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tv   Power Lunch  CNBC  May 16, 2012 1:00pm-2:00pm EDT

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to donate you can go to the website and donate on the tab. final trade, guy, first. >> yeah. georgia gulf. west lake pulled their bid. but i think gg catching a bounce today. >> josh brown. >> yeah. this xpi has broken out. new 52-week high as we speak. i like it. >> steve weiss. >> i convinced myself further shorting jc penney. that's my trade. >> i think following mr. ackman, i think canadian pacific looks like a great company that could get a lot better if they're able to get through what they want to do. >> that does it for us. we'll be here throughout the day bringing you the latest moves from the headliners here. "power lunch" begins right now. welcome everybody to "power lunch." a busy hour ahead. facebook, you can forget it. despite our obsession with it, greece, go on, drop it, too. today we are talking about some things that are more fundamental perhaps. talking about three pillars of
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the global economy. gold, housing and retail. gold now technically in bear market territory. is this an opportunity? key numbers detailing the state of the american housing market are out. your home is your most important investment in many ways. plus, brand new numbers on the retail sector, a barometer for the big picture. the bulls pushing back a little bit today. the dow down nine out of the last ten, but it is higher today. if i can get out of the way, you'd see how much higher it is. 21 points or about .5%. the s&p is higher too, but basically flat. nasdaq down a little, russell higher a little and transports up by 0.04%. sigh #simon hobbs is with us in for sue herera. >> very good afternoon, tyler. we'll get back to the broader markets in a minute. we should note we're off our highs 20 points on the dow. we start with housing, retail and commodities.
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and the commodities front, gold and oil both in the headlines. that is where we start with sharon epperson at the nymex. good afternoon, sharon. >> good afternoon, simon. we are looking at oil and gold prices under pressure, but off of their overnight lows as the euro has stabilized a bit. keep in mind that we're looking at the july brent contract that has the most volume right now. june will expire, but what is most interesting not so much the flat price slide that we've seen, but what has happened to the spread between brent and wti. it continues to widen even though that seaway pipeline reversal is imminent, we're also watching trading volumes in ice brent and keeping our eye on the gold contract because as you mentioned it hit its lowest price in 2012. we'll see if it closes in bear market territory. back to you. >> sharon, thank you very much. to diana olick now on some housing data out today. diana, fill us in. >> that's right. we've got a bunch, tyler. most of them positive for a change. housing starts rose more than expected in april up 2.6% with increases in single and
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multifamily. permits fell but off last month's three-year high. marches numbers were revised up. analysts still calling these numbers fragile. new mortgage delinquencies fell and they fell hard. the biggest quarterly drop. 7.4% of all u.s. loans outstanding were delinquent in q-1 of this year. loans in the foreclosure process however are still rising at 4.39%. most due to still big delays in states which require a judge in the process. and mortgage applications surged last week on report low interest rates, but it was all the refis. up 13%. applications to buy a home fell just over 2%. tyler. >> diana, thank you. we turn now to courtney reagan with some key retailers reporting this morning. tell us about that, court. >> well, tyler, i've got to start with jc penney. what a blunder. missing big on both the top and bottom line. posting a 19% drop in comp store sales. a 10% traffic drop off.
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abandoning its four-year gap guidance, maintaining its nongap forecast. jc penney also discontinuing its quarterly dividend. shares are plunging. s&p upped its rating to hold. and jpmorgan maintains it overweight. coo michael cramer said we didn't understand or appreciate the extent to which customers were using coupons. ceo ron johnson said coupons are like a drug. that's trouble for a company that's just gotten rid of them. teen retailer, abercrombie & fitch posted weak but slight revenue. weakness in europe is from pressure and cannibalization. the first negative quarterly comp since the fourth quarter of '09. shares trading at 18-month lows. and target is the sector standsout. eps easily beating the street by a dime reporting stronger than expected revenue and upping its four-year guidance. analysts continue to monitor the cost in progress of the retai r er's expansion into canada. simon. >> courtney, thank you very
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much. we've set out the menu. matt cheslock joins us. how do you play gold, retail and housing on the rise? >> i love gold. i think, you know, we traded down low today. we traded down to 1520 level. we're back up towards 1550. i think we're back up, maybe see 1700. we saw it go to 1900 when greece first had problems. i foresee a pretty good rise here. i do like gold. i do look newmonn in that space. housing, not so positive. we have higher starts. i'm not sure how to play it. very cautious on housing. i like beazer homes and jc penney, that's the story today. i think that's interesting. they hired chairman johnson to takeover and slash and burn here. he's done that. i think it's a good time to buy. i'm not loading up my whole position here on jc penney, but right now i'm looking to buy. i'm starting to position here. target, we got what we expected out of target. i think that's a solid company. abercrombie & fitch, well, you
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know, maybe europe is just scaring too many people off right now. >> fascinating how some of those big retailers have come down during the course of the year not just jc penney but best buy. matt, we'll leave it there for the moment, but we'll come back to you. let's check the aig story this lunchtime up almost 40% over the last six months. the business holding a shareholder meeting here in new york today as of course shareholders spring as many people see it rolls on. mary thompson is there live and just spoke to the ceo, i understand, mary. >> that's right, simon. the shareholder meeting 17 minutes long, uneventful, all the directors elected, the pay plan approved by shareholders. after that 17-minute meeting the company's ceo sat down to speak with cnbc about his and the company's future. he says despite cancer, he is feeling well and is ready to stay on as ceo well beyond the end of this year. >> i feel good and i feel if i can add this strength and energy into 2013, i've told the board i
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would like to have them consider me staying on beyond this year. we'll see how it goes. >> he also angles for the company for the rest of 2012 saying he'd like to see a complete government exit from aig at a profit. keep in mind the government still owns 61% of the company. also he'd like to see the company's credit rating raised from positive to stable. and in fact he'd actually like to see a complete credit upgrade. he says a lot of that depends on performance. they're working on that. all of which contribute to his last goal, that being a higher share price. of course the stock is up 35% already year-to-date. and he says keeping it above the $29 level basically where the government is profitable remains critical for the firm. he also spoke about the planned ipo of its aircraft leasing business, ilfc. he said this will happen when the markets and the company are ready at a price likely below the off mentioned range of $18 billion to $10 billion. >> what i will say is book value is about $7.5 billion.
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and i think we'll get some discount to that, probably, as what i would expect. so i think $8 to $10 -- someone else's speculation looking at book value and how markets will trade off that book value. >> he also said the company would consider selling a stake in ilfc to a cornerstone investigator possibly something like a sovereign fund, but that he said would depend on the price. guys, back to you. >> there's a lot of people who like the sovereign funds as buyers. mary, for the moment thank you very much at the aig meeting. general electric's finance arm has announced it will start paying a quarterly dividend to the parent ge. ge also be aware a minority owner of the parent of this network, nbc universal. the stock, let's look at where we're trading at the moment. $19.14. higher on the session overall. in the last year ge's stock is still down about 3%, as you can
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see. but over the last months it's done well. it's up 18%. and that of course has far outpaced, tyler, the s&p 500. >> simon, thank you very much. we may have said forget facebook at the top of the hour, but we haven't really forgotten it. in case you haven't heard, something is happening with facebook tomorrow. and kayla tausche is here ahead of that ipo with details on the new plan. a new plan that seems to change everyday, kayla. >> ty, there's only 24 hours left for any of those changes to the deal to be made. we don't really expect much since the investor book is already filled and closed and the price range has been bumped and they've even increased the number of shares they'll price tomorrow evening. but as of this morning facebook said it will offer 421 million shares from $38 to $44 a piece. that's a deal that could raise as much as $18 billion. add potential overallotment and potential to price above that range, you could be looking at the biggest u.s. ipo ever. right now facebook is in the mix with general motors, aig and
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visa for the top ranking title. the new shares offered will let existing investors sell more than they had previously disclosed. facebook's earliest investor, peter thiel quadrupling what he plans to sell. jim brier and russian billionaire cutting his stake as well. big shareholders selling out of a deal could be a big red flag, tyler. we'll walk you through the other risks and challenges in a facebook webinar. >> i'll be there. facebook ads causing a big controversy in the auto world as gm says we're out of here. the ads aren't paying off. phil lebeau live in atlanta for us. phil. >> and, tyler, it's important to point out that general motors has caught a lot of flak over the last 24 hours about pulling out of facebook. but it's standing by its decision it's not going to run direct ads. $10 million general motors decided it's no longer believing those ads are effective in terms
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of pulling in customers. we regularly review our media spends. this happens as a regular course of business and not unusual for us to move our spending around various media outlets. in fact, general motors has been looking at the $4.2 billion it spends annually and where is the best place for us to spend that money, clearly they decide direct advertising on facebook is not the place. but ford is increasing its spending on facebook. ford says facebook ads and the strategy it has in terms of the fan pages, it is helping with the brand and with sales. by the way, don't forget coming up on "street signs," you will hear from the head of marketing at ford, jim farley. he will talk first about not only to stick with facebook but increase spending with advertising on facebook. >> thank you very much. now to brian shactman for a market flash. >> look at shares of xcl. bob pisani talked earlier about this effort to return cash to shareholders through increased dividends. we've seen it across the board. they increased their dividend
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only by a penny but the stock nearing the highs of the day. and it is a theme we are seeing more and more. there's the stock there up .75% plus. back to you. >> thank you very much for that, brian. we are currently trading at 19 points higher on the dow. one of the reasons we're off our highs was a reuters report that the european central bank has stopped monetary policy operations for some of the greek banks, the big fall dow jones reporting they will regain access after recapitalization. and that's the key. the reason the ecb may be making this move is they've not been able to recapitalize properly because there isn't a greek government at the moment to do the deal and the detail. at the same time, importantly france's new leader, and the german chancellor, angela merkel, both saying they want greece to stay in the eurozone. angela merkel telling cnbc she in particular wants atkins to stick around but it comes clearly with a warning. greece must stick, she says, to its austerity commitment.
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and greece itself with no party with enough support to form a new government, new elections have now officially been set for june 17. the head of greece's council of state will lead now a caretaker government until then. coming up, what the 1% are doing with their money in the light of greece and all those other issues right now. big moves in the pharma space as another patent expires on a blue-collarbuster drug. this time it's bristol-miers. we're talking that next on "power lunch." tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly. tdd# 1-800-345-2550 i can also bounce my ideas off their trading specialists -
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first it was pfizer's blockbuster drug, lipitor. now bristol-myers top selling drug. you see shares a penny higher right now. seema mody's on the pharma beat. >> last quarter plavix brought in about a fifth of bristol's total revenue. but sales are expected to plunge after the blood thinner goes off patent and lower cost generics become available. analysts at isi group tell me they estimate a 40% drop in quarterly sales. so to compensate, bristol has been working to develop the next blockbuster drug. at the top of its list, an experimental drug thinner awaiting fda decision in late june. bristol among several players competing to launch new hepatitis c treatments recently making a $2.5 billion acquisition.
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bristol is on a spending spree buying up promising early to mid-stage sized biotech firms. analysts say future acquisitions will most likely be in the cancer and immunology space. all in all, tyler, bristol is hoping its strong pipeline and series of smart acquisitions will carry the company through the losses of plavix. back to you. matt cheslock back with me. matt, how are you playing specifically the biotechs right now? >> i think big pharma has provided investors nice safety over the last three or four years. but if you want to make money, invest in smaller plays. generic would be teva. and biogen at play, pricey at 138. >> two good ideas. simon, over to you. >> thank you, ty. from pills to planes, let's focus on the airlines where international travel has become now the new hot battleground. how hot? this summer u.s. carriers are
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expected to take a record number of passengers overseas. cnbc's phil lebeau is now live from the new international terminal at atlanta airport. hi, phil. >> hi, simon. and a lot of those people you mentioned that record number of people traveling overseas, they're going to be going through this new terminal here in atlanta. and like all of the new international terminals, it's spacious and built to add capacity to a system. and that's the reason that we're seeing growth in the airline international business. the airlines realizing its much more profitable to add these international flights. in fact, when you look at delta, which will be using this terminal more than others, 40% of its flights are international. its revenue in the first quarter overall for the entire company was up 14% per available seat mile with a big percentage of its growth coming overseas. >> for us the international economies today, particularly in latin america and in asia are performing at a rate much better than the united states.
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so we need a diversified portfolio. and international now is about 40% of our business. >> delta is not alone in expanding its international presence. u.s. airlines project a record number of travelers will be going overseas this summer. they're going to carry about 26.8 million passengers on international routes. as you look at the airline index, which has bounced a little as jet fuel prices have moderates, keep this in mind, american airlines just a few minutes ago announced it's going to propose adding 17 weekly flights between miami and new york down to brazil. why? because that's where the growth is. and we're seeing this not only here in atlanta but at other airports around the country. guys, back to you. >> so miami and new york to brazil. if you've been brave and played the airlines over the past year, let's take a look at how they've done. delta up about 4%. alaska basically flat. hawaiian air down just a touch, about 4%. united down 7%.
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and southwest down 32%. simon. >> tyler, would you like to know what it's like in business class? what the 1% is doing with its money right now, that's coming up on "power lunch." and ahead on the show, a behind the scenes look of what life is like for top tier investors on the eve of a giant ipo. before the break let's have a look at where we are on the currencies. it is of course generally an environment in which the dollar is stronger. though that's not entirely evident at the moment. [ male announcer ] the inspiring story
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from hyundai. when we got married. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.
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beyond facebook, where are venture capitalists placing their next big bets? tim chang with the mayfield fund already with 200 ipos and acquisitions under its belt. tim leads the investments in china, in mobile and social and gaming just earned a spot on the forbes's list of top tech investors. tim, welcome. good to see you. in social network, specifically, tim, what comes next after facebook? what's got your attention? >> so there's two big areas. social media has huge impact still in the consumer world. but even bigger we're betting a lot on socials impact on the enterprise. on the consumer side we'll see the rise of vertical interest networks. think of these as social networks specifically around interests, passions, affinities, specific interests. and the way i explain it is facebook is great for you to connect with people you already
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know in real life, but doesn't do that much for you to meet new people especially in areas you're particularly passionate or interested in. so these are the vertical interest graphs -- >> tim, i'm sorry to have to interrupt you. we're going to go to breaking news desk and michelle caruso-cabrera. we'll be right back. >> tyler, bruno iksil, apparently leaving the bank. that is according to "new york times," the departure, the timing of the departure is unclear. this is the man who gained notoriety after reports he built up that outside position that distorted prices in obscure proved disastrous leading to the $2 billion trading loss. the "new york times" reporting bruin iksil, the whale, at jpmorgan, is leaving the bank, according to former and current colleagues, the timing of the departure is unclear. >> all right.
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michelle, whale, harpoon, now back to you, tim. facebook is good at linking together people who know one another, but your interest is in the networks of people who may not know one another but have shared interests. >> exactly. when you have a lot of interests, those have big overlap in products and demand as well. debating, reviewing, sharing recommendations. it's not just advertising. that's what's interesting to us. and then i'd say the second piece on the enterprise side, there's three key areas there. social plumbing, infrastructure for all businesses who need to use social media in their businesses. the second would be social media advertising and marketing platforms. and the third would be applications for social enterprise. >> all right. >> so social to the workers. >> let me get you a quick question on this. as you size up an idea, what is more important to you? the idea itself or the person behind it? are you looking for a certain kind of resume as you size up a deal? >> yes. i would say majority of successes actually come from
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serial entrepreneurs, particularly in nonconsumer areas. so this notion of repeat sbep neuros, folk who is have done it before, our records check even before you have an idea. >> tim, if this venture capital thing doesn't work out for you, you have a future in fm radio. thanks very much. tim chang. >> thank you. >> when we come back, the countdown to the metals close is on. we're going to hit the nymex right after the break in 3:51. we'll be right back.
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we're losing ground down here at the nyse. bounced to negative it would appear on the major indices. if that happens, it will be the tenth out of 11 days that the market has fallen. a huge concern obviously about where we're going with growth. and we'll talk about that further in the market. through the program right now gold is about to close. the metals shutting down. sharon epperson has been tracking the action on that session all day at the nymex. and, again, not a great picture for the bulls, sharon. >> not a great picture for the gold bugs, for the bulls at all, simon. in fact, we are looking at gold set to close here in bear market territory. we're looking here at prices down about $20. well below that bear market
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territory level around 1538. and we are seeing the lowest close for 2012 once again. keep in mind we've seen gold prices down about 20% from where they were at the highs around $1900 an ounce. and we're continuing to see this slide. much of it has to do with the fact that gold is now being lumped in with the rest of the riskier assets that are being deleveraged across the board as we see this drop in the euro, the strength in the dollar. the only reason we are not at session lows is because the euro has stabilized a bit. gold was as low as $1526 an ounce overnight, simon. >> okay. sharon, thank you very much for that. a tough time for the metals. and obviously a tough time for the stock market as well. may has not been kind, bob pisani joins me here on the set with a market that is about to turn negative. or at least cut its losses substantially. >> i think the important thing that's going on here today is some of the comments made by bhp, i mean, sharon was mentioning all of the commodity stocks to the downside. bhp came out overnight with some
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comments basically saying we're not going to make the kind of investments in global development of mining materials that people thought. they had very, very high capital expenditure levels. they're now saying that's on review. they haven't given us new numbers, but the bottom line is iron ore plants that might have been built in the next five years are not going to be built. copper development companies and plants that might have been built are not going to be built as well. essentially this is a long-term play, simon. remember, just because copper is down for a few days doesn't mean they're going to cancel necessarily a big new copper plant. but when they come out and say all of these plans are on review, that means bhp is saying long-term we see less revenues come in. we see slower global growth. this is not a one or two month story, this is a longer term story and the ceo was quite explicit. things have changed in the last couple of years. and we have to review completely the way we're looking at the global commodity market. >> in particular we're going to talk about emerging markets ahead in the program. stay with us, bob. we have the breaking news we brought to you earlier in the
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show. it is said that it is reported that bruin iksil, who was the london whale at the heart of the jpmorgan trades that lost them $2 billion and counting is set to leave the bank, arguably the best run bank on wall street. let's bring in mary thompson. this of course, mary, is a story that blow-by-blow you have been up to speed with. where does this now lead us, do you think? >> well, right now this is a second victim, basically. you can say that the trading loss has claimed. the times reporting former and current colleagues that mr. iksil, he will be stepping down. yesterday i was at jpmorgan's annual meeting and the company's ceo, jamie di momon, has said. most notably the chief investment officer who retired, ina drew, on monday in part
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because she oversaw the unit responsible for those losses. so, again, this shouldn't come as a big surprise. this kind of thing would happen after a trading loss such as this with some people deciding to leave the company, ie, losing their jobs because of it. >> let me come back to bob on this. so we've got the whale gone, bruin iksil, gone, ina drew and indeed another trader. this was a leader that sat directly under jamie dimon. she was in or was a direct report of his. >> yeah. and i think what the street is trying to figure out is how many other kinds of large bets like this were made at other firms. so far nothing has really come up at all. i think that's really going to be the next part of this whole story. we'll get companies coming out talking about exposures. and i think there's been a lot of pressure on some companies out in the last few days to try to figure out what other kinds of big bets like this have been made. the question is are we hedging or engaging in some different
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form of gambling? i saw senator reid's comments got a lot saying mr. dimon and essentially the companies should move to las vegas because this is all a form of gambling. i don't agree with that position or attitude myself. it's rather shocking a senator like that would come out and make these kinds of comments shows a little bit of misunderstanding of what exactly is going on. >> and, mary -- >> simon, i want to jump in. >> please do. >> take off of something that you mentioned with miss drew being direct report to jamie dimon. there was a bit of a skrum with reporters yesterday. and i asked mr. dimon, she was a direct report of yours, what is your responsibility in all of this. he says of course the buck stops with me. i said well what questions could you have asked to maybe dig d p deeper into this problem or which questions did you wish you had asked? at that point he wasn't going to answer anymore questions. a lot of questions still remain
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not only about other companies having similar loss as bob mentioned, but the extent at jpmorgan. >> what i found interesting on your reporting yesterday was actually the shareholders are far more interested in the losses on the mortgage book. we have to leave it there, mary. thank you, bob. ty, over to you. >> let's switch gears and move to the bond markets for a moment. just 25 minutes before we hear the latest on the fed's thinking on the economy. the minutes come out. rick santelli joins us, not minutes from now but right now from the cme. rick. >> and those minutes could be important. think twist in any form of quantitative easing of course. if you look at a 24 human resource 24-hour chart, maybe around 3:00 in the morning when the headlines broke out of greece. the bund still very responsive to anxieties whether in europe, greece specifically. and this all comes at a day where the u.s. had arguably very good data. now f you look at the euro
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currency, what's fascinating is, yes, it responded to the morning headlines regarding greece, but still didn't trade any lower than the established range from 2:00 in the morning. whether it was the chinese stock market or anxieties in the middle of the night regarding europe. at the end of the day it seems especially the euro currency market might have a lot of these anxieties regarding greece priced in. simon, back to you. >> thank you, rick. we should note that we are now heading negative overall on the equity market. the dow down here at the nyse is down 1.5%. don't forget of course those fed minutes coming out at the top of the hour. we'll keep you abreast of that exactly. matt cheslock is with us. matt, what are you looking for as far as the fed minutes are concerned? >> i'm going to look for probably nothing. >> at least you're honest, matt. >> the world's coming to end in june with the greek elections and the fed actually what they're going to do the 20th. i don't know what qe we're on right now? are we on four, five, six? i'm not looking for this to be
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big news right now. market showing it by getting flat right now. >> so really play past these fed minute ss what you'll be doing today. >> absolutely. there's enough out there. >> you bet there is. simon, back to you. >> with fears of europe imploding and the u.s. market struggling to get afoot, what are your best plays? global head of emerging market equity at morgan stanley. $25 billion in assets under management. and indeed the author of "breakout nations" in pursuit of the next economic miracles. welcome to "power lunch." >> thank you very much. >> your three top markets are the philippines, indonesia and poland. while we play over the details of those markets. >> right. >> can you tell me whether actually now is the time to invest in emerging markets? because they've gone nowhere this year. and over the last 12 months, if you look at the etf, they've actually been a really bad bet. >> yes. i think the problem as far as emerging markets is concerned is that some of these big markets suffered from inflated
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expectations. and those markets are a little disappointing now. whether it's china or india or brazil or russia. those big markets are disappointing. the implications of what's going to happen to them in growth terms hasn't been properly understood in this entire european crisis. what's really going on there is that they benefitted enormously from the incredible emerging markets that we saw in global liquidity over the past decade. ask those markets now are giving back some of those gains. so it's time to look at the next -- >> if i am an american investor sitting in the u.s. dollar. >> right. >> isn't the safest place for me to be in the asset markets that the fed will artificially inflate with qe, provided i can get out in time rather than trusting you about the philippines, indonesia and poland where most people in this country have never traveled. >> i think it's to actively invest in emerging markets. to figure out which are the losers and winners in emerging
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markets rather than stick to a standard script. so you're fine as far as the fed's concerned. any global liquidity ends up inflating emerging markets as much as it does the u.s. what the fed does is backs the rest of the world and not just what's happening in the u.s. >> the price action over the last year would beg to differ. but we have to leave it there. very interesting read. >> simon, thank you. before you start shaking your finger at greece and the budget problems there, know that there is an equally frustrating budget mess brewing in washington again. john harwood joins us now. john, this also comes from the "haven't we been here before" file just like greece? >> no question, tyler. underscored by the meeting that's just taken behind me. the president was pressing them for action on a bipartisan
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balanced approach to deficit reduction. also on measures, he did it publicly earlier at a small business in washington here. >> we want to sustain momentum. and one of the ways we can sustain momentum is for congress to take some actions right now, even though it's election season, even though there's gridlock, even though there's partisanship, take some actions right now that would really make a difference. >> but of course congress is doing nothing of the sort right now. in fact, this afternoon the senate is taking up a series of budget proposals design today highlight the difficulty of getting a budget through the senate. the senate has not passed a budget. all are expected to be defeated. that's more political -- just like the president's pressing for the to-do list. and john boehner, the house speaker, gave a speech on the hard line yesterday saying american leaders have got to act like adults in this issue. >> we have time to deal with our
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problems. and what i'm trying to do is encourage people on both sides of the aisle, on both sides of the capitol and at both ends of pennsylvania avenue to be honest with the american people and to be honest with ourselves. >> so what we've all got to hope, tyler and simon, is that this is simply election year posturing and after the election when those bush tax cuts begin to expire, when the automatic spending cuts expire, the so-called fiscal cliff, then people will get serious and come forward on a bipartisan deal. that's what american leaders hope will distinguish us from greece. >> thank you very much. next, the 1%, maybe the 1% of the 1%, and their money. where are they putting it? stocks or socks? no. here's a hint. it will fit on a finger. we'll be back in two. what ? customers didn't like it.
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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. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. welcome back to "power lunch." brian shactman here at the
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markets desk. i follow the rare earth stocks on the way up. they've come full circle. molly corp hitting a 52-week low today. it's now down more than 60% in the last year. of course bhp bilked on pulling back investments. molly corp. is exhibit b after bhp. speaking of companies on the other side of the earth, someone who comes from that area, mandy drury, what's up on "street signs"? >> lots of things coming up. we've got new insight into the fed's thinking on possibly qe-3 when the fomc minutes are released at the top of the hour. and the big jc penney mess. ceo ron johnson says he's trying to turn the titanic into speedboats. has jcp already hit the iceberg? and we ask forward's marketing chief why they are sticking with their ads following gm's decision to bail. tyler, over to you. >> mandy, thanks very much. now we switch. we ask what are the rich doing with their money. a new study finds that the
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one-percenters are saving more than a third of their income. robert frank is cnbc's new wealth editor. welcome. and welcome back to cnbc. >> thank you. great to be here. >> good to have you come over to this side of the game. >> i'm excited. >> so the wealthy superrich are not investing in equities the way they might have in the past. what's the implication of that? >> well, this survey found two things. the first is that the wealthy are hoarding cash. so their savings rate compared to 2007 has almost tripled. in addition to that, they're putting 50% less of that savings into stocks. so this is bad news for the stock market. >> bad news for the stock market. and obviously makes it more difficult for companies to raise capital. >> that's right. >> so if they're not putting their money there, where are they investing their money? >> well, the wealthy around the world, not just in the u.s., they want safe stores of value. so they're looking for hard assets. >> uh-huh. >> that's been gold up until recently that's been real
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estate, it's been collectibles, it's been diamonds, which you could argue is the hardsest asset of all. >> the b final sale price $9.7 million. >> nearly two times the top estimate. we doept know who bought it, but this is a 400-year-old diamond. again, it was sort of the blue chip of the blue chip in collectibles. we've seen it in art. we've seen it with wine. what the wealthy want is something that they can enjoy while they're around but also that they know this won't fall in value that much. >> right. you can't wear a stock. you can wear a diamond. >> that's right. >> and you can live in real estate you buy. that's at area. >> exactly. real estate is a big area where, again, they're literally seeking shelter from the financial markets today. we saw two transactions in new york alone this week that were over $50 million. and we haven't seen that really since the crisis. and realtors tell me this is going to continue on into this year. >> howard marx bought it for $52
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million. and steve wynn, a $72 million purchase. was that a place at the ritz carlton? >> that's the penthouse. >> good for him. he deserves it. he needs a place to stay when he comes to new york. >> it's got multiple libraries. >> he's the guy who put his fist through a piece of art. but people are buying art, right? >> including him. again, what we want is confident capital right now instead of the worried wealthy. at least real estate creates jobs. when they buy these they often renovate them. that will at least provide some jobs unlike diamonds. >> robert, great to have you here. thank you very much. >> facebook hits the market on friday. if you want to buy it, how long should you stay in it? that's next. plus, would you lend money to greece? seriously. would you lend money to greece at 28%? we're back in two.
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brian shactman here at the markets desk. of course we're following all of the headlines out of the sohn conference. like at gildan.
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a lot of cotton-related apparel. the spike is on that reference. and cotton price haves come down, but long-term cotton stays low, they could make a lot more money. talk about money, money that's been lost in the last week in terms of course market cap and losses at jpmorgan, let's dpo to mary thompson with a lot more details on breaking news. >> hey, brian. i want to update a story we reported earlier. jpmorgan spokeswoman telling cnbc, bruin iksil, he is still employed at the firm. jpmorgan declining to comment on whether or not he would eventually leave. sources say iksil is expected to leave the firm at some point. keep in mind, this is my take on the story, you need to keep the people around who structured these trades in losing this $2 billion trading loss for jpmorgan to help you unwind or at least start to unwind them. iksil is in that category and could likely be around, you know, around the firm until the bank has a better grip on all of these losses. but once again, jpmorgan saying
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that iksil is still at the firm. simon, back to you. >> interesting. maybe they asked him to stay in order to do exactly that when his heart says maybe i should move on. thank you for that, mary. breaking news at clarifying that story. it's time for the power rundown. spencer ante is here. deputy chief of "the wall street journal" and our own bob pisani. gentlemen, welcome. first up, let's talk about greece. would you lend to greece at 28% interest rates? bob? >> i wouldn't lend greece anything at any interest rate right now. i have an idea, i wouldn't. but how about facebook? let's get mark zuckerberg to lend to greece, get the hoody off and get money over there. >> spencer, would you lend to greece at the moment with all this talk? >> i have to agree with bob. a country can't form its own government, on the verge of being kicked off the european union and off the currency, doesn't seem like a good time to lend money to greece. >> let's talk about facebook.
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you almost jumped the gun on the facebook question. would you buy facebook? would you hold facebook? >> facebook is a giant call option on the idea they have some special sauce that they're going to figure out how to monetize all this information they have on everybody else. i personally think it's a lot more difficult than people are saying is than the facebook bulls are. i wouldn't buy right now. that's my personal opinion. >> you see, spencer, i would buy it and flip it. you know it's going to accelerate at the offering -- from the offering. >> well, if you could buy it and flip it, that might be a good strategy. but most of the people who own facebook shares right now are restricted from selling the stock for six months. so i would say if you're a small time investor thinking of buying the stock, wait a while until the euphoria quiets down, see how they do in the public markets and usually the stocks fall after the initial jump and that could be the time to come in. don't put a lot of your money into it. this is a high risk category. be very conservative. >> and talking mu ining multipl
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ebitda to value the company, that sounds a little like 1999 to me. >> just the question of lockups. are we out of time? can i put in jc penney? jc penney, would you buy jc penney? >> well, i'm staying away from whether i would buy it or not. this is one of the great, i think, marketing decisions that was disastrous. everyday low prices sounds like a great idea. but people get used to sales. and apparently they missed them. they have told you that. the buyers obviously want to see the sales back. >> are you as short-term as bob? on a four-year strategy? >> well, you know, ron johnson, the former apple executive is runni innin inning jc penney ri. obviously his strategy of moving away from the coupons which they call drugs -- >> i beg your pardon. >> they have to wean them off the coupon addiction. it's going to take time, but the strategy makes sense, but you have to be in for the long-term. >> 19% drop in sales has to be one of the worst quarters in retail history.
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i hope they'll have the time to -- >> if the customers are going cold turkey, what did you expect? >> that's the point. >> i get it. >> listen, they don't do that at ross stores, for example. you don't see tjx. you don't see big sales. >> they've weaned them off it. >> cutting prices is not a good strategy. >> we are out of time. spencer, bob, thank you very much. that's the power play. back to you. >> thank you very much, simon. coming up, washington's war on wall street. should the government worry about their own balance sheet instead of worrying about jpmorgan's? here's a quick look at how the big banks are trading right now. a lot of red up there. bank of america, city, goldman, jpmorgan and morgan stanley, all lower right now. for three hours a week, i'm a coach. but when i was diagnosed with prostate cancer... i needed a coach. our doctor was great, but with so many tough decisions i felt lost. unitedhealthcare offered us a specially trained rn who helped us weigh and understand all our options.
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the stock market has bounced off the flat line. we're now heading in a positive direction, at least for the dow having dipped down. interesting moves today. gold closing within the last 30 minutes in bear market territory. in other words, a fall there of 20%. and tyler and matt, what i think is interesting we're about to go into the minutes of the fed at
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the top of the hour. and if you thought they were about to announce qe-3, you'd be a buyer surely, guys. >> what do you think of gold? you like it? >> absolutely. i've been pounding the table all week. >> but apart from qe-3. >> absolutely. i think sentiment is negative. a nice rally off that. >> do we have a six-month chart of gold? basically as simon pointed out right up against that 20% decline or bear market level. $1,500 an ounce or thereabouts. $1534. there is six months down 12%. but from the peak in early march down nearly 20% as you see right there. busy hour coming up on "street signs." that will do it for "power lunch." matt, thanks for being with us. the fed minutes are straight ahead, simon. >> absolutely. stay tuned. "street signs" is on its way. this is cnbc. welcome to "street signs." and as they said, we are nano seconds away from the fed minutes. but the situation in greece not far from traders minds. dual headlin


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