asked by a shareholder. a few minutes left in trading overseas. we'll get the european close in just a moment. he doesn't look like a heart attack patient. i was teaching a martial arts class and it hit me. we get to the emergency room... and then...and then they just wheeled him away. i had to come to that realization
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just a few seconds to the closing bell in europe. we're going to get simon hobbs' take in just a few seconds. >> let's take a look at the map and listen to the bell. and you'll see that a lot of the markets are in negative territory. >> the european markets are closing now. >> so, the big news that's, of course, breaking while we've been on air is the fact that the talks to form a new government in greece have effectively failed. i don't think that event in itself is necessarily negative. to many people, it was inevitable that we get there. the question now, as they look to elections in the middle of june, is this possibility of a bifurcation result, either the left wing's greater power and totally rejects the best of europe in austerity, or maybe the two main parties, as they were, can reassert themselves and there will be a better dialogue with the rest of europe, and perhaps a softening of the stances.
for the moment, it is quite clear that it took that news itself did take the market into negative territory, certainly over in greece. we're now at a fresh 22-year low on the market there. now, that isn't really a major concern, arguably, for people here in the united states. the three main markets are, london, frankfurt and paris. let's have a look at how those traded during the course of the session, and you can see the way that we have been brought lower as a result of that. and importantly, of course, your main question becomes any problems in greece? can you stop the contagion going to spain and italy? and it's interesting that, in particular, the italian yield has gained during the course of the session, not so much with spain, but you can see the way on the weekly chart, we're up to almost 6% on the italian ten-year, and that is a concern. it is one reason, along with the general sentiment on the downgrades from the credit agencies, why a lot of the weaker banks, certainly in italy, are down today, and indeed, across the eurozone.
you've seen others like kbc also fall. kbc is down 7%, bpms down 7% in italy. then you see some of the other great movers. interesting also that we have big moves at the bottom of the french market today. let me show you some of those. there's an academic study just released in paris tonight, saying that if greece leaves the eurozone, it will cost the french state 66 billion euros, the french banks 20 billion euros. and of course, francois hollande has just been inaugurated as the next president of france, and he's stressing solidarity as he goes to meet angela merkel. just before i leave you, i want to recap. the merkel/hollande meeting is tonight. it's very important. i want to tell you what the head of the euro group said yesterday. he said after the markets close, coming out of the meeting that he had with finance ministers, talk of a greek exit is nonsense and it is propaganda. as far as he is concerned, that is not what people are discussing at his level within
those finance ministers. there is a possibility that greece can form a government, that they will soften the targets and that everybody can stay on board. i think it's important because you could say, he would say that, wouldn't he? in part, that's his job. he's perhaps a little bit more anti-german than the rest of them, as well as we know from previous comments, but we need to cross check that we're not getting carried away with the idea that greece will imminently leave the eurozone, as many in the markets are. there may be a process there. there may be, as he sees it, light at the end of that tunnel, and i think it's important to mention that. >> interesting. hollande and merkel meet tonight. >> yes. >> tomorrow -- >> no, tonight. >> a and he speaks a little german. >> he speaks a little german. the video, no doubt, going to come out and look like they're best of friends, because that's what you do in european politics. and it may be that she sacrifices his word on not changing the fiscal compact, the rules on deficits, for a bit of infrastructure spending from the european investment bank or whatever. a deal on greece or comments on that are likely further down the
line. >> all right. it's going to be an interesting 24 hours in europe. thank you very much, simon. let's get to chicago, check in with rick santelli, talking a little german gdp and spain with his guest. hey, rick. >> hi. well, we'd like to welcome harry dent back. harry, let's keep this simple. you know, we've heard many times it's a new normal. why is it, then, that the likes of greece, california, the president, spain, they all believe that if there is a new normal, they're going to fight it, they still would rather see property values back where they were, even though how to recover those trillions of dollars seems to be impossible. we have 11% unemployment in california, 24%-plus in spain. will they be able to reorganize and hold this all together, harry? >> you know, that is the big illusion, that with enough stimulus to get over this little hump of debt and crisis that these economies can get back to normal. demographics say they're going to slow for the next decade and it's going to slow for decades in places like southern europe.
there is no back to normal. spain is unique because they overbuilt real estate, residential, commercial more than any country in europe, pretty much any country in the world, outside of china. and yet, their demand, the 30 to 39-year-olds that buy all the real estate are going to drop, literally drop 40% in the next two decades. that's the same for italy, similar for greece, portugal, germany, and even to some degree, switzerland and austria. so, there is no getting back to normal. we have aging societies that are too much in debt. if you don't, you know, get rid of this private debt and restructure it in some civilized way, we're just going to sink and sink. there is no way to bail out spain. germany may be pressured into one round here. everybody's ganging up on them. but if spain comes back for a second round, this whole thing's done in europe. >> well, harry, let's make it even more simple for the viewers and listeners on satellite radio. in the end, it seems as though the goal of every government, including ours, is to try to
achieve austerity without any pain. i think it's absolutely impossible, and it underscores why we saw so much political change, whether it was in greece or whether it was in france, because the notion of selling easy and painless is easier than actually selling the truth. thoughts? >> well, you know, there is a lack of leadership. we need the iron lady here. she came in the early '80s and said, look, we've got to do the right thing, we've got to push through this for long-term gains. you can't get from the biggest debt bubble in history to the other side without pain. you're right, there's no way to do it. every time we've had a major debt bubble, the 1830s, 1870s, roaring '20s, and now there's been at least a decade of high unemployment, debt restructuring, and basically, you have to do that to get to the other side and get from winter to spring. and if these governments like japan, to keep pushing it off, they never get to spring. you never get to the other side. so no pain, no gain again. it's that simple.
>> thank you, harry. of course, we're going to have you back again because i'm sure there's going to be many more rounds of trying to solve this with more debt. carl, back to you. >> i think you can count on that, rick. talk to you in a little bit. rick santelli. bob pisani's joined us here at the post 9. >> about even on the advance-decline line. we haven't seen this in a long time. it's been a horrible two weeks! we've been 2-1, 3-1, 4-1 declining to advancing stocks for a couple weeks, so it's nice to see even moving sideways. has anyone noticed, i know the u.s. isn't popular, it's all about greece, but the economic data was not bad in the united states. in fact, we had a lot of it today. and look, the cpi was in line. there's no real inflation. well, careful. but at least modest on the consumer level. then 2.3% year over year. retail sales were in line. they weren't great, but they were in line. the empire survey was terrific, well above expectations, although the outlook was kind of on the weak side. and the nahb homebuilding survey was above expectations. all right, that's not gangbusters, but still not a bad day for the economic data.
can i say one nice thing about jamie dimon? i'll be the one person in the united states. the bank makes money. it makes a lot of money, okay? so, while he's being pilloried down there and probably deservedly so, here is the profit for this year, $18.1 billion is the expected profit. that is the highest profit ever earned by an american bank, and this is with the $2 billion trading loss! they would have made north of $20 billion this year. so, take the profits of this company. you want to know how much the $18 billion is? put all of the profits of bank of america, goldman and morgan stanley together, combined. all three only make $16.98 mi billion. this is the most profitable bank ever! i'm not making excuses for what the company did, but it is. i want to thank dick bove of rockdale for pointing that out. very important piece of information. take a look at what else is going to be happening here. by the way, banks all on the up side today. haven't seen this in a long time either. let me just say one thing about home depot, i'll move on. the important thing about home depot, it is an earnings
monster. take a look at the numbers. they're growing 20% every quarter year over year. so, home depot has just been a terrific stock here. last two years, 20%, first quarter 30% earnings growth. the rest of the year, they're going to earn 20%. the problem, the reason the stock is down and people are unhappy with it right now, the expectations were way too high. some people had 10 cents above the numbers that they were reported, and they had modest full-year sales guidance here. the stock's run-up. remember, the stock was $40 two months ago. today, take a look at it, it's just shy of $50. i think if you put 17 times forward earnings, which is where it is now, into 2013 and look at the number here, 17 times $3.30 they're expected to earn, the stock is $56, $57, $58, you can easily see why the bulls are arguing that this is a terrific company on the pullback. they did talk about the dyi market, really strong in the conference call. that's their strength right now, the dyi market. >> thanks very much, bob.
gary kaminsky still here -- >> i'll say something nice about jamie dimon as well. for ten-plus years, he had a teflon reputation built on a mantra of risk management and expense control, and that's why you get the results bob was talking about. the real issue, again, is going to be a multiple of what these banks -- we've seen this many times before. the issue is not the earnings, but the multiple investors are willing to pay for it. remember, if this had been anything else, the numbers themselves aren't really the story. it's the fact that this is a management team that built up a huge institutional ownership base over a ten-year period that did not expect this type of a development from that company. >> still not going to get anybody else that's going to earn this kind of money. by the way, the u.s. government needs banks that are profitable to go out and sell the debt that it's going to need. how many banks are there that really matter, seven or eight in the united states? go out and sell the debt it needs to sell to maybe foreign banks? you need healthy american banks. >> by the way, at the meeting, a couple more headlines.
dimon holding out the possibility of clawbacks, says there may be more disciplinary action pending their own investigation into the trade. and the "wall street journal" is reporting that justice has opened their own probe, which is in a long line. >> this is always after the fact, is it not? after the fact. >> we'll see if we get anything similar out of chesapeake, which you've been watching too, right? >> again, well, i mentioned earlier in the program some of the stuff that happened yesterday, the bonds reacting one way, the stock the other way. i will say our own colleague, darren rovell-a story yesterday that i actually heard about from a number of people after he did it, because after he reported it. normally, again, $3.2 million. the company spending company money to buy it. aubrey mcclendon, minority party in the oklahoma thunder, in the playoffs right now against the los angeles lakers. at a time when there's a cash crunch call, the company should not be spending money in this case $3.2 million, to buy tickets to essentially give away, and it's not clear if they were giving away to clients or
business contacts, but there's a time and place when you're in a cash crunch. i don't think it's a good idea to be buying basketball tickets, whether it's a good marketing expense or not. >> okay. i mean -- >> timing. timing. again, timing. >> the optics certainly are difficult, but you know what selling involves, right? >> absolutely. but when you're trying to sell assets and you're essentially trying to manage a negative cash flow, not a great idea, in my opinion, if you're a shareholder, to see this company doing it. again, they'll probably take the other point of view. i think that they said, look, this is what we do, this is our business. we're still running a business. >> yeah. we have had some people on who say the lead director is actually not going to just fall in line behind mcclendon, that everything has happened is a clear signal of that. do you believe it or no? >> i don't know. when i look at this board of directors and i think we made this point several, several weeks ago, it just surprises me that there's been no movement at that level yet. i can't believe that, for example, charlie maxwell, who is affiliated with a registered brokered dealer, is still on the
board of this company. kind of scratch -- i don't have any hair, but scratching the head, the hair that i have there. >> let's get to brian sullivan at hq with a quick "market flash." brian? today coming out and cutting volumes because they say that a key customer is near default. they did not name in customer, but if the customer's having those kinds of problems, sales to that customer may slow or stop. and as such, patriot coal is down about 11%. and guys, here's the thing, the stock is now down 80% over one week -- or one year, rather. this is just over a $4 stock. four years ago, this was a $75 stock. at some point, the coal slide has got to stop or you can kind of see where some of these companies might be headed. >> yeah, unbelievable. look at that today. just incredible action out of the sector. thanks, brian. straight ahead, mark zuckerberg famously avoids media interviews. we're going to talk to two journalists who profiled the social network ceo in great
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yeah, audio is sometimes a difficulty in live television, but we'll work on that. meantime, facebook's ipo just a couple days away. the 28-year-old ceo has been busy pitching his company to investors. facebook upping its price range now to $34 to $38 a share. will the hike translate to big returns for facebook on d-day? evelyn russell is with "the new york times," grace with the "wall street journal." ladies, good to have you with us. good morning. >> thank you for having us. >> good morning. >> evelyn, tell me the significance behind a potential pricing at $38. what does that mean? >> it means it's going to be an even larger ipo. i mean, this is going to be the largest ipo, tech ipo since google, of course, in 2004. and google was quite small in comparison. when you're looking at these numbers, it could be valued at $104 billion just right out of the gates, and we're already seeing really strong investor
demand. according to sources i've talked to, even asian investors are 25 times oversubscribed on the offering. so, lots of demand around the world for facebook shares. >> that certainly flies in the face with some of those reports that said the road show is being met with tepid demand or softening demand. i imagine you're hearing some of the same things, though? >> absolutely. and i think one of the things we spoke about, carl, the last time i was on, was when the original price range came out, we talked about the possibility that they may end up raising the price range. so, this isn't that unexpected. i covered groupon's ipo, and the exact same thing happened. they came out with a low price range, and then it comes out a lot higher in the end. and part of that, i think, is a tactic to sort of drive demand for the ipo. you come out a little bit lower and then change the price range and make it a little bit higher towards the end to kind of show how much demand you have. >> yeah. evelyn, it's unfair for me to ask you this, but people will
wonder, right? mom and pop will wonder, does $38 mean it spikes less on friday morning? what do you tell people when they ask you if you think it's a good place to get in? >> well, for underwriters, you know, it's a tricky game, right? because they want a healthy bump on the first day, and that's what they're trying to orchestrate, but they also have to weigh that against all this demand and trying not to have a huge surge, which would cause more volatility in the stock moving forward because you'd have all the people who came earlier potentially selling their shares in the following months. so it's going to be a hard game to actually nail down the price correctly and gauge the investor demand correctly. now, for mom-and-pop retail investors, it's tough to look at facebook, right? i mean, it's still a business that is working through its business model, and there's questions about whether or not it's going to be able to properly monetize its mobile platform, but then, on the other hand, there is that argument that it has more than 900 million users around the world on a monthly basis, and that is very valuable in terms of that
data and that potential to continue to build out revenues from there. so, it's a hard question, for sure. >> it is tough. and finally, shandi, just on zuckerberg himself, there's been so much written about how reclusive he is, just strategically from that standpoint, why the company doesn't talk a lot. do you think that's going to change after friday? does it have to change? >> i highly doubt it will change, and i don't think it has to change, because cheryl sandberg has always been the face of that company, and she's done a fairly good job at it. some would say she's done a great job at it. and i think that he knows that. and so, he considers his strong suit the product. if you saw the "road show" video that they put out, all he was talking about was product. he really didn't talk about any of the financial issues with the company. he left that all to sheryl sandberg. she's the one who hosts the president of the united states. she's the one who, you know, has these meetings at her homes for various, you know,
world-renowned guests. he's really the one who kind of stays at home and plays video games and watches "game of thrones" with his friends. >> i think at the end of the day, as long as facebook continues to show that kind of growth, mark doesn't really have to change. he can wear as many hoodies as he wants. he doesn't have to talk as much as he wants. >> sure. >> you know, as long as facebook is doing well, as long as revenues continue to grow, investors will be happy. >> yeah, let the product speak for itself. ladies, look forward to talking to you both again soon. >> thank you. >> thank you. >> thanks so much why we come back, the four minutes during every trading day when you should never trade stocks. we're going to find out what time of day that is and why it's so dangerous, after this break. the cnbc "real-time exchange market snapshot" is sponsored by interactive brokers.
high-speed trading has always been controversial, but now there's data saying it might be even more dangerous than investors originally thought. our eamon javers is back at hq with details that, eamon, at least everyone down here is asking me about. >> that's right, carl. i want to take you inside the thinking of eric scott huntsler. he's ceo of nan yex and is one of the biggest critics high-frequency trading. he says it's undermining the underpinings of the market and
creating volatility and liquidity problems. in order to do this, i want to show you exactly what he's talking about. we'll go inside one second of trading on jobs day, may 4th. look at the graphic behind me. you can see this entire thing is one second of trading in the five-year t-note on may the 4th, 2012. what you see here is the beginning of this second, things are very, very calm and placid until about 200 mil plnk illiseconds. bang! somebody trades about $150 million in this market, and there you can see the rest of the second extremely volatile. now, why would somebody want to do that? his argument is that by doing this in the low of the markets, just before the big jobs report, you can actually move markets and create volatility with less capital deployed than you would otherwise need to use. so, what he's saying is that here, you've got somebody deliberately creating this volatility for the rest of the second, and then they're
profiting with knock-on trades in other markets based on the volatility that they, themselves created, and it all happens in less than a second, just a couple hundred milliseconds here for the rest of that trading activity to take place. we spoke to hunsitor and this is what he said. >> we might hear there's no problems, we're doing fine now. well, yes, everything will be just fine as long as the news is sunshiny happy. if you get a shock to the system, you're going to see very quickly just how under capacity we are. >> so, he says he's seeing this kind of volatility before news events like the jobs report or economic data. those typically come out at 10:00 a.m. eastern. so, his advice to retail investors, you might want to stay away from 9:58 to 10:02 on the clock, because that can create real distortions in the
marketplace. you could get caught in one of these little land mines, carl. >> 9:58 to 10:02 a.m. eastern time. >> that's right. >> great, great stuff, eamon. thanks a lot. eamon javers. >> you bet. final thoughts on today's market action after this break. . you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. [ male announcer ] the inspiring story
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